F-1: SMX Files F-1 for $100M Equity Line Amidst Going Concern Doubts

SMX (Security Matters) Public Limited Company files an F-1 registration statement for the resale of up to 13,025,574 ordinary shares, including those from a new $100 million equity line and convertible notes, amidst significant accumulated losses and going concern uncertainties.

Summary

• The company has filed an F-1 registration statement for the resale of up to 13,025,574 Ordinary Shares by Selling Stockholders.
• This includes shares from a Standby Equity Purchase Agreement (SEPA) for up to $100,000,000 in an equity line of credit, and shares from the conversion of convertible promissory notes totaling $14,375,000 and $6,250,000.
• The company will not receive proceeds from the resale of shares by Selling Stockholders but may receive up to $100,000,000 from sales to the SEPA Investor.
• Auditors have issued an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern for the year ended December 31, 2024.
• Net loss for the six months ended June 30, 2025, was $24,621 thousand, an increase from $10,886 thousand for the same period in 2024.
• Accumulated losses reached $105,664 thousand as of June 30, 2025, up from $82,026 thousand as of December 31, 2024.
• Cash and cash equivalents were $750 thousand as of June 30, 2025.
• The company has undergone multiple reverse stock splits: 1:22 (August 2023), 1:75 (July 2024), 1:28.5 (January 2025), 1:4.1 (June 2025), 1:7 (August 2025), 1:10.89958 (October 2025), and 1:8 (November 2025).
• An arbitration process is ongoing with R&I Trading concerning a terminated $5 million contract, with R&I Trading demanding full restitution.
• The company's loan agreement with Abri Advisors Ltd. for $1,000 thousand is in default as of June 30, 2025, resulting in the outstanding obligation increasing by 150% to $2,115 thousand and accruing 5% monthly interest.
• Strategic collaborations have been announced with Tradepro (plastics recycling), CETI (textile R&D), A*STAR (plastic circularity platform), and Bio-Packaging Pte Ltd (biodegradable packaging).
• The 2022 Incentive Equity Plan has been amended multiple times, significantly increasing the number of authorized Ordinary Shares for grants to employees, executive officers, and directors.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by substantial and increasing net losses, persistent negative cash flows, and an explicit 'going concern' warning from its auditors. A key loan is in default, and the history of numerous aggressive reverse stock splits indicates severe share price depreciation. While strategic collaborations and a significant equity line offer potential, they are heavily overshadowed by immediate liquidity challenges and ongoing litigation, making the financial position highly precarious.

Positives

• Secured a Standby Equity Purchase Agreement (SEPA) for up to $100 million, providing a potential source of future funding.
• Engaged in strategic collaborations with industry leaders like Tradepro, CETI, A*STAR, and Bio-Packaging Pte Ltd, expanding the application of its molecular traceability technology.
• Successfully completed proof-of-concept trials for advanced plastics sorting with RedWave and ethical silver sourcing with Sunshine Minting Inc.
• Achieved 100% success rates in marking 21 tons of natural rubber from tree to tire, validating origin authentication and traceability.
• Developing a Plastic Cycle Token initiative aimed at creating a new market for recyclable plastics credits, potentially surpassing traditional carbon credits.
• Expanded intellectual property portfolio with over 100 patents filed globally, enhancing technological barriers to entry.
• Established SMX Circular Economy FZCO in Dubai, indicating geographic expansion and commitment to circular economy solutions.

Negatives

• The company's financial statements for the year ended December 31, 2024, contain an explanatory paragraph regarding substantial doubt about its ability to continue as a going concern.
• Reported a significant net loss of $24,621 thousand for the six months ended June 30, 2025, an increase of 126% from $10,886 thousand in the same period of 2024.
• Accumulated losses have grown to $105,664 thousand as of June 30, 2025, indicating persistent unprofitability.
• Continues to generate negative cash flows from operations, with $4,145 thousand used in the six months ended June 30, 2025.
• Faces significant accounts payable and other current liabilities totaling $14,451 thousand as of June 30, 2025.
• A loan agreement with Abri Advisors Ltd. for $1,000 thousand is in default as of June 30, 2025, leading to a 150% increase in the outstanding obligation to $2,115 thousand and accruing 5% monthly interest.
• The company has undergone seven reverse stock splits since August 2023, indicating severe and ongoing downward pressure on its share price and challenges in maintaining Nasdaq listing requirements.
• An ongoing arbitration process with R&I Trading over a terminated $5 million contract poses legal and financial uncertainty.
• The Stock Purchase Agreement with Alpha was terminated on May 9, 2025, potentially impacting previous funding arrangements.

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring losses and negative cash flows.
• Significant accounts payable and other current liabilities, and inability to generate sufficient cash flow to meet obligations.
• The market for securities may not continue, adversely affecting liquidity and price volatility.
• Limited operating history makes accurate predictions about future performance difficult.
• Failure to effectively manage growth could adversely affect business, financial condition, and results of operations.
• Termination of the Isorad License Agreement could harm the business, financial condition, and results of operations.
• Failure to effectively penetrate the full value chain manufacturing eco-system.
• Pandemics, public health crises, and lingering effects from the COVID-19 pandemic could adversely affect business.
• Operations in foreign jurisdictions subject to economic, social, or political instability, including ongoing armed conflicts.
• Inability to successfully identify and integrate acquisitions could adversely affect results of operations.
• The industry is competitive, potentially leading to price reductions, reduced margins, or loss of revenues.
• Difficulty retaining current employees and attracting qualified personnel, especially in Israel's high-tech market.
• Inability to anticipate or adapt to consumer preferences may adversely affect business.
• Inability to adapt markers to customer needs or fields due to high research and development tailoring costs.
• Need to raise additional funds (equity, debt, or convertible debt) which may be unavailable on acceptable terms or at all, leading to substantial dilution.
• Legal proceedings, investigations, or claims (e.g., R&I Trading arbitration) may be costly, time-consuming, and harm reputation.
• Markers may contaminate or spoil raw material, damaging reputation and leading to product liability claims.
• Markers may include hazardous materials, posing risks to customers, employees, and supply chain parties, potentially leading to litigation.
• Readers use x-rays and may be dangerous 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.
• Inability to obtain, maintain, protect, or enforce intellectual property and other proprietary rights sufficiently.
• Claims by third parties of intellectual property infringement could adversely affect business.
• Inability to enforce covenants not to compete under applicable employment laws (e.g., Israeli law).
• Changes in laws, regulations, and standards, and failure to comply, may adversely affect financial and operating performance.
• Obligations and changes in laws or regulations relating to privacy, cybersecurity, and data protection could adversely affect business.
• Conditions in Israel and relations between Israel and other countries could adversely affect business operations.
• A large concentration of staff in Israel and military reserve duty requirements may disrupt work.
• Changes in taxation of international business activities, adoption of corporate tax reform policies, or changes in tax legislation 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 Internal Revenue Service may not agree that the Company should be treated 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 could adversely affect financial condition.
• Future changes in U.S. and foreign tax laws could adversely affect the company.
• Irish taxes may apply to any dividends paid or transfers of the company's securities.
• Provisions in the company's Amended and Restated Memorandum and Articles of Association and under Irish law could make an acquisition more difficult.
• The company does not intend to pay dividends for the foreseeable future.
• Significant costs and substantial management time incurred due to U.S. reporting requirements.
• Management has limited experience operating a public company in the United States.
• The stock price of the Ordinary Shares may be volatile.
• Future issuances of additional Ordinary Shares or other equity securities without shareholder approval (due to foreign private issuer status) would dilute ownership interests and may depress the market price.
• Reduced disclosure requirements applicable to emerging growth companies may make the Ordinary Shares less attractive to investors.
• Less publicly available information concerning the company as a foreign private issuer.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses and require GAAP reporting.
• The sale of currently-restricted Ordinary Shares by stockholders, or the perception that such sales may occur, could cause the price of Ordinary Shares to fall.
• Inability to predict the actual number of shares sold under the SEPA or the actual gross proceeds.
• The SEPA has been negotiated so that the SEPA Investor would always purchase Ordinary Shares at a discount to market, potentially disadvantaging public stockholders.
• Investors who buy Ordinary Shares at different times will likely pay different prices and experience different levels of dilution.

Future Outlook

The company anticipates continued net losses and negative cash flows from operations into the foreseeable future, requiring substantial capital infusions to fund operations, repay existing liabilities, and support growth. Future capital requirements are dependent on commercial scaling, R&D costs, intellectual property protection, marketing, and general administrative expenses. While the company expects to secure additional funding through capital raising and shareholder support, there is no assurance that such funding will be available when needed or on acceptable terms. The company may need to delay or reduce the scope of its business strategy if adequate funds are not secured.

Management Comments

• "We envision ourself 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 works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles."
• "The Company believes that its current facilities are suitable and sufficient to meet its anticipated needs for the foreseeable future."
• "The Company believes the termination of the contract 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."
• "The Company is working to maintain discipline on expenses over time."
• "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 anticipates that it will continue to incur net losses into the foreseeable future as it continues its development of its product candidates and expands its corporate infrastructure."

Industry Context

The company positions itself as a next-generation solution provider in the brand protection, authentication, and track-and-trace markets, with a strong focus on the anti-counterfeit and circular economy sectors. Its strategy aligns with increasing consumer and regulatory pressures for sustainability, verifiable sourcing, and ESG compliance across various industries. The development of a 'Plastic Cycle Token' aims to create a new market for recyclable plastics credits, potentially disrupting traditional carbon credit markets. By forming strategic partnerships with market leaders and leveraging its unique molecular marking, reading, and blockchain platform, the company seeks to establish new industry standards and capitalize on the growing demand for supply chain transparency and material efficiency.

Comparison to Industry Standards

• The company positions its technology as a 'next generation solution provider' for brand protection, authentication, and track and trace, aiming to create a 'new market standard' for circular economy solutions.
• The planned 'Plastic Cycle Token' is explicitly 'engineered to supersede traditional carbon credits,' suggesting a disruptive innovation in the ESG investment landscape.
• The company asserts that its 'unique combination of knowledge and features' and 'innovative, cross-segment technology' create a 'barrier to entry to its competitors.'
• The versatility of its technology, capable of detecting embedded data in various materials from metals to fabrics to food and plastics with a single reader, is highlighted as a distinguishing factor from competitors.
• No specific comparable companies or quantitative industry benchmarks are provided for direct comparison of financial performance or market share.

Corporate Governance

Legal Proceedings

• Ongoing arbitration process with R&I Trading of New York regarding a terminated $5 million contract. R&I Trading demands full restitution, while the company alleges breach of contract and seeks damages for loss of opportunities. The company intends to vigorously defend against the claims.
• CEO Haggai Alon is a defendant in a shareholders' claim of ILS 35.9 million related to the collapse of Plat Technologies International Ltd., a former company where he served as deputy general manager. Mr. Alon denies wrongdoing, and the claim is being handled by an insurance policy, with no direct relation to SMX's business.

Related Party Transactions

• **trueGold Consortium Pty Ltd.**: Security Matters PTY (a subsidiary) has a shareholders' agreement with Perth Mint and trueGold. SMX's CEO, Haggai Alon, and Executive Vice President, Zeren Browne, provide CEO and General Manager services to trueGold, respectively. Security Matters PTY's ownership in trueGold increased to 52.9% in July 2024.
• **Bridge Loans**: Between August 2022 and January 2023, Security Matters PTY entered into bridge loan agreements totaling $3,860,000 with eleven lenders, including Doron Afik and Jessica Wasserstrom, who are related parties. Some of these loans were converted into shares and warrants.
• **General Legal Counsel (Jessica L. Wasserstrom, LLC)**: Jessica L. Wasserstrom, principal of the firm, is the Chief Legal Officer of Lionheart Equities, an affiliate of SMX's Chairman. The company paid approximately $300,000 for legal services in 2023, with $100,000 remaining unpaid as of December 31, 2024.
• **Chairman Agreement (Ophir Sternberg)**: Mr. Sternberg, the Chairman of the Board, receives restricted stock units representing 3% of the issued and outstanding Ordinary Shares, vesting over three years, as compensation for his 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.
• **Borrowings From Related Parties (Kibbutz Ketura and Kibbutz Degania A)**: In 2015, SMX Israel received a loan of ILS 2 million (approximately $513 thousand) from these entities, associated with Director Amir Bader. The loan was fully repaid in August 2022. Bonus payments capped at ILS 2.5 million (approximately $710 thousand) were due upon the completion of the business combination.
• **Kamea Fund Loan**: In September 2023, $657 thousand of indebtedness under loan agreements with Kamea Fund was converted into 195 Ordinary Shares.
• **Proof Of Concept Projects Paid By Affiliated Companies**: Affiliated companies reimbursed the company for R&D expenses related to Proof of Concept projects, totaling $1,154,000 in 2024 and $858,000 in 2023.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from ongoing equity issuances under the SEPA and conversion of various notes and warrants. The numerous reverse stock splits indicate substantial value erosion and increased volatility. Reduced corporate governance protections due to the company's foreign private issuer status and reliance on home country practices.
• **Employees, Executive Officers, and Directors**: Benefit from substantial grants of restricted stock units and stock options under the amended 2022 Incentive Equity Plan, providing significant equity-based compensation and retention incentives.
• **Creditors**: The company's financial instability, including a defaulted loan with Abri Advisors Ltd. and ongoing negotiations to extend or convert other liabilities, poses repayment risks. The conversion of debt to equity may reduce immediate cash obligations but shifts risk to equity holders.
• **Customers and Strategic Partners**: Ongoing collaborations and successful proof-of-concept trials demonstrate continued technological development and market engagement. However, the company's going concern uncertainty could raise concerns about long-term service continuity and support.
• **Regulatory Bodies**: The company is subject to SEC reporting requirements (with FPI exemptions), Nasdaq listing standards, Irish company law, and Israeli R&D regulations. Compliance with these frameworks is critical for continued operations and market access.

Next Steps

• Cause the SEPA Form F-1 to be declared effective as soon as practicable to enable the sale of Ordinary Shares under the equity line.
• Draw down up to $5.0 million under the Equity Line after the SEPA Form F-1 becomes effective, with proceeds not required for note repayment.
• Continue negotiations with Abri Advisors to postpone the remainder of the payments due on the defaulted loan.
• Proceed with the ongoing arbitration process with R&I Trading, including exchanging further affidavits and preparing for hearings.
• Launch semi-industrial integration of the A*STAR plastic circularity platform in Q1 2026.
• Conduct a full-scale commercial showcase of the A*STAR platform in Q2 2027.
• Launch the Plastic Cycle Token initiative by the end of 2025.
• Continue to invest significant resources in research and development to improve existing solutions and develop new innovative products.
• Concentrate market penetration efforts into the U.S. market, including recruitment of sales and marketing personnel.
• Engage with additional suppliers and service providers to streamline product development and supply chain.
• Increase participation in professional expos, conventions, and exhibitions.
• Establish partnerships and collaborations with strategic customers and entities in relevant segments.
• Identify and appoint additional Board members to fill vacancies on the audit and compensation committees.
• The Board may strategically effect one or more additional reverse stock splits from time to time without further shareholder approval.

Key Dates

Recommendation

The company's financial position is extremely distressed, evidenced by substantial and increasing net losses, persistent negative cash flows, and an explicit 'going concern' warning from its auditors. A key loan is in default, leading to a significant increase in the outstanding obligation and accruing high interest. The history of multiple aggressive reverse stock splits indicates severe and ongoing share price depreciation, which is likely to continue with further dilution from the newly secured $100 million equity line and convertible notes. While strategic collaborations and technology development are positive, they are far outweighed by the immediate and severe financial risks, making the stock a highly speculative investment with significant downside potential and a high probability of further value erosion.

Keywords

Molecular traceability, Brand protection, Anti-counterfeit, Circular economy, ESG, Supply chain integrity, Plastics recycling, Natural rubber, Gold tracing, Blockchain, SEC F-1, Equity line, Convertible notes, Going concern, Nasdaq, Reverse stock split, Intellectual property, Financial distress