true 0001940674 POS AM P6M 0001940674 2023-01-01 2023-12-31 0001940674 dei:BusinessContactMember 2023-01-01 2023-12-31 0001940674 2023-12-31 0001940674 2022-12-31 0001940674 2022-01-01 2022-12-31 0001940674 2021-01-01 2021-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2022-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2022-12-31 0001940674 ifrs-full:RetainedEarningsMember 2022-12-31 0001940674 ifrs-full:EquityAttributableToOwnersOfParentMember 2022-12-31 0001940674 ifrs-full:NoncontrollingInterestsMember 2022-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2021-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2021-12-31 0001940674 ifrs-full:RetainedEarningsMember 2021-12-31 0001940674 2021-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2020-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2020-12-31 0001940674 ifrs-full:RetainedEarningsMember 2020-12-31 0001940674 2020-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2023-01-01 2023-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2023-01-01 2023-12-31 0001940674 ifrs-full:RetainedEarningsMember 2023-01-01 2023-12-31 0001940674 ifrs-full:EquityAttributableToOwnersOfParentMember 2023-01-01 2023-12-31 0001940674 ifrs-full:NoncontrollingInterestsMember 2023-01-01 2023-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2022-01-01 2022-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2022-01-01 2022-12-31 0001940674 ifrs-full:RetainedEarningsMember 2022-01-01 2022-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2021-01-01 2021-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2021-01-01 2021-12-31 0001940674 ifrs-full:RetainedEarningsMember 2021-01-01 2021-12-31 0001940674 SMX:IssuedAndAdditionalPaidInCapitalMember 2023-12-31 0001940674 SMX:ForeignCurrencyTranslationMember 2023-12-31 0001940674 ifrs-full:RetainedEarningsMember 2023-12-31 0001940674 ifrs-full:EquityAttributableToOwnersOfParentMember 2023-12-31 0001940674 ifrs-full:NoncontrollingInterestsMember 2023-12-31 0001940674 ifrs-full:OrdinarySharesMember SMX:SecurityMattersPTYLtdMember 2022-07-26 0001940674 SMX:LionheartMember SMX:BusinessCombinationAgreementMember 2022-07-26 2022-07-26 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-03 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-03 2023-10-03 0001940674 SMX:EquityLineAgreementMember 2023-01-01 2023-12-31 0001940674 SMX:EquityPurchaseAgreementMember ifrs-full:EnteringIntoSignificantCommitmentsOrContingentLiabilitiesMember 2024-04-01 0001940674 SMX:EquityLineAgreementMember 2023-12-31 0001940674 ifrs-full:BottomOfRangeMember 2023-01-01 2023-12-31 0001940674 ifrs-full:TopOfRangeMember 2023-01-01 2023-12-31 0001940674 SMX:NatoAgreementMember 2023-01-01 2023-12-31 0001940674 SMX:SecurityMattersSmxPlcMember 2023-01-01 2023-12-31 0001940674 SMX:SecurityMattersPTYLtdMember 2022-01-01 2022-12-31 0001940674 SMX:SecurityMattersPTYLtdMember 2023-01-01 2023-12-31 0001940674 SMX:LionheartIIICorpMember 2023-01-01 2023-12-31 0001940674 SMX:SMXCircularEconomyPlatformPTELtdMember 2023-01-01 2023-12-31 0001940674 SMX:SMXIrelandLimitedMember 2023-01-01 2023-12-31 0001940674 SMX:SMXFashionAndLuxuryMember 2023-01-01 2023-12-31 0001940674 SMX:TrueSilverSMXPlatformLtdMember 2023-01-01 2023-12-31 0001940674 SMX:SMXIsraelLtdMember 2023-01-01 2023-12-31 0001940674 SMX:SMXIsraelLtdMember 2022-01-01 2022-12-31 0001940674 SMX:SecurityMattersCanadaLtdMember 2023-01-01 2023-12-31 0001940674 SMX:SecurityMattersCanadaLtdMember 2022-01-01 2022-12-31 0001940674 SMX:SMXBeveragesPtyLtdMember 2023-01-01 2023-12-31 0001940674 SMX:SMXBeveragesPtyLtdMember 2022-01-01 2022-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-01-01 2023-12-31 0001940674 SMX:YahalomaTechnologiesIncMember 2023-01-01 2023-12-31 0001940674 SMX:YahalomaTechnologiesIncMember 2022-01-01 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember 2023-01-01 2023-12-31 0001940674 ifrs-full:MachineryMember 2023-01-01 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember 2023-01-01 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember 2023-01-01 2023-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-03 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-03 2023-10-03 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-02 2023-10-02 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-10-03 2023-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-01-01 2023-10-02 0001940674 SMX:SpecialPurposeAcquisitionCompanyMember 2022-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember ifrs-full:GrossCarryingAmountMember 2022-12-31 0001940674 ifrs-full:MachineryMember ifrs-full:GrossCarryingAmountMember 2022-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember ifrs-full:GrossCarryingAmountMember 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember ifrs-full:GrossCarryingAmountMember 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember 2022-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember ifrs-full:GrossCarryingAmountMember 2023-01-01 2023-12-31 0001940674 ifrs-full:MachineryMember ifrs-full:GrossCarryingAmountMember 2023-01-01 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember ifrs-full:GrossCarryingAmountMember 2023-01-01 2023-12-31 0001940674 ifrs-full:ComputerEquipmentMember ifrs-full:GrossCarryingAmountMember 2023-01-01 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember 2023-01-01 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember ifrs-full:GrossCarryingAmountMember 2023-12-31 0001940674 ifrs-full:MachineryMember ifrs-full:GrossCarryingAmountMember 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember ifrs-full:GrossCarryingAmountMember 2023-12-31 0001940674 ifrs-full:ComputerEquipmentMember ifrs-full:GrossCarryingAmountMember 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember SMX:AccumulatedDepreciationMember 2022-12-31 0001940674 ifrs-full:MachineryMember SMX:AccumulatedDepreciationMember 2022-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember SMX:AccumulatedDepreciationMember 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember SMX:AccumulatedDepreciationMember 2022-12-31 0001940674 SMX:AccumulatedDepreciationMember 2022-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember SMX:AccumulatedDepreciationMember 2023-01-01 2023-12-31 0001940674 ifrs-full:MachineryMember SMX:AccumulatedDepreciationMember 2023-01-01 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember SMX:AccumulatedDepreciationMember 2023-01-01 2023-12-31 0001940674 ifrs-full:ComputerEquipmentMember SMX:AccumulatedDepreciationMember 2023-01-01 2023-12-31 0001940674 SMX:AccumulatedDepreciationMember 2023-01-01 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember SMX:AccumulatedDepreciationMember 2023-12-31 0001940674 ifrs-full:MachineryMember SMX:AccumulatedDepreciationMember 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember SMX:AccumulatedDepreciationMember 2023-12-31 0001940674 ifrs-full:ComputerEquipmentMember SMX:AccumulatedDepreciationMember 2023-12-31 0001940674 SMX:AccumulatedDepreciationMember 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember 2023-12-31 0001940674 ifrs-full:MachineryMember 2023-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember 2023-12-31 0001940674 ifrs-full:ComputerEquipmentMember 2023-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember ifrs-full:GrossCarryingAmountMember 2021-12-31 0001940674 ifrs-full:MachineryMember ifrs-full:GrossCarryingAmountMember 2021-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember ifrs-full:GrossCarryingAmountMember 2021-12-31 0001940674 ifrs-full:ComputerEquipmentMember ifrs-full:GrossCarryingAmountMember 2021-12-31 0001940674 ifrs-full:GrossCarryingAmountMember 2021-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember ifrs-full:GrossCarryingAmountMember 2022-01-01 2022-12-31 0001940674 ifrs-full:MachineryMember ifrs-full:GrossCarryingAmountMember 2022-01-01 2022-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember ifrs-full:GrossCarryingAmountMember 2022-01-01 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember ifrs-full:GrossCarryingAmountMember 2022-01-01 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember 2022-01-01 2022-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember SMX:AccumulatedDepreciationMember 2021-12-31 0001940674 ifrs-full:MachineryMember SMX:AccumulatedDepreciationMember 2021-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember SMX:AccumulatedDepreciationMember 2021-12-31 0001940674 ifrs-full:ComputerEquipmentMember SMX:AccumulatedDepreciationMember 2021-12-31 0001940674 SMX:AccumulatedDepreciationMember 2021-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember SMX:AccumulatedDepreciationMember 2022-01-01 2022-12-31 0001940674 ifrs-full:MachineryMember SMX:AccumulatedDepreciationMember 2022-01-01 2022-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember SMX:AccumulatedDepreciationMember 2022-01-01 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember SMX:AccumulatedDepreciationMember 2022-01-01 2022-12-31 0001940674 SMX:AccumulatedDepreciationMember 2022-01-01 2022-12-31 0001940674 ifrs-full:LeaseholdImprovementsMember 2022-12-31 0001940674 ifrs-full:MachineryMember 2022-12-31 0001940674 SMX:FurnitureAndOfficeEquipmentMember 2022-12-31 0001940674 ifrs-full:ComputerEquipmentMember 2022-12-31 0001940674 SMX:YahalomaTechnologiesIncMember 2023-01-01 2023-12-31 0001940674 SMX:YahalomaTechnologiesIncMember 2022-01-01 2022-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2023-01-01 2023-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2022-01-01 2022-12-31 0001940674 SMX:TrueGoldConsortiumPtyLtdMember 2021-12-23 2021-12-24 0001940674 SMX:SMXBeveragesPtyLtdMember 2021-12-23 2021-12-24 0001940674 SMX:SMXBeveragesPtyLtdMember 2021-12-24 0001940674 SMX:GlobalBevCoPtyLtdMember SMX:ConsultingAgreementMember 2021-12-23 2021-12-24 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:LicencesMember 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember SMX:TechnologyLicenseMember 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2023-01-01 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:LicencesMember 2023-01-01 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember SMX:TechnologyLicenseMember 2023-01-01 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:LicencesMember 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember SMX:TechnologyLicenseMember 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:LicencesMember 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember SMX:TechnologyLicenseMember 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2023-01-01 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:LicencesMember 2023-01-01 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember SMX:TechnologyLicenseMember 2023-01-01 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember 2023-01-01 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:LicencesMember 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember SMX:TechnologyLicenseMember 2023-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember 2023-12-31 0001940674 ifrs-full:CapitalisedDevelopmentExpenditureMember 2023-12-31 0001940674 ifrs-full:LicencesMember 2023-12-31 0001940674 SMX:TechnologyLicenseMember 2023-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2021-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:LicencesMember 2021-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2022-01-01 2022-12-31 0001940674 ifrs-full:GrossCarryingAmountMember ifrs-full:LicencesMember 2022-01-01 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2021-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:LicencesMember 2021-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember 2021-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:CapitalisedDevelopmentExpenditureMember 2022-01-01 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember ifrs-full:LicencesMember 2022-01-01 2022-12-31 0001940674 SMX:AccumulatedDepreciationAmortisationMember 2022-01-01 2022-12-31 0001940674 ifrs-full:CapitalisedDevelopmentExpenditureMember 2022-12-31 0001940674 ifrs-full:LicencesMember 2022-12-31 0001940674 ifrs-full:OtherIntangibleAssetsMember SMX:SMXBeveragesPtyLtdMember 2023-12-31 0001940674 ifrs-full:OtherIntangibleAssetsMember SMX:SMXBeveragesPtyLtdMember 2023-01-01 2023-12-31 0001940674 SMX:ConvertibleNotesMember 2023-01-24 2023-01-25 0001940674 SMX:ConvertibleNotesMember 2023-01-25 0001940674 ifrs-full:OrdinarySharesMember 2023-01-25 0001940674 SMX:ConvertibleNotesMember ifrs-full:OrdinarySharesMember 2023-01-24 2023-01-25 0001940674 SMX:ConvertibleNoteAgreementsMember SMX:BonusWarrantsMember 2023-01-24 2023-01-25 0001940674 SMX:ConvertibleNoteAgreementsMember SMX:RedeemableWarrantsMember 2023-01-24 2023-01-25 0001940674 SMX:ConvertibleNoteAgreementsMember SMX:RedeemableWarrantsMember 2023-01-25 0001940674 SMX:RedeemableWarrantsMember 2023-01-24 2023-01-25 0001940674 2022-05-01 2022-05-31 0001940674 2022-05-31 0001940674 SMX:ConvertibleNotesAgreementsMember 2022-07-31 0001940674 ifrs-full:MajorOrdinaryShareTransactionsMember 2023-03-07 0001940674 SMX:SecuritiesPurchaseAgreementMember 2023-09-06 2023-09-06 0001940674 SMX:SecuritiesPurchaseAgreementMember SMX:WarrantAMember 2023-09-06 0001940674 SMX:SecuritiesPurchaseAgreementMember 2023-09-06 0001940674 SMX:SecuritiesPurchaseAgreementMember SMX:PromissoryNoteMember 2023-12-31 0001940674 SMX:SecuritiesPurchaseAgreementMember 2023-12-31 0001940674 2024-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:ElevenLendersMember 2022-08-01 2023-01-31 0001940674 ifrs-full:TopOfRangeMember SMX:BridgeLoanAgreementsMember 2022-08-01 2023-01-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-01-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:BonusWarrantsMember 2023-01-01 2023-12-31 0001940674 SMX:NonadjustingEventMember SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember 2022-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember SMX:ThirdAnniversaryMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember SMX:FourthAnniversaryMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember SMX:FourthAnniversaryMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember SMX:MonteCarloSimulationModelMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeOneMember SMX:MonteCarloSimulationModelMember 2022-01-01 2022-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:FirstAnniversaryMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:FirstAnniversaryMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:SecondAnniversaryMember 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:SecondAnniversaryMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:MonteCarloSimulationModelMember 2023-01-01 2023-12-31 0001940674 SMX:BridgeLoanAgreementsMember SMX:RedeemableWarrantsTypeTwoMember SMX:MonteCarloSimulationModelMember 2022-01-01 2022-12-31 0001940674 SMX:ThreeValuationModelsMember 2023-01-01 2023-12-31 0001940674 SMX:ThreeValuationModelsMember 2022-01-01 2022-12-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-03-01 2023-03-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-03-31 0001940674 SMX:BridgeLoanAgreementsMember 2023-12-31 2023-12-31 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-02-28 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-02-01 2023-02-28 0001940674 SMX:StandbyEquityPurchaseAgreementMember SMX:FirstInstallmentMember 2023-02-28 0001940674 SMX:StandbyEquityPurchaseAgreementMember SMX:SecondInstallmentMember 2023-02-28 0001940674 2023-07-27 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-07-27 2023-07-27 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-07-01 2023-07-31 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-12-31 2023-12-31 0001940674 SMX:StandbyEquityPurchaseAgreementMember 2023-07-31 0001940674 SMX:StandbyEquityPurchaseAgreementMember SMX:NonadjustingEventMember 2023-07-31 2023-07-31 0001940674 SMX:EquityPurchaseAgreementMember ifrs-full:EnteringIntoSignificantCommitmentsOrContingentLiabilitiesMember 2024-04-19 0001940674 ifrs-full:OfficeEquipmentMember 2023-01-01 2023-12-31 0001940674 ifrs-full:MotorVehiclesMember 2023-01-01 2023-12-31 0001940674 ifrs-full:OfficeEquipmentMember 2021-12-31 0001940674 ifrs-full:MotorVehiclesMember 2021-12-31 0001940674 ifrs-full:OfficeEquipmentMember 2022-01-01 2022-12-31 0001940674 ifrs-full:MotorVehiclesMember 2022-01-01 2022-12-31 0001940674 ifrs-full:OfficeEquipmentMember 2022-12-31 0001940674 ifrs-full:MotorVehiclesMember 2022-12-31 0001940674 ifrs-full:OfficeEquipmentMember 2023-12-31 0001940674 ifrs-full:MotorVehiclesMember 2023-12-31 0001940674 2015-01-01 2015-12-31 0001940674 SMX:LenderTwoMember 2023-01-01 2023-12-31 0001940674 2022-08-01 2022-08-31 0001940674 SMX:LoanAgreementMember 2023-09-19 0001940674 SMX:LoanAgreementsMember 2023-09-19 0001940674 ifrs-full:OrdinarySharesMember 2023-12-31 0001940674 ifrs-full:PreferenceSharesMember 2023-12-31 0001940674 ifrs-full:OrdinarySharesMember 2022-12-31 0001940674 ifrs-full:PreferenceSharesMember 2022-12-31 0001940674 SMX:DeferredSharesMember 2023-12-31 0001940674 SMX:DeferredSharesMember 2022-12-31 0001940674 2023-03-07 0001940674 2023-03-07 2023-03-07 0001940674 ifrs-full:WarrantsMember 2023-03-07 2023-03-07 0001940674 ifrs-full:WarrantsMember 2023-03-07 0001940674 ifrs-full:OrdinarySharesMember 2023-03-07 0001940674 SMX:PrivateWarrantsMember 2023-03-07 0001940674 SMX:PublicWarrantsMember 2023-03-07 0001940674 ifrs-full:WarrantsMember 2023-03-07 0001940674 SMX:OrdinarySharesTwoMember 2023-03-07 0001940674 SMX:OrdinarySharesTwoMember 2023-03-07 2023-03-07 0001940674 SMX:BridgeLoansMember 2023-03-07 0001940674 SMX:RedeemableWarrantsMember 2023-03-07 2023-03-07 0001940674 SMX:RedeemableWarrantsMember 2023-03-07 0001940674 SMX:UnderwritingAgreementMember SMX:EFHuttonLLCMember ifrs-full:OrdinarySharesMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantAMember SMX:EFHuttonLLCMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantBMember SMX:EFHuttonLLCMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantAMember ifrs-full:OrdinarySharesMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:PublicOfferingMember 2023-06-22 2023-06-22 0001940674 SMX:UnderwritingAgreementMember ifrs-full:OrdinarySharesMember SMX:PublicOfferingMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:PrefundedWarrantMember SMX:PublicOfferingMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantAMember SMX:PublicOfferingMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantBMember SMX:PublicOfferingMember 2023-06-22 0001940674 SMX:UnderwritingAgreementMember 2023-06-22 2023-06-22 0001940674 SMX:UnderwritingAgreementMember SMX:WarrantAMember 2023-06-22 2023-06-22 0001940674 SMX:UnderwritingAgreementMember ifrs-full:OrdinarySharesMember 2023-06-22 0001940674 SMX:WarrantBMember 2022-06-27 0001940674 SMX:WarrantBMember 2023-12-08 0001940674 SMX:WarrantBMember 2023-12-08 2023-12-08 0001940674 2023-12-08 2023-12-08 0001940674 SMX:WarrantBMember 2023-12-31 0001940674 ifrs-full:WarrantsMember 2023-01-01 2023-12-31 0001940674 SMX:UnderwriterWarrantMember 2023-12-31 0001940674 SMX:UnderwriterWarrantMember 2023-01-01 2023-12-31 0001940674 SMX:EmployeesMember 2023-01-01 2023-12-31 0001940674 ifrs-full:BottomOfRangeMember SMX:EmployeesMember 2023-12-31 0001940674 ifrs-full:TopOfRangeMember SMX:EmployeesMember 2023-12-31 0001940674 SMX:EmployeesMember 2023-12-31 0001940674 SMX:BlackScholesPricingModelMember ifrs-full:TopOfRangeMember 2023-01-01 2023-12-31 0001940674 SMX:BlackScholesPricingModelMember ifrs-full:BottomOfRangeMember 2023-01-01 2023-12-31 0001940674 SMX:BlackScholesPricingModelMember 2023-01-01 2023-12-31 0001940674 SMX:BlackScholesPricingModelMember ifrs-full:TopOfRangeMember 2022-01-01 2022-12-31 0001940674 SMX:BlackScholesPricingModelMember ifrs-full:BottomOfRangeMember 2022-01-01 2022-12-31 0001940674 SMX:BlackScholesPricingModelMember 2022-01-01 2022-12-31 0001940674 SMX:ServiceProviderAgreementsMember 2023-12-31 0001940674 SMX:IncentiveEquityPlanMember 2023-04-25 0001940674 SMX:EmployeesDirectorsAndServiceMember ifrs-full:RestrictedShareUnitsMember 2023-01-01 2023-12-31 0001940674 SMX:EmployeesDirectorsAndServiceMember ifrs-full:RestrictedShareUnitsMember ifrs-full:BottomOfRangeMember 2023-01-01 2023-12-31 0001940674 SMX:EmployeesDirectorsAndServiceMember ifrs-full:RestrictedShareUnitsMember ifrs-full:TopOfRangeMember 2023-01-01 2023-12-31 0001940674 ifrs-full:RestrictedShareUnitsMember SMX:EmployeesDirectorsAndServiceMember 2022-12-31 0001940674 ifrs-full:RestrictedShareUnitsMember SMX:EmployeesDirectorsAndServiceMember 2021-12-31 0001940674 ifrs-full:RestrictedShareUnitsMember SMX:EmployeesDirectorsAndServiceMember 2022-01-01 2022-12-31 0001940674 ifrs-full:RestrictedShareUnitsMember SMX:EmployeesDirectorsAndServiceMember 2023-12-31 0001940674 SMX:OptionsOutstandingTwoMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingTwoMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingTwoMember 2023-12-31 0001940674 SMX:OptionsOutstandingTwoMember 2023-01-01 2023-12-31 0001940674 SMX:OptionsOutstandingThreeMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingThreeMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingThreeMember 2023-12-31 0001940674 SMX:OptionsOutstandingThreeMember 2023-01-01 2023-12-31 0001940674 SMX:OptionsOutstandingFourMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingFourMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingFourMember 2023-12-31 0001940674 SMX:OptionsOutstandingFourMember 2023-01-01 2023-12-31 0001940674 SMX:OptionsOutstandingFiveMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingFiveMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingFiveMember 2023-12-31 0001940674 SMX:OptionsOutstandingFiveMember 2023-01-01 2023-12-31 0001940674 SMX:OptionsOutstandingSixMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingSixMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingSixMember 2023-12-31 0001940674 SMX:OptionsOutstandingSixMember 2023-01-01 2023-12-31 0001940674 SMX:OptionsOutstandingSevenMember ifrs-full:BottomOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingSevenMember ifrs-full:TopOfRangeMember 2023-12-31 0001940674 SMX:OptionsOutstandingSevenMember 2023-12-31 0001940674 SMX:OptionsOutstandingSevenMember 2023-01-01 2023-12-31 0001940674 SMX:ResearchAndDevelopmentExpensesMember 2023-01-01 2023-12-31 0001940674 SMX:ResearchAndDevelopmentExpensesMember 2022-01-01 2022-12-31 0001940674 SMX:ResearchAndDevelopmentExpensesMember 2021-01-01 2021-12-31 0001940674 SMX:GeneralAndAdministrativeExpensesMember 2023-01-01 2023-12-31 0001940674 SMX:GeneralAndAdministrativeExpensesMember 2022-01-01 2022-12-31 0001940674 SMX:GeneralAndAdministrativeExpensesMember 2021-01-01 2021-12-31 0001940674 ifrs-full:KeyManagementPersonnelOfEntityOrParentMember 2023-12-31 0001940674 ifrs-full:KeyManagementPersonnelOfEntityOrParentMember 2022-12-31 0001940674 SMX:DirectorsMember 2023-12-31 0001940674 SMX:DirectorsMember 2022-12-31 0001940674 SMX:ShareholdersMember 2023-12-31 0001940674 SMX:ShareholdersMember 2022-12-31 0001940674 ifrs-full:JointVenturesMember 2023-12-31 0001940674 ifrs-full:JointVenturesMember 2022-12-31 0001940674 ifrs-full:RelatedPartiesMember 2023-12-31 0001940674 ifrs-full:RelatedPartiesMember 2022-12-31 0001940674 2023-10-25 2023-10-25 0001940674 2015-01-31 0001940674 2023-01-31 0001940674 2023-01-29 2023-01-31 0001940674 ifrs-full:CreditRiskMember 2023-12-31 0001940674 ifrs-full:CreditRiskMember 2022-12-31 0001940674 SMX:ConvertibleNotesMember 2023-12-31 0001940674 SMX:ConvertibleNotesMember 2022-12-31 0001940674 SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:PrePaidAdvanceMember 2022-12-31 0001940674 ifrs-full:DerivativesMember 2023-12-31 0001940674 ifrs-full:DerivativesMember 2022-12-31 0001940674 SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:ConvertiblePromissoryNoteMember 2022-12-31 0001940674 ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:BorrowingFromRelatedPartiesMember 2023-12-31 0001940674 SMX:BorrowingFromRelatedPartiesMember 2022-12-31 0001940674 SMX:NISMember 2023-01-01 2023-12-31 0001940674 SMX:NISMember 2022-01-01 2022-12-31 0001940674 SMX:AUDMember 2023-01-01 2023-12-31 0001940674 SMX:AUDMember 2022-01-01 2022-12-31 0001940674 SMX:SGDMember 2023-01-01 2023-12-31 0001940674 SMX:SGDMember 2022-01-01 2022-12-31 0001940674 SMX:EURMember 2023-01-01 2023-12-31 0001940674 SMX:EURMember 2022-01-01 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:TradeAndOtherPayablesMember 2023-12-31 0001940674 SMX:TradeAndOtherPayableMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:BridgeLoansMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:BridgeLoansMember 2023-12-31 0001940674 SMX:BridgeLoansMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:GovernmentGrantsMember 2023-12-31 0001940674 SMX:GovernmentGrantsMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember ifrs-full:LeaseLiabilitiesMember 2023-12-31 0001940674 ifrs-full:LeaseLiabilitiesMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:ConvertiblePromissoryNoteMember 2023-12-31 0001940674 SMX:ConvertiblePromissoryMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:PrePaidAdvanceMember 2023-12-31 0001940674 SMX:PrePaidAdvanceMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:ConvertibleNoteMember 2023-12-31 0001940674 SMX:ConvertibleNoteMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:FinancialDerivativesMember 2023-12-31 0001940674 SMX:FinancialDerivativesMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember 2023-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember 2023-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember 2023-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember 2023-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember 2023-12-31 0001940674 ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2023-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:TradeAndOtherPayablesMember 2022-12-31 0001940674 SMX:TradeAndOtherPayableMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:BridgeLoansMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:BridgeLoansMember 2022-12-31 0001940674 SMX:BridgeLoansMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:GovernmentGrantsMember 2022-12-31 0001940674 SMX:GovernmentGrantsMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember ifrs-full:LeaseLiabilitiesMember 2022-12-31 0001940674 ifrs-full:LeaseLiabilitiesMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember SMX:BorrowingsFromRelatedPartiesMember 2022-12-31 0001940674 SMX:BorrowingsFromRelatedPartiesMember ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:NotLaterThanOneYearMember 2022-12-31 0001940674 SMX:NotLaterThanOneToTwoYearMember 2022-12-31 0001940674 SMX:NotLaterThanTwoToThreeYearMember 2022-12-31 0001940674 SMX:NotLaterThanThreeToFourYearMember 2022-12-31 0001940674 SMX:NotLaterThanFourToFiveYearMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsMember 2022-12-31 0001940674 ifrs-full:LaterThanFiveYearsAndNotLaterThanSevenYearsMember 2022-12-31 0001940674 ifrs-full:Level1OfFairValueHierarchyMember ifrs-full:DerivativesMember 2023-12-31 0001940674 ifrs-full:Level2OfFairValueHierarchyMember ifrs-full:DerivativesMember 2023-12-31 0001940674 ifrs-full:Level3OfFairValueHierarchyMember ifrs-full:DerivativesMember 2023-12-31 0001940674 ifrs-full:DerivativesMember 2023-12-31 0001940674 ifrs-full:Level1OfFairValueHierarchyMember 2023-12-31 0001940674 ifrs-full:Level2OfFairValueHierarchyMember 2023-12-31 0001940674 ifrs-full:Level3OfFairValueHierarchyMember 2023-12-31 0001940674 ifrs-full:Level1OfFairValueHierarchyMember ifrs-full:DerivativesMember 2022-12-31 0001940674 ifrs-full:Level2OfFairValueHierarchyMember ifrs-full:DerivativesMember 2022-12-31 0001940674 ifrs-full:Level3OfFairValueHierarchyMember ifrs-full:DerivativesMember 2022-12-31 0001940674 ifrs-full:DerivativesMember 2022-12-31 0001940674 ifrs-full:Level1OfFairValueHierarchyMember 2022-12-31 0001940674 ifrs-full:Level2OfFairValueHierarchyMember 2022-12-31 0001940674 ifrs-full:Level3OfFairValueHierarchyMember 2022-12-31 0001940674 SMX:UnderwritingAgreementMember SMX:NonadjustingEventMember 2024-01-12 0001940674 SMX:NonadjustingEventMember 2024-01-01 2024-01-31 0001940674 SMX:LetterAgreementMember SMX:NonadjustingEventMember 2024-02-29 0001940674 SMX:NonadjustingEventMember SMX:LetterAgreementMember 2024-02-01 2024-02-29 0001940674 SMX:UnderwritingAgreementMember ifrs-full:OrdinarySharesMember SMX:NonadjustingEventMember 2024-02-20 0001940674 SMX:UnderwritingAgreementMember ifrs-full:OrdinarySharesMember SMX:NonadjustingEventMember 2024-02-20 2024-02-20 0001940674 SMX:NonadjustingEventMember 2024-02-20 2024-02-20 0001940674 SMX:NonadjustingEventMember 2024-02-01 2024-02-29 0001940674 SMX:NonadjustingEventMember 2024-02-29 2024-02-29 0001940674 ifrs-full:OrdinarySharesMember SMX:BoardOfDirectorMember SMX:NonadjustingEventMember 2024-03-04 0001940674 ifrs-full:OrdinarySharesMember SMX:SecuritiesPurchaseAgreementMember SMX:NonadjustingEventMember 2024-04-11 0001940674 SMX:SecuritiesPurchaseAgreementMember SMX:NonadjustingEventMember ifrs-full:OrdinarySharesMember 2024-04-11 2024-04-11 0001940674 SMX:SecuritiesPurchaseAgreementMember SMX:WarrantBMember 2023-09-06 0001940674 SMX:StockPurchaseAgreementMember ifrs-full:EnteringIntoSignificantCommitmentsOrContingentLiabilitiesMember 2024-04-19 0001940674 SMX:NonadjustingEventMember 2024-04-19 0001940674 ifrs-full:OrdinarySharesMember ifrs-full:WarrantReserveMember SMX:NonadjustingEventMember 2024-01-12 0001940674 ifrs-full:OrdinarySharesMember SMX:NonadjustingEventMember 2024-01-12 0001940674 SMX:WarrantBMember SMX:NonadjustingEventMember 2024-01-12 iso4217:USD xbrli:shares iso4217:USD xbrli:shares SMX:Integer iso4217:AUD iso4217:ILS iso4217:AUD xbrli:shares iso4217:EUR iso4217:EUR xbrli:shares xbrli:pure iso4217:SGD

 

As filed with the Securities and Exchange Commission on April 19, 2024

 

Registration Statement No. 333-274774

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

POST-EFFECTIVE AMENDMENT NO. 1

TO

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

SMX (Security Matters) Public Limited Company

(Exact name of registrant as specified in its charter)

 

Ireland   3590   N/A

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

+353-1-920-1000

Mespil Business Centre, Mespil House, Sussex Road, Dublin 4, Ireland

(Address and telephone number of registrant’s principal executive offices)

 

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, DE 19711

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

Stephen E. Fox, Esq.

Samantha Guido, Esq.

Ruskin Moscou Faltischek P.C.

1425 RXR Plaza

East Tower, 15th Floor

Uniondale, NY 11556

Tel: (516) 663-6580

 

Doron Afik Adv.

Afik & Co.

103 Hahashmonaim Street

Tel Aviv, Israel 6120101

Tel: +972.3.6093609

 

Connor Manning

Arthur Cox

Ten Earlsfort Terrace

Dublin 2

D02 T380

 

Approximate date of commencement of proposed sale to the public: From time to time after the date this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

EXPLANATORY NOTE

 

This Post-Effective Amendment No. 1 to the Registration Statement on Form F-1 (File No. 333-274774) (as amended, the “Registration Statement”) of SMX (Security Matters) Public Limited Company (the “Company”), as originally declared effective by the Securities and Exchange Commission (the “SEC”) on November 29, 2023, is being filed pursuant to the undertakings in Item 9 of the Registration Statement to include the audited consolidated financial statements and related notes of the Company as and for the year ended December 31, 2023 and updated disclosures in the prospectus related thereto.

 

This Post-Effective Amendment contains an updated prospectus, and is being filed by the Company (i) to include the Company’s audited financial statements for the year ended December 31, 2023, (ii) to update the corresponding discussion of such financial information contained in the section “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of the prospectus, and (iii) to update certain other information in the prospectus, including business activities since the effective date of the Registration Statement.

 

 
 

 

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion dated April 19, 2024

 

Preliminary Prospectus

 

SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY

 

Issuance of up to 487,281 Ordinary Shares

 

This prospectus relates to the resale of up to 487,281 ordinary shares, $0.0022 par value per share (the “Ordinary Shares”), by the selling stockholder named elsewhere in this prospectus (“Selling Stockholder”). The Ordinary Shares included in this prospectus consist of Ordinary Shares that the Selling Stockholder received pursuant to the conversion of $657,203 of indebtedness into Ordinary Shares. See the section entitled, “Selling Stockholder” for additional information regarding the Selling Stockholder.

 

The Selling Stockholder may sell the Ordinary Shares at prevailing market or privately negotiated prices, including in one or more transactions that may take place by ordinary broker’s transactions, privately negotiated transactions or through sales to one or more dealers for resale.

 

We will not realize any proceeds from sales by the Selling Stockholder.

 

All costs incurred in the registration of the Ordinary Shares are being borne by the Company.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

We are a “foreign private issuer” as defined under applicable Securities and Exchange Commission (“SEC”) rules and an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and are eligible for reduced public company disclosure requirements.

 

Our ordinary shares are listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “SMX” and our public warrants are listed on The Nasdaq Capital Market under the symbol “SMXWW”. On April 18, 2024, the closing price of our ordinary shares was $0.1651.

 

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities. Investing in the Company’s securities involves risks. See “Risk Factors” beginning on page 16 of this prospectus.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

Prospectus dated , 2024

 

 

 

 

TABLE OF CONTENTS

 

ABOUT THE PROSPECTUS 1
IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES 2
INDUSTRY AND MARKET DATA 2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 3
PROSPECTUS SUMMARY 4
THE OFFERING 14
RISK FACTORS 16
USE OF PROCEEDS 37
DIVIDEND POLICY 37
BUSINESS 38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 60
BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT 72
DESCRIPTION OF SECURITIES 81
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 96
BENEFICIAL OWNERSHIP OF SECURITIES 100
SELLING STOCKHOLDER 102
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS 103
CERTAIN MATERIAL IRISH TAX CONSIDERATIONS TO NON-IRISH HOLDERS 110
PLAN OF DISTRIBUTION 114
EXPENSES RELATED TO THE OFFERING 116
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES UNDER U.S. SECURITIES LAWS 116
LEGAL MATTERS 116
EXPERTS 116
WHERE YOU CAN FIND MORE INFORMATION 117
INDEX TO FINANCIAL STATEMENTS F-1

 

 

 

 

ABOUT THE PROSPECTUS

 

You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. Any amendment or supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such amendment or supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. See “Where You Can Find More Information.”

 

Neither we nor Selling Stockholder have authorized any other person to provide you with different or additional information. Neither we nor Selling Stockholder take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates. This prospectus contains summaries of certain provisions contained in some of the documents described in this prospectus, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to in this prospectus have been filed, will be filed, or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, any you may obtain copies of those documents as described under “Where You Can Find More Information.”

 

Neither we nor Selling Stockholder are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. Except as otherwise set forth in this prospectus, neither we nor Selling Stockholder have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.

 

This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays may appear without the ® or symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade name or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

Certain amounts that appear in this prospectus may not sum due to rounding.

 

1
 

 

IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

 

The financial statements of SMX (Security Matters) Public Limited Company (the “Company”) are prepared in accordance with international financing reporting standards, as adopted by the International Accounting Standards Board (“IFRS”). The historical consolidated financial statements of Security Matter PTY Ltd. (“Security Matters PTY”) are prepared in accordance with IFRS. Security Matters PTY (formerly, Security Matters Limited, an Australian public company with Australian Company Number (ACN) 626 192 998 listed on the Australian Stock Exchange through March 7, 2023) is currently a private, wholly-owned subsidiary of the Company, whose name was changed to Security Matters PTY Ltd. in June 2023.

 

Certain of the measures included in this prospectus may be considered non-IFRS financial measures. Non-IFRS financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS, and non-IFRS financial measures as used by Security Matters PTY may not be comparable to similarly titled amounts used by other companies.

 

INDUSTRY AND MARKET DATA

 

Unless otherwise indicated, information contained in this prospectus concerning our industry and the regions in which we operate, including our general expectations and market position, market opportunity, market share and other management estimates, is based on information obtained from various independent publicly available sources and other industry publications, surveys and forecasts, which we believe to be reliable based upon our management’s knowledge of the industry. We have not independently verified the accuracy and completeness of such third-party information to the extent included in this prospectus. Such assumptions and estimates of our future performance and growth objectives and the future performance of our industry and the markets in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus.

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements in this prospectus may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

 

  the Company’s financial performance;
     
  the ability to maintain the listing of the Ordinary Shares on Nasdaq;
     
  changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
     
  the Company’s ability to develop and launch new products and services;
     
  the Company’s ability to successfully and efficiently integrate future expansion plans and opportunities;
     
  the Company’s ability to grow its business in a cost-effective manner;
     
  the Company’s product development timeline and estimated research and development costs;
     
  the implementation, market acceptance and success of the Company’s business model;
     
  developments and projections relating to the Company’s competitors and industry;
     
  the Company’s approach and goals with respect to technology;
     
  the Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
     
  the impact of war, terror threats, the COVID-19 pandemic or other adverse public health developments on the Company’s business;
     
  changes in applicable laws or regulations; and
     
  the outcome of any known and unknown litigation and regulatory proceedings.

 

These forward-looking statements are based on information available as of the date of this prospectus, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing views as of any subsequent date, and no obligation is undertaken to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

  the outcome of any legal proceedings that may be instituted against the Company;
     
  the ability to maintain the listing of the Ordinary Shares on Nasdaq;
     
  changes in applicable laws or regulations;
     
  the lingering effects of the COVID-19 pandemic on the Company’s business;

 

3
 

 

  the ability to implement business plans, forecasts, and other expectations after the completion of the proposed transaction, and identify and realize additional opportunities;
     
  the risk of downturns and the possibility of rapid change in the highly competitive industry in which the Company operates;
     
  the risk that the Company and its current and future collaborators are unable to successfully develop and commercialize its products or services, or experience significant delays in doing so;
     
  the risk that the Company may never achieve or sustain profitability;
     
  the risk that the Company will need to raise additional capital to execute its business plan, which may not be available on acceptable terms or at all;
     
  the risk that the Company experiences difficulties in managing its growth and expanding operations;
     
  the risk that third-party suppliers and manufacturers are not able to fully and timely meet their obligations;
     
  the risk that the Company is unable to secure or protect its intellectual property;
     
  the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and
     
  other risks and uncertainties described in this prospectus, including those under the section entitled “Risk Factors.”

 

PROSPECTUS SUMMARY

 

This summary highlights selected information contained elsewhere, or incorporated by reference, in this prospectus. This summary does not contain all the information that you should consider before investing in our securities. Before making an investment decision, you should read this entire prospectus carefully, especially “Risk Factors” and the financial statements and related notes thereto, and the other documents to which this prospectus refers. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements” for more information.

 

Our Company

 

We envision ourselves 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. Our transformative solution aims at building on the principles of The United Nations’ Sustainability Development Goals, particularly Goal 12: “Ensure sustainable consumption and production patterns” that can create value for participants in the circular economy. As an increasing number of industries and sectors are committing to using recycled material and realizing the broader strategic vision of net zero carbon emissions, we believe our solution is the next generation for sustainability and the circular economy.

 

For more information about the Company, see the sections entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

Business Combination

 

On March 7, 2023 (the “Closing Date”), the Company consummated its previously announced business combination pursuant to the BCA and its previously announced SID.

 

4
 

 

Beginning on the day immediately prior to the Closing Date and finishing on the day immediately after the Closing Date, the following transactions occurred pursuant to the terms of the BCA:

 

  Under the SID, Security Matters PTY proposed a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) (“Corporations Act”) (“Scheme”) and the equal reduction of capital under section 256B of the Corporations Act pursuant to which all ordinary shares of Security Matters PTY were cancelled in accordance with the terms of the resolution of the shareholders of Security Matters PTY whereby the shareholders approved the capital reduction (“Capital Reduction”) which resulted in all shares in Security Matters PTY being cancelled in return for the issuance of ordinary shares of the Company, with the Company being issued one share in Security Matters PTY (“Security Matters Shares”) (this resulted in Security Matters PTY becoming a wholly owned subsidiary of the Company);
     
  Under the SID, Security Matters PTY proposed an option scheme of arrangement under Part 5.1 of the Corporations Act (“Option Scheme”), which resulted in the Security Matters PTY options held by participants in the Option Scheme being subject to a cashless exercise based on a Black-Scholes valuation, in exchange for Security Matters Shares. Under the Scheme those shares were cancelled and the participants received Ordinary Shares on the basis of the Scheme consideration;
     
  Security Matters PTY shareholders received consideration under the Scheme of one Ordinary Share per 10.3624 Security Matters Shares having an implied value of $10.00 per Ordinary Share and the Company became the holder of all of the issued shares in Security Matters PTY and Lionheart, with Security Matters PTY being delisted from the Australian Stock Exchange;
     
  Merger Sub merged with and into Lionheart, with Lionheart surviving the merger as a wholly owned subsidiary of the Company; and
     
  Existing Lionheart stockholders received Ordinary Shares in exchange for their existing Lionheart shares and existing Lionheart warrant holders had their warrants automatically adjusted to become exercisable in respect of Ordinary Shares instead of Lionheart shares.

 

Recent Developments

 

Alpha SEPA

 

On April 19, 2024, the Company entered into a Stock Purchase Agreement (the “SPA”) with Generating Alpha Ltd. (“Alpha”), pursuant to which Alpha has committed to purchase from us up to $30,000,000 of our ordinary shares, subject to the terms and conditions specified in the SPA. The Company entering into the SPA was a condition of the Company’s previously announced note and warrant transaction with Alpha from April 11, 2024.

 

Subject to the terms and conditions of the SPA, the Company has the right from time to time at its discretion, any time after the three month anniversary of the shares underlying the SPA being registered for resale pursuant to the Registration Rights Agreement referred to below, to direct Alpha to purchase a specified amount of our ordinary shares (each such sale, a “Put”) by delivering written notice to Alpha (each, a “Put Notice”). There is a $20,000 mandatory minimum amount for any Put and it may not exceed $500,000, subject to a volume threshold equal to the quotient of (a) the number of ordinary shares requested by the Company in a Put Notice divided by (b) 0.30. The ordinary shares will be purchased at a price equal to : (a) 95% of the lowest daily traded price of the Company’s ordinary shares during the five trading day valuation period (provided that it shall not be less than a Company-specified minimum acceptable price) (“Market Price”), if the market price of the ordinary shares is over $1.00; (b) 90% of the Market Price, if the market price of the ordinary shares is between $0.80 and $1.00: (c) 85% of the Market Price, if the market price of the ordinary shares is between $0.60 and $0.80; (d) 80% of the Market Price, if the market price of the ordinary shares is between $0.40 and $0.60; (e) 75% of the Market Price, if the market price of the ordinary shares is between $0.20 and $0.40; and (f) 50% of the Market Price, if the market price of the ordinary shares is below $0.20.

 

The Company will control the timing and amount of any sales of ordinary shares to Alpha. Actual sales of our ordinary shares to Alpha as a Put under the SPA will depend on a variety of factors to be determined by the Company from time to time, which may include, among other things, market conditions, the trading price of the Company’s ordinary shares and determinations by the Company as to the appropriate sources of funding for its business and operations.

 

The obligations of Alpha to accept any Put pursuant to a Put Notice is subject to customary conditions, including that Alpha is not required to purchase any ordinary shares pursuant to a Put if it would result in Alpha beneficially owning in excess of 4.99% of the Company’s ordinary shares, and that the ordinary shares subject to the Put be registered for resale. The Company agreed to pay a commitment fee to Alpha equal to 1.5% of the commitment amount, payable in shares, or 2,725,621 ordinary shares and which shall be subject to a three month lock-up.

 

The net proceeds under the SPA to the Company will depend on the frequency and prices at which the Company sells ordinary shares to Alpha. The Company expects that any proceeds received by it from such sales to Alpha will be used for working capital and general corporate purposes; provided, however, that in the event the Company owes any indebtedness to Alpha, 50% of any such proceeds shall be applied to repayment of such indebtedness.

 

The SPA will automatically terminate on the earliest to occur of (a) the first day of the month next following the 36-month anniversary of the date of the SPA or (ii) the date on which Alpha shall have made payment of Puts pursuant to the SPA for ordinary shares equal to $30,000,000. The Company has the right to terminate the SPA at no cost or penalty upon five (5) trading days’ prior written notice to Alpha, provided that there are no outstanding Put Notices for which ordinary shares need to be issued and the Company has paid all amounts owed to Alpha pursuant to the SPA and any indebtedness the Company otherwise owes to Alpha or its affiliates. The Company and Alpha may also agree to terminate the SPA by mutual written consent. Neither the Company nor Alpha may assign or transfer its respective rights and obligations under the SPA, and no provision of the SPA may be modified or waived by the Company or Alpha other than by an instrument in writing signed by both parties.

 

The SPA contains customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties. The SPA contains restrictions on the Company’s ability to enter into any Variable Rate Transaction (as defined in the SPA), as described in the SPA.

 

The Company further entered into a Registration Rights Agreement with Alpha, pursuant to which the Company agreed to register for resale ordinary shares underlying the SPA.

 

April 11, 2024 Securities Purchase Agreement

 

On April 11, 2024 (the “April Effective Date”), the Company consummated the transactions pursuant to a Securities Purchase Agreement (“April SPA”) and issued and sold to an institutional investor a promissory note and warrants, for gross proceeds to the Company of approximately US$2.0 million, before deducting fees and other offering expenses payable by the Company. Notwithstanding such consummation of the transactions, funding of the proceeds occurred on or about April 15, 2024.

 

The Company used the net proceeds from the sale of the note to repay approximately $425,000 of certain amounts owed by the Company, and for working capital and general corporate purposes.

 

The note is in the principal amount of $2,250,000. The actual amount loaned by the investor pursuant to the note is approximately $2.0 million after a 10% original issue discount. The maturity date of the note is the 12-month anniversary of the April Effective Date, and is the date upon which the principal amount, as well as any accrued and unpaid interest and other fees, shall be due and payable. Interest accrues in the amount of 12% per year from the April Effective Date and shall be payable on the maturity date or upon acceleration or by prepayment or otherwise.

 

5
 

 

The investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid principal amount and interest (including any costs, fees and charges) into the Company’s Ordinary Shares, at a fixed conversion price of $0.24 per share, subject to customary adjustments as provided in the note including for fundamental transactions. In addition, in the event that the Company is no longer subject to certain limitations on entering into variable rate transactions, the investor may instead convert the note at a 15% discount to the lowest volume weighted average price during the 15 trading days prior to the conversion notice. Any such conversion is subject to customary conversion limitations set forth in the note so the investor beneficially owns less than 4.99% of the Company’s Ordinary Shares. Additionally, the Company has the right to convert in whole or in part the note into Ordinary Shares; provided that in no case shall the Company so convert the note if the result of the issuance of Ordinary Shares thereby would result in the beneficial ownership of the investor of Ordinary Shares in excess of 4.99%. In the event of the Company’s failure to timely deliver Ordinary Shares upon conversion of the note, the Company would be obligated to pay a “Conversion Default Payment” of $2,000 per day, pursuant to the terms of the note.

 

Subject to exceptions described in the purchase agreement, the Company may not sell any equity or debt securities for a period of 90 business days after the April Effective Date without the investor’s consent.

 

The note contains customary Events of Default for transactions similar to the transactions contemplated by the purchase agreement and the note, which entitle the investor, among other things, to accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the note. Any principal amount or interest on the note which is not paid when due shall bear interest at the rate of the lesser of (i) 24.5% per annum and (ii) the maximum amount permitted by law during the Event of Default. Upon the occurrence of any Event of Default, the principal amount then outstanding plus accrued interest (including any costs, fees and charges) increases to 120% of such amount through the date of full repayment (or upon the occurrence of certain Events of Default, 500% tacked back to the April Effective Date), as well as all costs of collection.

 

The April SPA and the note contains restrictions on the Company’s ability to enter into any transaction with a Variable Security (as defined in the Note) component, as well as other restrictions on and covenants by the Company, all as described in the note and the purchase agreement.

 

The April SPA contains customary representations and warranties made by each of the Company and the investor. It further grants to the investor certain rights of participation and first refusal, and certain most-favored nation rights, all as set forth in the purchase agreement and the note.

 

The Company is subject to customary indemnification terms in favor of the Investor and its affiliates and certain other parties.

 

The warrant, for 11,825,508 Ordinary Shares, has an exercise price of $0.157 per share, subject to customary adjustments and certain price-based anti-dilution protections (in the event that the Company is no longer subject to certain limitations on entering into variable rate transactions), and may be exercised at any time until the five and one-half year anniversary of the warrant. The warrant also may be exercised pursuant to a cashless or net exercise provision. The exercise of the warrant is subject to a beneficial ownership limitation of 4.99% of the number of Ordinary Shares outstanding immediately after giving effect to such exercise. In the event of the Company’s failure to timely deliver Ordinary Shares upon exercise of the warrants, the Company would be obligated to pay a “Buy-In” amount pursuant to the terms of the warrant.

 

The Company further entered into a Registration Rights Agreement with the investor, pursuant to which the Company agreed to register for resale all of the Ordinary Shares underlying the note and the warrant (the “April Registration Rights Agreement”).

 

Also on the April Effective Date, as a further inducement of the Company for the investor to enter into the transaction, the Company entered into a Warrant Amendment and Inducement Letter with the investor, with respect to its outstanding “B” warrants of the Company to purchase 2,619,367 Ordinary Shares. The outstanding “B” warrants were issued to the investor as of September 6, 2023 pursuant to a Securities Purchase Agreement dated as of September 5, 2023 and had a fixed exercise price of $1.6378 per share.

 

Pursuant to the Warrant Amendment and Inducement Letter, the investor agreed to exercise for cash the outstanding “B” warrants in full at a reduced exercise price of $0.0022 per share, or approximately $5,762.

 

The Company agreed to register for resale the shares underlying the outstanding “B” warrants.

 

The Company paid to EF Hutton LLC as placement agent, approximately $20,000 in cash fees in relation to the transactions contemplated by the purchase agreement.

 

Industrial Marking Process for Natural Rubber for Vehicle and Truck Tires

 

On April 10, 2024, the Company announced that it has successfully completed the marking of 21 tons of natural rubber sourced in Latin America from tree to tire. The program covered the marking at the tree in Latin America through manufacturing and production in the region. The Company’s marker was added to the cup lump harvesting by the farmers prior to transfer to the manufacturing centre where the 42 tons of latex was converted to 21 tons of natural rubber. The bails were then transferred to tire manufacturing for commercial car, truck and lorry tires. The tires were then sent for evaluation. The results demonstrated 100% success rates on all marked tires to have a proven verification technology for origin authentication of the natural rubber and full traceability all along the entire supply chain data and integrity from tree to tire.

 

6
 

 

Industrial Marking Process for the Steel Industry

 

On March 27, 2024, the Company announced that it finalized a solution to track and report the ethical sourcing of ores and can demonstrate a market-leading verification process for premium steel products spanning virgin and recycled steel.

 

The Company’s technology would enable customers to demonstrate with accurate data embedded within their steel products that they can track, authenticate and report origination and amount of recycled content in steel products, in an enhanced and compliant manner across their operations.

 

Appointment of Dr. Amnon Azoulay

 

On March 20, 2024, the Company announced its appointment of Dr. Amnon Azoulay as the new head of online and industrial detectors for the Company. Dr. Azoulay has a Ph.D. in condensed matter physics and has spent over 25 years transforming ideas into turnkey products, demonstrating ability to create vision and inspire teams towards achieving innovative outcomes.

 

Dr. Azoulay’s background includes work in additive manufacturing, particularly in 3D polymer printing, as well as non-destructive evaluation (NDE) and imaging systems, including ultrasound, X-Ray, Neutrons, and Terahertz technologies. His expertise extends to the development of nuclear sensors, gas-surface interaction analysis, and the creation of highly complex automated systems incorporating robotics, fast data acquisition, and diverse sensing technologies. The Company believes that this wide-ranging experience positions him to contribute to the Company’s endeavors in enhancing recycling processes and advancing circular economy initiatives through innovative scanning technology.

 

Throughout his career, Dr. Azoulay has held significant positions, including Head of the 3D Printing Lab at the National Research Center (NRC), where he established a center for developing new printing methods and polymers for additive manufacturing technologies. His role in leading the NDT Department and the Ultrasonic Section at NRC involved the management of large projects, budgeting, and the establishment of scientific infrastructures, highlighting his capability in leadership and business development in cutting-edge technological fields.

 

Dr. Azoulay’s appointment comes at a crucial time when the Company is spearheading efforts to improve supply chain transparency and brand protection through technological innovation. The Company believes that his record of accomplishment in R&D, particularly in the fields of ultrasound technology, signal analysis, and robotics, combined with his leadership in managing high-impact projects, makes him an invaluable asset to the Company.

 

Chief Financial Officer

 

As of March 1, 2024, Limor Lotker, the Chief Financial Officer (“CFO”) of the Company, resigned from her position, effective immediately.

 

Also as of March 1, 2024, the Company appointed Ofira Bar, age 43, as its CFO.

 

7
 

 

$2,910,000 Offering

 

On February 20, 2024, the Company closed an underwritten public offering of securities for gross proceeds of approximately $2.9 million, prior to deducting underwriting discounts and commissions and offering expenses payable by the Company. The offering was pursuant to an underwriting agreement with EF Hutton LLC relating to the public offering of 12,124,666 Ordinary Shares at a subscription price per share of $0.24. Additionally, to the extent that the purchase of such shares would cause the beneficial ownership of a purchaser in the offering, together with its affiliates and certain related parties, to exceed 4.99% of the Ordinary Shares, the Company agrees to issue the underwriter, for delivery to such purchasers, at the election of the purchasers, a number of Pre-Funded Warrants which are initially convertible on a 1-for-1 basis into Ordinary Shares, at a price per Pre-Funded Warrant of $0.2378 (100% of the public offering price allocated to each firm share less $0.0022).

 

The net proceeds to the Company upon the closing of the offering, after deducting the underwriting commissions and estimated offering expenses payable by the Company, were approximately $2.66 million. The Company used the net proceeds from the Offering for (i) sales and marketing; (ii) payment of certain outstanding liabilities and working capital; and (iii) digital branding consulting services. The Company entered into various agreements with consultants to provide the marketing and digital branding consulting services, effective as of the closing of the Offering.

 

Pursuant to the underwriting agreement, the Company paid the underwriter a cash fee equal to 2.5% of the gross proceeds of the Offering, and also paid $100,000 of expenses of the underwriter in connection with the offering.

 

Letter Agreement with YA II PN, Ltd.

 

On February 2, 2024, the Company entered into a Letter Agreement with YA II PN, Ltd., a Cayman Islands exempt limited partnership (“Yorkville”) dated February 1, 2024 (the “Letter Agreement”), which amends and supplements the Standby Equity Purchase Agreement dated February 23, 2023, by and between the Company and Yorkville (the “SEPA”) pursuant to which, among other things, Yorkville advanced to the Company pre-paid advances in the aggregate of $2,000,000 evidenced by a convertible promissory note issued to Yorkville dated May 23, 2023 as amended by that Letter Agreement dated July 27, 2023 (the “May Pre-Paid Advance”).

 

8
 

 

Pursuant to the Letter Agreement, the Company agreed to make payments to Yorkville, which may include proceeds of Advances (as defined in the SEPA) under the SEPA, to repay the amounts outstanding under the May Pre-Paid Advance plus Payment Premium (as defined in the SEPA), until all such amounts are fully repaid, and shall use commercially reasonable best efforts to do so by April 1, 2024. The Letter Agreement further provided that any proceeds from any capital raise after April 1, 2024, other than advances under the SEPA, will be utilized to pay down outstanding principal, outstanding default interest and Payment Premium under the May Pre-Paid Advance. As a result, subsequent to the effective date of the Letter Agreement, the Company issued an aggregate of 1,000,000 Ordinary Shares as advances, the proceeds of which were applied to pay the first $100,000 fee described below and the remainder to repay a portion of the principal and interest outstanding under the convertible promissory note evidencing the remaining Pre-paid Advance.

 

The Company agreed to pay a fee to Yorkville equal to $200,000, of which $100,000 shall be payable from the next Advance after the date of the Letter Agreement and $100,000 shall be payable by April 1, 2024 (the “Second Tranche Fee”); provided, that the Second Tranche Fee will not be due if the total amount due and outstanding under the May Pre-Paid Advance is paid in full by April 1, 2024.

 

The Company further agreed to issue to Yorkville a 5-year warrant to purchase 250,000 ordinary shares of the Company at an exercise price of $0.0022 per share (the “Yorkville Warrant”). Such ordinary shares issuable upon exercise of the Yorkville Warrant have demand registration rights, and the Company further agreed to register additional ordinary shares that may be issued pursuant to the SEPA as provided in the Letter Agreement.

 

The Company also agreed to file a registration statement to register additional Registrable Securities (defined in the SEPA) and the Ordinary Shares issuable upon exercise of the Yorkville Warrant no later than thirty (30) calendar days from the date of the Letter Agreement and to file a registration statement to register additional Registrable Securities any time the Registrable Securities are less than 500,000 Ordinary Shares.

 

On or about April 19, 2024, the Company terminated the SEPA in accordance with its terms.

 

Notice of Failure to Satisfy a Continued Listing Rule

 

On January 26, 2024, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of Nasdaq, notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market, as the bid price of the Company’s Ordinary Shares on the Nasdaq Capital Market was below $1.00 for 30 consecutive business days, from December 11, 2023 to January 25, 2024.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company has a period of 180 calendar days, or until July 24, 2024 (the “Compliance Date”), to regain compliance with the Minimum Bid Price Requirement. If, at any time before the Compliance Date, the closing bid price of the Company’s Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days, the Staff will provide a written confirmation to the Company that it has regained compliance with the Minimum Bid Price Requirement.

 

If the Company does not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, the Company may be eligible for additional time. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company meets these requirements, Nasdaq will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that its securities will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Nasdaq Listing Qualifications Panel (the “Panel”) pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.

 

9
 

 

Additionally, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement, or will otherwise be compliant with other Nasdaq Listing Rules.

 

Conversion and Exchange or Notes and Warrants

 

On or about January 12, 2024, the Company issued an aggregate of 4,032,256 Ordinary Shares and warrants to purchase an aggregate of 4,032,256 Ordinary Shares, to holders (the “Note Holders”) of existing convertible notes (the “Existing Notes”) and Redeemable Warrants (the “Redeemable Warrants”), in exchange for the cancellation of an aggregate of (a) approximately $750,000 owed to the Note Holders under the Existing Notes and (b) $1,450,000 cash value of Redeemable Warrants. The Company also issued 457,682 Ordinary Shares to a service provider (the “Service Provider”) as payment in full for $260,000 worth of services previously provided to the Company by the Service Provider. Such transactions were evidenced by a series of substantially similar Conversion and Exchange Rights Agreements executed as of December 31, 2023.

 

Agreement with R&I Trading of New York

 

On January 12, 2024, the Company announced that it entered into a $5 million contract with R&I Trading of New York (“R&I Trading”). The agreement with R&I Trading aims to set new standards in brand protection, authentication, ethical sourcing, and origination, specifically for the Fast-Moving Consumer Goods (FMCG) sector, including Beverage and Pharmaceutical industries.

 

Implications of Being an “Emerging Growth Company” and a “Foreign Private Issuer”

 

The Company qualifies as an “emerging growth company” as defined in the JOBS Act. As an “emerging growth company,” the Company may take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to public companies. These exemptions include:

 

  not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
     
  reduced disclosure obligations regarding executive compensation; and
     
  not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.

 

The Company may take advantage of these reporting exemptions until it is no longer an “emerging growth company.”

 

10
 

 

The Company is also considered a “foreign private issuer” and will report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as a non-U.S. company with “foreign private issuer” status. This means that, even after the Company no longer qualifies as an “emerging growth company,” as long as it qualifies as a “foreign private issuer” under the Exchange Act, it will be exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including:

 

  the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
     
  the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
     
  the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events

 

The Company may take advantage of these reporting exemptions until such time that it is no longer a “foreign private issuer.” The Company could lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of the Company’s outstanding voting securities become directly or indirectly held of record by U.S. holders and any one of the following is true: (i) the majority of the Company’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of the Company’s assets are located in the United States; or (iii) the Company’s business is administered principally in the United States.

 

The Company may choose to take advantage of some but not all of these reduced burdens. The Company has taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained in this prospectus may be different from the information you receive from the Company’s competitors that are public companies, or other public companies in which you have made an investment.

 

As a foreign private issuer, the Company is also be permitted to follow certain home country corporate governance practices instead of those otherwise required under the applicable rules of Nasdaq for domestic U.S. issuers. In order to rely on this exception, the Company is required to disclose each Nasdaq rule that it does not intend to follow and describe the home country practice that it will follow in lieu thereof. The Company currently follows the following Irish corporate governance practices in lieu of Nasdaq corporate governance rules: The Company has elected to (a) amend its 2022 Equity Incentive Plan to increase the number of shares authorized under the plan without stockholder approval, (b) follow home country practice in lieu of the requirements under Nasdaq Rule 5635(d) to seek shareholder approval in connection with certain transactions involving the sale, issuance and potential issuance of its Ordinary Shares (or securities convertible into or exercisable for its Ordinary Shares) at a price less than certain referenced prices, if such shares equal 20% or more of the Company’s Ordinary Shares or voting power outstanding before the issuance, and (c) follow home country practice in lieu of the requirements under Nasdaq Rule 5635(c) to seek shareholder approval in connection with the establishment or material amendment of a stock option or purchase plan or arrangement pursuant to which stock may be acquired by officers, directors, employees or consultants.

 

Summary Risk Factors

 

Investing in our securities entails a high degree of risk as more fully described under “Risk Factors”. You should carefully consider such risks before deciding to invest in our securities. These risks include, among others:

 

Risks Related to Ownership of the Ordinary Shares

 

  A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.
  If securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Ordinary Shares adversely, then the price and trading volume of the Ordinary Shares could decline.

 

Risks Related to Our Legal and Regulatory Environment

 

  Changes in laws, regulations or rules, and a failure to comply with any laws, regulations and standards, may adversely affect our financial and operating performance and profitability.

 

11
 

 

Risks related to the business and operations of the Company

 

  We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and it may be difficult to evaluate our future prospects.
  If we fail to effectively manage our growth, our business, financial condition, and results of operations could be adversely affected.
  The industry in which we operate is competitive, and if we fail to compete effectively, we could experience price reductions, reduced margins or loss of revenues.
  We will need in the future to raise additional funds, inter alia, by equity, debt, or convertible debt financings, to support our growth, and those funds may be unavailable on acceptable terms, or at all. As a result, we may be unable to meet our future capital needs, which may limit our ability to grow and jeopardize our ability to continue our business.

 

Risks Related to Technology, Intellectual Property and Data

 

  We may be unable to, and it may be difficult and costly to, obtain, maintain, protect, or enforce our intellectual property and other proprietary rights sufficiently.

 

Risks Related to Our Operations in Israel

 

  Conditions in Israel and relations between Israel and other countries could adversely affect our business.

 

Risks related to Tax

 

  The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could impact our future financial position and results of operations.
     
  U.S. holders that directly or indirectly own 10% or more of our equity interests may be subject to adverse U.S. federal income tax consequences under rules applicable to U.S. shareholders of “controlled foreign corporations.”
     
  Our U.S. shareholders may suffer adverse tax consequences if we are classified as a “passive foreign investment company.”
     
  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 resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
     
  Future changes in U.S. and foreign tax laws could adversely affect the Company.

 

Risks related to Irish Law

 

  The Company does not intend to pay dividends in the foreseeable future.
     
  Provisions in the Company’s Amended and Restated Memorandum and Articles of Association (the “Amended and Restated Memorandum and Articles of Association”) and under Irish law could make an acquisition of the Company more difficult, may limit attempts by the Company shareholders to replace or remove the Company’s management, may limit shareholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company’s directors, officers, or employees, and may limit the market price of the Ordinary Shares, the warrants to acquire one Ordinary Share at an exercise price of $253.00 per share (the “Public Warrants”) and/or other securities issued by the Company.

 

12
 

 

General Risks

 

  The Company will incur significant costs and devote substantial management time as a result of being subject to reporting requirements in the United States, which may adversely affect the operating results of the Company in the future.
     
  The stock price of the Ordinary Shares may be volatile.
     
  The Company may issue additional Ordinary Shares or other equity securities without seeking approval of its shareholders, which would dilute your ownership interests and may depress the market price of the Ordinary Shares.
     
  The Company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses. This would subject the Company to generally accepted accounting principles, as in effect in the United States from time to time (“GAAP”), reporting requirements which may be difficult for it to comply with.
     
  The Company is an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Ordinary Shares less attractive to investors.
     
  The Company will incur significant costs and devote substantial management time as a result of being subject to reporting requirements in the United States, which may adversely affect the operating results of the Company in the future.
     
  The Company’s management has limited experience in operating a public company in the United States.
     
  There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq. If we are not able to comply with the applicable continued listing requirements or standards of the Nasdaq Capital Markets, Nasdaq could delist our Ordinary Shares and Public Warrants.

 

In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed in “Risk Factors” and elsewhere in this prospectus before investing in our securities.

 

Corporate Structure

 

The Company has six wholly owned subsidiaries: Lionheart, Security Matters PTY, SMX Circular Economy Platform PTE, Ltd. (Singapore), TrueSilver SMX Platform Ltd. (Canada) (“TrueSilver”), SMX Fashion and Luxury (France) and SMX (Security Matters) Ireland Limited (Ireland). Security Matters PTY has two wholly-owned subsidiaries: Security Matters Ltd. (Israel) and SMX Beverages Pty Ltd. (Australia), along with being the record holder of 50% of Yahaloma Technologies Inc. (Canada) (“Yahaloma”) and 51.9% of trueGold Consortium Pty Ltd. (Australia).

 

Corporate Information

 

The Company is a public limited company organized and existing under the laws of Ireland. The Company was formed on July 1, 2022 as a public limited company incorporated in Ireland under the name “Empatan Public Limited Company”. The Company changed its name to SMX (Security Matters) Public Limited Company on February 17, 2023. Its affairs are governed by its Amended and Restated Memorandum and Articles of Association, the Irish Companies Act of 2014 (the “ICA”), and the laws of Ireland.

 

The Company’s principal website is https://smx.tech. We do not incorporate the information thereon, or accessible through, our website into this prospectus, and you should not consider it a part of this prospectus.

 

13
 

 

THE OFFERING

 

The summary below described the principal terms of the offering. The “Description of Securities” section of this prospectus contains a more detailed description of the Company’s Ordinary Shares.

 

Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” on page 16 of this prospectus.

 

Issuer   SMX (Security Matters) Public Limited Company
     
Ordinary Shares offered by the Selling Stockholder   487,281
     
Selling Stockholder   All of the Ordinary Shares are being offered by the Selling Stockholder. See “Selling Stockholder” on page 102 of this prospectus for more information on the Selling Stockholder
     
Ordinary Shares Outstanding Prior to Offering   34,016,388, as of April 18, 2024, which includes the prior issuance of all 487,281 Ordinary Shares to the Selling Stockholder. (1)

 

Use of Proceeds   We will not receive any of the proceeds from the sale of Ordinary Shares by the Selling Stockholders. The Selling Stockholder will receive all of the net proceeds from the sale of the Ordinary Shares in this offering. See “Use of Proceeds” on page 37 of this prospectus for more information.
     
Market for Ordinary Shares   Our Ordinary Shares are listed on The Nasdaq Stock Market LLC under the symbol “SMX”.
     
Risk Factors   See the section entitled “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.
     
Plan of Distribution   The Selling Stockholder, or its pledgees, donees, transferees, distributees, beneficiaries or other successors-in-interest, may offer or sell the Ordinary Shares from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The Selling Stockholder may also resell the Ordinary Shares to or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions.
     
    See “Plan of Distribution” beginning on page 114 of this prospectus for additional information on the methods of sale that may be used by the Selling Stockholder.

 

(1) Excludes the following:

 

  90,910 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of the Warrant B warrants, at an exercise price per share of $5.28;

 

14
 

 

  6,273 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of the Warrant A warrants, at an exercise price per share of $5.28 (or, if exercised on a cashless basis, 3,137 Ordinary Shares);
     
  30,303 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of underwriter warrants issued in June 2023, at an exercise price per share of $5.808;
     
  284,091 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon conversion of our Public Warrants;
     
  4,295 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of outstanding redeemable 5-year warrants, at an exercise price per share of $253.00;
     
  7,182 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of outstanding 5-year warrants, at an exercise price per share of $253.00;
     
  100,000 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares issuable upon exercise of outstanding warrants issued to Lionheart Equities, LLC, a Delaware limited liability company (the “Sponsor”) or its affiliates;
     
  60,307 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares reserved for future issuance under options originally granted under Security Matters PTY’s 2018 Share Option Plan and that were assumed by us as a result of the Business Combination;
     
  1,731,019 (adjusted pursuant to the Reverse Stock Split) Ordinary Shares reserved for issuance under our 2022 Incentive Equity Plan, of which (i) an aggregate of 197,042 are restricted stock units issued or to be issued to our employees and consultants, which vest from time to time through March 2027, and (ii) an aggregate of 32,138 5-year options were granted to employees, services providers and advisory board members, at exercise prices per share ranging from $78.54 to $88.00;
     
  Ordinary Shares that may be issued from time to time to Alpha pursuant to the $30 million SPA, including 2,725,621 Ordinary Shares expected to be issued as the commitment fee thereunder;
     
  Ordinary Shares issuable upon the conversion of accrued interest under a promissory note dated September 5, 2023;
     
  456,119 Ordinary Shares issuable upon exercise of an outstanding 5-year “A” warrant, at an exercise price per share of $0.0022;

 

  457,682 Ordinary Shares issuable upon exercise of outstanding 5-year warrants at an exercise price of $1.17 per share;
     
  750,000 Ordinary Shares issuable upon exercise of outstanding pre-funded warrants at an exercise price of 0.0022;
     
  227,273 Ordinary Shares issuable upon exercise of outstanding 5-year reset warrants at an exercise price of $1.15 per share;
     
  227,273 Ordinary Shares issuable upon exercise of outstanding 5-year reset warrants at an exercise price of $0.0022 per share;
     
  250,000 Ordinary Shares issuable upon exercise of an outstanding 5-year warrant held by Yorkville at an exercise price of $0.0022 per share;
     
  100,000 Ordinary Shares issuable upon exercise of an outstanding 5-year warrant held by an investor at an exercise price of $0.05 per share.
     
  11,825,508 Ordinary Shares issuable upon exercise of an outstanding 5.5 year purchase warrants, at an exercise price of $0.157 per share;
     
  Ordinary Shares that may be issued from time to time to an investor pursuant to a $350,000 convertible security; and
     
  Ordinary Shares that may be issued from time to time to Alpha pursuant to a $2.25 million convertible promissory note, dated April 11, 2024.

 

15
 

 

RISK FACTORS

 

An investment in our securities is highly speculative, involves a high degree of risk and should be made only by investors who can afford a complete loss. If any of the following risks actually occurs, then our business, financial condition or results of operations could be materially adversely affected, the trading of our Ordinary Share and warrants could decline, and you may lose all or part of your investment therein. In addition to the risks outlined below, risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating results and financial condition include, without limitation, the following:

 

Risks Related to Ownership of the Ordinary Shares

 

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

 

The price of our securities may fluctuate significantly due to the general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

The trading price of our securities could be volatile and subject to wide fluctuations.

 

The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

 

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to the Company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

 

In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.

 

If securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Ordinary Shares adversely, then the price and trading volume of the Ordinary Shares could decline.

 

The trading market for our Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Ordinary Shares would likely decline. If any analyst who may cover the Company were to cease coverage or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

16
 

 

Risks related to the business and operations of the Company

 

We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and it may be difficult to evaluate our future prospects.

 

We have experienced rapid growth in recent years in the markets we serve, including hiring additional employees, running multiple projects concurrently and expanding into new fields, and we plan to continue to expand into new markets. Our limited operating history may make it difficult to make accurate predictions about our future performance. Assessing our business and future prospects may also be difficult because of the risks and difficulties we face. These risks and difficulties include our ability to:

 

  enter into new relationships and maintain existing relationships with clients and business partners;
     
  maintain cost-effective access to capital;
     
  expand the use and applicability of our technology;
     
  successfully build our brand and protect our reputation from negative publicity;
     
  successfully adjust our proprietary technology, products and services in a timely manner in response to changing market conditions;
     
  successfully compete with companies that are currently in, or may in the future enter, the business of providing traceability solutions;
     
  enter into new markets and introduce new products and services based on our technology;
     
  comply with and successfully adapt to complex and evolving legal and regulatory environments in our existing markets and ones we may enter in the future;
     
  attract, integrate and retain qualified employees and independent contractors; and
     
  effectively manage, scale and expand the capabilities of our teams, outsourcing relationships, third-party service providers, operating infrastructure and other business operations.

 

If we are not able to timely and effectively address these risks and difficulties as well as those described elsewhere in this “Risk Factors” section, our business, financial condition and results of operations may be adversely affected.

 

If we fail to effectively manage our growth, our business, financial condition, and results of operations could be adversely affected.

 

As described above, over the last several years, we have experienced rapid growth in our business and number of employees, and we expect to continue to experience growth in the future. This rapid growth has placed, and may continue to place, significant demands on our management, processes, systems and operational, technological and financial resources. Our ability to manage our growth effectively, integrate new employees, independent contractors and technologies into our existing business and attract new business partners and maintain relationships with existing business partners will require us to continue to retain, attract, train, motivate and manage employees and independent contractors and expand our operational, technological and financial infrastructure. Continued growth could strain our ability to develop and improve our operational, technological, financial and management controls, reporting systems and procedures, recruit, train and retain highly skilled personnel and maintain business partners’ and their customers’ satisfaction.

 

17
 

 

We may not have sufficient manufacturing capabilities for our markers and readers to satisfy demand for our products, including due to the Eastern-European issues, world politics, COVID-19 related issues, international freight issues, costs of goods and other external financial or political issues. We may be unable to control the availability or cost of producing such products.

 

Our current manufacturing capabilities may not reach the required production levels necessary in order to meet growing demands for any products we may commission or future products we may develop. There can be no assurance that our commissioned products can be manufactured at the desired commercial quantities, in compliance with our requirements and at an acceptable cost. Any such failure could delay or prevent us from shipping said products and marketing the technologies in accordance with our target growth strategies.

 

While we were able to date to find new employees, when required, Israeli (and other) high-tech employment atmosphere (including due to the post-COVID-19 pandemic and lack of available professionals) is making it harder and harder to find and retain new employees. Thus, risk exists that we will not be able to hire all the employees we seek to hire, in the timeframe required and anticipated, which may slow down our growth, cause increased costs and reduced profits or hinder our ability to duly and timely fulfill all tasks and growth plans.

 

We note that due to such employment atmosphere we may need to extend additional resources, including issuance of shares and options, and financial measures in order to create retention plans for key personnel.

 

Part of our products are in the field of sustainability and circular economy and part of our growth engine is the upcoming world-wide legislation and regulations demanding sustainability and circular economy and carbon-free environment. While we are not relying on such upcoming legislation or regulations, slow legislation or promulgation process and changes in priorities (including due to the COVID-19 epidemic or the Eastern-European issues) may slow our growth.

 

Due to the fact that we aim our sales efforts at large international market-maker conglomerates, our sales cycle is relatively slow and there is a larger risk that at any time, due to many reasons that are beyond our control, the sales cycle will be broken and all efforts will be lost.

 

Any of the foregoing factors could negatively affect our business, financial condition and results of operations.

 

If the Isorad License Agreement is terminated, our business, financial condition and results of operations may be harmed.

 

In January 2015, SMX Israel entered a license agreement with Isorad Ltd (a company wholly owned by the State of Israel with rights to exclusively commercialize the Soreq Nuclear Research Center technology for civilian uses) (“Isorad”) to license the initial technology of tracking and tracing materials by observing and identifying markers (“Source IP”) and commercialize and develop the technology further (the “Isorad License Agreement”). Under the Isorad License Agreement, the Source IP can be utilized in almost any industry and with any product. The Source IP has been the cornerstone for our technological developments. Since entering into the Isorad License Agreement, we filed over a hundred additional patent applications worldwide (most of which are irrelated to the Source IP).

 

Specifically as to Yahaloma, the royalty rate on gross sales of Yahaloma, to be paid by Yahaloma, are 4.2% (and not 2.2% that applies solely to Security Matters PTY, its other affiliates and to other sublicensees). Upon the occurrence of an M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of Yahaloma and similar event), Isorad is entitled to a fee equal to 1% of the total consideration paid to, received by, or distributed to, Yahaloma and/or its shareholders and/or its affiliates in connection with the event, including, without limitation, all cash, securities or other property which is received by Yahaloma and/or its shareholders in connection with such event of two such events (i.e. twice) at its choice.

 

The Isorad License Agreement will continue in full force and effect in perpetuity unless terminated. If either party does not remedy a material breach of its obligations within 180 days of notice of the material breach, the non-defaulting party may terminate the Isorad License Agreement immediately. Isorad may terminate the agreement by providing 30 days prior written notice if the royalties payable to Isorad are nil in any semi-annual report or if we breach other certain obligations (such as a failure to maintain a patent or patent application in the previous semi-annual review period). If the Isorad License Agreement is terminated, our business, financial condition and results of operations may be harmed.

 

18
 

 

If we fail to penetrate the full value chain manufacturing eco-system effectively, our business, financial condition, and results of operations could be adversely affected.

 

Value based pricing may be necessary to enable roll-out across clients, creating challenges in full value capture and effective customer segmentation. Some end-markets (e.g. plastics) require high levels of penetration to support our full value proposition. A broad range of potential end-markets and clients with different value propositions and price sensitivities will require a substantial, high performing, commercial organization.

 

In order to maintain continuous growth there is a need to onboard more and more players from different parts of the value chain manufacturing eco-system with the final view of covering all links in the value chain manufacturing eco-system. This may be time and cost consuming and will require funding and personnel and we may not be able to achieve the full value chain penetration due to failure to attain funding or personnel or due to external circumstances, which may hinder our growth.

 

The COVID-19 pandemic has adversely affected, and may continue to affect, our business, financial condition, liquidity and results of operations.

 

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States, Israel, Australia and international capital markets. We have followed guidance issued from time to time by the Australian and Israeli governments and the other local governments in territories in which we operate to protect our employees. As such, we have implemented work from home where possible, minimized face-to-face meetings and utilized video conference as much as possible and adhered to social distancing rules at our facilities while eliminating international travel, which required us to use local representatives to handle presentations and demonstrations for oversees customers. As a result, we have experienced some difficulties in employee ability to efficiently collaborate to meet our customer needs, a difficulty in our efforts to recruit and hire qualified personnel during this time, and have recorded a minor decrease in expected growth in 2020 and 2021, both due to the lockdown and restrictions, and our customers postponing or being hesitant of making future financial, or other, commitments due to the need to put response to the pandemic at the forefront, hesitations that may continue, or reoccur, in the future. Although some of these limitations have been lifted as the pandemic has receded, many of the resulting difficulties have remained in varying degrees.

 

We cannot predict the other future potential, direct or indirect, impacts of the COVID-19 pandemic on our business or operations, and there is no guarantee that any near-term trends in our results of operations will continue, particularly if the COVID-19 pandemic and the adverse consequences thereof worsen. Additional waves of infections, a continuation of the current environment, or any further adverse impacts caused by the COVID-19 pandemic could further impact employment rates, supply chains, priorities and the economy, affecting our customer base and divert customers’ discretionary spend to other uses, including for essential items. These events could impact our cash flows, results of operations and financial conditions and heighten many of the other risks described in this prospectus.

 

Our operations in foreign jurisdictions will subject us to risks associated with operating in those jurisdictions and may adversely affect our business, cash flows, financial condition and results of operations.

 

As we operate in foreign jurisdictions (such as Ireland, Israel, Australia, Singapore, France and Canada), we will be subject to those risks associated with operating in foreign jurisdictions. Such risks may include economic, social or political instability or change, hyperinflation, currency non-convertibility or instability and changes of laws affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, licensing, repatriation of income or return of capital, consumer health and safety or labor relations. While the jurisdictions in which we currently operate are economically stable, there is no certainty that political and economic conditions will remain stable. Any deterioration in political or economic conditions, including hostilities or terrorist activity may adversely affect our operations and profitability. There is a risk that the government of any such jurisdiction may change its policies regarding foreign investment, apply new or different taxes and levies, or make any other change which may have an adverse impact on our profitability. See the risk factors under “Risks Related to Our Operations in Israel.”

 

19
 

 

Prior to the Russian-Ukrainian dispute, Security Matters PTY was cooperating with a Ukrainian entity in parallel with its activities in Israel and European entities for research and development for its readers. Security Matters PTY was also reviewing potential relationships with entities in Russia, Belarus and Ukraine. As a result of the dispute, Security Matters PTY put on hold its research and development in Ukraine while continuing its research and development activity in Israel and with European entities and undertook no business relationships with parties in those regions. It is yet unknown what other effects such dispute may have on other jurisdictions, mainly in Europe, and any such effect might affect our business and growth. We cannot predict the other future potential impacts of the dispute on our business or operations, especially if such dispute becomes more than a regional event. These events could impact our cash flows, business, results of operations and financial condition and heighten many of the other risks described in this prospectus.

 

Moreover, events may occur within or outside the jurisdictions in which we operate that could impact those economies, our operations and the price of the Ordinary Shares. These events include but are not limited to acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, labor strikes, civil wars, natural disasters, outbreaks of disease or other natural or manmade events or occurrences that can have an adverse effect on the demand for our products and our ability to conduct business. While we seek to maintain insurance in accordance with industry practice to insure against the risks we consider appropriate after consideration of our needs and circumstances, no assurance can be given as to our ability to obtain such insurance coverage in the future at reasonable rates or that any coverage arranged will be adequate and available to cover any and all potential claims. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

 

If we are unable to successfully identify and integrate acquisitions, our results of operations could be adversely affected.

 

Acquisitions may be a significant component of our growth strategy and from time to time we may seek to identify and complete acquisitions. Our future acquisitions may not be successful or may not generate the financial benefits that we expected we would achieve at the time of acquisition. In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or, because of competition in the marketplace. Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership. While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition and operating results.

 

We may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions. We may also incur integration costs following the completion of any such acquisitions as we integrate the acquired business with the rest of our Company. Although we expect that the realization of efficiencies related to the integration of any acquired businesses will offset the incremental transaction and acquisition-related costs over time, this net financial benefit may not be achieved in the near term, or at all.

 

The industry in which we operate is competitive, and if we fail to compete effectively, we could experience price reductions, reduced margins or loss of revenues.

 

Generally, the track and trace and anti-counterfeit industry in which we operate is subject to global and domestic competition. We are unable to influence or control the conduct of our competitors and such conduct may detrimentally affect our financial and operating performance There are several competitors that operate in the anti-counterfeit and track-and-trace industries and if new competitors enter the market, or established companies develop new products and technologies that are superior to our current technology, our ability to exploit any technological advantage successfully may be affected. We may be unable to develop further products or keep pace with developments and may lose clients to competitors. If our competitors develop a more efficient business model or undertake a more aggressive marketing campaign, this is likely to affect our marketing strategies and results of operations adversely.

 

20
 

 

There is no guarantee that customers will adopt our products and we may be unable to compete successfully with more established track and trace and anti-counterfeit companies on price or quality or may be unsuited to the established preferences of potential customers.

 

Our continued growth, including our ability to manage our operations and meet our strategic objectives, depends on retaining our current employees upon whom we are dependent and attracting and retaining qualified personnel, and we may not be able to do so at a rate that will enable us to stand up to our expected growth or cope with specific demands that may arise.

 

Our success depends to a large extent upon the skills and experience of our executive officers, management and sales, marketing, operations and scientific staff. We may not be able to attract or retain qualified employees due to the intense competition for qualified personnel in the technology industry, as well as to geographic considerations, our ability to offer competitive compensation and benefits, and other reasons.

 

If we are not able to attract and retain the necessary qualified personnel to manage our operations and accomplish our business objectives, we may experience constraints that will adversely affect our ability to manufacture, sell and market our products or to support research and development programs effectively.

 

SMX Israel has entered into employment contracts with several of its executives including Haggai Alon, its founder and Chief Executive Officer, and Ofira Bar, its CFO. Due to the specific knowledge and experience of these executives regarding the industry, technology and market generally and to our company specifically, the loss of the services of any one of these executives could have a material adverse effect on us. We have not obtained a key person insurance policy on any officer.

 

Although our employment agreements contain non-compete clauses, Israeli law does not fully enforce employees’ non-compete obligations and may limit their application, including with regard to duration and scope.

 

Under Israeli case law an Israeli Court will usually only enforce non-compete provisions if the employee received specific consideration for it. While all of our employment agreements include specific provisions stipulating that special consideration was paid for the non-compete provision, a risk always exists that a Court will not enforce such.

 

We may not be able to anticipate or adapt to consumer preferences which may have an adverse effect on our business, cash flows, financial condition and results of operations.

 

Our success depends on our ability to develop and commercialize our technology. A failure to successfully develop and commercialize our technology could lead to a loss of opportunities and adversely impact on our business, cash flows, financial condition and results of operations.

 

The global market for our technology is ever changing due to new technologies, new products, changes in regulations and other factors influencing market acceptance or market rejection of our technologies. This market volatility and risks exists despite our best efforts in relation to market research, promotion and sales efforts.

 

Our business is dependent on consumer awareness and market acceptance of our products. We may not be able to anticipate and react to trends within the industries we target in a timely manner or accurately assess the impact that such trends may have on consumer preferences. Failure to respond to changes in consumer preferences or anticipate market trends may adversely affect our future revenues and performance. Although we have striven to establish market recognition for our products in the relevant industry, it is too early in the life cycle of our brand to determine whether markers, readers, blockchain technology and any further technology developed by us will achieve and maintain satisfactory levels of acceptance and sustained adoption by manufacturers and consumers. Our technology may not be accepted by the market or used in our proposed markets and industries. We may not be able to commercialize our products, which could adversely impact on business, cash flows, financial condition and results of operations.

 

21
 

 

We may not be able to adapt our markers to the needs of any customer or field which may have an adverse effect on our business, cash flows, financial condition and results of operations.

 

Research and development tailoring costs are required to adapt marker and scanning technology to different materials and industrial/commercial environments, potentially increasing the cost and time to market as we scale across customers and verticals. If we are unable to adapt our markers to the needs of any customer or field due to the costs of doing so, our business, cash flows, financial condition and results of operations could be adversely affected.

 

We will need in the future to raise additional funds, inter alia, by equity, debt, or convertible debt financings, to support our growth, and those funds may be unavailable on acceptable terms, or at all. As a result, we may be unable to meet our future capital needs, which may limit our ability to grow and jeopardize our ability to continue our business.

 

We plan to continue to make investments to support our growth and will require additional funds to respond to business challenges that may arise, including the need to develop new products and services, enhance our technology, scale and improve our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we will need to engage in equity, debt or convertible debt financings to secure additional funds. In raising additional funds by the issuance of equity securities or securities convertible into equity securities, our shareholders may experience dilution. Debt financing, such as credit facilities or corporate bonds, may involve covenants restricting our operations or our ability to incur additional debt. Debt financing may also require security arrangements including cash collateral agreements that restrict the availability of cash held as collateral which is the case for amounts we may borrow in the future. In addition, future equity financing or replacement or refinancing of any debt financings may not be available on terms favorable to us, or at all, and the fact that debt holders are repaid first may reduce our ability to raise a later equity financing and may limit the ability to distribute dividends.

 

If we are unable to obtain adequate financing or financing at terms satisfactory to us when we require it, we may be unable to pursue certain business opportunities, supply proper service to our customers, and our ability to continue to support our business growth and the then current business and to respond to business challenges may be impaired and our business may be harmed.

 

Legal proceedings, investigations or claims against us may be costly and time-consuming to defend and may harm our reputation and damage our business regardless of the outcome. In addition, our business and operations could be negatively affected if they become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our share price.

 

We are currently not aware of any risk of litigation against us, but we may be involved in litigation disputes with third parties including suppliers, customers, employees, former employees and government bodies in the ordinary course of business. The occurrence of a litigation dispute may be costly and impact on our reputation which may have a material adverse effect on our business, cash flows, financial condition and results of operations. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims and might not continue to be available at terms acceptable to us. A claim brought against us for which we are uninsured or underinsured could result in unanticipated costs, potentially harming our business, cash flows, financial position and results of operations.

 

Although not a director of that entity, Mr. Alon previously worked as the deputy general manager for business development of an Israeli public company, Plat Technologies International Ltd (“Plat”) which entered insolvency. In early 2017, an ILS 35.9 million shareholders claim was filed by the appointed court officers at the end of the seven year statute of limitation period against 18 defendants, including Mr. Alon, regarding the collapse of Plat (the “Claim”). The insurance policy covering directors and officers responded and are now handling the claim. Mr. Alon denies any wrongdoing and does not consider that he will be required to commit any significant time to the conduct of the Claim and therefore will not constrain his ability to perform his duties and obligations to Security Matters PTY. The parties agreed to try and amicably resolve the dispute in mediation under which the insurance company agreed to consider taking upon itself any compensation as to the liability of Mr. Alon, if any, in such mediation proceedings. Security Matters PTY is not a party to the Claim and the Claim does not relate to the business or the affairs of Security Matters PTY.

 

22
 

 

Our markers may contaminate or spoil the raw material into which our marker is inserted, which could damage our reputation, subject us to product liability claims and result in a loss of revenue.

 

While we follow production protocols and conduct quality assurance tests, our markers may contaminate the raw material or certain raw material ingredients may be spoiled, contaminated by chemicals, microorganisms or toxins, or include foreign materials or substances. The risk of contamination may lead to product recalls or other interventions, which may cause serious damage to our reputation as a marking solution which does not affect the characteristics of the materials or products, or result in product liability claims and loss of revenue.

 

Our markers may include hazardous materials which may put customers, employees and other parties in our supply chain at risk. If any person is harmed by hazardous materials in our markers, our reputation could be damaged and we could be subject to litigation which may adversely affect our business, cash flows, financial position and results of operations.

 

The markers used by us are produced from materials chosen specifically for a specific application. Markers may, in some cases, include low concentrations of materials that may be deemed hazardous materials and the production of the markers by our employees can include dealing with hazardous materials. While manufacturing is conducted according to the material’s Material Safety Data Sheets (MSDS) and other relevant safety guidelines, a risk of health, even if minimal, may arise. While the hazardous materials are sent to the customers at a low concentration (of the marker), the risk of misuse or error in production may cause damage to our employees or customers, which may affect our expenses and production abilities. While we take safety provisions with respect to the hazardous materials used in our markers, these safety precautions may not be sufficient to prevent harm to our employees or customers from the production of or use of, respectively, our markers. While we are in compliance with the requirements of ISO 9001:2015 standard for quality management and quality assurance as well as safety measures instructed by an external safety engineer, such safety provisions may not be sufficient to prevent human error or other causes of damage.

 

Our readers use x-rays and may be of danger if tampered with or otherwise not used in accordance with the user manual and safety rules.

 

Although we supply customers with strict instructions for the use of our readers, and although we take measures to avoid misuse of the readers and minimize the risk of damage from misuse of the readers, users and others may suffer damage from not following such user instructions and may seek legal actions against us, even if such users or others are at fault.

 

We may not be able to procure adequate insurance and any insurance we have or may have may not be of sufficient coverage

 

We and our subsidiaries seek to maintain appropriate policies of insurance consistent with those customarily carried by organizations in our industry sector, including product insurance, as well as cyber-risk and privacy-risk insurance. Any increase in the cost of insurance policies or the industry in which they operate could adversely affect our business, cash flows, financial condition and results of operations. Our insurance coverage may also be inadequate to cover losses we may sustain and the insurance company may refuse to provide coverage or demand excessive payment for such coverage. In particular, our insurance does not extend to any potential liability or claims made against us under our agreement with Isorad. Uninsured loss or a loss in excess of our insured limits could adversely affect our business, cash flows, financial condition and results of operations.

 

Our risk management policies and procedures, and those of our third-party vendors upon which we rely, may not be fully effective in identifying or mitigating risk exposure. If our policies and procedures do not adequately protect us from exposure to these risks, we may incur losses that would adversely affect our financial condition, reputation and market share.

 

We have developed risk management policies and procedures and we continue to refine such as we conduct our business. Our policies and procedures are meant to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure. Further, as we are a research and development (“R&D”) company and expand into new fields of business, our risk management policies and procedures may not be able to keep up with our current rapid rate of expansion adequately, and may not be adequate or sufficient to mitigate risks. Moreover, we are subject to the risks of errors and misconduct, including by our officers, employees and independent contractors, including fraud and non-compliance with policies. These risks are difficult to detect in advance and prevent or avoid, and could harm our business, results of operations or financial condition. Although we seek to maintain insurance and use other traditional risk-shifting tools when possible, such as third-party indemnification, where possible, to manage certain exposures, they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency. If our policies and procedures do not adequately protect us from exposure, and our exposure is not adequately covered by insurance or other risk-shifting tools, we may incur losses that would adversely affect our business, cash flows, financial condition and results of operations.

 

23
 

 

Risks Related to Technology, Intellectual Property and Data

 

We may be unable to, and it may be difficult and costly to, obtain, maintain, protect, or enforce our intellectual property and other proprietary rights sufficiently.

 

Our ability to operate our businesses depends, in part, upon our proprietary technology. We may be unable to protect our proprietary technology effectively, which would allow competitors to duplicate our technology and adversely affect our ability to compete with them.

 

We have applied for over a hundred patents. While we are not aware of any such patent applications or the technology infringing any third party’s patents, we have not undertaken an exhaustive assessment of existing patents to determine any overlapping technology or potential infringement, and we do not conduct a freedom to operate search or any other exhaustive search of patents that may limit our ability to supply solutions to specific customers or fields, as the costs of such would be prohibitive. Accordingly, there is a risk that a third party may claim that any patent application infringes that third party’s patent. Any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have an adverse effect on our ability to market or exploit our technology.

 

There is no guarantee that our proposed patents that are the subject of the patent applications filed by us will provide adequate protection for our intellectual property, or that third parties will not infringe or misappropriate the patents or similar proprietary rights. In addition, there can be no assurance that we will not have to pursue litigation against other parties to assert our rights. There is no guarantee that any of the patents that have been applied for will be granted. If some or all of the patent applications are not granted, our ability to exploit our technology may be materially adversely affected.

 

If third parties claim that we infringe upon or otherwise violate their intellectual property rights, our business could be adversely affected.

 

Although we are not aware of any infringement on the rights of third parties, we may in the future be subject to claims that we have infringed or otherwise violated third parties’ intellectual property rights. There is patent, copyright, and other intellectual property development and enforcement activity in our industry and relating to the advanced technology we use in our business. Our future success depends in part on not infringing upon or otherwise violating the intellectual property rights of others. From time to time, our competitors or other third parties (including non-practicing entities and patent holding companies) may contend that we are infringing upon or otherwise violating their intellectual property rights, or attack our pending or approved patents, and we may be found to be infringing upon or otherwise violating such rights or otherwise in legal claims regarding patents or other intellectual property rights. We may be unaware of the intellectual property rights of others that may cover some or all of our current or future technology or conflict with our rights, and the patent and other intellectual property rights of others may limit our ability to improve our technology and compete effectively. Any claims of intellectual property infringement or other intellectual property violations, even those without merit, could cause the incurrence of costs and other direct, or indirect, damage to us, including:

 

  be expensive and time consuming to defend;
     
  cause us to cease making, licensing, or using any of our products that incorporate the challenged intellectual property;

 

24
 

 

  require us to modify, redesign, reengineer or rebrand our products, if feasible;
     
  damage our reputation;
     
  hinder our ability to market or sell our products and services;
     
  affect negotiations or executed agreements;
     
  cause increase to our insurance policies premium or refusal of insurance companies to insure us;
     
  divert management’s attention and resources; or
     
  require us to enter into royalty or licensing agreements to obtain the right to use a third-party’s intellectual property.

 

Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly settlement agreements, or prevent us from offering our solutions, any of which could have a negative impact on our operating profits and harm our future prospects. We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses, modify our solutions, or refund fees, which could further exhaust our resources. Such disputes could also disrupt our solutions, adversely affecting our customer satisfaction and ability to attract customers.

 

Under applicable employment laws, we may not be able to enforce covenants not to compete.

 

As part of our employment agreements with our employees we have confidentiality obligations. These agreements generally prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us. For example, Israeli labor Courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the protection of a company’s trade secrets or other proprietary knowhow.

 

Risks Related to Our Legal and Regulatory Environment

 

Litigation, regulatory actions, consumer complaints and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses.

 

In the ordinary course of business, we may be named as a defendant in various legal actions, including litigation or regulatory enforcement actions. All such legal actions are inherently unpredictable and, regardless of the merits of the claims, are often expensive, time-consuming, disruptive to our operations and resources, and distracting to management.

 

Changes in laws, regulations and standards and failure to comply with laws, regulations and standards may adversely affect our financial and operating performance and profitability.

 

Any changes to the existing regulatory framework or the imposition of new legislation or regulations applicable to any of the industries in which Security Matters PTY operates may adversely affect the financial and operating performance of Security Matters PTY. This risk factor applies to government policy and legislative changes in the United States, Australia, Israel, as well as the other jurisdictions in which we currently operate, or will operate in the future, or jurisdictions in which our current or future customers may operate.

 

25
 

 

Additionally, while we currently do not anticipate this, as the markers used in materials or products are of minuscule quantities, the markers may in the future be required to comply with health and safety laws in certain jurisdictions, and failure to comply with such laws may lead to penalties and other liabilities being imposed on us. In such circumstances, we may be required to suspend production or cease operations, which may lead to a materially adverse effect on our financial performance and profitability.

 

While we are not aware of any regulation or similar restriction that currently materially limits our ability to use our markers, such regulation or similar restriction may in the future limit our ability to sell our products and may require us either to avoid marking certain material or require us to disclose data to certain entities for certification process that may be required in order for us to use our markers.

 

The readers use X-range ray technology, which may thus require in certain jurisdictions specific authorization in order to import, manufacture or use such readers. Such authorization process in each such jurisdiction may be time and resources consuming, but may also limit the ability of users to use the readers without proper qualifications, as well as may require, in certain jurisdictions the supervision of such use.

 

Obligations and changes in laws or regulations relating to privacy, cybersecurity, and data protection, or any actual or deemed failure by us to comply with such laws and regulations that could adversely affect our business.

 

We receive, collect, use, disclose, transmit, and store information, including certain sensitive data, relating to our customers and employees. Our collection and processing of such data in our business may subject us to certain state, federal, and international laws and regulations relating to privacy, cybersecurity, and data protection. These laws, rules, and regulations evolve frequently and their scope may continually change through new legislation, amendments to existing legislation, and changes in interpretation or enforcement, and may be inconsistent from one jurisdiction to another.

 

Changes in laws or regulations relating to privacy, cybersecurity, and data protection, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer, or disclosure, could greatly increase the cost of our operations or prevent us from providing certain services. Complying with these requirements through changing our policies and practices may be onerous and costly. These changes may in turn impair our ability to offer our existing or planned products and services or increase our cost of doing business. Further, we may become subject to privacy and data security laws from jurisdictions outside of our standard business operations in. Despite our efforts to comply with any applicable laws, regulations, and other obligations relating to privacy, cybersecurity, and data protection, it is possible that our interpretations of the law, practices, or our network could be inconsistent with, or fail or be alleged to fail to meet all requirements of, such laws, regulations, or obligations. Our failure, or the failure by our business partners or customers using our services to comply with applicable laws or regulations or any other obligations relating to privacy, cybersecurity, and data protection or any compromise of security that results in unauthorized access to, or use or release of personal information or other data relating to consumers or other individuals, or the perception that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing business partners and customers from working with us, or result in fines, investigations, or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, cash flows, financial condition, and results of operations. Even if not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, cash flows, financial condition, and results of operations.

 

We invest significant resources in information technology protection and security measures. If these measures are targeted or breached, we may incur significant legal and financial exposure as a result of ransomware, loss of information, and related litigation. Moreover, we hold data of our employees and customers and we invest significant resources in information technology protection and security measures to ensure that such data is safe. If these measures are targeted or breached, we may incur significant reputational damage and related legal and financial exposure.

 

26
 

 

Risks Related to Our Operations in Israel

 

Conditions in Israel and relations between Israel and other countries could adversely affect our business.

 

Certain of our offices and R&D facilities are located in Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region directly affect our business and operations and could materially and adversely affect our ability to continue to operate from Israel. Recently, for example, the current political situation in Israel where the ruling parties are attempting to implement laws that essentially allow the parliament to enact laws that are preemptively immune to judicial review could adversely affect our business and results of operations. In addition, since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of our facilities, our ability to continue our operations could be materially adversely affected.

 

In recent years, and most recently restarting in October 2023 Israel has been engaged in sporadic armed conflicts with terrorist groups, including those that control the Gaza Strip and other regions close to Israel. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip, Lebanon and Syria against civilian targets in various parts of Israel, including areas in which our employees and independent contractors are located, which negatively affected business conditions in Israel. Any hostilities involving Israel, regional political instability or the interruption or curtailment of trade between Israel and its trading partners could materially and adversely affect our operations and results of operations.

 

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of property damage and certain direct and indirect damages that are caused by terrorist attacks or acts of war, such coverage would likely be limited, may not be applicable to our business (either due to the geographic location of our offices or the type of business that we operate) and may not reinstate our loss of revenue or economic losses more generally. Furthermore, we cannot assure that this government coverage will be maintained or that it will sufficiently cover our potential damages, or whether such coverage would be timely provided. Any losses or damages incurred by us could have a material adverse effect on our business, cash flows, financial condition and results of operations.

 

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts and Israeli legal reforms initiatives may cause countries to limit activities with Israel or otherwise apply certain restrictions, or may otherwise adversely affect our activities. Several countries still restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictive laws and policies, or significant downturn in the economic or financial condition of Israel, could materially and adversely affect our operations and product development, and could cause our sales to decrease.

 

A large concentration of our staff resides in Israel and many of our employees and independent contractors in Israel are required to perform military reserve duty, which may disrupt their work for us.

 

Many of our employees and independent contractors, including certain of our founders and certain members of our management team, operate from our headquarters that are located in central Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations.

 

In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists, including since October 7, 2023. It is possible that there will be additional and continued military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, particularly if such call-ups include the call-up of members of our management, and given the current shortage of talent in Israel due to the recent acceleration of activity in startups, especially in the technology space. Such disruption could materially and adversely affect our business, financial condition and results of operations.

 

27
 

 

Risks Related to Tax

 

The enactment of legislation implementing changes in taxation of international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could impact the Company’s future financial position and results of operations.

 

Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many tax jurisdictions where we have business operations. As a result, policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is being proposed or enacted in a number of jurisdictions.

 

In 2015, the Organization for Economic Co-operation and Development (the “OECD”) published final recommendations on base erosion and profit shifting (“BEPS”). These recommendations proposed the development of rules directed at counteracting the effects of tax havens and preferential tax regimes in countries around the world. Several of the areas of tax law on which the BEPS project focused have led or will lead to changes in the domestic law of individual OECD jurisdictions. These changes include (amongst others) restrictions on interest and other deductions for tax purposes, the introduction of broad anti-hybrid regimes and reform of controlled foreign corporation rules. Changes are also expected to arise in the application of certain double tax treaties, which may restrict the ability of certain members of the Company to rely on the terms of relevant double tax treaties in certain circumstances.

 

On December 20, 2021, the OECD published the draft Global Anti-Base Erosion Model Rules which are aimed at ensuring that Multinational Enterprises (“MNEs”) will be subject to a global minimum 15% tax rate from 2023 (“GloBE Rules”). The GloBE Rules are part of the OECD/G20 Inclusive Framework on BEPS which currently has 141 participant countries. The EU Council adopted Council Directive 2022/25234 (the “GloBE Directive”) on 22 December 2022 to implement the GloBE Rules in the EU. The GloBE Directive provides for the introduction of rules designed to achieve a minimum effective taxation for MNEs and large-scale domestic groups with revenues of at least €750,000,000, operating in the EU’s internal market and beyond. It provides a common framework for implementing the GloBE Rules into EU Member States’ national laws by 31 December 2023. If the Company is regarded as part of an “MNE Group” (or large-scale domestic group) which has consolidated revenues of more than EUR 750,000,000 in at least two out of the previous four years, it may be within the scope of the GloBE Rules which may result in an increase in the Company’s tax costs and operational expenses.

 

Changes of law in individual jurisdictions which may arise as a result of the BEPS project or other tax measures may ultimately increase the tax base of individual members of the Company in certain jurisdictions or the worldwide tax exposure of the Company. Changes of law may also include revisions to the definition of a “permanent establishment” and the rules for attributing profit to a permanent establishment. Other changes may focus on the goal of ensuring that transfer pricing outcomes are in line with value creation.

 

Such changes to tax laws could increase their complexity and the burden and costs of compliance. Additionally, such changes could also result in significant modifications to existing transfer pricing rules and could potentially have an adverse impact on the Company’s taxable profits in various jurisdictions.

 

U.S. holders that directly or indirectly own 10% or more of our equity interests may be subject to adverse U.S. federal income tax consequences under rules applicable to U.S. shareholders of “controlled foreign corporations.”

 

A non-U.S. corporation generally will be classified as a controlled foreign corporation for U.S. federal income tax purposes (a “CFC”), if “10% U.S. equityholders” (as defined below) own, directly, indirectly or constructively, more than 50% of either (i) the total combined voting power of all classes of stock of such corporation entitled to vote or (ii) the total value of the stock of such corporation. We do not believe that the Company would be classified as a CFC at the time of Closing, although CFC status is determined after taking into account complex constructive ownership rules and, accordingly, there can be no assurance in this regard. However, certain of the Company’s non-U.S. subsidiaries may be classified as CFCs (as a result of the application of certain constructive ownership rules which treat the Company’s U.S. subsidiaries as owning the equity of those non-U.S. subsidiaries), and it is possible that we may be classified as a CFC in the future. The U.S. federal income tax consequences for U.S. holders who at all times are not 10% U.S. equityholders would not be affected by the CFC rules. However, a U.S. holder that owns (or is treated as owning, directly, indirectly or constructively, including by applying certain attribution rules) 10% or more of the combined voting power of all classes of our stock entitled to vote or the total value of our equity interests (including equity interests attributable to a deemed exercise of options and convertible debt instruments), or a “10% U.S. equityholder,” if we were classified as a CFC, would generally be subject to current U.S. federal income taxation on a portion of our applicable subsidiaries’ earnings and profits (as determined for U.S. federal income tax purposes) and our earnings and profits, regardless of whether such 10% U.S. equityholder receives any actual distributions (with certain exceptions in the case of CFCs attributed through downward attribution). In addition, if we were classified as a CFC, a portion of any gains realized on the sale of our common shares by a 10% U.S. equityholder may be treated as ordinary income. A 10% U.S. equityholder will also be subject to additional U.S. federal income tax information reporting requirements with respect to our subsidiaries that are classified as CFCs and with respect to us (if we or any of our subsidiaries were classified as a CFC) and substantial penalties may be imposed for noncompliance. We cannot provide any assurances that the Company will assist U.S. holders in determining whether the Company or any of its subsidiaries are treated as a CFC for U.S. federal income tax purposes or whether any U.S. holder is treated as a 10% U.S. equityholder with respect to any of such CFC or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations if the Company, or any of its subsidiaries, is treated as a CFC for U.S. federal income tax purposes. Each U.S. holder should consult its own tax advisor regarding the CFC rules and whether such U.S. holder may be a 10% U.S. equityholder for purposes of these rules.

 

28
 

 

There is a risk that we will be a passive foreign investment company for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our shares.

 

In general, a non-U.S. corporation is a passive foreign investment company, (“PFIC”), for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and certain gains. Cash is a passive asset for these purposes.

 

Based on the expected composition of our income and assets and the value of our assets, including goodwill, we do not expect to be a PFIC for our current taxable year. However, the proper application of the PFIC rules to a company with a business such as ours is not entirely clear. Because the proper characterization of certain components of our income and assets is not entirely clear, because we will hold a substantial amount of cash following this offering, and because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our shares, which could be volatile), there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year.

 

If we were a PFIC for any taxable year during which a U.S. investor holds shares, certain adverse U.S. federal income tax consequences could apply to such U.S. investor. See “Material Income Tax Considerations-U.S. Federal Income Taxation Considerations-Passive Foreign Investment Company Consequences” for additional information.

 

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.

 

Although the Company is incorporated in Ireland, the Internal Revenue Service (“IRS”) may assert that it should be treated as a U.S. corporation (and therefore a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”). For U.S. federal income tax purposes, a corporation is generally considered a U.S. “domestic” corporation (or U.S. tax resident) if it is organized in the United States, and a corporation is generally considered a “foreign” corporation (or non-U.S. tax resident) if it is not a U.S. corporation. Because the Company is an entity incorporated in Ireland, it would generally be classified as a foreign corporation (or non-U.S. tax resident) under these rules. Section 7874 of the Code provides an exception under which a foreign incorporated and foreign tax resident entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes.

 

29
 

 

As more fully described in the section titled “Certain Material U.S. Federal Income Tax Considerations—Material U.S. Federal Tax Considerations—U.S. Federal Income Tax Treatment of the Company,” based on the terms of the Business Combination and certain factual assumptions, the Company is not currently expected to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code after the Business Combination. However, the application of Section 7874 of the Code is complex and is subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. Treasury Regulations with possible retroactive effect) and is subject to certain factual uncertainties. Accordingly, there can be no assurance that the IRS will not challenge the status of the Company as a foreign corporation under Section 7874 of the Code or that such challenge would not be sustained by a court.

 

If the IRS were to successfully challenge under Section 7874 of the Code the Company’s status as a foreign corporation for U.S. federal income tax purposes, the Company and certain the Company shareholders would be subject to significant adverse tax consequences, including a higher effective corporate income tax rate on the Company and future withholding taxes on certain the Company shareholders, depending on the application of any income tax treaty that might apply to reduce such withholding taxes.

 

See “Certain Material U.S. Federal Income Tax Considerations—Material U.S. Federal Tax Considerations —U.S. Federal Income Tax Treatment of the Company” for a more detailed discussion of the application of Section 7874 of the Code to the Business Combination. Investors in the Company should consult their own tax advisors regarding the application of Section 7874 of the Code to the Business Combination.

 

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

 

We are subject to federal and state income taxes in the United States and potentially in other jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

  changes in the valuation of our deferred tax assets and liabilities;
     
  expected timing and amount of the release of any tax valuation allowances;
     
  tax effects of stock-based compensation;
     
  changes in tax laws, regulations or interpretations thereof; or
     
  lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

 

In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

 

Future changes in U.S. and foreign tax laws could adversely affect the Company.

 

The U.S. Congress and the Organisation for Economic Co-operation and Development have focused on issues related to the taxation of multinational corporations. In particular, specific attention has been paid to “base erosion and profit shifting”, where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in Ireland could change on a prospective or retroactive basis, and any such change could adversely affect the Company.

 

Risks Related to Irish Law

 

The Company does not intend to pay dividends for the foreseeable future.

 

The Company has never declared or paid any cash dividends on its capital stock and does not intend to pay any cash dividends in the foreseeable future. The Company expects to retain future earnings, if any, to fund the development and growth of its business. Any future determination to pay dividends on the Company’s capital stock will be at the discretion of the Board of Directors of the Company (the “Board”).

 

30
 

 

Irish taxes may apply to any dividends paid or transfers of the Company’s securities.

 

If the Company pays dividends, such dividends may be subject to Irish dividend withholding tax or Irish income tax. Certain transfers of Ordinary Shares, may be subject to Irish capital acquisitions tax or stamp duty. In particular, Irish stamp duty will apply to any future transfer of Ordinary Shares which are not listed and held through the Depository Trust Company (“DTC”) and generally the purchaser / transferee will be liable for the payment of the stamp duty arising.

 

Provisions in the Amended and Restated Memorandum and Articles of Association and under Irish law could make an acquisition of Lionheart more difficult, may limit attempts by the Company shareholders to replace or remove the Company’s management, may limit shareholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company’s directors, officers or employees, and may limit the market price of the Ordinary Shares, the Public Warrants and/or other securities issued by the Company.

 

Provisions in the Amended and Restated Memorandum and Articles of Association may have the effect of delaying or preventing a change of control or changes in the Company’s management. The Amended and Restated Memorandum and Articles of Association includes provisions that:

 

  require that the Company’s Board be classified into three classes of directors with staggered three-year terms;
     
  permit the Company’s Board to establish the number of directors and fill any vacancies and newly created directorships; and
     
  prohibit shareholder action by written consent without unanimous approval of all holders of the Ordinary Shares.

 

General Risk Factors

 

The Company will incur significant costs and devote substantial management time as a result of being subject to reporting requirements in the United States, which may adversely affect the operating results of the Company in the future.

 

As a company subject to reporting requirements in the United States, the Company incurs significant legal, accounting and other expenses that the Company would not have incurred as a private limited company in Ireland. For example, the Company is subject to the reporting requirements of the Exchange Act and is required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements increase the Company’s legal and financial compliance costs and make some activities more time consuming and costly, while also diverting management attention. In particular, the Company expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when it is no longer an emerging growth company as defined by the JOBS Act.

 

The Company’s management has limited experience in operating a public company in the United States.

 

While the Company’s executive officers have experience in the management of a public company in Australia, the Company’s executive officers have limited experience in the management of a public company in the United States. The Company’s management team may not successfully or effectively manage its transition to a U.S. public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to U.S. public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Company. The Company may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the Company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that the Company will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.

 

31
 

 

The stock price of the Ordinary Shares may be volatile.

 

The market price of the Ordinary Shares may be volatile. In addition to factors discussed elsewhere in this Risk Factors section, the market price of the Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond the Company’s control, including:

 

  overall performance of the equity markets;
     
  actual or anticipated fluctuations in the Company’s revenue and other operating results;
     
  changes in the financial projections the Company may provide to the public or the failure to meet these projections;
     
  failure of securities analysts to initiate or maintain coverage of the Company, changes in financial estimates by any securities analysts who follow the Company or the Company’s failure to meet these estimates of the expectations of investors;
     
  the issuance of reports from short sellers that may negatively impact the trading price of the Ordinary Shares;
     
  the Company’s stock being targeted by “naked” short sellers or other manipulative acts;
     
  recruitment or departure of key personnel;
     
  the economy as a whole and market conditions in the Company’s industry;
     
  new laws, regulations, subsidies, or credits or new interpretations of them applicable to the Company’s business;
     
  negative publicity related to real or perceived quality of the Company’s products;
     
  rumors and market speculation involving the Company or other companies in the Company’s industry;
  announcements by the Company or its competitors of significant technical innovations, acquisitions, strategic partnerships, or capital commitments;
     
  lawsuits threatened or filed against the Company;
     
  other events or factors including those resulting from war, incidents of terrorism or responses to these events or events related to changes, attempted changes, or anticipated changes in the Israeli or other legal or governmental system in jurisdictions in which the Company is active;
     
  the expiration of contractual lock-up or market standoff agreements; and
     
  sales or anticipated sales of shares of the Ordinary Shares by the Company or the Company’s shareholders.

 

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility.

 

32
 

 

The Company may issue additional Ordinary Shares or other equity securities without seeking approval of the Company’s shareholders, which would dilute your ownership interests and may depress the market price of the Ordinary Shares.

 

The Company has warrants and other convertible securities outstanding to purchase approximately 29 million Ordinary Shares, compared to 34,016,388 Ordinary Shares issued and outstanding, as of April 18, 2024. Further, the Company may choose to seek third party or other financing to provide additional working capital, in which event the Company may issue additional equity securities. The Company may also issue additional Ordinary Shares or other equity securities of equal or senior rank in the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding warrants, or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances.

 

The Company’s issuance of additional Ordinary Shares or other equity securities of equal or senior rank would have the following effects:

 

  The Company’s existing shareholders’ proportionate ownership interest in the Company will decrease;
     
  the amount of cash available per share, including for payment of dividends in the future, may decrease;
     
  the relative voting strength of each previously outstanding Ordinary Share may be diminished; and
     
  the market price of the Ordinary Shares may decline.

 

The Company is an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Ordinary Shares less attractive to investors.

 

The Company is an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, the Company is only required to provide two years of audited financial statements and only two years of related selected financial data and management discussion and analysis of financial condition and results of operations disclosure. In addition, the Company is not required to obtain auditor attestation of its reporting on internal control over financial reporting, has reduced disclosure obligations regarding executive compensation and is not required to hold non-binding advisory votes on executive compensation. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. The Company has elected to take advantage of such extended transition period. The Company cannot predict whether investors will find the Ordinary Shares to be less attractive as a result of its reliance on these exemptions. If some investors find the Ordinary Shares to be less attractive as a result, there may be a less active trading market for the Ordinary Shares and the price of the Ordinary Shares may be more volatile.

 

The Company will remain an emerging growth company until the earliest of: (i) the end of the fiscal year in which the Company has total annual gross revenue of $1.07 billion; (ii) the last day of the Company’s fiscal year following the fifth anniversary of the date on which Lionheart consummated its initial public offering; (iii) the date on which the Company issues more than $1.0 billion in non-convertible debt during the preceding three-year period; or (iv) the end of the fiscal year in which the market value of the Ordinary Shares held by non- affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter.

 

Further, there is no guarantee that the exemptions available to the Company under the JOBS Act will result in significant savings. To the extent that the Company chooses not to use exemptions from various reporting requirements under the JOBS Act, it will incur additional compliance costs, which may impact the Company’s financial condition.

 

33
 

 

The Company will need additional capital in the future to meet its financial obligations and to pursue its business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise the Company’s ability to meet its financial obligations and grow its business.

 

The Company will need to raise additional capital to fund operations in the future, pay substantial existing liabilities and obligations, and possibly finance future growth of acquisitions.

 

If the Company seeks to raise additional capital in order to meet various objectives, including developing existing or future technologies and solutions, refinancing or repaying indebtedness or other liabilities or obligations, increasing working capital, acquiring new clients, expanding geographically and responding to competitive pressures, capital may not be available on favorable terms or may not be available at all, which could have a material adverse effect on the continued development or growth of the Company. Lack of sufficient capital resources could significantly limit the Company’s ability to take advantage of business and strategic opportunities. Any additional capital raised through the sale of equity or debt securities with an equity component would dilute stock ownership. If adequate additional funds are not available, the Company may be required to delay, reduce the scope of, or eliminate material part of its business strategy, including acquiring potential new clients or the continued development of new or existing technologies or solutions and geographic expansion.

 

There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq. If we are not able to comply with the applicable continued listing requirements or standards of the Nasdaq Capital Markets, Nasdaq could delist our Ordinary Shares and Public Warrants.

 

The Company’s Ordinary Shares and Public Warrants are currently listed on the Nasdaq Capital Market, after failing to meet all of the listing standards of the Nasdaq Global Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding minimum stockholders’ equity, minimum market value, minimum share price, and certain corporate governance requirements.

 

On January 26, 2024, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”), notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market, as the bid price of the Company’s ordinary shares on the Nasdaq Capital Market was below $1.00 for 30 consecutive business days, from December 11, 2023 to January 25, 2024.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company has a period of 180 calendar days, or until July 24, 2024 (the “Compliance Date”), to regain compliance with the Minimum Bid Price Requirement. If, at any time before the Compliance Date, the closing bid price of the Company’s ordinary shares is at least $1.00 for a minimum of ten consecutive business days, the Staff will provide a written confirmation to the Company that it has regained compliance with the Minimum Bid Price Requirement.

 

In addition, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii), if the Ordinary Shares trade below $0.10 per share for ten consecutive trading days, we could be subject to a Nasdaq delisting notification which could result in the delisting of our Ordinary Shares from Nasdaq unless we appeal or unless Nasdaq provides a compliance period in which to cure such bid price deficiency.

 

If the Company does not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, the Company may be eligible for additional time. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company meets these requirements, Nasdaq will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that its securities will be subject to delisting. At that time, the Company may appeal the Staff’s delisting determination to a Nasdaq Listing Qualifications Panel (the “Panel”) pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.

 

Additionally, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement, or will otherwise be compliant with other Nasdaq Listing Rules.

 

34
 

 

If Nasdaq delists the Ordinary Shares and/or the Public Warrants from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

 

a limited availability of market quotations for our securities;
   
reduced liquidity for our securities;
   
a determination that the Ordinary Shares is a “penny stock” which will require brokers trading in the Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
   
a limited amount of news and analyst coverage; and
   
a decreased ability to issue additional securities or obtain additional financing in the future.

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” To the extent the Ordinary Shares and Public Warrants are listed on Nasdaq, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

 

Upon delisting from Nasdaq, our Ordinary Shares may be traded, if at all in the over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions in securities traded on securities exchanges such as Nasdaq. Many OTC stocks trade less frequently and in smaller volumes than exchange-listed Stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the values of OTC stocks are often more volatile than exchange-listed stocks. Additionally, institutional investors are often prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.

 

In addition, if our Ordinary Shares are delisted, your ability to transfer or sell your Ordinary Shares may be limited and the value of those securities will be materially adversely affected.

 

If our Ordinary Shares becomes subject to the penny stock rules, it may be more difficult to sell our Ordinary Shares.

 

The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The OTC Bulletin Board does not meet such requirements and if the price of our Ordinary Shares is less than $5.00 and our Ordinary Shares are no longer listed on a national securities exchange such as Nasdaq, our stock may be deemed a penny stock. The penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain from the customer a signed and dated acknowledgment of receipt of that document. In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our Ordinary Shares, and therefore shareholders may have difficulty selling their shares.

 

35
 

 

Future issuances of debt securities and equity securities may adversely affect us, including the market price of our Ordinary Shares and may be dilutive to existing shareholders.

 

We expect that significant additional capital will be needed in the future to continue our planned research, development and business operations. In the future, we may incur debt or issue equity ranking senior to our Ordinary Shares. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of Ordinary Shares. Because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, recent and future capital raising efforts may reduce the market price of Ordinary Shares and be dilutive to existing shareholders. In addition, our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of Ordinary Shares by selling shareholders pursuant to one or more prospectuses, which could result in a significant decline in the trading price of Ordinary Shares and potentially hinder our ability to raise capital at terms that are acceptable to us or at all.

 

The JOBS Act permits “emerging growth companies” like the Company to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, which may make our Ordinary Shares less attractive to investors.

 

The Company currently qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Its Business Startups Act of 2012, which is referred to as the “JOBS Act.” As such, the Company takes advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. As a result, Company shareholders may not have access to certain information they deem important.

 

The Company cannot predict if investors will find Ordinary Shares less attractive because it relies on these exemptions. If some investors find Ordinary Shares less attractive as a result, there may be a less active trading market and share price for Ordinary Shares may be more volatile. The Company may incur increased legal, accounting and compliance costs associated with Section 404 of the Sarbanes-Oxley Act.

 

There is expected to be less publicly available information concerning the Company than there is for issuers that are not foreign private issuers because the Company will be considered a foreign private issuer and will be exempt from a number of rules under the Exchange Act, and will be permitted to file less information with the SEC than issuers that are not foreign private issuers.

 

The Company is considered a “foreign private issuer” under the Exchange Act. A foreign private issuer under the Exchange Act is exempt from certain rules under the Exchange Act, and is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as companies whose securities are registered under the Exchange Act but are not foreign private issuers, or to comply with Regulation FD, which restricts the selective disclosure of material non-public information. The Company is exempt from certain disclosure and procedural requirements applicable to proxy solicitations under Section 14 of the Exchange Act. SMX currently prepares its financial statements in accordance with IFRS. The Company will not be required to file financial statements prepared in accordance with or reconciled to U.S. GAAP so long as its financial statements are prepared in accordance with IFRS as issued by the International Accounting Standards Board. The Company is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. The members of the Company’s board of directors, officers and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act with respect to their purchases and sales of Company securities. Accordingly, there will likely be less publicly available information concerning the Company than there is for companies whose securities are registered under the Exchange Act but are not foreign private issuers, and such information may not be provided as promptly as it is provided by such companies.

 

36
 

 

In addition, certain information may be provided by the Company in accordance with Irish law, which may differ in substance or timing from such disclosure requirements under the Exchange Act. As a foreign private issuer, under Nasdaq rules the Company is subject to less stringent corporate governance requirements. Subject to certain exceptions, the rules of Nasdaq permit a foreign private issuer to follow its home country practice in lieu of the listing requirements of Nasdaq, including, for example, certain internal controls as well as board, committee and director independence requirements. The Company intends from time to time to follow Irish corporate governance practices in lieu of Nasdaq corporate governance rules and most recently (a) followed Irish practices to amend its 2022 Incentive Equity Plan to increase the number of authorized shares under such plan without shareholder approval and (b) followed home country practice in lieu of the requirements under Nasdaq Rule 5635(d) to seek shareholder approval in connection with certain transactions involving the sale, issuance and potential issuance of its Ordinary Shares (or securities convertible into or exercisable for its Ordinary Shares) at a price less than certain referenced prices, if such shares equal 20% or more of the Company’s Ordinary Shares or voting power outstanding before the issuance, each as permitted under Irish law, and we cannot assure you that we will not avail ourselves of other such exceptions in the future. If the Company determines to follow Irish corporate governance practices in lieu of Nasdaq corporate governance standards, the Company will disclose each Nasdaq rule that it does not intend to follow and describe the Irish practice that the Company will follow in lieu thereof.

 

The Company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses. This would subject the Company to GAAP reporting requirements which may be difficult for it to comply with.

 

As a “foreign private issuer,” the Company would not be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under those rules, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter.

 

In the future, the Company could lose its foreign private issuer status if a majority of its Ordinary Shares are held by residents in the United States and it fails to meet any one of the additional “business contacts” requirements. Although the Company intends to follow certain practices that are consistent with U.S. regulatory provisions applicable to U.S. companies, the Company’s loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to the Company under U.S. securities laws if it is deemed a U.S. domestic issuer may be significantly higher. If the Company is not a foreign private issuer, the Company will be required to file periodic reports and prospectuses on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the Company would become subject to the Regulation FD, aimed at preventing issuers from making selective disclosures of material information. The Company also may be required to modify certain of its policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, the Company may lose its ability to rely upon exemptions from certain corporate governance requirements of Nasdaq that are available to foreign private issuers. For example, Nasdaq’s corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors, and corporate governance matters. As a foreign private issuer, the Company would be permitted to follow home country practice in lieu of the above requirements. As long as the Company relies on the foreign private issuer exemption to certain of Nasdaq’s corporate governance standards, a majority of the directors on its board of directors are not required to be independent directors, its compensation committee is not required to be comprised entirely of independent directors, and it will not be required to have a nominating committee. Also, the Company would be required to change its basis of accounting from IFRS as issued by the IASB to GAAP, which may be difficult and costly for it to comply with. If the Company loses its foreign private issuer status and fails to comply with U.S. securities laws applicable to U.S. domestic issuers, the Company may have to de-list from Nasdaq and could be subject to investigation by the SEC, Nasdaq and other regulators, among other materially adverse consequences.

 

The sale of the Ordinary Shares acquired by the Selling Stockholders, or the perception that such sales may occur, could cause the price of our Ordinary Shares to fall.

 

Depending on a number of factors, including market liquidity, sales of the Ordinary Shares held by the Selling Stockholders may cause the trading price of our Ordinary Shares to fall. The Selling Stockholders may resell all, some, or none of those shares at its discretion. Therefore, sales to the Selling Stockholders by us could result in substantial dilution to the interests of other holders of our Ordinary Shares. Additionally, the sale of a substantial number of Ordinary Shares, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a desirable time and price. The resale of Ordinary Shares by the Selling Stockholders in the public market or otherwise, including sales pursuant to this prospectus, or the perception that such sales could occur, could also harm the prevailing market price of our Ordinary Shares.

 

Following these issuances described above and following the expiration of lock-ups of certain other restricted shareholders and as restrictions on resale end and registration statements are available for use, the market price of our Ordinary Shares could decline if the holders of restricted or locked up shares sell them or are perceived by the market as intending to sell them. As such, sales of a substantial number of Ordinary Shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of Ordinary Shares.

 

USE OF PROCEEDS

 

All of the Ordinary Shares being offered under this prospectus are being sold by or for the account of the Selling Stockholder. We will not receive any proceeds from the sale of the Ordinary Shares.

 

DIVIDEND POLICY

 

The holders of Ordinary Shares are entitled to such dividends as may be declared by the Company’s board of directors. Dividends may be declared and paid out of the funds legally available therefor, or any other fund or account which can be authorized for this purpose in accordance with the ICA.

 

37
 

 

BUSINESS

 

Vision

 

The Company envisions itself as the next generation solution provider of brand protection, authentication and track and trace technology for the anti-counterfeit market. Its vision is to build confidence in the era of the digital economy, enabling parties to maintain trust in physical assets and processes. Its transformative solution aims at building on the principles of The United Nations’ Sustainability Development Goals, particularly Goal 12: “Ensure sustainable consumption and production patterns” that can create value for participants in the circular economy. As an increasing number of industries and sectors are committing to using recycled material and realizing the broader strategic vision of net zero carbon emissions, we believe our solution is the next generation for sustainability and the circular economy.

 

History

 

SMX Israel was incorporated in 2014 to provide brand protection and supply chain integrity solutions to businesses. It provides these solutions through the commercialization of the initial technology of tracking and tracing materials by observing and identifying markers. SMX Israel’s Source IP was initiated from the Soreq Nuclear Research Center, an Israeli government research and development institute for nuclear and photonic technologies under the Israeli Atomic Energy Commission. In January 2015, SMX Israel entered into the Isorad License Agreement with Isorad Ltd. (an IP holding company of Soreq) to license the Source IP and develop and commercialize the technology. Under the Isorad License Agreement, as amended, the Source IP can be utilized in almost any industry and with any product.

 

38
 

 

In 2018, SMX Israel merged into Security Matters PTY, an Australian company, to effect a listing on the Australian Securities Exchange under the symbol “ASX: SMX.” Security Matters PTY was incorporated in May 2018 under Australian law. SMX’s registered address is Mespil Business Center, Mespil House, Sessex Road, Dublin 4, Ireland, D04 T4A6. Security Matters PTY has two wholly-owned subsidiaries: Security Matters Ltd. (Israel), and SMX Beverages Pty Ltd. (Australia). It is also the record holder of 50% of Yahaloma Technologies Inc., a Canadian company and 51.9% of trueGold Consortium Pty Ltd., an Australian company.

 

SMX (Security Matters) Public Limited Company (f/k/a Empatan Public Limited Company) was formed on July 1, 2022 as a public limited company under the name Empatan Public Limited Company, incorporated in Ireland. The Company’s principal executive office is located at Mespil Business Centre, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6. The Company’s telephone number is +353 1 920 1000.

 

The Company was newly incorporated for the purposes of becoming a holding company following the Business Combination. Through the consummation of the Business Combination, the Company did not conduct any material activities other than those incident to its formation and the Business Combination and only had nominal assets consisting of cash and its interest in Merger Sub.

 

On March 7, 2023, the Company consummated its previously announced business combination pursuant to the BCA and its previously announced SID. Beginning on the day immediately prior to the Closing Date and finishing on the day immediately after the Closing Date, the following transactions occurred pursuant to the terms of the BCA:

 

  Under the SID, Security Matters PTY proposed a scheme of arrangement under Part 5.1 of the Corporations Act and Capital Reduction which resulted in all shares in Security Matters PTY being cancelled in return for the issuance of Ordinary Shares, with the Company being issued one share in Security Matters PTY (this resulted in Security Matters PTY becoming a wholly owned subsidiary of the Company);
     
  Under the SID, Security Matters PTY proposed an option scheme of arrangement under Part 5.1 of the Corporations Act, which resulted in the Security Matters PTY options held by participants in the Option Scheme being subject to a cashless exercise based on a Black-Scholes valuation, in exchange for Security Matters Shares. Under the Scheme those shares were cancelled and the participants received Ordinary Shares on the basis of the Scheme consideration;

 

  Security Matters PTY shareholders received consideration under the Scheme of 1 Ordinary Share per 10.3624 Security Matters Shares having an implied value of $10.00 per Ordinary Share and the Company became the holder of all of the issued shares in Security Matters PTY and Lionheart, with Security Matters PTY being delisted from the Australian Stock Exchange;
     
  Merger Sub merged with and into Lionheart, with Lionheart surviving the merger as a wholly owned subsidiary of the Company; and
     
  Existing Lionheart stockholders received Ordinary Shares in exchange for their existing Lionheart shares and existing Lionheart warrant holders had their warrants automatically adjusted to become exercisable in respect of Ordinary Shares instead of Lionheart shares.

 

The Company is subject to certain of the informational filing requirements of the Exchange Act. Since the Company is a “foreign private issuer,” it is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers, directors and principal shareholders of the Company are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of Ordinary Shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. The SEC maintains a website at http://www.sec.gov that contains reports and other information that the Company files with or furnishes electronically to the SEC.

 

39
 

 

Overview

 

The Company 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.

 

Business Model

 

The Company’s business model targets leading brands and manufacturers (as opposed to directly targeting consumers) in order to create a new market standard for circular economy solutions, brand authentication and supply chain integrity. The Company offers both business-to-business sales and “white label” solutions, depending on the needs of customers and the ultimate end use based on either a fixed fee or volume-based revenue model (or both).

 

The Company may work directly with the manufacturer of the products or through the manufacturer’s raw material supplier so that the manufacturer is not required to change (or is required to make no more than minimal changes to) its manufacturing process in order to implement Security Matters PTY technology in the production process. Gaining the trust of raw material producers is the first stage, which in turn allows for credibility and trust when supplying solutions to brand owners, manufacturers and suppliers, which is a key step for its success.

 

Product and Applications

 

Product

 

The Company provides a solution comprised of three components: (1) a physical or chemical marker system coupled with (2) a reader and connected to (3) a blockchain digital platform.

 

Markers

 

Markers are embedded sub-molecular particles applied to a solid, liquid or gas. The Company uses various building blocks, comprised of a variety of molecules, to serve as markers for materials and products. For each project, its team selects a combination of molecules based on the specification of the customer and marked material (for example, the marked medium, the production process, the end use of the product and regulatory requirements, among others). The Company’s innovative reader can identify the marker and identify a response at a sub molecular building block level, designed to make the marker identification more accurate.

 

The ability to more accurately identify the concentration level of a marker allows Security Matters PTY to use numerous markings from a variety of different molecules. This enables it to not only identify the marker, but also identify the concentration within a product within a pre-defined range and “read” whether the marked material was diluted (authenticating not only the marked goods but also identifying the quantity).

 

Based on the specifications of the marked product, Security Matters PTY can mark materials based on several techniques, allowing its solution to be implemented across materials and processes. Markers can carry information denoting each origins of manufacture, product provenance, date of production and many other types of data, depending on customer needs.

 

40
 

 

The Company can produce either permanent or removable markers that can be applied either topically or internally to material in any state of matter (solid, liquid or gas) to form an “Intelligence on Things,” or “IOT2” marking system. The IOT2 concept involves marking products during or after the manufacturing process by inserting or applying materials to the products and encoding information through this process, namely by the treatment of materials or affixing and embedding product authentication security devices. The IOT2 concept allows for materials in a wide variety of products to be protected against counterfeiting, tampering, and diversion, and to help ensure the integrity of genuine products and manage the supply chain and logistics processes.

 

The marker supports invisible, indelible, and non-damaging tracking of distinctive molecules designed to ensure uniqueness and prevent duplication or counterfeiting. The marker is designed to not in any way affect the properties of the material it is applied to—it simply becomes a part of that material. The molecules are designed to be inert, inactive, and invisible to the human eye.

 

Readers

 

Markers are embedded in the material and can only be read by designated readers. A reader scans for the existence of markers. If the reading satisfies a pre-determined condition set by Security Matters PTY (which can be programmed), than the reader can identify the marked product and convey information about such product to the customer.

 

The Company currently utilizes an x-ray wave reader that is modified according to its specifications to allow it to scan its proprietary markers. The reader and Security Matters PTY’s algorithm are designed to make its detection method unique and prevent duplication or interference with its markers. The reader is available as hand-held device or industrial apparatus for large-scale applications, with the ability to read the embedded material data from a physical or chemical marker without requiring lengthy and expensive laboratory testing for confirmation.

 

Platform

 

Blockchain technology is a ledger of records, which are linked and designed to be secured using cryptography from third party infrastructure and Security Matters PTY’s architecture. The Company can record a marker manifestation on the blockchain and store this information in cloud computing data storage. It has developed an algorithm designed to securely connect its reader to an existing platform (licensed from a SaaS provider) and record changing ownership and other information to the blockchain. Once Security Matters PTY’s blockchain solution is implemented, a marked good or material is scanned in order to identify the marker, the results can be verified on the blockchain in order to confirm the data embedded in it, such as the identity of the producer, date of production, supplier and past owners. During the same scan, the reader can record to the blockchain a change of location or ownership of the marked product or material.

 

The IOT2 concept mentioned above also refers to the retrieving, analyzing and processing of encoded information embedded on products and product components and uploading such information to a cloud computing system or to a distributed blockchain system, creating a digital twin to a physical product for the purpose of product authentication, brand protection, tracking and tracing products and product components, supply chain management, and logistical processes.

 

Applications

 

The Company’s solution offers the following applications across industries:

 

Process Tracing

 

Process tracing involves the upstream marking of raw material and blockchain-backed scanning throughout processing stages to allow for full traceability of raw material across its life cycle. Manufacturers are under increasing consumer and regulatory pressure to prove material provenance in order to be able to certify compliance with environmental, social and governance (“ESG”), sourcing practices and carbon content of finished goods. Through upstream marking of raw material and blockchain-backed scanning throughout the processing stages, Security Matters PTY’s technology enables real tracking and tracing of materials, including the source of those materials. Additionally, Security Matters PTY’s technology enables manufacturers to know whether any used items are theirs and enables them to pay third parties to collect their used products, creating a market for collecting used products and selling them to other manufacturers.

 

41
 

 

Authentication

 

Growing concerns about component tampering along high security or critical infrastructure product supply chains and increasing counterfeit issues for high value density products are also issues that Security Matters PTY’s marking and authenticating process is designed to address. Manufacturers can validate product authenticity to their customers by marking final products or prime components and scanning the marker at a retail location or as part of the process of recycling their products.

 

Sustainability and Circular Economics

 

The end-to-end technology solution covers three product lifecycles to enhance the circular economy from raw material to manufacturing/production, packaging, and end-of-life, enabling it to re-enter the economy for recycling or reuse. By marking upstream raw material and later scanning recycled content at waste collection points, an advanced sorting of materials is enabled which can increase the value of recycled content and in turn help to increase global recycling rates and recycled content certification.

 

Key Strengths

 

Innovative Technology

 

The Company’s technology can serve various manufacturers’ needs such as brand protection, authentication, track and trace for supply chain integrity and quality assurance. This technology has the potential to disrupt several industries and enable manufacturers and brand owners to be better able to protect their products.

 

Growing Addressable Market

 

The circular economy represents a potential opportunity for global economic growth as society moves towards a more sustainable future and as manufacturers and other entities come under increasing consumer and regulatory pressure to comply with ESG sourcing practices.

 

Experienced Development Technology Team

 

The Company’s technology team is an experienced team of professionals, with a track record in the industrial sector and governmental agencies.

 

Cross Segment Activity and Collaborative Relationships

 

The Company’s technology is applicable for multiple industries. The growth potential of the Company is derived from its ability to provide an adaptive solution for multiple market segments, based on a unified technology solution. The Company also has collaborative relationships with leading companies which can provide it with access to various entities to which to sell its technology. This is part of the Company’s strategy to create strategic partnerships with market leaders across its main segments of activity.

 

Sustainability

 

The Company believes regulatory and consumer pressure to increase recycling rates of high-pollution materials, such as plastics and rubber as well as growing sustainability concerns and requirements to preserve resources and minimize pollution are important drivers for our growth. Thus, any such sustainability regulations and consumer pressure promoting solutions that enable the circular economy, including the solutions that Security Matters PTY offers, can help to drive our growth.

 

42
 

 

Business Strategy

 

The Company’s roadmap for entry into markets it identifies is as follows:

 

  Market Leader Adoption. Adoption of the solution by a market leader that provides a “seal of approval” that the technology is valid for the industry and generates added value.
     
  Becoming an Industry Standard. Leverage the market leader’s position in the market to increase adoption by other companies along the value chain.
     
  Regulator Adoption. In the future, Security Matters PTY aims to become the preferred solution by regulators and professional associations in each industry.

 

Research and Development

 

Given the varied needs of different industries, the Company’s research and development processes are divided according to industry.

 

Plastics, Rubber and Other Materials

 

In 2022, Security Matters PTY completed a successful trial of marking recycled plastics by studying the impact of gravimetric and volumetric feeding methods on final Post Consumer Recyclat (“PCR”), readings. The compounding master batch and extrusion processes of these trials were performed on a pilot scale in a fully commercial and industrial facility. The Company’s team demonstrated its ability to manage the process remotely, indicating the viability of industrial scale adoption.

 

The successful trial provides plastic manufacturer and importing companies with a proof of concept, enabling them to more accurately identify and audit, via an automated transparent reporting system, the polymer type, number of loops and the amount of recycled content despite the size and color of the plastic. As a result, the Company is positioning itself to be able to offer plastic manufacturing and importing companies the ability to promote their operations as being sustainable and environmentally friendly. Combined with its ability to digitally certify the materials, the Company is also positioning itself to offer these companies the ability to avoid human/manual-paper auditing and use technology/automated auditing, which helps to reduce the potential for human errors and can provide for cost savings.

 

In March 2023, the Company announced that it succeeded for the first time in verifying a marker substance for natural rubber in a tire and so throughout the entire production process. The dedicated marker technology, which the Company and Continental optimized for use in natural rubber, is designed to create greater transparency along the entire value chain of tires and technical rubber products from Continental. Provided with special security features, the use of the marker substances enables the invisible marking of natural rubber with information on its geographical origin. This means, for example, that responsibly sourced natural rubber and its origin can be verified at every stage of the supply chain all the way through to the customer.

 

In the field test, the marker substance was added to responsibly grown latex during harvesting and withstood not only the intensive preparations involved in the production of natural rubber but also the tire manufacturing process itself. In the manufactured tire, the data was retrieved using special, purpose-built software and a reader and correctly interpreted. The appearance and performance of a bicycle tire containing the invisible marker remained unchanged.

 

The Company expects that Continental will use the new marker technology on a larger scale in the future during the process of sourcing its rubber and also to integrate it in other rubber products. As part of the industrialization of this technology, it is conceivable to link the markers with blockchain technology. This could provide additional support for tamper-free monitoring of compliance with quality standards and quality criteria along the complex supply chain of natural rubber.

 

On April 10, 2024, the Company announced that it has successfully completed the marking of 21 tons of natural rubber sourced in Latin America from tree to tire. The program covered the marking at the tree in Latin America through manufacturing and production in the region. The Company’s marker was added to the cup lump harvesting by the farmers prior to transfer to the manufacturing centre where the 42 tons of latex was converted to 21 tons of natural rubber. The bails were then transferred to tire manufacturing for commercial car, truck and lorry tires. The tires were then sent for evaluation. The results demonstrated 100% success rates on all marked tires to have a proven verification technology for origin authentication of the natural rubber and full traceability all along the entire supply chain data and integrity from tree to tire.

 

43
 

 

Plastic Cycle Token

 

On November 28, 2023, the Company announced the planned launch of a plastic cycle token, scheduled for release in the third quarter of 2024. The initiative is being designed to present a reliable, ethical digital credit platform, aiming to capitalize on billions of dollars in recyclable plastics credits in a newly created market.

 

The tradeable plastic cycle token is being designed to enable companies to transition towards sustainable practices, encouraging entities within and outside the plastic ecosystem, including oil producers and waste management firms, to increase recycled content utilization.

 

This initiative is also expected to position the SMX Plastic Cycle Token as a next-generation alternative to carbon credits, creating a new paradigm in the Impact ESG investment landscape. Each token is being designed to represent a quantifiable amount of recycled plastic using SMX’s technology to physically mark the plastics, potentially offering a tangible impact on environmental circularity.

 

Gold and Other Metals

 

Gold

 

Security Matters PTY formed a joint initiative with Perth Mint to develop a mine-to-marketplace ethical gold supply chain technology solution. Since the incorporation of trueGold Consortium Pty Ltd (“trueGold”) in June 2020, this research and development project aims to promote a ‘mine to product’ transparency solution dedicated to responsible mining of materials. Security Matters PTY’s track & trace technology provides information on the origin of the materials and how they move across production and distribution chains towards recycling and back to refining.

 

On July 29, 2020, Security Matters PTY signed a shareholders’ agreement with W.A. Mint Pty Ltd. (“Perth Mint”) and trueGold. The shareholders’ agreement and the ancillary agreements discuss the establishment of a new entity—trueGold—by Security Matters PTY and Perth Mint. Security Matters PTY granted to trueGold, subject to the terms of the license agreement, an exclusive, worldwide, perpetual license to use Security Matters PTY’s technology for the purpose of commercializing it within the industry comprising gold as a precious metal (as elaborated below). Security Matters PTY owns any development of its intellectual property and, while trueGold owns all generated data it creates, trueGold granted to Security Matters PTY a free non-exclusive, irrevocable, perpetual, royalty free license to use the generated data, subject to regulatory requirements and to the extent that it relates to the Isorad License Agreement technology or Security Matters PTY’s technology. The parties agreed that neither Perth Mint or Security Matters PTY are required to provide any funding to trueGold and that any investment by any of them in trueGold from time to time will be by way of in-kind contributions. Third party equity investors will contribute the working capital will fund R&D, development capital and other expenses in accordance with the business plan.

 

Other than with the consent of the other shareholders or between affiliates (defined, inter alia, as a related body corporate of a shareholder; a company in which the shareholder beneficially owns 50% or more of the issued shares) a transfer of shares will be done subject to a right of first refusal of the other shareholders, whom will also have tag-along rights and a drag-along (as elaborated below). Under the constitution (as amended in July, 2022, to add the specific right of Security Matters PTY to purchase shares before any other shareholders) any shareholder wishing to transfer shares must notify the board of directors and, before the board of directors authorize the transfer of any share or shares, the share or shares must first have been offered to Security Matters PTY (for its own benefit and unless Security Matters PTY is 50% owned by one entity), and if SMX does not notify within 30 days that it wishes to purchase, then to all other shareholders (including Security Matters PTY) at a price to be agreed on by the transferor and the directors of trueGold. If the transferor and the directors of trueGold are unable to agree on a price, the price of the relevant shares will be a price which: represents a fair market price; and is determined by expert determination administered by the Australian Disputes Centre (ADC) in accordance with the ADC Rules for Expert Determination which are operating at the time the matter is referred to ADC, which Rules are incorporated into the constitution of trueGold. The determination of such person in relation to the price of the relevant shares will be final and binding on all shareholders.

 

Subject to certain terms and conditions, a drag-along right is established under which where shareholders wish to dispose of all of their share to a third party that wishes to acquire 100% of trueGold and 75% or more of the aggregate number of shares on issue at that time agreed, the remaining shareholders may be forced to transfer to the third party all of the shares held by each of the remaining shareholders. In case of a deadlock (defined as a case where the board of directors disagrees on a material matter regarding the fundamental operation of trueGold or the business and cannot resolve the disagreement within 10 business days of the disagreement first arising), if the shareholders are unable to reach agreement on any matter, a dispute resolution mechanism was created.

 

44
 

 

The board of directors of trueGold was agreed to consist of not less than three and not more than seven. The board is comprised as follows: Security Matters PTY may appoint (remove or replace) up to two directors; Zeren Browne; Perth Mint may appoint (remove or replace) up to two directors; and Hugh Morgan, who is a non-executive, independent chair. A list of resolutions was set, which require a board majority including at least one Security Matters PTY appointed director and one Perth Mint appointed director. Another list of resolutions was set, which require a resolution carried by a majority of the shareholders including Security Matters PTY and Perth Mint. trueGold and Yahaloma (defined below) agreed to bear the payments to Soreq related thereto of 4.2% of its revenues. SMX’s CEO, Mr. Haggai Alon, provides CEO services to trueGold and reports to the board of directors of trueGold, and Zeren Browne provides General Manager services to trueGold.

 

On October 3, 2023, Security Matters PTY entered into the Investment Agreement with trueGold. Pursuant to the Investment Agreement, the AUD475,000 of indebtedness as of June 30, 2023 trueGold owes to Security Matters PTY was waived by Security Matters PTY in exchange for the issuance of additional shares of True Gold (the “True Gold Shares”) such that Security Matters PTY’s holdings in trueGold shall be increased to 51.9% of the total issued and outstanding shares of trueGold, making Security Matters PTY the majority owner of trueGold. Additionally, the existing license agreement as between Security Matters PTY and trueGold was amended to include additional intellectual property of Security Matters PTY to be licensed to trueGold thereunder. Security Matters PTY shall further supply to trueGold a credit line for research and development work by its employees of up to AUD1,000,000, free of interest and collateral.

 

TrueSilver

 

On June 7, 2023, we announced that we are in the process of creating a new subsidiary, TrueSilver, and that we have entered into a 120 day exclusive agreement with Sunshine Minting Inc. (“Sunshine”), to create a path to full transparency and traceability for silver products from mine site to final products and recycling and the creation of an industry standard. During the 120-day exclusivity period, Sunshine shall evaluate our technology for its use, with possible further collaborations thereafter.

 

In July 2023, we transferred the ownership of our wholly owned granddaughter company “Security Matters Canada Ltd.” from ownership by our subsidiary Security Matters PTY to direct ownership by the Company and renamed it “TrueSilver SMX Platform Ltd.”

 

On April 15, 2024, the Company announced the successful completion of proof of concept for ethical sourcing and authentication of silver in cooperation with Sunshine.

 

The Company has now successfully completed the marking of 2.2 tons of silver within Sunshine’s operations. The program covered the marking of the silver raw material through continuous manufacturing processes to final products including recycling loops.

 

The Company’s technology was added at the melting stage and the marked silver material was processed into blank (from casting, extrusion, rolling, annealing, blank cutting & recycling), and the quality of the marked intermediate material and final products was evaluated (from billet to blank and recycled blank after several cycles).

 

The results demonstrated 100% success rates on all marked products all along the production process (from billet to finished product) ensuring the durability and irrefutable proof of quality and Brand authentication of the silver for credible ESG reporting for stakeholders, customers, auditors, and regulators.

 

Non-Ferrous Metals

 

On November 29, 2022, Security Matters PTY signed a products distribution and SAAS reseller agreement with Sumitomo Corporation, a Japanese corporation. Under such agreement, Security Matters PTY appointed Sumitomo to act as Security Matters PTY’s exclusive, worldwide distributor to market and sell markers, readers and Security Matters PTY services to customers for application in the Non-Ferrous Metals Market (as defined below) only, subject to the customer entering into with Security Matters PTY its standard product license agreement. The “Non-Ferrous Metals Market” is defined as all supply chain market segments of the industry for aluminum, copper, lead, nickel, zinc, molybdenum, cobalt, lithium and tin.

 

The price at which Security Matters PTY shall sell products to Sumitomo and the license fee at which Security Matters PTY shall license Security Matters PTY products and Security Matters PTY service to Sumitomo shall be a discount of the invoices issued to the customers.

 

Generally, the agreement shall remain in effect for an initial term of five years from the effective date of first commercial sale by Security Matters PTY to Sumitomo of any products. The companies have agreed that over the coming years there is a target to reach $35 million in sales.

 

45
 

 

Alcoholic Beverages

 

In December 2021, Security Matters PTY acquired all the holdings SMX Beverages Pty Ltd, a joint venture incorporated in February 2020 for the promotion of solutions in the alcoholic beverage industries including in relation to the prevention of counterfeit alcoholic beverages, circular economy concepts and packaging and supply chain within those industries.

 

Diamonds and Precious Stones

 

On April 30, 2019, Security Matters PTY signed an agreement with Trifecta Industries Inc. (“Trifecta”) for the commercialization of Security Matters PTY’s trace technology in the diamonds and precious stone industry. Under the terms of the agreement, Security Matters PTY and Trifecta established a new entity—Yahaloma Technologies Inc., which is equally held by Security Matters PTY and Trifecta.

 

Both parties covenanted not to pursue the use of Security Matters PTY’s technology for diamonds and precious stones, or any other venture related to the testing of the origin of diamonds or precious stone, other than through the Yahaloma. Additionally, in agreement with Isorad, all rights in and to any intellectual property related to the diamonds and precious stones industry that is developed by or for Yahaloma is jointly owned in equal parts by the Security Matters PTY, Yahaloma and Soreq.

 

Security Matters PTY continues to develop the technology and will supply Yahaloma technical services. Security Matters PTY bears the cost of such R&D services but the agreed hourly costs of Security Matters PTY’s staff is recorded as a shareholders loan of Security Matters PTY to Yahaloma, once the first USD 250,000 to be paid by Trifecta are exhausted (which is yet to happen). Trifecta supplies Yahaloma diamonds and other raw materials, which remain in the ownership of Trifecta. If Security Matters PTY causes damage to such diamonds during the R&D process, this will be reported the Trifecta and the damage recorded as a shareholders loan of Trifecta to Yahaloma. Trifecta will supply Yahaloma services of business development. Trifecta bears the cost of such services but the agreed hourly costs of Trifecta’s staff is recorded as a shareholders loan of Trifecta to Yahaloma. Management of Yahaloma is agreed to be jointly, with certain special resolutions requiring agreement of both parties. Actual day-to-day management is in Canada.

 

In addition to the shareholders loan extended by man-hours as stipulated above, the parties covenanted to extend up to USD 1 million to Yahaloma (USD 350,000 by Security Matters PTY and USD 650,000 by Trifecta, with USD 250,000 extended by Trifecta registered as capital and all other funds as shareholders loans). Funds were agreed to be injected upon reaching certain milestones. The Security Matters PTY loan of USD 350,000 are to be injected only upon reaching future milestones and only if such funds will be required, which stage has not yet arrived. Such Security Matters PTY loan will bear an interest rate of 5% per annum. Upon Yahaloma being able to repay the shareholders loans, first a sum of USD 250,000 will be repaid to Trifecta and then all other shareholders loans will be repaid pro-rata. Only after repayment of all shareholders loans will Yahaloma distribute profits.

 

A party may not transfer its shares to others without the prior approval of the other party other than a transfer to an affiliate (defined as an entity directly or indirectly controlled by a party or directly or indirectly controls such party or is directly or indirectly controlled by a person which also, directly or indirectly, controls such person) done after 30 days’ notice to the other party, and after the affiliate agrees to adopt the agreement.

 

Yahaloma agreed to bear the payments to Soreq related thereto (as described in “Gold and Other Metals” above).

 

Electronics

 

Security Matters PTY has joined an alliance formed by six founding partners, among them the World Business Council for Sustainable Development, to set a shared vision for a circular economy for electronics, called the Circular Electronics Partnership. This group of global companies has been brought together to reduce e-waste and to commit to a roadmap for a circular economy for electronics by 2030.

 

46
 

 

Fashion

 

In December 2020, Security Matters PTY announced that it had launched a Fashion Sustainability Competence Centre to enable fashion brands globally, to transition successfully to a sustainable circular economy by being able to identify the origination of their raw materials and hence, recycle their own unsold and/or end-of-life merchandise (garments, footwear and accessories including sunglasses) back into new high-quality materials and new fashion merchandise Security Matters PTY’s technology is applicable across a range of materials including leather, silk, cotton, wool, coated canvas, vegan leather, polyesters, cashmere, metals (e.g., gold & metallic parts) and plastics; and its applications encompass finished leather goods, shoes, garments, and accessories. Security Matters PTY is also collaborating with several luxury fashion conglomerates on R&D projects to trace the origin of raw materials used in their supply chain and is in commercial negotiations regarding the implementation of its solution with partners in the industry.

 

In July 2023, we changed the name of the wholly owned subsidiary from “SMX France” to “SMX Fashion and Luxury” in anticipation for such company to be used for the fields of fashion and luxury.

 

Intellectual Property

 

The ability of Security Matters PTY to develop and maintain proprietary information technology is crucial to our success. Since 2015, Security Matters PTY technology has been protected by more than 20 patent families and more than 100 patents filed around the world in various stages with respect to our marking and reading technologies. The table below lists the 20 patent families. Under each patent family, we note the countries under which such patents have been filed.

 

The following table provides a list of Security Matters PTY’s patents that have passed the international phase (PCT) and may be publicly disclosed:

 

Patent

Family

  Countries   Type  

Title and

Type of

Patent

Protection

  US Status   US App#’s  

US Filing

Date

  US Patent #  

US

Publication

 

US

Expiration

Date

1  

US

Taiwan

Japan

China

Europe

Israel

Republic of

Korea

  PCT   System and method for reading x-ray-fluorescence marking   Registered  

15/563,756

 

16/709,804

 

Mar 2016

 

Mar 2016

 

US10539521B2

 

US10969351B2

 

Jan.2020

 

Apr 2021

 

Jul 2036

 

Mar 2036

                   
2  

US

Australia

China

Europe

Israel

Japan

Korea

  PCT   Authentication of metallic objects   Registered   16/074,226   Feb 2017   US11446951B2   Sep 2022   Jan 2040
                   
3  

US

Australia

Europe

Israel

Korea

  PCT   Access control system and method thereof  

Published/

 

Pending

  16/083,966   Mar 2017   US20200242865A1   Jul 2020    
                                     
4  

US

Australia

China

Europe

Israel

Japan

Korea

  PCT   A method and a system for XRF marking and reading XRF marks of electronic systems  

Registered

 

Registered

 

16/091,222

 

16/834,732

  Apr 2017   US10607049B2   Mar 2020   Apr 2037
                   
5  

US

Australia

China

Europe

Austria

Germany

Estonia

Spain

Finland

France

Great Britain

Latvia

Sweden

Israel

Japan

Korea

  PCT   An XRF analyzer for identifying a plurality of solid objects, a sorting system and a sorting method thereof   Registered   US16/311,290   Jun 2021   US10967404B2   Apr 2021   Dec 2037
                   
6  

US

Australia

Canada

Europe

Israel

South Africa

  PCT   Method for marking and authenticating precious stones  

Registered

 

Pending

 

16/328,526

 

17/666,866

  Aug 2017