SmartKem (SMTK) risk factors, FY2025 10-K

Risks Related to Our Financial Position, Financial Reporting Matters and Need for Capital

1. 01We have generated no revenue from commercial sales to date, and our future profitability is uncertainNew
2. 02If we fail to obtain the capital necessary to fund our operations, we will be unable to continue or complete our product development, and you will likely lose your entire investmentNew

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

1. 03Our 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
2. 04Our 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
3. 05We 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
4. 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
5. 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 revenue70% rewritten
6. 08We 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

Risks Related to Our Operations and Manufacturing

1. 09We rely on access to third-party facilities, including ITRI, for prototyping and commercial process development, and the loss of access to such facilities could have a material adverse effect on our businessNew
2. 10Our 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
3. 11Certain 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
4. 12We 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
5. 13If we fail to effectively manage our growth, our business, financial condition and results of operations would be harmed
6. 14Public 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
7. 15Disruptions in global supply chains have impacted, and may in the future, impact, our business, results of operations and financial condition

Risks Related to Our International Operations and Regulatory Compliance

1. 16We are subject to risks associated with international sales and operations
2. 17Our 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
3. 18Failure 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
4. 19In 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
5. 20Our business may be affected by litigation and government investigations

Risks Related to Our Information Technology and Cybersecurity

1. 21Security 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. 22Any failure by us to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete32% rewritten

Risks Related to Our Financial Controls and Reporting

1. 23We incur significant costs as a result of operating as a public company
2. 24If 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 price58% rewritten
3. 25If 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. 26Changes 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. 27We 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
2. 28An 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 capital35% rewritten
3. 29Our 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 Market59% rewritten
4. 30We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment
5. 31FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock
6. 32Substantial future sales of shares of our common stock could cause the market price of our common stock to decline
7. 33If 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
8. 34Our principal stockholders and management have substantial control over us and could delay or prevent a change in corporate control
9. 35Provisions 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
10. 36Such 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
11. 37The 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
12. 38The exclusive forum provisions described above do not apply to claims arising under the Exchange Act
13. 39Because 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