SmartKem (SMTK) risk factors, FY2024 10-K

Risks Related to our Business and the Industry in Which We Operate

1. 01We have a history of losses, anticipate continued operating losses in the future, and may not be able to achieve or maintain profitability. If we cannot achieve or maintain profitability, stockholders could lose all or part of their investment
2. 02Our recurring losses from operations have raised substantial doubt regarding our ability to continue as a going concern and will likely require additional capital to support our business and objectives
3. 03Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline
4. 04We may not be able to develop technologies and products to satisfy changes in customer demand or industry standards, and our competitors could develop products that decrease the demand for our products
5. 05If MicroLED technology is not widely adopted by display manufacturers, our business would be harmed
6. 06We participate in highly competitive markets characterized by rapid technological changes, and existing and new companies may introduce products that compete with ours, which may adversely affect our business and operating results
7. 07If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell our existing or future products or generate product revenue
8. 08prototyping of demonstration products and process improvement activities may be significantly delayed as a result of the relocation of those functions
9. 09The transfer of our technology and manufacturing know-how to a third-party commercial manufacturer may result in unanticipated costs and delays that could have a material and adverse effect our business, financial condition and results of operations
10. 10Because we will depend on third-party fabricators to manufacture products for us, we will be susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales, income and customers
11. 11We expect that our sales cycles will be long and unpredictable, and our sales efforts will require considerable time and expense. As a result, our revenue is difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly
12. 12Our current operations are concentrated, and in the event of an earthquake, terrorist attack or other disaster affecting these locations or those of our major suppliers, our operations may be interrupted, and our business may be harmed
13. 13Certain of our partners are and many of our potential customers will be located in Taiwan, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could have a material adverse effect on our business, financial condition and results of operations
14. 14We rely on our management team and other key employees and will need additional personnel to grow our business. The loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business
15. 15If we fail to effectively manage our growth, our business, financial condition and results of operations would be harmed
16. 16Public health crises, such as pandemics, epidemics, or widespread outbreaks of infectious disease, have had, and could in the future have, an adverse effect on our business, financial condition and results of operations
17. 17Disruptions in global supply chains have impacted, and may in the future, impact, our business, results of operations and financial condition
18. 18We are subject to risks associated with international sales and operations
19. 19Our operations and our financial results, including our ability to execute our business strategy, can be adversely affected by changes in global economic conditions as well as the potential impacts of geopolitical uncertainties and international conflicts
20. 20Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations could subject us to penalties and other adverse consequences
21. 21In order to comply with environmental laws and regulations, we may need to modify our activities or incur substantial costs, and such laws and regulations, including any failure to comply with such laws and regulations, could subject us to substantial costs, liabilities, obligations and fines
22. 22Our business may be affected by litigation and government investigations
23. 23Security breaches, computer malware, computer hacking attacks and other security incidents could harm our business, reputation, brand and operating results

Risks Related to our Intellectual Property

1. 24Any failure by us to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete

Risks Related to our Financial Control Environment

1. 25We incur significant costs as a result of operating as a public company
2. 26If we fail to maintain effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business or share price
3. 27If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of investors, resulting in a decline in the market price of our common stock
4. 28Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies

Risks Related to Our Common Stock

1. 29We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors
2. 30We are a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors
3. 31An active trading market for our common stock may not develop or be sustained, which may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital
4. 32trading market for our common stock will develop or be sustained. The lack of an active market for our common stock may make it difficult for investors to sell shares of our common stock and may make it difficult for us to raise capital
5. 33Our common stock is listed on The Nasdaq Capital Market. We must satisfy the continued listing requirements of Nasdaq to maintain the listing of our common stock on The Nasdaq Capital Market
6. 34We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment
7. 35FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock
8. 36Substantial future sales of shares of our common stock could cause the market price of our common stock to decline
9. 37If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline
10. 38Our principal stockholders and management have substantial control over us and could delay or prevent a change in corporate control
11. 39Provisions in our amended and restated certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock
12. 40Such provisions could impede any merger, consolidation, takeover or other business combination involving the Company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company
13. 41The Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the exclusive forum or if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware
14. 42The exclusive forum provisions described above do not apply to claims arising under the Exchange Act
15. 43Because we became a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering, we may not be able to attract the attention of research analysts at major brokerage firms