| GENERAL |
NOTE
1 - GENERAL:
| A. |
SMX
(Security Matters) Public Limited Company (“Security Matters” or “ SMX” or the “Company” and
together with its subsidiaries, the “Group”) was incorporated in July 1, 2022, under the laws of Ireland with registered
number 722009 and its registered office at Mespil Business Center, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6. The Company
was incorporated in 2022 as part of the Business Combination |
The
Group provides one solution to solve both authentication and track challenges in order to uphold supply chain integrity and provide quality
assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and
an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process
(or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending
on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker
codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented
reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved
and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers
or on a blockchain ledger, to protect data integrity and custody.
| B. |
As
of June 30, 2026, the Company incurred accumulated losses of $295.5 million and continued to
incur operating losses and negative cash flows from operating activities during to date
of these financial statements. The Company has not yet generated revenues and is required
to obtain additional financing in order to continue to operate. The Company continues to
actively manage its capital structure through a combination of equity financing, strategic
partnerships, and access to committed capital facilities. These initiatives are designed
to support the Company’s transition toward large-scale commercialization. While current cash resources are sufficient to fund its planned operations in the near term, additional
funding will be required to support long-term growth, management believes that the Company’s
current strategy and access to capital provide a reasonable basis to continue operations.
The accompanying unaudited interim consolidated financial statements have been prepared assuming that the Company
will continue as a going concern.
During
the period, the Company increased its Standby Equity Purchase Agreement (hereafter “SEPA”) from of $100 million to of
$250 million. The Company plans to continue the issuance of shares and other funding sources such as the increase of the SEPA (see
note 5). While future funding remains subject to market conditions, the Company continues to actively pursue multiple financing pathways,
including equity facilities, strategic investors, and capital markets initiatives, to support its operational and commercialization
objectives. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that
are required for the Company’s long-term business plan. |
SMX
(SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES
TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
(US$
in thousands except share and per share data) |
NOTE
1 – GENERAL (CONT.):
| C. |
The Company operates primarily through the following wholly owned subsidiaries and one majority owned, all of which have been consolidated
in these consolidated financial statements. |
SCHEDULE
OF COMPANIES SUBSIDIARIES
| Controlled
entity | |
Country
of Incorporation | |
Percentage Owned June
30, 2026 | | |
Percentage Owned December 31, 2025 | |
| Security Matters (SMX) PLC * | |
| |
| | % | |
| | % |
| Security Matters PTY Ltd. | |
Australia | |
| 100 | % | |
| 100 | % |
| Lionheart III Corp | |
USA | |
| 100 | % | |
| 100 | % |
| SMX (Security Matters) Ireland Limited | |
Ireland | |
| 100 | % | |
| 100 | % |
| SMX Fashion and Luxury | |
France | |
| 100 | % | |
| 100 | % |
| TrueSilver SMX Platform Ltd. | |
Canada | |
| 100 | % | |
| 100 | % |
| SMX (Security Matters) Israel Ltd. | |
Israel | |
| 100 | % | |
| 100 | % |
| Security Matters Canada Ltd. | |
Canada | |
| 100 | % | |
| 100 | % |
| SMX Beverages Pty Ltd. | |
Australia | |
| 100 | % | |
| 100 | % |
| SMX Circular Economy Platform PTE, Ltd. | |
Singapore | |
| 70 | % | |
| 70 | % |
| True Gold Consortium Pty Ltd. | |
Australia | |
| 52.9 | % | |
| 52.9 | % |
| SMX Circular Economy FZCO | |
UAE | |
| 100 | % | |
| 100 | % |
| SMX IP and Licensing Limited | |
Ireland | |
| 100 | % | |
| - | |
In
addition, the Company’s has the following investments in associated company:
| Entity | |
Country
of Incorporation | |
Percentage
Owned June
30, 2026 | | |
Percentage
Owned December
31, 2025 | |
| Yahaloma Technologies Inc. | |
Canada | |
| 50 | % | |
| 50 | % |
The
proportion of ownership interest is equal to the proportion of voting power held.
| |
* |
The
Company’s Irish structure supports its intellectual property strategy, enhancing protection, licensing efficiency, and future
revenue generation from its technology portfolio |
| D. |
On
January 15, 2025, the Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 28.5:1
under the symbol “SMX,” with a new CUSIP number of G8267K158 and ISIN code IE000WZ90ZV5. Approved by shareholders and
Board of Directors on December 10, 2024. This reverse split consolidated every 28.5 shares into one new ordinary share and was aimed
at meeting Nasdaq’s minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately
33,155 thousand to approximately 1,163 thousand. Fractional shares resulting from the split were aggregated and sold at market prices.
Additionally, the par value of the Ordinary Shares increased from $0.165 to $4.70250014886352. The Company’s options, warrants,
and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect these
changes. All share, options and warrants amount in these June 30, 2026, financial statements are presented post this reverse stock
split. |
| E. |
On
June 16, 2025, the Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 4.1:1 under
the symbol “SMX,” with a new CUSIP number of G8267K 166 and the new ISIN code IE000B8AU702. Approved by shareholders
and Board of Directors on April 15, 2025, this reverse split consolidated every 4.1 shares into one new ordinary share and was aimed
at meeting Nasdaq’s minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately
4 million to approximately 1 million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally,
the par value of the ordinary shares will be increased from $0.00000000000001 to $0.000000000000041. The Company’s options,
warrants, and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect
these changes. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2026, financial statements
are presented post this reverse stock split. |
SMX
(SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES
TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
(US$
in thousands except share and per share data) |
NOTE 1 – GENERAL (CONT.):
| F. |
On
August 7, 2025, the Company’s Ordinary Shares began trading on the Nasdaq Capital Market post- reverse stock split of 7:1 under
the symbol “SMX,” with a new CUSIP number of G8267K2174 and the new ISIN code IE000TB5RTG4. Approved by shareholders
and Board of Directors on July 10, 2025, this reverse split consolidated every 7.0 shares into one new ordinary share and was aimed
at meeting Nasdaq’s minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately
9 million to approximately 1 million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally,
the par value of the ordinary shares will be increased from $0.00000000000041 to $0.000000000000287. The Company’s options,
warrants, and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect
these changes. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2026, financial statements
are presented post this reverse stock split. |
| G. |
On October 23, 2025, the
Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 10.89958:1 under the symbol
“SMX,” with a new CUSIP number of G8267K182 and the new ISIN code IE000UPDVNX9. Approved by shareholders and Board of Directors
on July 10, 2025, this reverse split consolidated every 10.89958 shares into one new ordinary share and was aimed at meeting Nasdaq’s
minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately 15.5 million to approximately
1.4 million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of the
ordinary shares will be increased from $0.000000000000287 to $0.00000000000312817946. The Company’s options, warrants, and convertible
securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect these changes. The Basic
and diluted loss per share attributable to shareholders amount in these June 30, 2026, financial statements are presented post this
reverse stock split. |
| H. |
On November 18, 2025, the
Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 8:1 under the symbol “SMX,”
with a new CUSIP number of G8267K307 and the new ISIN code IE000UPDVNX9. Approved by shareholders and Board of Directors on July 10,
2025, this reverse split consolidated every 8 shares into one new ordinary share and was aimed at meeting Nasdaq’s minimum bid
price requirement of $1.00 per share, reducing the number of outstanding shares from approximately 8.4 million to approximately 1.05
million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of the ordinary
shares will be increased from $0.00000000000312817946 to $0.00000000002502543568 per share. The Company’s options, warrants,
and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect these
changes. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2026, financial statements are
presented post this reverse stock split. |
| I. |
On February 17, 2026, the
Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 4.8828125:1 under the symbol
“SMX,” with a new CUSIP number of G8267K406 and the new ISIN code IE000B5COQZ5. Approved by shareholders and Board of Directors
on July 10, 2025, this reverse split consolidated every 4.8828125 shares into one new ordinary share and was aimed at meeting Nasdaq’s
minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately 10.67 million to approximately
2.18 million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of
the ordinary shares will be increased from $0.00000000002502543568 to $0.00000000012219451015625 per share. The Company’s options,
warrants, and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect
these changes. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2026, financial statements
are presented post this reverse stock split. |
| J. |
On May 11, 2026, the Company’s
Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 20:1 under the symbol “SMX,” with
a new CUSIP number of G8267K190 and the new ISIN code IE0008D7EWV5. Approved by shareholders and Board of Directors on July 10, 2025,
this reverse split consolidated every 20 shares into one new ordinary share and was aimed at meeting Nasdaq’s minimum bid price
requirement of $1.00 per share, reducing the number of outstanding shares from approximately 12 million to approximately 614. Fractional
shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of the ordinary shares will
be increased from $0.00000000012219451015625 to $0.000000002443890203125 per share. The Basic and diluted loss per share attributable
to shareholders amount in these June 30, 2026, financial statements are presented post this reverse stock split. |
| K. |
On June 1, 2026, the
Company’s Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 2.285:1 under the symbol
“SMX,” with a new CUSIP number of G8267K216 and the new ISIN code IE000CNLGHH1. Approved by shareholders and Board of
Directors on July 10, 2025, this
reverse split consolidated every 2.285 shares into one new ordinary share and was aimed at meeting Nasdaq’s minimum bid price
requirement of $1.00
per share, reducing the number of outstanding shares from approximately 1.5
million to approximately 650.
Fractional shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of the ordinary
shares will be increased from $0.000000002443890203125
to $0.00000000558603475 per share. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2026,
financial statements are presented post this reverse stock split. |
SMX
(SECURITY MATTERS) PUBLIC LIMITED COMPANY
NOTES
TO THE UNAUDITED INTERIM CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
(US$
in thousands except share and per share data) |
|