Exhibit 99.1
SMX (SECURITY MATTERS)
PUBLIC LIMITED COMPANY
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023
UNAUDITED
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023
UNAUDITED
TABLE OF CONTENTS
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
| As
of June 30, 2023 | As of December 31, 2022 | ||||||||||
| Note | US$ in thousands | ||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | |||||||||||
| Other current receivables | |||||||||||
| Total current assets | |||||||||||
| Non-current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Investment in associated companies | |||||||||||
| Total non-current assets | |||||||||||
| Total assets | |||||||||||
| Current liabilities | |||||||||||
| Trade payables | |||||||||||
| Lease liabilities | |||||||||||
| Other payables | |||||||||||
| Convertible notes | 3 | ||||||||||
| Warrants | |||||||||||
| Pre-paid advance | 5.1 | ||||||||||
| Bridge loans and derivative financial liabilities | 4 | ||||||||||
| Borrowings from related parties | |||||||||||
| Total current liabilities | |||||||||||
| Non-current liabilities | |||||||||||
| Lease liabilities | |||||||||||
| Bridge loans and derivative financial liabilities | 4 | ||||||||||
| Long term payables | |||||||||||
| Total non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Shareholders’ equity (deficit) | |||||||||||
| Issued capital and additional paid in capital | 6 | ||||||||||
| Foreign currency translation reserve | ( | ) | ( | ) | |||||||
| Accumulated losses | ( | ) | ( | ) | |||||||
| Total Shareholders’ equity (deficit) | ( | ) | |||||||||
| Total liabilities and shareholders’ equity (deficit) | |||||||||||
| /s/ Limor Moshe Lotker | /s/ Haggai Alon | /s/ Pauline Khoo | November 3, 2023 | |||
Limor Moshe Lotker Chief Financial Officer |
Haggai Alon Chief Executive Officer |
Pauline Khoo Audit Committee Chairperson |
Date of approval of financial statements |
The accompanying notes are an integral part of the financial statements.
| -1- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
| For the Six Months Ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| Note | US$ in thousands except share and per share data | ||||||||||
| Research and development expenses, net | |||||||||||
| Selling and marketing expenses | |||||||||||
| General and administrative expenses | 7 | ||||||||||
| Listing expenses | |||||||||||
| Operating loss | |||||||||||
| Finance income | |||||||||||
| Finance expenses | |||||||||||
| Share of net loss of associated companies | |||||||||||
| Loss before income tax | |||||||||||
| Income tax | |||||||||||
| Loss after income tax for the period attributable to shareholders | |||||||||||
| Other comprehensive loss: | |||||||||||
| Items that will be reclassified to profit or loss: | |||||||||||
| Foreign currency translation | ( | ) | ( | ) | |||||||
| Other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||
| Total comprehensive loss | |||||||||||
| Loss per share attributable to shareholders | |||||||||||
| Basic and diluted loss per share attributable to shareholders (in dollars) | 8 | * | ) | ** | ) | ||||||
| * |
| ** |
The accompanying notes are an integral part of the consolidated financial statements.
| -2- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS’ EQUITY
(US$ in thousands)
Issued capital and Additional paid-in capital | Foreign currency translation reserve | Accumulated loss | Total equity | |||||||||||||
| Balance as of January 1, 2023 | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | ||||||||||||||||
| Loss after income tax for the period | ( | ) | ( | ) | ||||||||||||
| Other comprehensive loss for the period | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ( | ) | ||||||||||
| Issuance of shares, net | ||||||||||||||||
| Recapitalization due to issuance of shares following the SPAC transaction, net | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Conversion of convertible notes to shares | ||||||||||||||||
| Conversion of bridge loans to shares | ||||||||||||||||
| Exercise of options | ||||||||||||||||
| Conversion of warrants A to ordinary shares, net (See note 5.2) | ||||||||||||||||
| Issuance of Security Bundle, net (See note 5.2) | ||||||||||||||||
| Balance as of June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| (*) | Represents an amount lower than US$ 1 thousand, see Note 2D. |
| -3- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS’ EQUITY
(US$ in thousands)
Issued capital and
Additional paid-in capital | Foreign currency translation reserve | Accumulated loss | Total equity | |||||||||||||
| Balance as of January 1, 2022 | ( | ) | ||||||||||||||
| Comprehensive income | ||||||||||||||||
| Loss after income tax for the period | ( | ) | ( | ) | ||||||||||||
| Other comprehensive loss for the period | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ( | ) | ||||||||||
| Issuance of shares, net | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Balance as of June 30, 2022 | ( | ) | ( | ) | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| -4- |
UNAUDITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)
| For the Six Months Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| US$ in thousands | ||||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Share-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Increase (decrease) in other receivables | ( | ) | ||||||
| Increase in trade payables | ||||||||
| Increase in other payables | ||||||||
| Decrease in other liabilities | ||||||||
| Revaluation of financial liabilities at fair value | ( | ) | ||||||
| Financial expenses due to bridge loans principal amounts | ||||||||
| Interest on leases | ||||||||
| Provision of borrowing to related parties | ( | ) | ||||||
| Revaluation of convertible notes | ( | ) | ||||||
| Share of net loss of associated companies | ||||||||
| Issuance of shares for directors | ||||||||
| SPAC transaction - listing costs | ||||||||
| Net cash flow used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Capitalized development cost | ( | ) | ( | ) | ||||
| Net cash flow used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment of lease liabilities | ( | ) | ( | ) | ||||
| Proceeds from issuance of convertible notes | ||||||||
| Proceeds from issuance of Security Bundle, net | ||||||||
| Issuance of warrants | ||||||||
| Issuance of derivative financial liability | ||||||||
| Proceeds from bridge loans | ||||||||
| Repayment of bridge loans | ( | ) | ||||||
| Advance payment for equity, net (see Note 5.1) | ||||||||
| Issuance of shares in the SPAC transaction, net | ||||||||
| Net cash flow from financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Exchange rate differences on cash and cash equivalent | ( | ) | ( | ) | ||||
| Cash and cash equivalents at end of period | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| -5- |
UNAUDITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US$ in thousands)
| For the Six Months Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| US$ in thousands | ||||||||
| Appendix A – Non-Cash transactions during the period: | ||||||||
| Conversion of liability to ordinary shares (see Note 5.1) | ||||||||
| Conversion of warrants to ordinary shares (see note 5.2) | ||||||||
| Conversion of bridge loans and derivative financial liability to ordinary shares | ||||||||
| Exercise of options and warrants to ordinary shares | ||||||||
| Conversion of convertible notes to ordinary shares | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| -6- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 1 - GENERAL:
| A. | SMX (Security Matters) Public Limited Company (“Security Matters” or the “Company” and together with its subsidiaries, the “Group”) was incorporated in July 1, 2022 under the laws of Ireland with registered number 722009 and its registered office at Mespil Business Center, Mespil House, Sessex Road, Dublin 4, Ireland, D04 T4A6. The Company was incorporated in 2022 as part of the Business Combination (see Note 1.B). |
The Group provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.
| B. | The Business Combination - the SPAC transaction (“Business Combination”): |
On March 7, 2023 (the “Closing Date”) the Company completed its Business Combination with Lionheart III Corp (“Lionheart”), following that Lionheart and Security Matters PTY Ltd. (formerly named Security Matters Limited, which was incorporated in May 2018 under Australian law) became the Company’s wholly-owned subsidiaries and the Company listed its ordinary shares and public warrants on the NASDAQ stock market under the tickers SMX and SMXWW, respectively. On July 26, 2022, Security Matters PTY Ltd. and Lionheart, a publicly traded special purpose acquisition company (SPAC), entered into a business combination agreement (the “BCA”) and accompanying scheme implementation deed (“SID”). Under the BCA, the existing Lionheart stockholders received the Company’s shares and warrants in exchange for their existing Lionheart shares and warrants and all shares existed in Security Matters PTY Ltd were cancelled in return for the Company’s shares and resulting in Security Matters PTY Ltd. becoming a wholly owned subsidiary of the Company. Security Matters PTY Ltd. shareholders received consideration of ordinary share per Security Matters PTY Ltd. shares, having an implied value of $ per ordinary share and the Company became the holder of all of the issued shares in Security Matters PTY Ltd. and Lionheart, with Security Matters PTY Ltd. being delisted from the Australian Stock Exchange.
The
Business Combination resulted in
| -7- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 1 – GENERAL (CONT.):
| C. | The Company operates primarily through 8 wholly owned subsidiaries, all of which have been consolidated in these consolidated financial statements. |
| Controlled entity | Country of Incorporation | Percentage Owned June 30, 2023 | Percentage Owned December 31, 2022 | |||||||||
| Security Matters PTY Ltd. (Formerly - Security Matters Limited) | % | |||||||||||
| Lionheart III Corp | % | ** | ||||||||||
| SMX Circular Economy Platform PTE, Ltd. | % | * | ||||||||||
| SMX (Security Matters) Ireland Limited | % | * | ||||||||||
| SMX (Security Matters) Israel Ltd. (Formerly - Security Matters Ltd.) | % | %*** | ||||||||||
| Security Matters Canada Ltd. | % | %*** | ||||||||||
| Security Matters France Ltd. | % | %*** | ||||||||||
| SMX Beverages Pty Ltd. | % | %*** | ||||||||||
In addition, the Company’s has the following investments in associated companies:
| Entity | Country of Incorporation | Percentage Owned June 30, 2023 | Percentage Owned December 31, 2022 | |||||||||
| Yahaloma Technologies Inc. | % | %*** | ||||||||||
| True Gold Consortium Pty Ltd | % | %*** | ||||||||||
The proportion of ownership interest is equal to the proportion of voting power held.
| * |
| ** |
| *** |
| D. | During
the six months ended June 30, 2023, the Company incurred operating losses and negative cash flows from operating activities. The
Company has not yet generated revenues. As discussed in Note 4, during the period, the Company entered into binding loan agreements
with existing shareholders. As discussed in Note 5.1, the Company executed an equity line agreement to raise up to $ |
| -8- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of preparation
These interim consolidated financial statements have been prepared in a condensed format in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual consolidated financial statements as of December 31, 2022 of the Company and of Security Matters PTY Ltd. (formerly - Security Matters Limited).
B. Functional currency
The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company.
C. Application of accounting policies
The Group has applied the same accounting policies and methods of computation in its interim condensed consolidated financial statements as in its 2022 annual financial statements and as in the 2022 annual financial statements of Security Matters PTY Ltd, except as stated below in note 2D and 2E.
Several amendments to IFRS Standards apply for the first time in 2023, but do not have an impact on the interim condensed consolidated financial statements.
D. Issue of a unit of financial instruments
The issue of a unit of financial instruments such as a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issuance costs) to financial derivatives and other financial instruments measured at fair value in each period and to financial liabilities that are measured at amortized cost, with residual allocated to equity instruments. Issuance costs are allocated to each component pro rata to the amounts determined for each component in the unit.
E. Reverse acquisition transaction
The result of the merger between the Company and Security Matters PTY Ltd. as described in Note 1B is that legally the Company owns the entire share capital of Security Matters PTY Ltd.
Accordingly, for financial reporting purposes, Security Matters PTY Ltd. (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY Ltd. and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY Ltd. at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction ($), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $, between the fair value of the shares deemed to have been issued by Security Matters PTY Ltd. and the fair value of the Company’s identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.
| -9- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| E. | Reverse acquisition transaction (Cont.) |
The
Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of
the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($
| 1. | The assets and liabilities of Security Matters PTY Ltd. have been recognized and measured in these consolidated financial statements at their pre-combination carrying amounts. |
| 2. | The retained earnings and other equity balances recognized in those consolidated financial statements are the retained earnings and other equity balances of Security Matters PTY Ltd. immediately before the Business Combination. |
| 3. | The amount recognized as issued equity instruments in these consolidated financial statements has been determined by adding to the issued equity of Security Matters PTY Ltd. immediately before the Business Combination the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly, the equity structure of Security Matters PTY Ltd. (issued capital and addition paid in capital) in comparative periods is restated using the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in the reverse acquisition transaction. |
| 4. | The statement of comprehensive loss reflects that of Security Matters PTY Ltd. for the full period together with the post-acquisition results of the Company from the Closing Date. Loss per share of Security Matters PTY Ltd. for periods prior to the acquisition date is restated such the denominator of the historical loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share calculation by the exchange ratio established in the Business Combination. |
F. Reverse stock split
The presentation of loss per share amounts has been retrospectively adjusted to give effect to the reverse share split which occurred on August 8, 2023. Except otherwise specifically provided, no other adjustments have been made in these notes to reflect the reverse share split. See also Note 9.1.
NOTE 3 – CONVERTIBLE NOTES
On
January 25, 2023, the Company received an amount of $
As part of the Convertible Note agreements, the investor was granted two types of warrants:
| (i) | Bonus
Warrants – warrants to purchase ordinary shares of the Company at an exercise
price of USD |
| (ii) | Redeemable
Warrants – warrants to purchase ordinary shares of the Company at a purchase
price of USD per share. The Redeemable Warrants term is |
The Convertible Notes are recorded in accordance with their fair value. The Redeemable Warrants are accounted for as a derivative financial liability. Management utilized a third-party appraiser to assist them in valuing the Convertible Notes and Redeemable Warrants.
In
order to calculate the fair value of the Convertible Notes, the Company discounted the payment schedule by a discount rate of
The
fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model with expected volatility of and the risk-free
interest rate used is . As of June 30, 2023, the fair value of the Convertible Notes was $
| -10- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 4 – BRIDGE LOANS AND DERIVATIVE FINANCIAL LIABILITY:
Between
August 2022 to January 2023, Security Matters PTY Ltd. entered into bridge loan agreements (the “Bridge Loans”) with eleven
lenders, which lent Security Matters PTY Ltd. an aggregate amount of $
As part of the Bridge Loans agreements, the lenders were granted two types of warrants:
| (iii) | Bonus
Warrants – warrants to purchase ordinary shares of the Company at an exercise
price of USD per share. The Bonus Warrants term is |
| (iv) | Redeemable
Warrants – warrants to purchase ordinary shares of the Company at a purchase
price of USD per share. The Redeemable Warrants term is |
Management
with the assistance of a third-party appraiser valued the Bonus and the Redeemable Warrants. The fair value of the Bonus Warrants was
calculated using the Black-Scholes model. As of June 30, 2023, the fair value of the Bonus Warrants was less than $
The
fair value of the Redeemable Warrants was calculated using Monte-Carlo simulation model. As of June 30, 2023, the fair value of the Redeemable
Warrants was
The
main assumptions used in the three valuation models described above were: (1) risk free rate ; (2) volatility of assets ;
and (3) excepted terms of the warrants -
During
2023, the Company entered into an additional bridge loan agreement (the “Additional Bridge Loans”), in which the Company
raised an aggregate amount of $
| -11- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 5 – MATERIAL EVENTS DURING THE PERIOD
| 1. | The
Company entered in February 2023 into a Standby Equity Purchase Agreement (“SEPA”)
to raise up to $ in consideration of the issuance of ordinary shares over the course of
36 months with Yorkville. According to the SEPA, the Company
may issue Yorkville the ordinary shares at a purchase price as one of two options (i) equal
to |
Yorkville
advanced to the Company an aggregate principal amount of $
| 2. | On
June 22, 2023, the Company entered into an underwriting agreement (the “Underwriting
Agreement”) with EF Hutton, LLC (the “Underwriter”) relating to the public
offering of (i) ordinary shares of the Company, at a subscription price per share
of $ (the “Firm Shares”), (ii) |
The offering closed on June 27, 2023. The Company delivered the Firm Shares (or Firm Share equivalents in the form of Pre-Funded Warrants), the Firm Warrants and the Option Warrants to the Underwriter on the same day.
The
Warrant A terms specify that the warrants may be exercised at any time on or before June 27, 2028. On or after the earlier of (i) the
thirty day anniversary of the date of the Underwriting Agreement and (ii) the date on which the aggregate composite trading volume of
the Company’s ordinary shares as reported by Bloomberg LP beginning on the date of the Underwriting Agreement exceeds
ordinary shares, a holder of Warrant A warrants may also provide notice and elect a “cashless exercise” pursuant to which
the holder would receive an aggregate number of
ordinary shares equal to the product of (x) the aggregate number of ordinary shares that would be issuable upon a cash exercise and (y)
$. As of the date of publication of these financial statements, an aggregate of
| -12- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 5 – MATERIAL EVENTS DURING THE PERIOD (CONT.)
The Warrant B terms specify that the warrants may be exercised at any time on or before June 27, 2028. All of such Warrant B warrants remain outstanding as of the end of period.
Warrant A was valued at $ which is half of the share market price at the end of the period, assuming cashless exercise. Warrants A were considered to be a derivative financial liability. The terms of warrants B specify that each warrant has a cash exercise price of $. Warrant B was valued at $ by using the Black-Scholes option-pricing model, with expected volatility of % and the risk-free interest rate used is %. Warrants A and B expire in June 2028.
The
net proceeds to the Company upon the closing of this offering were approximately $
The
Company also granted to the Underwriter,
warrants at an exercise price of $
per share, which expires after
| 3. | In January 2023, the Company signed an amendment to the agreement with Isorad that determine the following: (1) for the BCA
with Lionheart, (a) Isorad was issued
options to purchase shares of the Company, which options were issued in January 2023 and valued using the Black-Scholes pricing
model, with the main parameters used are: (1) risk-free rate: %;
(2) expected volatility: %:
(3) expected term: up to |
(2)
Exit fee - in the occurrence of the first M&A event (as such event is defined in such agreement to include mergers, sale of all or
substantially all the assets of the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal
to
| 4. | On March 2, 2023, the Company amended its loan agreement dated September 7, 2015, between the Company, its Shareholders and Kamea Fund that postponed the repayment of the borrowings from related party (Bonus Payment) to March 31, 2024 (refer also to Note 9.4 – Subsequent Events). |
| -13- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
A. Share capital:
| Number of shares | ||||||||||||||||
| June 30, 2023 | December 31, 2022 | |||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | |||||||||||||
| Ordinary shares USD 0.0001 par value | ||||||||||||||||
| Preferred shares USD par value | ||||||||||||||||
| Deferred shares Euro par value | ||||||||||||||||
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held.
Preferred shares
preferred shares with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors.
Deferred shares
Deferred Ordinary Shares are non-voting shares and do not convey upon the holder the right to be paid a dividend or to receive notice of or to attend, vote or speak at a general meeting. The Deferred Shares confer the right on a return of capital, on a winding-up or otherwise, only to the repayment of the nominal value paid up on the Deferred Shares after repayment of the nominal value of the Ordinary Shares.
Changes in Share capital
| A. | On March 7, 2023 (the “Closing Date”), the Company consummated the Business Combination pursuant the BCA, dated July 26, 2022, and also consummated the SID, dated July 26, 2022. |
Beginning on the day immediately prior to the Closing Date and ending on the day immediately after the Closing Date, the following transactions occurred:
| 1. | The
AUD |
| 2. | Security
Matters PTY Ltd. performed acceleration of vesting for all unvested warrants and options,
the expense for the acceleration amounted to $ |
| 3. |
| 4. | ordinary shares of the Company have been issued to Security Matters PTY Ltd.’s shareholders in return for their ordinary shares in Security Matters PTY Ltd. that were cancelled. Security Matters PTY Ltd.’s shareholders received as consideration ordinary share of the Company per Security Matters PTY Ltd.’s ordinary shares. |
| 5. | The
Company issued
ordinary shares,
private warrants and
public warrants to Lionheart’s stockholders, in exchange for their existing Lionheart shares and warrants. The warrants
exercise price is $ |
| -14- |
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 6 – SHAREHOLDERS’ EQUITY (CONT.)
| 6. | The Company issued ordinary shares for an aggregate of $ net proceeds. |
| 7. | The Company issued ordinary shares for the conversion of bridge loan at principal amount of $ and redeemable warrants ($ per warrant, , exercise price of $ per share). |
| B. | In
May and June 2023, the Company issued ordinary shares to Yorkville, for an aggregate
of $ |
| C. | In
June 2023, the Company raised capital as part of issuance of a unit of financial instruments
in consideration of an aggregate of $ |
| D. | After the balance sheet date, on August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis, after consolidating every twenty-two ordinary shares of the Company into one ordinary share (see also Note 9.1). |
Incentive Equity Plan
In April 25, 2023, the Company’s board of directors and its shareholders approved and adopted the SMX Public Limited Company 2022 Incentive Equity Plan, which was subsequently amended the Company’s board of directors, subject to applicable Nasdaq requirements, which reserved for grant a number of ordinary shares equal to % of the number of issued and outstanding ordinary shares on a fully diluted basis immediately after the closing of the Business Combination, or authorized ordinary shares.
| 1. | During the six-month period ended June 30, 2023, the Company granted RSUs to employees, directors and service providers. The fair value at grant date of RSUs granted in the period were $-$. The related share-based expenses that were recognized in the period amounted to $. |
RSUs granted to employees, directors and service providers:
Six months period ended June 30, 2023 (in thousands) | Six months period ended June
30, 2022 | |||||||
| Outstanding at beginning of period | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Outstanding at June 30, 2023 | ||||||||
| 2. | During
the six-month period ended June 30, 2023, the Company granted options to employees
and service providers. These grants carry an exercise price of between $ - $, The fair value of the grant at grant date is $ The related share based expenses
that were recognized in the six months period ended June 30, 2023 amounted to $ |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 6 - SHAREHOLDERS’ EQUITY (CONT.)
Options granted to employees and service providers:
Six months period ended June 30, 2023 | ||||||||
Number of options (in thousands) | Weighted average exercise price per share (US$) | |||||||
| Outstanding at beginning of period | ||||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ||||||||
| Outstanding at June 30, 2023 | ||||||||
| Exercisable options at June 30, 2023 | ||||||||
Six months period ended June 30, 2022 | ||||||||
Number of options (in thousands) | Weighted average exercise price per share (US$) | |||||||
| Outstanding at beginning of period | ||||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | ||||||
| Outstanding at June 30, 2022 | ||||||||
| Exercisable options at June 30, 2022 | ||||||||
| Exercise price (US$) | Outstanding as of June 30, 2023 (in thousands) | Weighted average remaining contractual term | Exercisable as of June 30, 2023 (in thousands) | Weighted average remaining contractual term | |||||||||||||
| (years) | (years) | ||||||||||||||||
| - | |||||||||||||||||
| - | |||||||||||||||||
| - | |||||||||||||||||
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 7 – GENERAL AND ADMINISTRATIVE EXPENSES
| Six Months Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| US$ in thousands | US$ in thousands | |||||||
| Transaction cost | ||||||||
| Advertising, Public and Investors Relations | ||||||||
| Share based compensation | ||||||||
| Professional services | ||||||||
| Wages and salaries related | ||||||||
| Travel expenses | ||||||||
| Insurance | ||||||||
| Office and maintenance | ||||||||
| Depreciation and amortization | ||||||||
| Others | ||||||||
| Total | ||||||||
| Six months ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Net loss attributable to the owners of the Company | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ) | $ | *) | ||||
| Weighted average number of ordinary shares | ||||||||
| Weighted average number of ordinary shares used in calculating basic and diluted loss per share (in thousands) | * | |||||||
As a result of the reverse share split described in Note 9.1, the calculation of the basic and diluted loss per share for all periods presented have been adjusted retrospectively based on the new number of shares as derived from the conversion ratio.
| * |
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SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(US$ in thousands except share and per share data)
NOTE 9 – SUBSEQUENT EVENTS
Since the reporting date, the following significant events have occurred:
| 1. | Reverse Stock Split - On August 8, 2023, at the Extraordinary General Meeting of Shareholders of the Company, the Company’s shareholders voted in favor of consolidating every twenty-two ordinary shares in the authorized but unissued and in the authorized and issued share capital of the Company into one ordinary share (the “Reverse Stock Split”). |
On August 21, 2023, the Company’s ordinary shares began trading on the Nasdaq Global Market on a post-Reverse Stock Split basis under the current symbol “SMX”.
Following is a table which presents the loss per share before the change (see also Note 8).
| Six months ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Net loss attributable to the owners of the Company | ( | ) | ( | ) | ||||
| Basic and diluted loss per share | ) | ) | ||||||
| Weighted average number of ordinary shares | ||||||||
| Weighted average number of ordinary shares used in calculating basic and diluted loss per share | ||||||||
| 2. | On
July 27, 2023, the Company amended its Pre-Paid Advance agreement with Yorkville (see
also Note 5.1) evidencing the remaining Pre-Paid Advance to decrease the Floor Price to $ |
| 3. | On
September 6, 2023, the Company consummated the transactions pursuant to a Securities Purchase
Agreement dated as of September 5, 2023 and issued and sold to an institutional investor
a promissory note with a fixed conversion price of $ |
| 4. | On
September 15, 2023, the Company paid $ |
| 5. | On September 19, 2023, the Company amended its loan agreements dated September 7, 2015, by and between the Company, its shareholders and Kamea Fund (the “Loan Agreements”). Pursuant to the amendment to the Loan Agreements, Kamea agreed to convert $ of indebtedness under the Loan Agreements (the “Indebtedness Amount”) into ordinary shares (post Reverse Stock Split) of the Company, as payment in full for the Indebtedness Amount; provided however, that in the event the proceeds received from Kamea with respect to any sales of such shares are not at least equal to the Indebtedness Amount, the Company will remain liable to Kamea for the balance of the Indebtedness Amount. |
| 6. | On October 3, 2023, the Company has signed an agreement with True Gold Consortium Pty Ltd (“TrueGold”) (see also Note 1C) shareholders to acquire an additional 7.5% which will increase the Company’s holdings to 51.9% in TrueGold and result in the Company’s gain control over TrueGold. As part of the agreement and in consideration for the additional 7.5%, it was agreed that the outstanding payables from TrueGold to the Company which amounted to AU$ 475 as of June 30, 2023 (approximately $307) would be forgiven in full.
The transaction is based on past valuation, which was prepared in October 2021, which evaluates TrueGold’s fair value in the range of $78.5 million to $90 million and at a mean of $84.3 million. This past valuation was not audited or reviewed.
As of the agreement’s closing date, both parties agreed to engage an independent third party appraiser to prepare an updated TrueGold valuation as of closing date by November 30, 2023. Accordingly, the Company will recognize in its financial statements the fair value of TrueGold’s assets & liabilities at closing date as will be valued by the independent third party appraiser. Once this valuation will be completed, there may be material differences between TrueGold’s past valuation from October 2021 to the updated valuation. |
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