F-1/A: SMX Faces Going Concern Doubts Amidst Mounting Losses and Continuous Capital Raises

SMX (Security Matters) Public Limited Company reported a significant net loss of $35.4 million in 2024, accumulating $82 million in losses since inception, raising substantial doubt about its ability to continue as a going concern, despite ongoing capital raising efforts and technological advancements.

Summary

• SMX (Security Matters) Public Limited Company incurred a net loss of $35,401 thousand for the year ended December 31, 2024, an increase from $20,989 thousand in 2023 and $6,184 thousand in 2022.
• The company has accumulated losses of $82 million as of December 31, 2024, and continues to generate negative cash flows from operations, leading to substantial doubt about its ability to continue as a going concern.
• Operating loss for 2024 was $27,865 thousand, an improvement from $36,741 thousand in 2023, primarily due to a one-time listing expense in 2023.
• General and administrative expenses decreased by 23% to $12,729 thousand in 2024, while research and development expenses increased by 13% to $3,059 thousand, and selling and marketing expenses increased by 50% to $992 thousand.
• The company recognized $11,085 thousand in impairment and amortization of intangible assets, technology assets, and goodwill in 2024.
• SMX had $2,343 thousand in cash and cash equivalents as of December 31, 2024, and has raised an additional approximately $1,625 thousand in funding since that date.
• Outstanding liabilities as of December 31, 2024, include approximately $9,221 thousand in existing payables related to the Business Combination, $8,717 thousand due to other lenders and investors, and $2,781 thousand in other payables (employee salaries, suppliers).
• The company has undertaken multiple capital raises, including a RBW Purchase Agreement for up to $5.5 million gross proceeds (principal $6,875,000), a March 2025 Note for $257,000 gross proceeds, and a shelf registration statement on Form F-3 for up to $45,000,000 of securities.
• SMX's technology provides brand protection, authentication, and track-and-trace solutions using physical/chemical markers, readers, and a blockchain digital platform, applicable across industries like plastics, rubber, metals, fashion, and electronics.
• The company successfully completed a proof of concept for ethical sourcing and authentication of 2.2 tons of silver in cooperation with Sunshine Minting Inc. in April 2024.
• SMX is currently engaged in an arbitration process with R&I Trading regarding a terminated $5 million contract, with R&I Trading demanding full restitution and SMX alleging breach and seeking relief for damages and loss of opportunities.
• The company has undergone several reverse stock splits: 1:22 on August 21, 2023; 1:75 on July 15, 2024; 1:28.5 on January 15, 2025; and 1:4.1 on June 16, 2025, to maintain Nasdaq listing compliance.
• SMX is an emerging growth company and a foreign private issuer, taking advantage of certain exemptions from U.S. public company disclosure and corporate governance requirements.

Sentiment

Score: 2

Explanation: The company is in a highly precarious financial position, evidenced by substantial accumulated losses, negative cash flows, and an explicit 'going concern' warning from its auditors. While there are positive technological developments and ongoing efforts to secure funding and partnerships, the fundamental financial instability and reliance on continuous capital raises for survival outweigh these positives, indicating a very high risk profile.

Positives

• The company's operating loss improved from $36,741 thousand in 2023 to $27,865 thousand in 2024, partly due to the absence of one-time listing expenses incurred in 2023.
• Research and development expenses increased by 13% to $3,059 thousand in 2024, indicating continued investment in technology and product development.
• Selling and marketing expenses increased by 50% to $992 thousand in 2024, reflecting efforts to expand market penetration and build a professional sales team.
• Successful completion of a proof of concept for ethical sourcing and authentication of 2.2 tons of silver in cooperation with Sunshine Minting Inc., demonstrating 100% success rates in tracking silver from raw material to final products and recycling loops.
• Announced a new solution in July 2024 to deliver a centralized blockchain reporting system for supply chain data in the Natural Rubber industry, focusing on ethical sourcing, origination, and brand authentication.
• Achieved integration of its markers in NFC and RFID chips by December 2024, identifying potential for use in wearable technology and active wear.
• The company's technology is applicable across multiple industries (plastics, rubber, metals, fashion, electronics, alcoholic beverages, diamonds), offering a versatile solution.
• Strategic partnerships with market leaders are part of the company's strategy to become an industry standard.
• The company has successfully raised additional capital through various funding agreements and convertible notes, including $2,750 thousand from the RBW Purchase Agreement as of the filing date, and approximately $1,625 thousand since December 31, 2024.

Negatives

• The company reported a net loss of $35,401 thousand for the year ended December 31, 2024, a significant increase from $20,989 thousand in 2023.
• Accumulated losses reached $82 million as of December 31, 2024, indicating a history of unprofitability.
• The financial statements for the year ended December 31, 2024, contain an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern.
• The company has not historically generated sufficient cash flow from operations to repay indebtedness and fund liquidity needs, relying heavily on external funding.
• Significant accounts payable and accrued liabilities of approximately $13,782 thousand as of December 31, 2024, along with other outstanding liabilities totaling over $20 million.
• The company recognized $11,085 thousand in impairment and amortization of intangible assets, technology assets, and goodwill in 2024, indicating a reduction in asset value.
• Finance expenses increased by 71% to $13,493 thousand in 2024, primarily due to revaluation of bridge loans and convertible notes, and foreign currency changes.
• The company is currently engaged in an arbitration process with R&I Trading over a terminated $5 million contract, which could result in significant costs and reputational damage.
• The company has undergone multiple reverse stock splits (1:22, 1:75, 1:28.5, 1:4.1) in a short period, indicating persistent issues with maintaining Nasdaq's minimum bid price requirement.
• The non-binding Heads of Agreement with Ybyr Capital S.A. has not been finalized, and there is no assurance that definitive documents will be executed or a transaction consummated.
• The company terminated the Alpha Stock Purchase Agreement on May 9, 2025, which had committed Alpha to purchase up to $30,000,000 of ordinary shares.

Risks

• Substantial doubt about the company's ability to continue as a going concern, which may prevent obtaining new financing on reasonable terms.
• Significant accounts payable and other current liabilities, which could reduce financial flexibility and increase interest expenses.
• Dependence on future capital raises (equity, debt, or convertible debt) to fund operations and growth, which may not be available on acceptable terms or at all, leading to potential dilution for existing shareholders.
• Volatility in the trading price of securities due to general market conditions, company performance, and potential delisting from Nasdaq.
• Risk of delisting from Nasdaq if continued listing standards are not met, leading to reduced liquidity and trading activity.
• Limited operating history makes it difficult to predict future performance and assess business prospects.
• Failure to effectively manage growth, integrate new employees and technologies, or attract/maintain business partners could adversely affect operations.
• Insufficient manufacturing capabilities for markers and readers, potentially delaying product shipments and hindering growth.
• Difficulty in finding and retaining qualified personnel, especially in Israel's high-tech employment atmosphere, which may slow growth and increase costs.
• Slow legislation or changes in priorities regarding sustainability and circular economy policies could slow growth.
• Long sales cycles with large international market-maker conglomerates, with a risk of efforts being lost due to unforeseen circumstances.
• Termination of the Isorad License Agreement could harm business, financial condition, and results of operations, as it is the cornerstone of technological developments.
• Failure to penetrate the full value chain manufacturing eco-system effectively due to time, cost, funding, or personnel limitations.
• Pandemics, public health crises, or lingering effects of COVID-19 could adversely affect business, financial condition, and liquidity.
• Risks associated with operating in foreign jurisdictions, including economic, social, or political instability, currency fluctuations, and changes in laws.
• Inability to successfully identify and integrate acquisitions, leading to unanticipated liabilities, disruption, and dissipation of management resources.
• Intense competition in the track and trace and anti-counterfeit industry, potentially leading to price reductions, reduced margins, or loss of revenues.
• Inability to anticipate or adapt to consumer preferences, affecting future revenues and performance.
• Inability to adapt markers to the specific needs of customers or fields due to high tailoring costs.
• Legal proceedings, investigations, or claims (e.g., R&I Trading arbitration, Plat Claim) may be costly, time-consuming, and harm reputation.
• Risk of markers contaminating or spoiling raw materials, leading to product liability claims and reputational damage.
• Risk of hazardous materials in markers causing harm to customers or employees, leading to litigation.
• Readers using x-rays may pose danger if tampered with or misused, potentially leading to legal actions.
• Inability to procure adequate insurance or insufficient coverage for potential losses.
• Risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure.
• Difficulty in obtaining, maintaining, protecting, or enforcing intellectual property rights, and risk of infringing on third-party IP.
• Inability to enforce covenants not to compete under applicable employment laws (e.g., Israeli law).
• Changes in laws, regulations, and standards relating to privacy, cybersecurity, and data protection could increase operational costs or prevent service provision.
• Conditions in Israel and relations between Israel and other countries could adversely affect business operations, including military conflicts and economic boycotts.
• A large concentration of staff in Israel, with military reserve duty requirements, may disrupt work.
• Changes in taxation of international business activities or corporate tax reform policies could impact financial position.
• U.S. holders owning 10% or more of equity interests may be subject to adverse U.S. federal income tax consequences under controlled foreign corporation (CFC) rules.
• Risk of being classified as a passive foreign investment company (PFIC) for any taxable year, resulting in adverse U.S. federal income tax consequences to U.S. investors.
• The IRS may challenge the company's status as a non-U.S. corporation for U.S. federal income tax purposes.
• Unanticipated changes in effective tax rates or adverse outcomes from tax return examinations.
• Irish taxes may apply to dividends paid or transfers of securities.
• Provisions in the company's Articles of Association and Irish law could make an acquisition more difficult or limit shareholder actions.
• The company does not intend to pay dividends for the foreseeable future.
• Significant costs and management time incurred due to U.S. reporting requirements.
• Management's limited experience in operating a U.S. public company.
• Future issuances of debt or equity securities may adversely affect the company and dilute existing shareholders.
• Reduced disclosure requirements as an emerging growth company may make shares less attractive to investors.
• Less publicly available information as a foreign private issuer may make shares less attractive.
• Loss of foreign private issuer status could result in significant additional costs and expenses, including GAAP reporting requirements.
• Sale of currently-restricted Ordinary Shares by stockholders, or the perception of such sales, could cause the share price to fall.

Future Outlook

The company expects to continue incurring net losses and negative cash flows in the foreseeable future as it develops products and expands corporate infrastructure. Future capital requirements depend on commercial scaling, R&D costs, intellectual property protection, marketing, and general administrative expenses. The company anticipates satisfying future cash needs through capital raising and shareholder financial support, but cannot assure that additional funding will be available on acceptable terms or at all. The planned launch of a plastic cycle token by the end of 2025 aims to create a reliable, ethical digital credit platform.

Management Comments

• "We envision our self as the next generation solution provider of brand protection, authentication and track and trace technology for the anti-counterfeit market."
• "Our vision is to build confidence in the era of the digital economy, enabling parties to maintain trust in physical assets and processes."
• "We believe our solution is the next generation for sustainability and the circular economy."
• "Our technology seeks to enable global companies across various industries to transition more successfully to a sustainable circular economy."
• "The Company believes the termination of the contract [with R&I Trading] is unlawful and has demanded that R&I Trading honor its obligations under the contract."
• "The Company further believes R&I Trading's claims are without merit and intends to defend any action, if and when commenced, vigorously."
• "We believe negotiations [with Ybyr Capital S.A.] are continuing, we can no longer give any assurance that definitive documents will ever be negotiated, executed or delivered, or that a transaction will ever be consummated."
• "Our 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."
• "This versatility across materials sets the Company's technology apart from competitors."
• "To date, we have not seen substantial revenue from our technology sales. This is partly because our focus has been on creating a seamless onboarding process for multinational clients, establishing a solid foundation to become an industry standard, and ensuring readiness for a full and rapid deployment as a global commercial service."
• "The Company is working to maintain discipline on expenses over time."
• "The Company expects that its research and development expenses will increase as the Company continues to develop its products and recruit additional research and development employees."
• "The Company expects to fund the payment of such amounts [outstanding liabilities] out of ongoing activities of the Company and other capital raisings the Company is pursuing in 2025."
• "Our financial statements for the year ended December 31, 2024 contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. This going concern assessment may prevent us from obtaining new financing on reasonable terms, if at all, and imperil our ability to continue operating as a going concern."
• "The Company's outstanding warrants are generally either out of money or have nominal exercise prices; accordingly, the Company does not expect to raise any material additional funds from the exercise of outstanding warrants in at least the short-term."

Industry Context

SMX operates in the growing brand protection, anti-counterfeit, and supply chain integrity markets, with a strong focus on sustainability and the circular economy. Its technology, which integrates chemistry, physics, and computer science with blockchain, positions it as a potential leader in verifying material provenance and enabling recycling. The company aims to capitalize on increasing consumer and regulatory pressure for ESG compliance and net-zero carbon emissions, particularly in high-pollution materials like plastics and rubber. While the industry is competitive, SMX believes its innovative, cross-segment technology and collaborative relationships with market leaders provide a barrier to entry for competitors. The planned plastic cycle token initiative aligns with global efforts to increase recycling rates and create new ESG investment paradigms, potentially positioning it as an alternative to carbon credits.

Comparison to Industry Standards

• The company's technology is described as 'next generation' for sustainability and the circular economy, aiming to create a new market standard for brand authentication and supply chain integrity.
• SMX's ability to detect embedded data in various materials (metals, fabrics, food, plastics) with one reader and log all data onto the same digital platform is highlighted as a key differentiator from competitors.
• The successful marking of 21 tons of natural rubber from 'tree to tire' with 100% success rates for origin authentication and full traceability demonstrates a robust solution for a critical supply chain, setting a high bar for verification technology.
• The planned plastic cycle token is positioned as a 'next-generation alternative to carbon credits,' aiming to capitalize on a market valued at over $40 billion, suggesting an ambition to lead in a new segment of the ESG investment landscape.
• The company's focus on 'large international market-maker conglomerates' for sales efforts indicates a strategy to establish its technology as an industry standard through adoption by influential players, rather than direct consumer targeting.
• The company's over 100 patent applications worldwide are presented as a 'barrier to entry' for competitors, suggesting a strong intellectual property portfolio compared to industry peers.

Corporate Governance

Legal Proceedings

• The company is currently engaged in an arbitration process with R&I Trading of New York regarding a disputed $5 million contract. R&I Trading demands full restitution, while the company alleges breach of contract and seeks relief for expenses and loss of opportunities. The outcome is currently not possible to assess.
• The company's CEO, Haggai Alon, is a defendant in an ILS 35.9 million shareholders claim (Plat Claim) related to the collapse of Plat Technologies International Ltd, where he previously worked. The claim is being handled by an insurance policy, and Mr. Alon denies wrongdoing. The company is not a party to this claim.

Related Party Transactions

• **trueGold Consortium Pty Ltd.:** Security Matters PTY (a wholly-owned subsidiary of SMX) has an exclusive, worldwide, perpetual license to use SMX's technology for gold commercialization. SMX's ownership in trueGold increased to 51.9% on October 3, 2023, and further to 52.9% on July 10, 2024, through the waiver of AUD475,000 indebtedness and PMB Partners LP exchanging shares. SMX's CEO, Haggai Alon, provides CEO services to trueGold, and Zeren Browne provides General Manager services.
• **Bridge Loans:** Between August 2022 and January 2023, Security Matters PTY and the company borrowed an aggregate of $3,860,000 from private investors, including Doron Afik and Jessica Wasserstrom. These loans carried a 10% annual interest rate and included warrants. Portions of these loans were converted into ordinary shares and warrants in March and December 2023, and July 2024. As of December 31, 2024, $728,000 in principal and accumulated interest remained outstanding.
• **Jessica L. Wasserstrom, LLC (Wasserstrom):** This firm, whose principal Jessica Wasserstrom is Chief Legal Officer of Lionheart Equities (an affiliate of SMX's Chairman Ophir Sternberg), provided legal services to Lionheart. For the year ended December 31, 2023, the company paid Wasserstrom approximately $300,000 in cash, ordinary shares, and warrants. As of December 31, 2024, $100,000 remains unpaid.
• **Chairman Agreement (Ophir Sternberg):** Mr. Sternberg, Chairman of the Board, receives restricted stock units representing 3% of the issued and outstanding Ordinary Shares as of the grant date, vesting over three years, with accelerated vesting upon certain terminations. He receives no cash compensation for his board service.
• **Independent Contractor Agreement (Faquiry Diaz Cala):** Mr. Diaz Cala receives an annual compensation of $84,000 and restricted stock units representing 1% of the issued and outstanding Ordinary Shares, vesting over three years, with accelerated vesting upon certain terminations.
• **Kamea Fund (Kibbutz Ketura and Kibbutz Degania A):** In 2015, SMX Israel received a loan of ILS 2 million (approx. $513,000) from these entities, associated with director Amir Bader. The loan was fully repaid in August 2022. The company agreed to bonus payments capped at ILS 2.5 million (approx. $710,000) upon the Business Combination's completion, which was later postponed. In September 2023, Kamea converted $657,000 of indebtedness into 55 Ordinary Shares.
• **Proof of Concept Projects Paid By Affiliated Companies:** Affiliated companies reimbursed the company for POC projects, amounting to $1,154,000 in 2024 and $858,000 in 2023.

Stakeholder Impact

• **Shareholders:** Face significant dilution risk from ongoing and future equity capital raises, especially given the company's practice of not seeking shareholder approval for certain large issuances. The multiple reverse stock splits have drastically reduced the number of outstanding shares, potentially impacting per-share value and liquidity. The 'going concern' warning poses a substantial risk of complete loss of investment. Existing warrants and options could lead to further dilution upon exercise.
• **Employees:** The company's continued growth and ability to meet strategic objectives depend on retaining current employees and attracting qualified personnel, which is challenging in a competitive market. The current financial instability and 'going concern' doubt could impact employee morale and retention.
• **Customers:** The company's ability to provide proper service and pursue business opportunities may be impaired if it cannot secure adequate financing. Ongoing legal disputes, such as the R&I Trading arbitration, could affect customer confidence and future contracts.
• **Suppliers/Creditors:** The company has significant outstanding payables and liabilities, raising concerns about its ability to meet financial obligations. Negotiations to extend debt terms or convert liabilities into equity indicate financial strain that could impact suppliers and creditors.
• **Regulatory Authorities:** The company's status as an emerging growth company and foreign private issuer allows for reduced disclosure and corporate governance requirements, which may be scrutinized. Non-compliance with Nasdaq listing rules has led to deficiency letters, requiring active management to maintain listing.

Next Steps

• Continue negotiations to finalize principle deal terms and draft definitive transaction documents for the non-binding Heads of Agreement with Ybyr Capital S.A.
• Defend vigorously against R&I Trading's arbitration claims and pursue its own claims for breach of contract, loss of opportunities, and declaratory relief.
• Continue to raise additional funds through equity, debt, or convertible debt financings to fund day-to-day operations and support growth.
• Pursue commercial scaling and initial deployment of technology, along with ongoing research and development activities.
• Continue efforts to file, prosecute, enforce, and defend patent claims and other intellectual property rights.
• Potentially contract with third parties to provide marketing and distribution services or build internal capacities.
• Manage general and administrative expenses to maintain financial discipline.
• Monitor and comply with Nasdaq listing standards to avoid delisting.
• Launch the plastic cycle token initiative, scheduled for release in late 2025.
• Continue to advance innovative technology and commercialization efforts by engaging with additional suppliers and service providers, increasing marketing and sales activities, and establishing strategic partnerships.

Key Dates

Keywords

Brand Protection, Anti-Counterfeit, Supply Chain Integrity, Track and Trace, Circular Economy, Sustainability, Blockchain, Physical Markers, X-ray Readers, ESG Compliance, Intellectual Property, SEC Filing, F-1/A, Nasdaq, Convertible Notes, Warrants, Going Concern, Financial Technology, Materials Science, Digital Twin