10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-42115

SmartKem, Inc.

(Exact name of registrant as specified in its charter)

Delaware	85-1083654
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3 Germay Drive, Unit 4 #1029
Wilmington, DE	19804
(Address of Principal Executive Offices)	(Zip code)

011-44-161-721-1514

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $0.0001 per share	SMTK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, 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 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No   ☒

As of May 18, 2026, there were 21,446,213 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

		Page
Part I	Financial Information	3
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2026 and 2025	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity / (Deficit) for the three months ended March 31, 2026 and 2025	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025	6
	Notes to the Unaudited Interim Condensed Consolidated Financial Statements	7-20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	25
Part II	Other Information	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Exhibit Index		28
Signatures		30

2

Item 1. Financial Statements

SMARTKEM, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except number of shares and per share data)

	March 31,		December 31,
	2026		2025
Assets
Current assets
Cash and cash equivalents	$	7,566	$	374
Accounts receivable		3		3
Research and development tax credit receivable		536		549
Prepaid expenses and other current assets		696		575
Total current assets		8,801		1,501
Property, plant and equipment, net		141		180
Right-of-use assets, net		535		607
Total assets	$	9,477	$	2,288
Liabilities and stockholders’ (deficit) / equity
Current liabilities
Accounts payable and accrued expenses	$	3,357	$	4,603
Lease liabilities, current		277		271
Notes payable, net		101		928
Deferred revenue		106		108
Total current liabilities		3,841		5,910
Lease liabilities, non-current		230		312
Total liabilities		4,071		6,222
Contingencies (Note 9)		—		—
Stockholders’ equity / (deficit):
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, 21,411.5 and 0 shares issued and outstanding, at March 31, 2026 and December 31, 2025, respectively		—		—
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 21,202,911 and 6,839,689 shares issued and outstanding, at March 31, 2026 and December 31, 2025, respectively		2		1
Additional paid-in capital		152,570		124,772
Accumulated other comprehensive loss		(2,668)		(3,578)
Accumulated deficit		(144,498)		(125,129)
Total stockholders' equity / (deficit)		5,406		(3,934)
Total liabilities and stockholders’ equity / (deficit)	$	9,477	$	2,288

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

3

SMARTKEM, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except number of shares and per share data)

	Three Months Ended March 31,
	2026		2025
Revenue	$	20	$	23
Cost of revenue		4		1
Gross profit		16		22
Other operating income		34		251
Operating expenses
Research and development		913		1,497
General and administrative		1,664		2,009
Loss / (gain) on foreign currency transactions		46		(95)
Total operating expenses		2,623		3,411
Loss from operations		(2,573)		(3,138)
Non-operating (expense) / income
(Loss) / gain on foreign currency transactions		(810)		969
Change in fair value of derivative liabilities		(3,391)		—
Loss on the execution of equity line of credit (ELOC)		(11,874)		—
Loss on settlement debt		(371)		—
Transaction costs related to debt financing		(67)		—
Interest, net		(283)		10
Total non-operating (expense) / income		(16,796)		979
Loss before income taxes		(19,369)		(2,159)
Income tax refund		—		25
Net loss	$	(19,369)	$	(2,134)
Common share data:
Basic and diluted net loss per common share	$	(1.34)	$	(0.32)
Weighted average shares outstanding - basic and diluted		14,436,282		6,649,603
Net loss	$	(19,369)	$	(2,134)
Other comprehensive loss:
Foreign currency translation		910		(1,005)
Total comprehensive loss	$	(18,459)	$	(3,139)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

4

SMARTKEM, INC.

Condensed Consolidated Statements of Stockholders’ Equity / (Deficit)

(Unaudited)

(in thousands, except share data)

	Preferred Stock			Common stock			Additional		Accumulated other				Total
	$0.0001 par value			$0.0001 par value			paid-in		comprehensive		Accumulated		stockholders'
	Shares	Amount		Shares	Amount		capital		income / (loss)		deficit		equity / (deficit)
Balance at January 1, 2026	—	$	—	6,839,689	$	1	$	124,772	$	(3,578)	$	(125,129)	$	(3,934)
Stock-based compensation expense	—		—	—		—		255		—		—		255
Exercise of stock options into common stock	—		—	5,089		—		—		—		—		—
Cashless exercise of warrants into common stock	—		—	1,930,524		—		—		—		—		—
Common stock issued for settlement of debt	—		—	385,130		—		342		—		—		342
Issuance of common stock and warrants, net of issuance costs	—		—	677,129		—		555		—		—		555
Issuance of common stock, net of issuance costs	—		—	11,365,350		1		2,464		—		—		2,465
Issuance of Series A-1 Preferred Stock and warrants, net of issuance costs	5,786.5		—	—		—		4,446		—		—		4,446
Exchange of notes payable for Series A-1 Preferred Stock	5,625.0		—	—		—		7,862		—		—		7,862
Issuance of Series A-1 Preferred Stock for equity line of credit (ELOC)	10,000.0		—	—		—		11,874		—		—		11,874
Foreign currency translation adjustment	—		—	—		—		—		910		—		910
Net loss	—		—	—		—		—		—		(19,369)		(19,369)
Balance at March 31, 2026	21,411.5	$	—	21,202,911	$	2	$	152,570	$	(2,668)	$	(144,498)	$	5,406

	Preferred Stock			Common stock			Additional		Accumulated other				Total
	$0.0001 par value			$0.0001 par value			paid-in		comprehensive		Accumulated		stockholders'
	Shares	Amount		Shares	Amount		capital		income / (loss)		deficit		equity
Balance at January 1, 2025	856	$	—	3,590,217	$	—	$	122,316	$	(1,105)	$	(114,620)	$	6,591
Stock-based compensation expense	—		—	—		—		250		—		—		250
Issuance of common stock to vendor	—		—	30,000		—		85		—		—		85
Foreign currency translation adjustment	—		—	—		—		—		(1,005)		—		(1,005)
Net loss	—		—	—		—		—		—		(2,134)		(2,134)
Balance at March 31, 2025	856	$	—	3,620,217	$	—	$	122,651	$	(2,110)	$	(116,754)	$	3,787

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

5

SMARTKEM, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Three Months Ended March 31,
	2026		2025
Cash flow from operating activities:
Net loss	$	(19,369)	$	(2,134)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		36		56
Stock-based compensation expense		255		250
Issuance of common stock to vendor		—		85
Right-of-use asset amortization		72		68
Loss / (gain) on foreign currency transactions		856		(1,063)
Change in fair value of derivative liabilities		3,391		—
Loss on the execution of equity line of credit (ELOC)		11,874		—
Debt discount amortization		283		—
Loss on the extinguishment of debt		371		—
Transactions costs allocable to notes payable and equity line of credit (ELOC)		67		—
Change in operating assets and liabilities:
Research and development tax credit receivable		11		(126)
Prepaid expenses and other assets		(122)		(222)
Accounts payable and accrued expenses		780		(393)
Lease liabilities		(75)		(29)
Other current liabilities		(2)		170
Net cash used in operating activities		(1,572)		(3,338)
Cash flow from financing activities:
Gross proceeds received related to Common Stock and Warrants Purchase Agreement		681		—
Payments for financing expense related to Common Stock and Warrants Purchase Agreement		(126)		—
Payment for legal expenses related to extinguishment of debt		(10)		—
Gross proceeds received related to note payable		2,625		—
Payment for legal expense related to notes payable		(50)		—
Principal payment for the settlement of note payable		(1,100)		—
Payment for a release of claims related to notes payable		(300)		—
Gross proceeds received related to Common Stock Purchase Agreement		2,617		—
Payment for financing expense related to Common Stock Purchase Agreement		(152)		—
Gross proceeds received related to Preferred Stock and Warrants Purchase Agreement		4,630		—
Payment for financing expense related to Preferred Stock and Warrants Purchase Agreement		(184)		—
Payment for financing expense related to equity line of credit (ELOC)		(17)		—
Principal payment on the financing of the director and officer insurance policy		(11)		—
Net cash provided by financing activities		8,603		—
Effect of exchange rate changes on cash		161		78
Net change in cash		7,192		(3,260)
Cash, beginning of period		374		7,141
Cash, end of period	$	7,566	$	3,881
Supplemental disclosure of cash and non-cash investing and financing activities
Initial classification of fair value of derivative liability		1,460		—
Debt discount related to notes payable		1,125		—
Conversion of debt to preferred stock and warrants		7,862		—
Financing of directors’ and officers' liability insurance with debt		112		—

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

6

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. GENERAL

Organization

SmartKem, Inc. (“SmartKem” or the “Company”) a Delaware corporation, formerly known as Parasol Investments Corporation (“Parasol”), was formed on May 13, 2020, and is the successor, as discussed below, of SmartKem Limited, which was formed under the Laws of England and Wales. The Company was founded as a “shell” company registered under the Exchange Act, with no specific business plan or purpose until it began operating the business of SmartKem Limited following the closing of the Exchange described below.

On February 23, 2021, Parasol entered into a Securities Exchange Agreement (the “Exchange Agreement”), with SmartKem Limited. Pursuant to the Exchange Agreement all of the equity interests in SmartKem Limited, except certain deferred shares which had no economic or voting rights, and which were purchased by Parasol for an aggregate purchase price of $1.40, were exchanged for shares of Parasol common stock, par value $0.0001 per share (“common stock”), and SmartKem Limited became a wholly owned subsidiary of Parasol (the “Exchange”).

As a result of the Exchange, Parasol legally acquired the business of SmartKem Limited, and continues as the existing business operations of SmartKem Limited as a public reporting company under the name SmartKem, Inc.

Business

We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry. Our TRUFLEX® semiconductor polymers enable low-temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost, high-performance displays. Our semiconductor platform can be used in a range of display technologies, including MicroLED, liquid crystal display (“LCD”), and AMOLED, as well as in applications in advanced computer and artificial intelligence chip packaging, sensors, and logic.

We design and develop our materials at our research and development facility in Manchester, UK. We also operate a field application office in Hsinchu, Taiwan, in close proximity to our collaboration partner, The Industrial Technology Research Institute of Taiwan. Together with our collaboration partners, we are developing a commercial-scale production process and Electronic Design Automation ("EDA") tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials.

During the first quarter of 2026, SmartKem was involved in a number of financing transactions. These included the transfer of our patent portfolio to a third party. The company still owns its process and formulation intellectual property as codified in 40 trade secrets. As previously disclosed, the Company is continuing to conduct a review of its strategy. In particular, it is evaluating its display prototyping activities, its materials formulation activities and the possibility of adding new materials to its portfolio.

The consolidated entity presented is referred to herein as “SmartKem”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.

Risk and Uncertainties

The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the growth stage, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements.

7

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

Going Concern

The Company has incurred continuing losses including net losses of $19.4 million for the three months ended March 31, 2026. The Company’s cash as of March 31, 2026 was $7.6 million with net cash used in operating activities of $1.6 million for the three months ended March 31, 2026. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products.

The Company expects that its cash and cash equivalents of $7.6 million as of March 31, 2026 will not be sufficient to fund its operating expenses and capital expenditures for the 12 months from the issuance of these financial statements. In the event that the Company is unable to raise additional capital in the near term, it may have to curtail its operations or seek protection under applicable bankruptcy or insolvency laws.

The Company’s future viability will continue to be dependent on its ability to raise additional capital to fund its operations. The Company will need to obtain additional funds to satisfy its operational needs. Until such time, if ever, as the Company can generate sufficient cash through revenue, management’s plans are to finance the Company’s working capital requirements through a combination of equity offerings, including the issuance of Common Stock pursuant to the ELOC Purchase Agreement (as defined in Note 8), debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If the Company raises additional funds by issuing equity securities, the Company’s existing security holders will likely experience dilution. If the Company borrows money, the incurrence of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that could restrict its operations. If the Company enters into a collaboration, strategic alliance or other similar arrangement, it may be forced to give up valuable rights. There can be no assurance, however, that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company’s products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding.

There is substantial doubt that the Company will be able to pay its obligations as they fall due, and this substantial doubt is not alleviated by management plans. The condensed consolidated financial statements as of March 31, 2026 have been prepared assuming that the Company will continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

Basis of Presentation

The unaudited interim condensed consolidated financial statements of the Company as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025 should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”), which was filed with the SEC on April 8, 2026 and may also be found on the Company’s website (www.smartkem.com). In these notes to the interim condensed consolidated financial statements the terms “us,” “we” or “our” refer to the Company and its consolidated subsidiaries.

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all wholly owned subsidiaries and all significant inter-company accounts and transactions have been eliminated in consolidation. Amounts are presented in thousands, except number of shares and per share data.

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended

8

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

March 31, 2026 and 2025; however, certain information and footnote disclosures normally included in our audited consolidated financial statements included in our Annual Report have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Other than the policies listed below, there have been no material changes to the Company’s significant accounting policies as set forth in Note 3 Summary of Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report.

Management’s Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relate to the valuation of common stock, fair value of stock options and fair value of derivative liabilities. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the period ended March 31, 2026. The carrying value of the Company’s cash, accounts receivable, other receivables, and accounts payable approximate fair value because of the short-term maturity of these financial instruments.

Issuance Costs

The Company assessed the issuance cost in connection with the issuance of an equity offering. ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering, states that specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering. Analogizing to that guidance, specific incremental costs directly attributable to the issuance of an equity contract to be classified in equity should generally be recorded as

9

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

a reduction in equity. However, issuance costs for equity contracts that are classified as a liability should be expensed immediately. The issuance costs are allocated to the equity and liability components of the underlying transaction on a basis of the allocated fair value of the gross proceeds in the overall transactions.

Direct and incremental legal and accounting costs associated with the Company’s issuance of common stock, preferred stock and warrants are deferred and classified as a component of other assets on the consolidated balance sheet until completion of the issuance. Upon completion of the issuance, deferred offering costs are reclassified from other assets to equity in additional paid-in capital and recorded against the net proceeds received in the issuance. For the period ended March 31, 2026, we recorded $539 thousand of offering costs of which $489 thousand were recorded in additional paid-in capital and $50 thousand were recorded as non-operating expenses.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment: Semiconductor materials.

Recent Accounting Pronouncements

On November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses, which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively, with early adoption permitted. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies various topics in the Accounting Standards Codification to improve consistency and address technical corrections. Key improvements include clarifying the calculation of diluted earnings per share (EPS) when a loss from continuing operations exists. The amendments in this update are effective for the Company beginning January 1, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This update clarifies the applicability of interim reporting guidance and the form and content of interim financial statements. It also establishes a disclosure principle requiring an entity to disclose material events and changes occurring since the end of the last annual reporting period. ASU 2025-11 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This update establishes authoritative guidance for the recognition, measurement, presentation, and disclosure of government grants received by business entities. ASU 2025-10 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. The Company is assessing the impact of adopting this standard.

10

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

The Organization for Economic Co-operation and Development (“OECD”) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on Pillar Two Proposals. We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Given the numerous proposed changes in law and uncertainty regarding such proposed changes, the impact cannot be determined at this time.

3.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Advances and retainers	$	53	$	54
Prepaid insurance		207		152
Research grant receivable		65		88
Prepaid facility costs		221		68
Prepaid software licenses		40		52
Tax Receivable		106		117
Other receivable and other prepaid expenses		4		44
Total prepaid expenses and other current assets	$	696	$	575

4.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Plant and equipment	$	1,750	$	1,786
Furniture and fixtures		112		114
Computer hardware and software		104		106
		1,966		2,006
Less: Accumulated depreciation		(1,825)		(1,826)
Property, plant and equipment, net	$	141	$	180

Depreciation expense was $36.1 thousand and $56.1 thousand for the three months ended March 31, 2026 and 2025, respectively and is classified as research and development expense.

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Accounts payable - trade	$	3,033	$	4,435
Payroll liabilities		183		39
Accrued expenses		141		129
Total accounts payable and accrued expenses	$	3,357	$	4,603

On February 5, 2026, the Company entered into a debt conversion agreement (the “Debt Conversion Agreement”) with SmartKem Limited, a wholly owned subsidiary of the Company, and a creditor (the “Creditor”), pursuant to which the Company agreed to issue to the Creditor (i) 385,130 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at an ascribed price of $2.75 per share and (ii) pre-funded warrants (the “Pre-Funded Warrant”) to purchase 348,260 shares of Common Stock in satisfaction of approximately $2 million owed to the Creditor by SmartKem Limited.

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SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

6.    LEASES

The Company has operating leases consisting of office space, lab space and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right of use asset and lease liability based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred.

The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended:

	Three Months Ended March 31,
(in thousands)	2026		2025
Operating lease cost	$	72	$	73
Short-term lease cost		1		3
Total lease cost	$	73	$	76

The total lease cost is included in the unaudited condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	72	$	73
General and administrative		1		3
Total lease cost	$	73	$	76

Right of use lease assets and lease liabilities for the Company’s operating leases were recorded in the unaudited condensed consolidated balance sheet as follows:

	March 31,		December 31,
(in thousands)	2026		2025
Assets
Right of use assets - Operating Leases	$	535	$	607
Total lease assets	$	535	$	607
Liabilities
Current liabilities:
Lease liability, current - Operating Leases	$	277	$	271
Noncurrent liabilities:
Lease liability, non-current - Operating Leases		230		312
Total lease liabilities	$	507	$	583

The Company had no right of use lease assets or lease liabilities classified as financing leases as of March 31, 2026 and December 31, 2025.

12

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended:

	March 31,
	2026
Weighted average remaining lease term (in years) – operating leases		2.0
Weighted average discount rate – operating leases		10.63%

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

	March 31,
(in thousands)	2026
2026	$	237
2027		304
2028		22
Total undiscounted lease payments		563
Less imputed interest		(56)
Total net lease liabilities	$	507

7. NOTES PAYABLE

Notes payable consist of the following:

	March 31, 2026						December 31, 2025
(in thousands)	Gross		Discount		Net		Gross		Discount		Net
Notes Payable, Current	$	101	$	—	$	101	$	1,100	$	(172)	$	928

Senior Secured Notes Financing

On March 18, 2026, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Buyers"), pursuant to which the Company agreed to issue and sell to the Buyers senior secured promissory notes (the "Notes") in the aggregate original principal amount of $3.75 million for an aggregate purchase price of $2.6 million, reflecting an original issue discount of approximately 30%.  The Notes contained an exchange feature that was determined to be a derivative liability. Please see Note 8 for additional information.

As of March 31, 2026, the Notes had been exchanged into the March 30, 2026 Preferred Stock and Warrant offering and are no longer outstanding. Please see Note 10 for additional information. 

Settlement and Release Agreements

On March 18, 2026, the Company entered into Settlement Agreements and Releases (collectively, the "Settlement Agreements") with certain holders (collectively, the "Holders") of those certain Senior Secured Notes (the "Prior Notes") issued by the Company on October 31, 2025, pursuant to a Securities Purchase Agreement dated June 14, 2023 (as amended, the "Prior Purchase Agreement"). The Settlement Agreements were entered into to resolve certain claims alleged by the Holders against the Company in connection with the Prior Notes, which claims the Company denied. Pursuant to the Settlement Agreements, the Company agreed to (i) repay each Holder the outstanding principal amount of its respective Prior Note in full within two (2) business days following the effective date of the Settlement Agreements, and (ii) pay to the Holders an aggregate cash settlement payment of $300,000 by wire transfer of immediately available funds.

In addition, pursuant to the Settlement Agreements, the Company agreed to assign, transfer, and convey to SmartKem IP LLC, a Delaware limited liability company, certain of the Company's right, title, and interest in and to certain patents and patent applications, together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, extensions, foreign counterparts, and all rights to sue for past, present, and future

13

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

infringement thereof. In furtherance thereof, the Company and its subsidiary, SmartKem Ltd, a corporation organized under English law (the "Assignor"), entered into an Intellectual Property Assignment Agreement (the "IP Assignment Agreement") with Smartkem IP LLC (the "Assignee"), pursuant to which the Assignor irrevocably conveyed, transferred, and assigned to the Assignee certain of the Assignor's right, title, and interest in and to certain patents, patent applications, and related intellectual property rights, together with all royalties, fees, income, and proceeds related thereto, and all claims and causes of action with respect thereto. The Company also agreed to maintain the employment of a designated patent liaison for a period of six (6) months following the effective date of the Settlement Agreements to provide the Holders with information, assistance, and support relating to the Assigned IP.

The Settlement Agreements contain mutual releases pursuant to which the Holders released the Company and its affiliates, and the Company released the Holders and their affiliates, from any and all claims arising under the Prior Notes and the Prior Purchase Agreement, other than with respect to the obligations set forth in the Settlement Agreements.

8. FAIR VALUE MEASUREMENTS:

The table below presents activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value for the quarter ended March 31, 2026:

(in thousands)	Derivative Liability
Balance at January 1,2026	$	—
Fair value of the derivative liabilities		(1,460)
Total change in the liability included in earnings		(3,391)
Reclass from liability to equity		4,851
Balance at March 31, 2026	$	—

The $5 million related to the fair value of the derivative is included in the exchange of the notes payable for Series A-1 Preferred Stock.

The valuation of the derivative liability, preferred stock warrants and the preferred stock was determined using option pricing models. These models use inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument. Since our common stock was not publicly traded until February 2022 there has been insufficient volatility data available. Accordingly, we have used an expected volatility based on historical common stock volatility of our peers.

The fair value of the derivative liability and preferred stock warrants was determined by using an option pricing model assuming the following:

	March 30		March 18
	2026		2026
Expected term (years)		3.00		0.50
Risk-free interest rate		3.78%		3.67%
Expected volatility		50.0%		50.0%
Expected dividend yield		0.0%		0.0%

The fair value of the preferred stock and equity line of credit (ELOC) was determined by using an option pricing model assuming the following:

	March 30
	2026
Expected term (years)		10.00
Risk-free interest rate		4.26%
Expected volatility		50.0%
Expected dividend yield		0.0%

14

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

Additionally, the Company had determined that the derivative liability was most appropriately classified within Level 3 of the fair-value hierarchy by evaluating each input for the option pricing models against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of the Company’s common stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of the Company’s stock over that term; annual rate of dividends; and the risk-free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of SmartKem stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The risk-free rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, the Company determined the warrant liability was most appropriately classified within Level 3 of the fair value hierarchy.

9.    CONTINGENCIES

Legal proceedings

In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the interim condensed consolidated financial statements.

10.    STOCKHOLDERS’ EQUITY

Preferred Stock

The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.

Series A Preferred Stock

On March 30, 2026, the Company filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware designating 31,412 shares out of the authorized but unissued shares of its preferred stock as Series A Preferred Stock with a stated value of $1,000 per share (the “Series A Certificate of Designation”). The following is a summary of the principal terms of the Series A Preferred Stock as set forth in the Series A Certificate of Designation:

Voting Rights

Holders of Series A Preferred Stock have no voting power except as required by the Delaware General Corporation Law or as set forth in the Certificate of Designations with respect to certain protective matters requiring the consent of the Required Holders.

Conversion

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into shares of Common Stock at a conversion rate determined by dividing the conversion amount by the conversion price of $0.5812 per share, with alternate conversion options available following stockholder approval (at 90% of the lowest VWAP during the five preceding trading days) or upon a triggering event (at 80% of such VWAP, with the conversion amount subject to a required premium of 125%), in each case subject to a 4.99% beneficial ownership limitation (adjustable to 9.99% upon 61 days' prior written notice) and a $0.045 conversion floor price after shareholder approval.

Dividends

Dividends are payable when and as declared by the Board of Directors in its sole discretion, in cash, securities or other assets, on the stated value of each share, provided that upon the occurrence and continuance of a triggering event, default dividends accrue at a rate of 15.0% per annum.

15

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

Ranking

The Series A Preferred Stock ranks senior to the Common Stock and all other junior capital stock with respect to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.

Liquidation

Upon a liquidation event, holders of Series A Preferred Stock are entitled to receive, before any payment to holders of junior stock, an amount per share equal to the sum of (i) the Black-Scholes value of the outstanding portion of all Warrants held by such holder and (ii) the greater of (A) 125% of the applicable conversion amount and (B) the amount per share such holder would receive upon conversion immediately prior to such event.

Series A Preferred Stock and Warrants

On March 30, 2026, the Company entered into a securities purchase agreement (the “Preferred Stock Purchase Agreement”) with certain institutional investors, including certain holders of convertible notes (the “March 2026 Notes”) of the Company (collectively, the "Buyers") pursuant to which the Company issued and sold to the Buyers in a private placement (the “Private Placement”) (i) 11,411.5 shares of the Company's newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, with a stated value of $1,000 per share, convertible into shares of Common Stock at an initial conversion price of $0.5812 per share (the “Series A Preferred Stock”) and (ii) warrants to purchase up to 24,542,982 shares of Common Stock at an initial exercise price of $0.5812 per share, subject to adjustment (the “2026 Warrants”).

The purchase price under the Preferred Stock Purchase Agreement was satisfied in cash and by exchange of $2.6 million March 2026 Notes. The gross proceeds from the Private Placement were $4.6 million prior to deducting offering expenses payable by the Company.

As of March 31, 2026, there were 21,411.5 shares of Series A-1 Preferred Stock outstanding, including the Commitment Shares (as defined below).

Common Stock

Voting Rights

Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at all meetings of the stockholders.

Dividends

The Company has never paid any cash dividends to stockholders and do not anticipate paying any cash dividends to stockholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

Market Information

The Company’s common stock has been trading on the Nasdaq Stock Market LLC under the symbol “SMTK” since May 31, 2024.

March 2026 Registered Direct Offering

On March 20, 2026, the Company entered into a securities purchase agreement (the “March 2026 RDO Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued and sold to such investors

16

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

11,365,350 shares of the Company’s Common Stock at a purchase price of $0.2303 per share (the “March 2026 Offering”).

The Company received gross proceeds of $2.6 million, before deducting offering expenses payable by the Company.

Equity Line of Credit

On March 30, 2026, the Company entered into a Common Stock Purchase Agreement (the "ELOC Purchase Agreement") with an equity line investor (the “Investor”), pursuant to which the Company has the right, but not the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to  lesser of (a) $500,000,000 and (b) 19.99% of the Company's outstanding shares of Common Stock as of the date of the ELOC Purchase Agreement, which number of shares shall be reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the ELOC Purchase Agreement under applicable rules of the Trading Market (as defined under the ELOC Purchase Agreement), (unless stockholder approval is obtained or applicable sales qualify as "at market" under applicable rules of The Nasdaq Stock Market LLC), from time to time during the period commencing April 8, 2026 (the effective date of the Company’s registration statement on Form S-1 registering the resale of shares issuable under the ELOC Purchase Agreement) and ending upon termination of the ELOC Purchase Agreement. Sales of Common Stock to the Investor under the ELOC Purchase Agreement, if any, will be made by the Company at its sole discretion from time to time by delivering purchase notices to the Investor (each, a "VWAP Purchase"). The purchase price per share for each VWAP Purchase will be equal to 90% of the lesser of (i) the lowest sale price of the Common Stock on the applicable purchase date and (ii) the volume weighted average price of the Common Stock during the applicable purchase period.

In connection with signing the ELOC Purchase Agreement, the Company issued 10,000 shares of Series A Preferred Stock to the Investor as Commitment Shares.

Common Stock Warrants

A summary of the Company’s warrants to purchase common stock activity is as follows:

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual
	Number of	Exercise Price	Exercise		Term
	Shares	per Share	Price		(Years)
Warrants outstanding at January 1, 2026	3,021,274	$0.35 - $70.00	$	6.28	2.81
Issued	24,542,982			0.58
Exercised	—			—
Expired	(28,161)			70.00
Warrants outstanding at March 31, 2026	27,536,095	$0.35 - $8.75	$	1.14	2.96

During the quarter ended March 31, 2026, 24,542,982 common stock warrants were issued at an exercise price of $0.5812. During the quarter ended March 31, 2026, 28,161 warrants expired.

A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows:

		Weighted-
		Average
	Number of	Exercise
	Shares	Price
Pre-funded warrants outstanding at January 1, 2026	1,532,251	$	0.0097
Issued	1,032,131		0.0001
Exercised	(1,930,877)		0.0001
Expired	—		—
Pre-funded warrants outstanding at March 31, 2026	633,505	$	0.0232

17

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

During the quarter ended March 31, 2026, 1,032,131 prefunded warrants were issued at an exercise price of $0.0001. During the quarter ended March 31, 2026, 1,930,877 prefunded warrants were exercised on a cashless basis resulting in the issuance of 1,930,524 shares of Common Stock.

11. SHARE-BASED COMPENSATION

On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 65,000 shares. Subject to the adjustment provisions of the 2021 Plan, the number of shares of the Company’s common stock available for issuance under the 2021 Plan will also include an annual increase on the first day of each fiscal year beginning with 2022 fiscal year and ending on the Company’s 2031 fiscal year in an amount equal to the least of: 1) 65,000 shares of the Company’s common stock; 2) four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; or 3) such number of shares of the Company’s common stock as the administrator may determine.

At the 2023 Annual Meeting, the Company’s stockholders approved an amendment (the “2023 Plan Amendment”) to the Company’s 2021 Plan, increasing the number of the shares of common stock reserved for issuance under the 2021 Plan from 125,045 shares to 743,106 shares. The Company’s Board of Directors had previously approved the 2023 Plan Amendment, subject to stockholder approval.

At the 2025 Annual Meeting, the Company’s stockholders approved an amendment (the “2025 Plan Amendment”) to the Company’s 2021 Plan, (i) increasing the number of the shares of common stock, reserved for issuance thereunder from 843,692 shares to 1,643,692 shares, and (ii) setting the “evergreen” share amount to 4% of the outstanding shares of common stock. The Company’s Board of Directors had previously approved the 2025 Plan Amendment, subject to stockholder approval.

Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards.

The following table reflects share activity under the share option plans for the three months ended March 31, 2026:

				Weighted-
				Average
		Weighted-		Remaining	Weighted-		Aggregate
		Average		Contractual	Average		Intrinsic
	Number of	Exercise		Term	Fair Value at		Value
	Shares	Price		(Years)	Grant Date		(in thousands)
Options outstanding at January 1, 2026	1,643,122	$	5.90	8.95	$	3.12
Granted	—		—
Exercised	(5,089)		0.04
Forfeited	(36,524)		4.76
Expired	—		—
Options outstanding at March 31, 2026	1,601,509	$	5.95	8.55	$	2.92
Options exercisable at March 31, 2026	898,017	$	8.06	8.19			$	0.36

Stock-based compensation is included in the unaudited interim condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	57	$	72
General and administration		198		178
Total	$	255	$	250

18

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

Total compensation cost related to non-vested stock option awards not yet recognized as of March 31, 2026 was $1.4 million and will be recognized on a straight-line basis through the end of the vesting periods in September 2028. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures.

12. BASIC AND DILUTED LOSS PER SHARE

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period, without consideration of potentially dilutive securities, except for those shares that are issuable for little or no cash consideration. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as stock options and warrants calculated using the treasury stock method. In periods with reported net operating losses, all common stock options and warrants are generally deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The following potentially dilutive securities were excluded from the computation of earnings per share as of March 31, 2026 and 2025 because their effects would be anti-dilutive:

	March 31,
	2026		2025
Common stock warrants		26,843,310		4,450,324
Assumed conversion of preferred stock		36,840,168		1,973,200
Stock options		1,601,509		611,908
Total		65,284,987		7,035,432

13.  DEFINED CONTRIBUTION PENSION

The Company operates a defined contribution pension scheme for its UK employees. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the unaudited interim condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	20	$	21
General and administration		22		20
Total	$	42	$	41

14. SEGMENT REPORTING

We manage our business activities on a consolidated basis and operate as a single operating segment: Semiconductor materials.  Our revenue is mostly generated from R&D grants and R&D tax credits.  The accounting policies of the semiconductor materials are the same as those described in Note 2 – Summary of Significant Accounting Policies.

Our CODM is our Chief Executive Officer and President, Ian Jenks.  The CODM uses net loss, as reported on our Consolidated Statements of Comprehensive Income, in evaluating performance of the Semiconductor materials segment and determining how to allocate resources of the Company as a whole and making decisions on perspective joint development and collaboration agreements. The CODM does not review assets in evaluating the results of the Semiconductor materials segment, and therefore, such information is not presented.

19

SMARTKEM, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

The following table provides the net losses of the Semiconductor materials segment:

	Three Months Ended March 31,
	2026		2025
Revenue	$	20	$	23
Cost of revenue		4		1
Gross profit		16		22
Other operating income		34		251
Operating expenses
Research and development		913		1,497
General and administrative		1,664		2,009
Loss / (gain) on foreign currency transactions		46		(95)
Total operating expenses		2,623		3,411
Loss from operations		(2,573)		(3,138)
Total non-operating (expense) / income		(16,796)		979
Loss before income taxes		(19,369)		(2,159)
Income tax refund		—		25
Net loss	$	(19,369)	$	(2,134)

15. SUBSEQUENT EVENTS

Warrant Exercises

Since March 31, 2026, 243,302 shares of the Company’s common stock were issued upon the exercise of 243,302 Class C Warrants. There are no Class C Warrants outstanding subsequent to these exercises.

Ferrox Critical Minerals Bridge Loan

On April 23, 2026, we funded a bridge loan to Ferrox Critical Minerals, a British Virgin Islands company (“Ferrox”), in the original principal amount of $2.3 million, which loan was evidenced by that certain Convertible Promissory Note (the “Note”) issued by Ferrox to the Company. Per the terms of the Note, interest will accrue at a rate of 5.0% per annum and matures on October 30, 2026. We were paid an originate fee of $200,000.00.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of operations of SmartKem, Inc. (“SmartKem” or the “Company”) should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K  for the fiscal year ended December 31, 2025 to provide an understanding of its results of operations, financial condition and cash flows.

All references in this Quarterly Report to “we,” “our,” “us” and the “Company” refer to SmartKem, Inc., and its subsidiaries unless the context indicates otherwise.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to our business, financial condition, liquidity, and results of operations. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should,” and the negative of these terms or other comparable terminology often identify forward-looking statements. Statements in this Quarterly Report on Form 10-Q (this “Report”) that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “10-K”) in Item 1A under “Risk Factors” and the risks detailed from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”). These forward-looking statements include, but are not limited to, statements about:

● the implementation of our business model and strategic plans for our business, technologies and products;

● the rate and degree of market acceptance of any of our products or organic semiconductor technology in

general, including changes due to the impact of (i) new semiconductor technologies, including MicroLED technology, (ii) the performance of organic semiconductor technology, whether perceived or actual, relative to competing semiconductor materials, and (iii) the performance of our products, whether perceived or actual, compared to competing silicon-based and other products;

● the timing and success of our, and our customers’, product releases;

● our ability to develop new products and technologies;

● our ability to meet management goals;

● our ability to maintain compliance with the continued listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”);

● our estimates of our expenses, ongoing losses, future revenue and capital requirements, including

our needs for additional financing;

● our ability to obtain additional funds for our operations and our intended use of any such funds;

● our ability to remain eligible on an over-the-counter quotation system if our common stock is delisted from Nasdaq;

● our receipt and timing of any royalties, milestone payments or payments for products, under any current or future collaboration, license or other agreements or arrangements;

● our ability to obtain and maintain intellectual property protection for our technologies and products and our ability to operate our business without infringing the intellectual property rights of others;

● the strength and marketability of our intellectual property portfolio;

● our dependence on current and future collaborators for developing, manufacturing or otherwise bringing our products to market;

● the ability of our third-party supply and manufacturing partners to meet our current and future business needs;

● our exposure to risks related to international operations;

● our dependence on third-party fabrication facilities;

● our relationships with our executive officers, directors, and significant stockholders;

21

● our expectations regarding our classification as a “smaller reporting company,” as defined under the Exchange Act, and an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”) in future periods;

● our future financial performance;

● the competitive landscape of our industry;

● the impact of government regulation and developments relating to us, our competitors, or our industry; and

● other risks and uncertainties, including those listed under the caption “Risk Factors” in our 10-K.

These statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” in our 10-K and in this Report and elsewhere in this Report.

Any forward-looking statement in this Report reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our business, results of operations, industry and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Company Overview

We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry. Our TRUFLEX® semiconductor polymers enable low-temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost, high-performance displays. Our semiconductor platform can be used in a range of display technologies, including MicroLED, liquid crystal display (“LCD”), and AMOLED, as well as in applications in advanced computer and artificial intelligence chip packaging, sensors, and logic.

We design and develop our materials at our research and development facility in Manchester, UK. We also operate a field application office in Hsinchu, Taiwan, in close proximity to our collaboration partner, The Industrial Technology Research Institute of Taiwan. Together with our collaboration partners, we are developing a commercial-scale production process and Electronic Design Automation ("EDA") tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials.

During the first quarter of 2026, SmartKem was involved in a number of financing transactions. These included the transfer of our patent portfolio to a third party. The Company still owns its process and formulation intellectual property as codified in 40 trade secrets. As previously disclosed, the Company is continuing to conduct a review of its strategy. In particular, it is evaluating its display prototyping activities, its materials formulation activities and the possibility of adding new materials to its portfolio.

Results of Operations for the three months ended March 31, 2026

Three months ended March 31, 2026 compared with three months ended March 31, 2025

Revenue and Cost of revenue

We had revenue of $20 thousand and cost of revenue of $4 thousand in the three months ended March 31, 2026, compared to $23 thousand revenue and $1 thousand cost of revenue for the same period of 2025. Both revenue and related cost of revenue for the three months ended March 31, 2026 are a result of sales of OTFT backplanes and TRUFLEX® materials for customer assessment and development purposes.

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Other operating income

We had $34 thousand of other operating income for the three months ended March 31, 2026, compared to $251 thousand in the same period of 2025. The primary source of other operating income is related to multiple research grants from Innovate UK and research and development tax credits.

Operating expenses

Operating expenses were $2.6 million for the three months ended March 31, 2026, compared to $3.4 million for the three months ended March 31, 2025, a decrease of $0.8 million, or 23.1%.

Research and development expenses are incurred for the development and process validation for TRUFLEX® inks to make OTFT circuits and OTFT based display concepts integrating novel display technology, and to provide dielectric solutions for packaging applications. The expenses consist primarily of payroll, technical facilities overheads, and development consumables costs. Research and development expenses were $0.9 million for the three months ended March 31, 2026, compared to $1.5 million for the same period of 2025, a decrease of $0.6 million, or 39.0%. This decrease primarily resulted from the termination of the CPI agreement as of December 2025 and less legal costs due to the transfer of the intellectual property and patents. The research and development expenses represent 34.8% and 43.9% of the total operating expenses for the three months ended March 31, 2026 and 2025, respectively.

General and administrative expenses consist primarily of payroll and professional services such as investor relations, accounting and legal services. General and administrative expenses were $1.7 million for the three months ended March 31, 2026, compared to $2.0 million for the same period of 2025, a decrease of $0.3 million, or 17.2%. These expenses represent 63.4% and 58.9% of our total operating expenses for the three months ended March 31, 2026 and 2025, respectively. This decrease primarily resulted from a decrease in professional service fees principally related to corporate consulting agreements, the Delaware franchise taxes and travel related expenses.

Non-Operating income/(expense)

Non-operating expense was $16.8 million for the three months ended March 31, 2026, compared to non-operating income of $1.0 million for the same period in 2025, for a decrease of $17.8 million. A decrease of $1.8 million is primarily due to a loss on foreign currency related to the revaluation of the intercompany loans and related interest. The change in the foreign exchange spot rate of 1.3223 as of March 31, 2026 compared to 1.2944 as of March 31, 2025 resulted in a foreign exchange loss. The offset of this loss is recorded in other comprehensive income. We recorded a loss of $11.9 million related to the execution of an equity line of credit (ELOC). In addition, we recorded a loss of $3.8 million related to the extinguishment of debt. We also recorded $0.3 million related to interest expense associated with the debt discounts.

Liquidity and Capital Resources

As of March 31, 2026, our cash and cash equivalents were $7.6 million compared with $0.4 million as of December 31, 2025. We believe our cash balance at March 31, 2026 will not be sufficient to fund its operating expenses and capital expenditures for the 12 months from the issuance of these financial statements and that we will require additional capital funding to continue our operations and research development activity. In the event that we are unable to raise additional capital in the near term, we may have to curtail our operations or seek protection under applicable bankruptcy or insolvency laws.

Our expected cash payments over the next twelve months include (a) $3.4 million to satisfy accounts payable and accrued expenses, (b) $0.3 million to satisfy the lease liabilities and (c) $0.1 million to satisfy a loan related to the financing of our D&O insurance policy. Additional expected cash payments beyond the next twelve months include $0.2 million of lease liabilities.

Beyond our near term need for capital, our future viability is dependent on our ability to raise additional capital to fund our operations. We will need to obtain additional funds to satisfy our operational needs and to fund our sales and marketing efforts, research and development expenditures, and business development activities. Until such time, if ever, as we can generate sufficient cash through revenue, management’s plans are to finance our

23

working capital requirements through a combination of equity offerings, including the issuance of Common Stock pursuant to the ELOC Purchase Agreement (as defined in Note 8), debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution. If we borrow money, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict our operations. If we enter into a collaboration, strategic alliance or other similar arrangement, we may be forced to give up valuable rights. There can be no assurance however that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for our products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services.

Cash Flow

Net cash used in operating activities was $1.6 million for the three months ended March 31, 2026, compared to $3.3 million for the three months ended March 31, 2025, a decrease of $1.7 million. The change resulted primarily from an increase in accounts payable.

Net cash received from financing activities was $8.6 million the three months ended March 31, 2026, compared to no cash flow financing activities during the same period in 2025. We received net proceeds of $10.0 million from various financing activities related to the sale of the Company’s common stock, preferred stock and warrants. We used $1.1 million to pay-off notes payable and $0.3 million for the settlement to release claims related to the notes.

Contractual Payment Obligations

Our principal commitments primarily consist of obligations under leases for office space and purchase commitments in the normal course of business for research and development facilities and services, communications infrastructure, and administrative services. We expect to fund these commitments from our cash balances and working capital.

Critical Accounting Estimates

We prepare our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which require our management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Critical accounting estimates include the determination of the fair value of derivative liabilities and intellectual property.

The fair value of derivative liabilities, including embedded conversion features, warrant liabilities, contingent settlement provisions, and other complex financial instruments, may require the use of valuation models such as Monte Carlo simulations, lattice models, or modified Black-Scholes methodologies. These valuation models incorporate significant unobservable inputs, including expected volatility, risk-free interest rates, expected term, probability-weighted financing or liquidity events, market yield assumptions, and the likelihood and timing of contractual settlement or conversion events. Changes in these assumptions could result in material adjustments to the recorded fair value of derivative liabilities and related gains or losses recognized in the condensed consolidated statements of operations.

24

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. Changes in estimates used in these and other items could have a material impact on our financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2026 because of the material weaknesses in internal control over financial reporting described below.

Material Weakness in Internal Control Over Financial Reporting

In connection with the preparation of the financial statements for the first quarter of 2026 a material weakness in the Company’s internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the Company’s Equity Line of Credit, a non-cash item. None of the Company’s filed financial statements are impacted. The March 31, 2026 financial statements contained in this Form 10-Q reflect the appropriate accounting for this transaction and no prior financial statements were impacted.

In connection with the preparation of the financial statements for the year ended December 31, 2025, a material weakness in the Company’s internal control over financial reporting was identified relating to the lack of an independent review and assessment of our internal control environment. None of the Company’s filed financial statements are impacted. The March 31, 2026 financial statements contained in this Form 10-Q reflect the appropriate accounting for this transaction and no prior financial statements were impacted.

Remediation

Due to fiscal constraints during the year ended December 31, 2025 the Company was not able to fund an independent assessment of our internal control environment. With the recent financing activities discussed in Note 10, we have been able to reinstitute the independent evaluation of our internal control environment. The evaluation will be ongoing throughout 2026.

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Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act) that occurred during the period covered by this Report that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the 10-K, which could materially affect our business, financial condition or future results. The risks described in the 10-K may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

There have been no material changes to the risk factors previously disclosed in the 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None of the Company’s directors and officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended March 31, 2026 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

Item 6. Exhibits

See Exhibit Index.

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EXHIBIT INDEX

Exhibit No.	Description
2.1 *	Share Exchange Agreement, dated as of February 23, 2021, among the Registrant, SmartKem Limited and the shareholders of SmartKem Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)
3.1	Amended and Restated Certificate of Incorporation of the Registrant, as amended to date (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on May 13, 2025)
3.2	Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed on February 24, 2021)
3.3	Certificate of Designations of Rights and Preferences of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 31, 2026)
4.1	Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 3, 2025)
4.2	Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 30, 2026)
4.3	Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 6, 2026)
4.4	Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Amendment No. 1 to Current Report on Form 8-K filed on April 22, 2026)
4.5	Convertible Promissory Note, dated April 13, 2026 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 29, 2026)
10.1#	Amendment No. 1 to Employment Agreement, dated September 3, 2025, by and between SmartKem, Inc. and Ian Jenks (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 5, 2025)
10.2	Amendment Agreement, dated October 13, 2025 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 14, 2025)
10.3	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2025)
10.4	Form of Senior Secured Note (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 3, 2025)
10.5	Security Agreement, dated October 31, 2025, by and between SmartKem, Inc. and The Hewlett Fund LP, as collateral agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 3, 2025)
10.6	Securities Purchase Agreement, dated January 30, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 30, 2026)
10.7	Debt Conversion Agreement, dated February 5, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 6, 2026)
10.8	Securities Purchase Agreement, dated March 18, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 19, 2026)
10.9	Form of Senior Secured Promissory Note (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 19, 2026)
10.10	Securities Purchase Agreement, dated March 20, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 26, 2026)
10.11	Securities Purchase Agreement, dated March 30, 2026 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 31, 2026)
10.12	Registration Rights Agreement, dated March 30, 2026 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 31, 2026)

28

10.13	Common Stock Purchase Agreement, dated March 27, 2026 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 31, 2026)
10.14	Registration Rights Agreement, dated March 27, 2026 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on March 31, 2026)
31.1†	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2†	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1††	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2††	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH†	Inline XBRL Taxonomy Extension Schema Document
101.CAL†	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE†	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104†	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

# Indicates management contract or compensatory plan.

† Filed herewith.

†† This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.

Date: May 20, 2026

SMARTKEM, INC.
By:	/s/ Ian Jenks
Name:	Ian Jenks
Title:	Chief Executive Officer and Chairman of the Board
	(Principal Executive Officer)
By:	/s/ Barbra C. Keck
Name:	Barbra C. Keck
Title:	Chief Financial Officer
	(Principal Financial Officer)

30

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,IanJenks,certifythat:

1. IhavereviewedthisquarterlyreportonForm10-QofSmartKem,Inc.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant’sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:

(a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b) Designed such internal control over financial reporting, or caused such internal control overfinancialreportingtobedesignedunderoursupervision,toprovidereasonableassuranceregarding the reliability of financial reporting and the preparation of financial statements forexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c) Evaluatedtheeffectivenessoftheregistrant’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d) Disclosed in this report any change in the registrant’s internal control over financial reportingthat occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and

5. Theregistrant’sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternal control over financial reporting, to the registrant’s auditors and the audit committee of theregistrant’sboardofdirectors(orpersonsperformingtheequivalentfunctions):

(a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontrol over financial reporting which are reasonably likely to adversely affect the registrant’sability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: May 20, 2026

By:	/s/ Ian Jenks
Name:	Ian Jenks
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,BarbraC.Keck,certifythat:

1. IhavereviewedthisquarterlyreportonForm10-QofSmartKem,Inc.;

2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant’sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe registrant and have:

(a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b) Designed such internal control over financial reporting, or caused such internal control overfinancialreportingtobedesignedunderoursupervision,toprovidereasonableassuranceregarding the reliability of financial reporting and the preparation of financial statements forexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c) Evaluatedtheeffectivenessoftheregistrant’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d) Disclosed in this report any change in the registrant’s internal control over financial reportingthat occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and

5. Theregistrant’sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternal control over financial reporting, to the registrant’s auditors and the audit committee of theregistrant’sboardofdirectors(orpersonsperformingtheequivalentfunctions):

(a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontrol over financial reporting which are reasonably likely to adversely affect the registrant’sability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.

Date: May 20, 2026

J.
	By:	/s/ Barbra C. Keck
	Name:	Barbra C. Keck
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report of SmartKem, Inc. (the “Company”) on Form 10-Q for the quarterended March 31, 2026 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, theundersigned, Ian Jenks, Chief Executive Officer of the Company, hereby certifies, to the knowledge of theundersigned, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company.

Date: May 20, 2026

By:	/s/ Ian Jenks
Name:	Ian Jenks
Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report of SmartKem, Inc. (the “Company”) on Form 10-Q for the quarterended March 31, 2026 (the “Report”) as filed with the Securities and Exchange Commission on the date hereof, theundersigned, Barbra C. Keck, Chief Financial Officer of the Company, hereby certifies, to the knowledge of theundersigned, pursuant to 18 U.S.C. Section 1350, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company.

Date: May 20, 2026

J.
	By:	/s/ Barbra C. Keck
	Name:	Barbra C. Keck
	Title:	Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2026	May 18, 2026
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2026
Document Transition Report	false
Entity File Number	001-42115
Entity Registrant Name	SmartKem, Inc.
Entity Address State Or Province	DE
Entity Tax Identification Number	85-1083654
Entity Address, Address Line One	3 Germay Drive, Unit 4 #1029
Entity Address, City or Town	Wilmington
Entity Incorporation, State or Country Code	DE
Entity Address, Postal Zip Code	19804
City Area Code	011-44-161
Local Phone Number	721-1514
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	SMTK
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		21,446,213
Entity Central Index Key	0001817760
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2026
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
Current assets
Cash and cash equivalents	$ 7,566	$ 374
Accounts receivable	3	3
Research and development tax credit receivable	536	549
Prepaid expenses and other current assets	696	575
Total current assets	8,801	1,501
Property, plant and equipment, net	141	180
Right-of-use assets, net	535	607
Total assets	9,477	2,288
Current liabilities
Accounts payable and accrued expenses	3,357	4,603
Lease liabilities, current	277	271
Notes payable, net	101	928
Deferred revenue	106	108
Total current liabilities	3,841	5,910
Lease liabilities, non-current	230	312
Total liabilities	4,071	6,222
Contingencies (Note 9)
Stockholders' equity / (deficit):
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, 21,411.5 and 0 shares issued and outstanding, at March 31, 2026 and December 31, 2025, respectively
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 21,202,911 and 6,839,689 shares issued and outstanding, at March 31, 2026 and December 31, 2025, respectively	2	1
Additional paid-in capital	152,570	124,772
Accumulated other comprehensive loss	(2,668)	(3,578)
Accumulated deficit	(144,498)	(125,129)
Total stockholders' equity / (deficit)	5,406	(3,934)
Total liabilities and stockholders' equity / (deficit)	$ 9,477	$ 2,288

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2026	Dec. 31, 2025
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	21,411.5	0
Preferred stock, shares outstanding (in shares)	21,411.5	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	21,202,911	6,839,689
Common stock, shares outstanding (in shares)	21,202,911	6,839,689

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Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Condensed Consolidated Statements of Operations and Comprehensive Loss
Revenue	$ 20	$ 23
Cost of revenue	4	1
Gross profit	16	22
Other operating income	34	251
Operating expenses
Research and development	913	1,497
General and administrative	1,664	2,009
Loss / (gain) on foreign currency transactions	46	(95)
Total operating expenses	2,623	3,411
Loss from operations	(2,573)	(3,138)
Non-operating (expense) / income
(Loss) / gain on foreign currency transactions	(810)	969
Change in fair value of derivative liabilities	(3,391)
Loss on the execution of equity line of credit (ELOC)	(11,874)
Loss on the extinguishment of debt	(371)
Transaction costs related to debt financing	(67)
Interest, net	(283)	10
Total non-operating (expense) / income	(16,796)	979
Loss before income taxes	(19,369)	(2,159)
Income tax refund		25
Net loss	$ (19,369)	$ (2,134)
Common share data:
Basic net loss per common share (in dollars per share)	$ (1.34)	$ (0.32)
Diluted net loss per common share (in dollars per share)	$ (1.34)	$ (0.32)
Weighted average shares outstanding - basic (in shares)	14,436,282	6,649,603
Weighted average shares outstanding - diluted (in shares)	14,436,282	6,649,603
Net loss	$ (19,369)	$ (2,134)
Other comprehensive loss:
Foreign currency translation	910	(1,005)
Total comprehensive loss	$ (18,459)	$ (3,139)

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Condensed Consolidated Statements of Stockholders' Equity / (Deficit) - USD ($) $ in Thousands	Preferred Stock	Common stock	Additional paid-in capital	Accumulated other comprehensive income / (loss)	Accumulated deficit	Total
Beginning Balance at Dec. 31, 2024			$ 122,316	$ (1,105)	$ (114,620)	$ 6,591
Beginning Balance (in shares) at Dec. 31, 2024	856	3,590,217
Stock-based compensation expense			250			250
Issuance of common stock to vendor			85			85
Issuance of common stock to vendor (in shares)		30,000
Foreign currency translation adjustment				(1,005)		(1,005)
Net loss					(2,134)	(2,134)
Ending Balance at Mar. 31, 2025			122,651	(2,110)	(116,754)	3,787
Ending Balance (in shares) at Mar. 31, 2025	856	3,620,217
Beginning Balance at Dec. 31, 2025		$ 1	124,772	(3,578)	(125,129)	(3,934)
Beginning Balance (in shares) at Dec. 31, 2025		6,839,689
Stock-based compensation expense			255			$ 255
Exercise of stock options into common stock (in shares)		5,089				5,089
Cashless exercise of warrants into common stock (in shares)		1,930,524
Issuance of common stock and warrants, net of issuance costs			555			$ 555
Issuance of common stock and warrants, net of issuance costs (in shares)		677,129
Common stock issued for settlement of debt			342			342
Common stock issued for settlement of debt (in shares)		385,130
Issuance of common stock, net of issuance costs		$ 1	2,464			2,465
Issuance of common stock, net of issuance costs (in shares)		11,365,350
Issuance of Series A-1 Preferred Stock and warrants, net of issuance costs			4,446			4,446
Issuance of Series A-1 Preferred Stock and warrants, net of issuance costs (in shares)	5,786.5
Exchange of notes payable for Series A-1 Preferred Stock			7,862			7,862
Exchange of notes payable for Series A-1 Preferred Stock (in shares)	5,625
Issuance of Series A-1 Preferred Stock for ELOC, net of issuance costs			11,874			11,874
Issuance of Series A-1 Preferred Stock for ELOC, net of issuance costs (in shares)	10,000
Foreign currency translation adjustment				910		910
Net loss					(19,369)	(19,369)
Ending Balance at Mar. 31, 2026		$ 2	$ 152,570	$ (2,668)	$ (144,498)	$ 5,406
Ending Balance (in shares) at Mar. 31, 2026	21,411.5	21,202,911

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Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Cash flow from operating activities:
Net loss	$ (19,369,000)	$ (2,134,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	36,000	56,000
Stock-based compensation expense	255,000	250,000
Issuance of common stock to vendor		85,000
Right-of-use asset amortization	72,000	68,000
Loss / (gain) on foreign currency transactions	856,000	(1,063,000)
Change in fair value of derivative liabilities	3,391,000
Loss on the execution of equity line of credit (ELOC)	11,874,000
Debt discount amortization	283,000
Loss on the extinguishment of debt	371,000
Transactions costs allocable to notes payable	67,000
Change in operating assets and liabilities:
Research and development tax credit receivable	11,000	(126,000)
Prepaid expenses and other assets	(122,000)	(222,000)
Accounts payable and accrued expenses	780,000	(393,000)
Lease liabilities	(75,000)	(29,000)
Other current liabilities	(2,000)	170,000
Net cash used in operating activities	(1,572,000)	(3,338,000)
Cash flow from financing activities:
Payment for legal expenses related to extinguishment of debt	(10,000)
Gross proceeds received related to note payable	2,625,000
Payment for legal expense related to notes payable	(50,000)
Principal payment for the settlement of note payable	(1,100,000)
Payment for a release of claims related to notes payable	(300,000)
Principal payment on the financing of the director and officer insurance policy	(11,000)
Net cash provided by financing activities	8,603,000
Effect of exchange rate changes on cash	161,000	78,000
Net change in cash	7,192,000	(3,260,000)
Cash, beginning of period	374,000	7,141,000
Cash, end of period	7,566,000	$ 3,881,000
Supplemental disclosure of cash and non-cash investing and financing activities
Initial classification of fair value of derivative liability	1,460,000
Debt discount related to notes payable	1,125,000
Conversion of debt to preferred stock and warrants	7,862,000
Financing of directors and officers' liability insurance with debt	112,000
Private placement
Cash flow from financing activities:
Gross proceeds received	4,630,000
Payments for financing expense	(184,000)
Common stock and warrants purchase agreement
Cash flow from financing activities:
Gross proceeds received	681,000
Payments for financing expense	(126,000)
March 2026 Registered Direct Offering
Cash flow from financing activities:
Gross proceeds received	2,617,000
Payments for financing expense	(152,000)
Equity line of credit
Cash flow from financing activities:
Payments for financing expense	$ (17,000)

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GENERAL

3 Months Ended

Mar. 31, 2026

GENERAL

GENERAL

1. GENERAL

Organization

SmartKem, Inc. (“SmartKem” or the “Company”) a Delaware corporation, formerly known as Parasol Investments Corporation (“Parasol”), was formed on May 13, 2020, and is the successor, as discussed below, of SmartKem Limited, which was formed under the Laws of England and Wales. The Company was founded as a “shell” company registered under the Exchange Act, with no specific business plan or purpose until it began operating the business of SmartKem Limited following the closing of the Exchange described below.

On February 23, 2021, Parasol entered into a Securities Exchange Agreement (the “Exchange Agreement”), with SmartKem Limited. Pursuant to the Exchange Agreement all of the equity interests in SmartKem Limited, except certain deferred shares which had no economic or voting rights, and which were purchased by Parasol for an aggregate purchase price of $1.40, were exchanged for shares of Parasol common stock, par value $0.0001 per share (“common stock”), and SmartKem Limited became a wholly owned subsidiary of Parasol (the “Exchange”).

As a result of the Exchange, Parasol legally acquired the business of SmartKem Limited, and continues as the existing business operations of SmartKem Limited as a public reporting company under the name SmartKem, Inc.

Business

We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry. Our TRUFLEX® semiconductor polymers enable low-temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost, high-performance displays. Our semiconductor platform can be used in a range of display technologies, including MicroLED, liquid crystal display (“LCD”), and AMOLED, as well as in applications in advanced computer and artificial intelligence chip packaging, sensors, and logic.

We design and develop our materials at our research and development facility in Manchester, UK. We also operate a field application office in Hsinchu, Taiwan, in close proximity to our collaboration partner, The Industrial Technology Research Institute of Taiwan. Together with our collaboration partners, we are developing a commercial-scale production process and Electronic Design Automation ("EDA") tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials.

During the first quarter of 2026, SmartKem was involved in a number of financing transactions. These included the transfer of our patent portfolio to a third party. The company still owns its process and formulation intellectual property as codified in 40 trade secrets. As previously disclosed, the Company is continuing to conduct a review of its strategy. In particular, it is evaluating its display prototyping activities, its materials formulation activities and the possibility of adding new materials to its portfolio.

The consolidated entity presented is referred to herein as “SmartKem”, “we”, “us”, “our”, or the “Company”, as the context requires and unless otherwise noted.

Risk and Uncertainties

The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the growth stage, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements.

Going Concern

The Company has incurred continuing losses including net losses of $19.4 million for the three months ended March 31, 2026. The Company’s cash as of March 31, 2026 was $7.6 million with net cash used in operating activities of $1.6 million for the three months ended March 31, 2026. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, further development of our technology and products and expenses related to the commercialization of our products.

The Company expects that its cash and cash equivalents of $7.6 million as of March 31, 2026 will not be sufficient to fund its operating expenses and capital expenditures for the 12 months from the issuance of these financial statements. In the event that the Company is unable to raise additional capital in the near term, it may have to curtail its operations or seek protection under applicable bankruptcy or insolvency laws.

The Company’s future viability will continue to be dependent on its ability to raise additional capital to fund its operations. The Company will need to obtain additional funds to satisfy its operational needs. Until such time, if ever, as the Company can generate sufficient cash through revenue, management’s plans are to finance the Company’s working capital requirements through a combination of equity offerings, including the issuance of Common Stock pursuant to the ELOC Purchase Agreement (as defined in Note 8), debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If the Company raises additional funds by issuing equity securities, the Company’s existing security holders will likely experience dilution. If the Company borrows money, the incurrence of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that could restrict its operations. If the Company enters into a collaboration, strategic alliance or other similar arrangement, it may be forced to give up valuable rights. There can be no assurance, however, that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company’s products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of services. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding.

There is substantial doubt that the Company will be able to pay its obligations as they fall due, and this substantial doubt is not alleviated by management plans. The condensed consolidated financial statements as of March 31, 2026 have been prepared assuming that the Company will continue as a going concern. Accordingly, the consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

Basis of Presentation

The unaudited interim condensed consolidated financial statements of the Company as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025 should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”), which was filed with the SEC on April 8, 2026 and may also be found on the Company’s website (www.smartkem.com). In these notes to the interim condensed consolidated financial statements the terms “us,” “we” or “our” refer to the Company and its consolidated subsidiaries.

These interim condensed consolidated financial statements are unaudited and were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. They include the accounts of all wholly owned subsidiaries and all significant inter-company accounts and transactions have been eliminated in consolidation. Amounts are presented in thousands, except number of shares and per share data.

The preparation of interim condensed consolidated financial statements requires management to make assumptions and estimates that impact the amounts reported. These interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s results of operations, financial position and cash flows for the interim periods ended

March 31, 2026 and 2025; however, certain information and footnote disclosures normally included in our audited consolidated financial statements included in our Annual Report have been condensed or omitted as permitted by GAAP. It is important to note that the Company’s results of operations and cash flows for interim periods are not necessarily indicative of the results of operations and cash flows to be expected for a full fiscal year or any interim period.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2026

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Other than the policies listed below, there have been no material changes to the Company’s significant accounting policies as set forth in Note 3 Summary of Significant Accounting Policies to the consolidated financial statements included in the Company’s Annual Report.

Management’s Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relate to the valuation of common stock, fair value of stock options and fair value of derivative liabilities. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the period ended March 31, 2026. The carrying value of the Company’s cash, accounts receivable, other receivables, and accounts payable approximate fair value because of the short-term maturity of these financial instruments.

Issuance Costs

The Company assessed the issuance cost in connection with the issuance of an equity offering. ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering, states that specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering. Analogizing to that guidance, specific incremental costs directly attributable to the issuance of an equity contract to be classified in equity should generally be recorded as

a reduction in equity. However, issuance costs for equity contracts that are classified as a liability should be expensed immediately. The issuance costs are allocated to the equity and liability components of the underlying transaction on a basis of the allocated fair value of the gross proceeds in the overall transactions.

Direct and incremental legal and accounting costs associated with the Company’s issuance of common stock, preferred stock and warrants are deferred and classified as a component of other assets on the consolidated balance sheet until completion of the issuance. Upon completion of the issuance, deferred offering costs are reclassified from other assets to equity in additional paid-in capital and recorded against the net proceeds received in the issuance. For the period ended March 31, 2026, we recorded $539 thousand of offering costs of which $489 thousand were recorded in additional paid-in capital and $50 thousand were recorded as non-operating expenses.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment: Semiconductor materials.

Recent Accounting Pronouncements

On November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses, which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively, with early adoption permitted. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies various topics in the Accounting Standards Codification to improve consistency and address technical corrections. Key improvements include clarifying the calculation of diluted earnings per share (EPS) when a loss from continuing operations exists. The amendments in this update are effective for the Company beginning January 1, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This update clarifies the applicability of interim reporting guidance and the form and content of interim financial statements. It also establishes a disclosure principle requiring an entity to disclose material events and changes occurring since the end of the last annual reporting period. ASU 2025-11 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This update establishes authoritative guidance for the recognition, measurement, presentation, and disclosure of government grants received by business entities. ASU 2025-10 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. The Company is assessing the impact of adopting this standard.

The Organization for Economic Co-operation and Development (“OECD”) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on Pillar Two Proposals. We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Given the numerous proposed changes in law and uncertainty regarding such proposed changes, the impact cannot be determined at this time.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

3 Months Ended

Mar. 31, 2026

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

3.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Advances and retainers	$	53	$	54
Prepaid insurance		207		152
Research grant receivable		65		88
Prepaid facility costs		221		68
Prepaid software licenses		40		52
Tax Receivable		106		117
Other receivable and other prepaid expenses		4		44
Total prepaid expenses and other current assets	$	696	$	575

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PROPERTY, PLANT AND EQUIPMENT

3 Months Ended

Mar. 31, 2026

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

4.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Plant and equipment	$	1,750	$	1,786
Furniture and fixtures		112		114
Computer hardware and software		104		106
		1,966		2,006
Less: Accumulated depreciation		(1,825)		(1,826)
Property, plant and equipment, net	$	141	$	180

Depreciation expense was $36.1 thousand and $56.1 thousand for the three months ended March 31, 2026 and 2025, respectively and is classified as research and development expense.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

3 Months Ended

Mar. 31, 2026

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	March 31,		December 31,
(in thousands)	2026		2025
Accounts payable - trade	$	3,033	$	4,435
Payroll liabilities		183		39
Accrued expenses		141		129
Total accounts payable and accrued expenses	$	3,357	$	4,603

On February 5, 2026, the Company entered into a debt conversion agreement (the “Debt Conversion Agreement”) with SmartKem Limited, a wholly owned subsidiary of the Company, and a creditor (the “Creditor”), pursuant to which the Company agreed to issue to the Creditor (i) 385,130 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at an ascribed price of $2.75 per share and (ii) pre-funded warrants (the “Pre-Funded Warrant”) to purchase 348,260 shares of Common Stock in satisfaction of approximately $2 million owed to the Creditor by SmartKem Limited.

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LEASES

3 Months Ended

Mar. 31, 2026

LEASES

LEASES

6.    LEASES

The Company has operating leases consisting of office space, lab space and equipment with remaining lease terms of 1 to 3 years, subject to certain renewal options as applicable.

The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right of use asset and lease liability based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred.

The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended:

	Three Months Ended March 31,
(in thousands)	2026		2025
Operating lease cost	$	72	$	73
Short-term lease cost		1		3
Total lease cost	$	73	$	76

The total lease cost is included in the unaudited condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	72	$	73
General and administrative		1		3
Total lease cost	$	73	$	76

Right of use lease assets and lease liabilities for the Company’s operating leases were recorded in the unaudited condensed consolidated balance sheet as follows:

	March 31,		December 31,
(in thousands)	2026		2025
Assets
Right of use assets - Operating Leases	$	535	$	607
Total lease assets	$	535	$	607
Liabilities
Current liabilities:
Lease liability, current - Operating Leases	$	277	$	271
Noncurrent liabilities:
Lease liability, non-current - Operating Leases		230		312
Total lease liabilities	$	507	$	583

The Company had no right of use lease assets or lease liabilities classified as financing leases as of March 31, 2026 and December 31, 2025.

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended:

	March 31,
	2026
Weighted average remaining lease term (in years) – operating leases		2.0
Weighted average discount rate – operating leases		10.63%

Remaining maturities of the Company’s operating leases, excluding short-term leases, are as follows:

	March 31,
(in thousands)	2026
2026	$	237
2027		304
2028		22
Total undiscounted lease payments		563
Less imputed interest		(56)
Total net lease liabilities	$	507

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NOTES PAYABLE

3 Months Ended

Mar. 31, 2026

NOTES PAYABLE

NOTES PAYABLE

7. NOTES PAYABLE

Notes payable consist of the following:

	March 31, 2026						December 31, 2025
(in thousands)	Gross		Discount		Net		Gross		Discount		Net
Notes Payable, Current	$	101	$	—	$	101	$	1,100	$	(172)	$	928

Senior Secured Notes Financing

On March 18, 2026, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Buyers"), pursuant to which the Company agreed to issue and sell to the Buyers senior secured promissory notes (the "Notes") in the aggregate original principal amount of $3.75 million for an aggregate purchase price of $2.6 million, reflecting an original issue discount of approximately 30%.  The Notes contained an exchange feature that was determined to be a derivative liability. Please see Note 8 for additional information.

As of March 31, 2026, the Notes had been exchanged into the March 30, 2026 Preferred Stock and Warrant offering and are no longer outstanding. Please see Note 10 for additional information. 

Settlement and Release Agreements

On March 18, 2026, the Company entered into Settlement Agreements and Releases (collectively, the "Settlement Agreements") with certain holders (collectively, the "Holders") of those certain Senior Secured Notes (the "Prior Notes") issued by the Company on October 31, 2025, pursuant to a Securities Purchase Agreement dated June 14, 2023 (as amended, the "Prior Purchase Agreement"). The Settlement Agreements were entered into to resolve certain claims alleged by the Holders against the Company in connection with the Prior Notes, which claims the Company denied. Pursuant to the Settlement Agreements, the Company agreed to (i) repay each Holder the outstanding principal amount of its respective Prior Note in full within two (2) business days following the effective date of the Settlement Agreements, and (ii) pay to the Holders an aggregate cash settlement payment of $300,000 by wire transfer of immediately available funds.

In addition, pursuant to the Settlement Agreements, the Company agreed to assign, transfer, and convey to SmartKem IP LLC, a Delaware limited liability company, certain of the Company's right, title, and interest in and to certain patents and patent applications, together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, extensions, foreign counterparts, and all rights to sue for past, present, and future

infringement thereof. In furtherance thereof, the Company and its subsidiary, SmartKem Ltd, a corporation organized under English law (the "Assignor"), entered into an Intellectual Property Assignment Agreement (the "IP Assignment Agreement") with Smartkem IP LLC (the "Assignee"), pursuant to which the Assignor irrevocably conveyed, transferred, and assigned to the Assignee certain of the Assignor's right, title, and interest in and to certain patents, patent applications, and related intellectual property rights, together with all royalties, fees, income, and proceeds related thereto, and all claims and causes of action with respect thereto. The Company also agreed to maintain the employment of a designated patent liaison for a period of six (6) months following the effective date of the Settlement Agreements to provide the Holders with information, assistance, and support relating to the Assigned IP.

The Settlement Agreements contain mutual releases pursuant to which the Holders released the Company and its affiliates, and the Company released the Holders and their affiliates, from any and all claims arising under the Prior Notes and the Prior Purchase Agreement, other than with respect to the obligations set forth in the Settlement Agreements.

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2026

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS:

The table below presents activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value for the quarter ended March 31, 2026:

(in thousands)	Derivative Liability
Balance at January 1,2026	$	—
Fair value of the derivative liabilities		(1,460)
Total change in the liability included in earnings		(3,391)
Reclass from liability to equity		4,851
Balance at March 31, 2026	$	—

The $5 million related to the fair value of the derivative is included in the exchange of the notes payable for Series A-1 Preferred Stock.

The valuation of the derivative liability, preferred stock warrants and the preferred stock was determined using option pricing models. These models use inputs such as the underlying price of the shares issued at the measurement date, expected volatility, risk free interest rate and expected life of the instrument. Since our common stock was not publicly traded until February 2022 there has been insufficient volatility data available. Accordingly, we have used an expected volatility based on historical common stock volatility of our peers.

The fair value of the derivative liability and preferred stock warrants was determined by using an option pricing model assuming the following:

	March 30		March 18
	2026		2026
Expected term (years)		3.00		0.50
Risk-free interest rate		3.78%		3.67%
Expected volatility		50.0%		50.0%
Expected dividend yield		0.0%		0.0%

The fair value of the preferred stock and equity line of credit (ELOC) was determined by using an option pricing model assuming the following:

	March 30
	2026
Expected term (years)		10.00
Risk-free interest rate		4.26%
Expected volatility		50.0%
Expected dividend yield		0.0%

Additionally, the Company had determined that the derivative liability was most appropriately classified within Level 3 of the fair-value hierarchy by evaluating each input for the option pricing models against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of the Company’s common stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of the Company’s stock over that term; annual rate of dividends; and the risk-free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of SmartKem stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The risk-free rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, the Company determined the warrant liability was most appropriately classified within Level 3 of the fair value hierarchy.

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CONTINGENCIES

3 Months Ended

Mar. 31, 2026

CONTINGENCIES

CONTINGENCIES

9.    CONTINGENCIES

Legal proceedings

In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the interim condensed consolidated financial statements.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2026

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

10.    STOCKHOLDERS’ EQUITY

Preferred Stock

The board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences, and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.

Series A Preferred Stock

On March 30, 2026, the Company filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware designating 31,412 shares out of the authorized but unissued shares of its preferred stock as Series A Preferred Stock with a stated value of $1,000 per share (the “Series A Certificate of Designation”). The following is a summary of the principal terms of the Series A Preferred Stock as set forth in the Series A Certificate of Designation:

Voting Rights

Holders of Series A Preferred Stock have no voting power except as required by the Delaware General Corporation Law or as set forth in the Certificate of Designations with respect to certain protective matters requiring the consent of the Required Holders.

Conversion

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into shares of Common Stock at a conversion rate determined by dividing the conversion amount by the conversion price of $0.5812 per share, with alternate conversion options available following stockholder approval (at 90% of the lowest VWAP during the five preceding trading days) or upon a triggering event (at 80% of such VWAP, with the conversion amount subject to a required premium of 125%), in each case subject to a 4.99% beneficial ownership limitation (adjustable to 9.99% upon 61 days' prior written notice) and a $0.045 conversion floor price after shareholder approval.

Dividends

Dividends are payable when and as declared by the Board of Directors in its sole discretion, in cash, securities or other assets, on the stated value of each share, provided that upon the occurrence and continuance of a triggering event, default dividends accrue at a rate of 15.0% per annum.

Ranking

The Series A Preferred Stock ranks senior to the Common Stock and all other junior capital stock with respect to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.

Liquidation

Upon a liquidation event, holders of Series A Preferred Stock are entitled to receive, before any payment to holders of junior stock, an amount per share equal to the sum of (i) the Black-Scholes value of the outstanding portion of all Warrants held by such holder and (ii) the greater of (A) 125% of the applicable conversion amount and (B) the amount per share such holder would receive upon conversion immediately prior to such event.

Series A Preferred Stock and Warrants

On March 30, 2026, the Company entered into a securities purchase agreement (the “Preferred Stock Purchase Agreement”) with certain institutional investors, including certain holders of convertible notes (the “March 2026 Notes”) of the Company (collectively, the "Buyers") pursuant to which the Company issued and sold to the Buyers in a private placement (the “Private Placement”) (i) 11,411.5 shares of the Company's newly designated Series A Convertible Preferred Stock, par value $0.0001 per share, with a stated value of $1,000 per share, convertible into shares of Common Stock at an initial conversion price of $0.5812 per share (the “Series A Preferred Stock”) and (ii) warrants to purchase up to 24,542,982 shares of Common Stock at an initial exercise price of $0.5812 per share, subject to adjustment (the “2026 Warrants”).

The purchase price under the Preferred Stock Purchase Agreement was satisfied in cash and by exchange of $2.6 million March 2026 Notes. The gross proceeds from the Private Placement were $4.6 million prior to deducting offering expenses payable by the Company.

As of March 31, 2026, there were 21,411.5 shares of Series A-1 Preferred Stock outstanding, including the Commitment Shares (as defined below).

Common Stock

Voting Rights

Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s amended and restated certificate of incorporation and the Company’s amended and restated bylaws do not provide for cumulative voting rights. The holders of one-third of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum for the transaction of business at all meetings of the stockholders.

Dividends

The Company has never paid any cash dividends to stockholders and do not anticipate paying any cash dividends to stockholders in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

Market Information

The Company’s common stock has been trading on the Nasdaq Stock Market LLC under the symbol “SMTK” since May 31, 2024.

March 2026 Registered Direct Offering

On March 20, 2026, the Company entered into a securities purchase agreement (the “March 2026 RDO Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued and sold to such investors

11,365,350 shares of the Company’s Common Stock at a purchase price of $0.2303 per share (the “March 2026 Offering”).

The Company received gross proceeds of $2.6 million, before deducting offering expenses payable by the Company.

Equity Line of Credit

On March 30, 2026, the Company entered into a Common Stock Purchase Agreement (the "ELOC Purchase Agreement") with an equity line investor (the “Investor”), pursuant to which the Company has the right, but not the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to  lesser of (a) $500,000,000 and (b) 19.99% of the Company's outstanding shares of Common Stock as of the date of the ELOC Purchase Agreement, which number of shares shall be reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the ELOC Purchase Agreement under applicable rules of the Trading Market (as defined under the ELOC Purchase Agreement), (unless stockholder approval is obtained or applicable sales qualify as "at market" under applicable rules of The Nasdaq Stock Market LLC), from time to time during the period commencing April 8, 2026 (the effective date of the Company’s registration statement on Form S-1 registering the resale of shares issuable under the ELOC Purchase Agreement) and ending upon termination of the ELOC Purchase Agreement. Sales of Common Stock to the Investor under the ELOC Purchase Agreement, if any, will be made by the Company at its sole discretion from time to time by delivering purchase notices to the Investor (each, a "VWAP Purchase"). The purchase price per share for each VWAP Purchase will be equal to 90% of the lesser of (i) the lowest sale price of the Common Stock on the applicable purchase date and (ii) the volume weighted average price of the Common Stock during the applicable purchase period.

In connection with signing the ELOC Purchase Agreement, the Company issued 10,000 shares of Series A Preferred Stock to the Investor as Commitment Shares.

Common Stock Warrants

A summary of the Company’s warrants to purchase common stock activity is as follows:

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual
	Number of	Exercise Price	Exercise		Term
	Shares	per Share	Price		(Years)
Warrants outstanding at January 1, 2026	3,021,274	$0.35 - $70.00	$	6.28	2.81
Issued	24,542,982			0.58
Exercised	—			—
Expired	(28,161)			70.00
Warrants outstanding at March 31, 2026	27,536,095	$0.35 - $8.75	$	1.14	2.96

During the quarter ended March 31, 2026, 24,542,982 common stock warrants were issued at an exercise price of $0.5812. During the quarter ended March 31, 2026, 28,161 warrants expired.

A summary of the Company’s pre-funded warrants to purchase common stock activity is as follows:

		Weighted-
		Average
	Number of	Exercise
	Shares	Price
Pre-funded warrants outstanding at January 1, 2026	1,532,251	$	0.0097
Issued	1,032,131		0.0001
Exercised	(1,930,877)		0.0001
Expired	—		—
Pre-funded warrants outstanding at March 31, 2026	633,505	$	0.0232

During the quarter ended March 31, 2026, 1,032,131 prefunded warrants were issued at an exercise price of $0.0001. During the quarter ended March 31, 2026, 1,930,877 prefunded warrants were exercised on a cashless basis resulting in the issuance of 1,930,524 shares of Common Stock.

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SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2026

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

11. SHARE-BASED COMPENSATION

On February 23, 2021, the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), in which a maximum aggregate number of shares of common stock that may be issued under the 2021 Plan is 65,000 shares. Subject to the adjustment provisions of the 2021 Plan, the number of shares of the Company’s common stock available for issuance under the 2021 Plan will also include an annual increase on the first day of each fiscal year beginning with 2022 fiscal year and ending on the Company’s 2031 fiscal year in an amount equal to the least of: 1) 65,000 shares of the Company’s common stock; 2) four percent (4%) of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year; or 3) such number of shares of the Company’s common stock as the administrator may determine.

At the 2023 Annual Meeting, the Company’s stockholders approved an amendment (the “2023 Plan Amendment”) to the Company’s 2021 Plan, increasing the number of the shares of common stock reserved for issuance under the 2021 Plan from 125,045 shares to 743,106 shares. The Company’s Board of Directors had previously approved the 2023 Plan Amendment, subject to stockholder approval.

At the 2025 Annual Meeting, the Company’s stockholders approved an amendment (the “2025 Plan Amendment”) to the Company’s 2021 Plan, (i) increasing the number of the shares of common stock, reserved for issuance thereunder from 843,692 shares to 1,643,692 shares, and (ii) setting the “evergreen” share amount to 4% of the outstanding shares of common stock. The Company’s Board of Directors had previously approved the 2025 Plan Amendment, subject to stockholder approval.

Determining the appropriate fair value of share-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for share options, the expected life of the option, and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its share option awards. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, the share-based compensation expense could be materially different for future awards.

The following table reflects share activity under the share option plans for the three months ended March 31, 2026:

				Weighted-
				Average
		Weighted-		Remaining	Weighted-		Aggregate
		Average		Contractual	Average		Intrinsic
	Number of	Exercise		Term	Fair Value at		Value
	Shares	Price		(Years)	Grant Date		(in thousands)
Options outstanding at January 1, 2026	1,643,122	$	5.90	8.95	$	3.12
Granted	—		—
Exercised	(5,089)		0.04
Forfeited	(36,524)		4.76
Expired	—		—
Options outstanding at March 31, 2026	1,601,509	$	5.95	8.55	$	2.92
Options exercisable at March 31, 2026	898,017	$	8.06	8.19			$	0.36

Stock-based compensation is included in the unaudited interim condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	57	$	72
General and administration		198		178
Total	$	255	$	250

Total compensation cost related to non-vested stock option awards not yet recognized as of March 31, 2026 was $1.4 million and will be recognized on a straight-line basis through the end of the vesting periods in September 2028. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures.

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BASIC AND DILUTED LOSS PER SHARE

3 Months Ended

Mar. 31, 2026

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED LOSS PER SHARE

12. BASIC AND DILUTED LOSS PER SHARE

Basic net loss per share is determined by dividing net loss by the weighted average shares of common stock outstanding during the period, without consideration of potentially dilutive securities, except for those shares that are issuable for little or no cash consideration. Diluted net loss per share is determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflects the dilutive effect, if any, of potentially dilutive common shares, such as stock options and warrants calculated using the treasury stock method. In periods with reported net operating losses, all common stock options and warrants are generally deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The following potentially dilutive securities were excluded from the computation of earnings per share as of March 31, 2026 and 2025 because their effects would be anti-dilutive:

	March 31,
	2026		2025
Common stock warrants		26,843,310		4,450,324
Assumed conversion of preferred stock		36,840,168		1,973,200
Stock options		1,601,509		611,908
Total		65,284,987		7,035,432

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DEFINED CONTRIBUTION PENSION

3 Months Ended

Mar. 31, 2026

DEFINED CONTRIBUTION PENSION

DEFINED CONTRIBUTION PENSION

13.  DEFINED CONTRIBUTION PENSION

The Company operates a defined contribution pension scheme for its UK employees. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Pension cost is included in the unaudited interim condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	20	$	21
General and administration		22		20
Total	$	42	$	41

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2026

SEGMENT REPORTING

SEGMENT REPORTING

14. SEGMENT REPORTING

We manage our business activities on a consolidated basis and operate as a single operating segment: Semiconductor materials.  Our revenue is mostly generated from R&D grants and R&D tax credits.  The accounting policies of the semiconductor materials are the same as those described in Note 2 – Summary of Significant Accounting Policies.

Our CODM is our Chief Executive Officer and President, Ian Jenks.  The CODM uses net loss, as reported on our Consolidated Statements of Comprehensive Income, in evaluating performance of the Semiconductor materials segment and determining how to allocate resources of the Company as a whole and making decisions on perspective joint development and collaboration agreements. The CODM does not review assets in evaluating the results of the Semiconductor materials segment, and therefore, such information is not presented.

The following table provides the net losses of the Semiconductor materials segment:

	Three Months Ended March 31,
	2026		2025
Revenue	$	20	$	23
Cost of revenue		4		1
Gross profit		16		22
Other operating income		34		251
Operating expenses
Research and development		913		1,497
General and administrative		1,664		2,009
Loss / (gain) on foreign currency transactions		46		(95)
Total operating expenses		2,623		3,411
Loss from operations		(2,573)		(3,138)
Total non-operating (expense) / income		(16,796)		979
Loss before income taxes		(19,369)		(2,159)
Income tax refund		—		25
Net loss	$	(19,369)	$	(2,134)

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2026

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

Warrant Exercises

Since March 31, 2026, 243,302 shares of the Company’s common stock were issued upon the exercise of 243,302 Class C Warrants. There are no Class C Warrants outstanding subsequent to these exercises.

Ferrox Critical Minerals Bridge Loan

On April 23, 2026, we funded a bridge loan to Ferrox Critical Minerals, a British Virgin Islands company (“Ferrox”), in the original principal amount of $2.3 million, which loan was evidenced by that certain Convertible Promissory Note (the “Note”) issued by Ferrox to the Company. Per the terms of the Note, interest will accrue at a rate of 5.0% per annum and matures on October 30, 2026. We were paid an originate fee of $200,000.00.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Pay vs Performance Disclosure
Net Income (Loss)	$ (19,369)	$ (2,134)

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2026
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false
Rule 10b5-1 Arrangement Modified	false
Non-Rule 10b5-1 Arrangement Modified	false

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2026

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management's Use of Estimates

Management’s Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relate to the valuation of common stock, fair value of stock options and fair value of derivative liabilities. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the period ended March 31, 2026. The carrying value of the Company’s cash, accounts receivable, other receivables, and accounts payable approximate fair value because of the short-term maturity of these financial instruments.

Issuance Costs

Issuance Costs

The Company assessed the issuance cost in connection with the issuance of an equity offering. ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering, states that specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering. Analogizing to that guidance, specific incremental costs directly attributable to the issuance of an equity contract to be classified in equity should generally be recorded as

a reduction in equity. However, issuance costs for equity contracts that are classified as a liability should be expensed immediately. The issuance costs are allocated to the equity and liability components of the underlying transaction on a basis of the allocated fair value of the gross proceeds in the overall transactions.

Direct and incremental legal and accounting costs associated with the Company’s issuance of common stock, preferred stock and warrants are deferred and classified as a component of other assets on the consolidated balance sheet until completion of the issuance. Upon completion of the issuance, deferred offering costs are reclassified from other assets to equity in additional paid-in capital and recorded against the net proceeds received in the issuance. For the period ended March 31, 2026, we recorded $539 thousand of offering costs of which $489 thousand were recorded in additional paid-in capital and $50 thousand were recorded as non-operating expenses.

Segment Information

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment: Semiconductor materials.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses, which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively, with early adoption permitted. The adoption of this guidance did not have a material impact in the interim condensed consolidated financial statements of the Company.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which clarifies various topics in the Accounting Standards Codification to improve consistency and address technical corrections. Key improvements include clarifying the calculation of diluted earnings per share (EPS) when a loss from continuing operations exists. The amendments in this update are effective for the Company beginning January 1, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This update clarifies the applicability of interim reporting guidance and the form and content of interim financial statements. It also establishes a disclosure principle requiring an entity to disclose material events and changes occurring since the end of the last annual reporting period. ASU 2025-11 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is assessing the impact of adopting this standard.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This update establishes authoritative guidance for the recognition, measurement, presentation, and disclosure of government grants received by business entities. ASU 2025-10 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. The Company is assessing the impact of adopting this standard.

The Organization for Economic Co-operation and Development (“OECD”) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on Pillar Two Proposals. We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Given the numerous proposed changes in law and uncertainty regarding such proposed changes, the impact cannot be determined at this time.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

3 Months Ended

Mar. 31, 2026

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets

	March 31,		December 31,
(in thousands)	2026		2025
Advances and retainers	$	53	$	54
Prepaid insurance		207		152
Research grant receivable		65		88
Prepaid facility costs		221		68
Prepaid software licenses		40		52
Tax Receivable		106		117
Other receivable and other prepaid expenses		4		44
Total prepaid expenses and other current assets	$	696	$	575

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PROPERTY, PLANT AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2026

PROPERTY, PLANT AND EQUIPMENT

Schedule of property, plant and equipment

	March 31,		December 31,
(in thousands)	2026		2025
Plant and equipment	$	1,750	$	1,786
Furniture and fixtures		112		114
Computer hardware and software		104		106
		1,966		2,006
Less: Accumulated depreciation		(1,825)		(1,826)
Property, plant and equipment, net	$	141	$	180

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

3 Months Ended

Mar. 31, 2026

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of accounts payable and accrued expenses

	March 31,		December 31,
(in thousands)	2026		2025
Accounts payable - trade	$	3,033	$	4,435
Payroll liabilities		183		39
Accrued expenses		141		129
Total accounts payable and accrued expenses	$	3,357	$	4,603

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LEASES (Tables)

3 Months Ended

Mar. 31, 2026

LEASES

Schedule of lease costs

	Three Months Ended March 31,
(in thousands)	2026		2025
Operating lease cost	$	72	$	73
Short-term lease cost		1		3
Total lease cost	$	73	$	76

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	72	$	73
General and administrative		1		3
Total lease cost	$	73	$	76

Schedule of right of use lease assets and lease liabilities for operating leases

	March 31,		December 31,
(in thousands)	2026		2025
Assets
Right of use assets - Operating Leases	$	535	$	607
Total lease assets	$	535	$	607
Liabilities
Current liabilities:
Lease liability, current - Operating Leases	$	277	$	271
Noncurrent liabilities:
Lease liability, non-current - Operating Leases		230		312
Total lease liabilities	$	507	$	583

Schedule of weighted average remaining lease term and weighted average discount rate for operating leases

	March 31,
	2026
Weighted average remaining lease term (in years) – operating leases		2.0
Weighted average discount rate – operating leases		10.63%

Schedule of remaining maturities of operating leases, excluding short-term leases

	March 31,
(in thousands)	2026
2026	$	237
2027		304
2028		22
Total undiscounted lease payments		563
Less imputed interest		(56)
Total net lease liabilities	$	507

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NOTES PAYABLE (Tables)

3 Months Ended

Mar. 31, 2026

NOTES PAYABLE

Schedule of notes payable

	March 31, 2026						December 31, 2025
(in thousands)	Gross		Discount		Net		Gross		Discount		Net
Notes Payable, Current	$	101	$	—	$	101	$	1,100	$	(172)	$	928

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2026

FAIR VALUE MEASUREMENTS

Summary of activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value

(in thousands)	Derivative Liability
Balance at January 1,2026	$	—
Fair value of the derivative liabilities		(1,460)
Total change in the liability included in earnings		(3,391)
Reclass from liability to equity		4,851
Balance at March 31, 2026	$	—

Summary of fair value of the derivative liability determined by using an option pricing model assumptions

	March 30		March 18
	2026		2026
Expected term (years)		3.00		0.50
Risk-free interest rate		3.78%		3.67%
Expected volatility		50.0%		50.0%
Expected dividend yield		0.0%		0.0%

	March 30
	2026
Expected term (years)		10.00
Risk-free interest rate		4.26%
Expected volatility		50.0%
Expected dividend yield		0.0%

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2026

Common stock warrants

Class of Warrant or Right [Line Items]

Schedule of warrants

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual
	Number of	Exercise Price	Exercise		Term
	Shares	per Share	Price		(Years)
Warrants outstanding at January 1, 2026	3,021,274	$0.35 - $70.00	$	6.28	2.81
Issued	24,542,982			0.58
Exercised	—			—
Expired	(28,161)			70.00
Warrants outstanding at March 31, 2026	27,536,095	$0.35 - $8.75	$	1.14	2.96

Pre funded warrants

Class of Warrant or Right [Line Items]

Schedule of warrants

		Weighted-
		Average
	Number of	Exercise
	Shares	Price
Pre-funded warrants outstanding at January 1, 2026	1,532,251	$	0.0097
Issued	1,032,131		0.0001
Exercised	(1,930,877)		0.0001
Expired	—		—
Pre-funded warrants outstanding at March 31, 2026	633,505	$	0.0232

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SHARE-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2026

SHARE-BASED COMPENSATION

Schedule of share activity under the share option plans

				Weighted-
				Average
		Weighted-		Remaining	Weighted-		Aggregate
		Average		Contractual	Average		Intrinsic
	Number of	Exercise		Term	Fair Value at		Value
	Shares	Price		(Years)	Grant Date		(in thousands)
Options outstanding at January 1, 2026	1,643,122	$	5.90	8.95	$	3.12
Granted	—		—
Exercised	(5,089)		0.04
Forfeited	(36,524)		4.76
Expired	—		—
Options outstanding at March 31, 2026	1,601,509	$	5.95	8.55	$	2.92
Options exercisable at March 31, 2026	898,017	$	8.06	8.19			$	0.36

Schedule of stock-based compensation

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	57	$	72
General and administration		198		178
Total	$	255	$	250

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BASIC AND DILUTED LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2026

BASIC AND DILUTED LOSS PER SHARE

Schedule of potentially anti-dilutive securities were excluded from the computation of earnings per share

	March 31,
	2026		2025
Common stock warrants		26,843,310		4,450,324
Assumed conversion of preferred stock		36,840,168		1,973,200
Stock options		1,601,509		611,908
Total		65,284,987		7,035,432

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DEFINED CONTRIBUTION PENSION (Tables)

3 Months Ended

Mar. 31, 2026

DEFINED CONTRIBUTION PENSION

Schedule of pension cost

	Three Months Ended March 31,
(in thousands)	2026		2025
Research and development	$	20	$	21
General and administration		22		20
Total	$	42	$	41

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2026

SEGMENT REPORTING

Schedule of net losses of the semiconductor material segment.

	Three Months Ended March 31,
	2026		2025
Revenue	$	20	$	23
Cost of revenue		4		1
Gross profit		16		22
Other operating income		34		251
Operating expenses
Research and development		913		1,497
General and administrative		1,664		2,009
Loss / (gain) on foreign currency transactions		46		(95)
Total operating expenses		2,623		3,411
Loss from operations		(2,573)		(3,138)
Total non-operating (expense) / income		(16,796)		979
Loss before income taxes		(19,369)		(2,159)
Income tax refund		—		25
Net loss	$	(19,369)	$	(2,134)

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GENERAL (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025	Feb. 05, 2026	Dec. 31, 2025	Feb. 23, 2021
GENERAL [Line Item]
Par value of common stock (in $ per share)	$ 0.0001		$ 0.0001	$ 0.0001
Net loss	$ 19,369	$ 2,134
Cash and cash equivalents	7,566			$ 374
Net cash used in operating activities	$ 1,572	$ 3,338
Warrants to purchase shares of common stock			385,130
Securities Exchange Agreement, Smartkem Limited
GENERAL [Line Item]
Purchase price (in dollars per share)					$ 1.4
Par value of common stock (in $ per share)					$ 0.0001

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2026 USD ($) segment
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Offering costs	$ 539
Additional paid-in capital	489
Other Nonoperating Expense	$ 50
Number of operating segments | segment	1
Number of reportable segments | segment	1

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Advances and retainers	$ 53	$ 54
Prepaid insurance	207	152
Research grant receivable	65	88
Prepaid facility costs	221	68
Prepaid software licenses	40	52
Tax Receivable	106	117
Other receivable and other prepaid expenses	4	44
Total prepaid expenses and other current assets	$ 696	$ 575

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($)	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025	Dec. 31, 2025
Property, Plant and Equipment
Property, plant and equipment, gross	$ 1,966,000		$ 2,006,000
Less: Accumulated depreciation	(1,825,000)		(1,826,000)
Property, plant and equipment, net	141,000		180,000
Depreciation	36,000	$ 56,000
Plant and equipment
Property, Plant and Equipment
Property, plant and equipment, gross	1,750,000		1,786,000
Furniture and fixtures
Property, Plant and Equipment
Property, plant and equipment, gross	112,000		114,000
Computer hardware and software
Property, Plant and Equipment
Property, plant and equipment, gross	104,000		$ 106,000
Research and development
Property, Plant and Equipment
Depreciation	$ 36,100	$ 56,100

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Feb. 05, 2026	Mar. 31, 2026	Dec. 31, 2025
NOTES PAYABLE
Accounts payable - trade		$ 3,033	$ 4,435
Payroll liabilities		183	39
Accrued expenses		141	129
Total accounts payable and accrued expenses		$ 3,357	$ 4,603
Warrants to purchase shares of common stock	385,130
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001	$ 0.0001
Exercise price of warrant	$ 2.75
Gross proceeds received related to note payable		$ 2,625
Prefunded Warrant [Member]
NOTES PAYABLE
Warrants to purchase shares of common stock	348,260
Gross proceeds received related to note payable	$ 2,000

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LEASES - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Lessee, Lease, Description [Line Items]
Operating lease cost	$ 72	$ 73
Short-term lease cost	1	3
Total lease cost	73	76
Research and development
Lessee, Lease, Description [Line Items]
Total lease cost	72	73
General and administrative
Lessee, Lease, Description [Line Items]
Total lease cost	$ 1	$ 3

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LEASES - Right of Use Lease Assets And Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
Assets
Right of use assets - Operating Leases	$ 535	$ 607
Total lease assets	535	607
Current liabilities:
Lease liability, current - Operating Leases	277	271
Noncurrent liabilities:
Lease liability, non-current - Operating Leases	230	312
Total lease liabilities	$ 507	$ 583

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LEASES - Weighted Average (Details)	Mar. 31, 2026
LEASES
Weighted average remaining lease term (in years) - operating leases	2 years
Weighted average discount rate - operating leases	10.63%

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LEASES - Remaining maturities of operating leases (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
LEASES
2026	$ 237
2027	304
2028	22
Total undiscounted lease payments	563
Less imputed interest	(56)
Total net lease liabilities	$ 507	$ 583

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LEASES - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
Lessee, Lease, Description [Line Items]
Finance lease - Right-of-use assets	$ 0	$ 0
Finance Lease Liabilities	$ 0	$ 0
Minimum
Lessee, Lease, Description [Line Items]
Operating lease term (in years)	1 year
Maximum
Lessee, Lease, Description [Line Items]
Operating lease term (in years)	3 years

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NOTES PAYABLE (Details) - USD ($)		3 Months Ended
	Mar. 18, 2026	Mar. 31, 2026	Dec. 31, 2025
NOTES PAYABLE
Gross		$ 101,000	$ 1,100,000
Discount			(172,000)
Net		101,000	$ 928,000
Settlement agreements period	2 days
Payment for a release of claims related to notes payable	$ 300,000	$ 300,000
Patent liaison service period	6 months
Purchase Agreement [Member]
NOTES PAYABLE
Aggregate principal	$ 3,750,000
Aggregate principal after discount	$ 2,600,000
Debt Instrument Discount Percentage	30.00%

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FAIR VALUE MEASUREMENTS - Activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2026 USD ($)
Activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value
Fair value of warrant issued in Private Placement Offering	$ 5,000
Derivative Liability
Activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value
Fair value of the note payable exchange feature	(1,460)
Total change in the liability included in earnings	(3,391)
Reclass from liability to equity	$ 4,851

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FAIR VALUE MEASUREMENTS - Fair value of the derivative liability and preferred stock determined by using option pricing models assumptions (Details)	Mar. 30, 2026 Y	Mar. 18, 2026 Y
Expected term (years)
FAIR VALUE MEASUREMENTS
Fair value of derivative liability and preferred stock	3	0.5
Fair value of preferred stock	10
Risk-free interest rate
FAIR VALUE MEASUREMENTS
Fair value of derivative liability and preferred stock	0.0378	0.0367
Fair value of preferred stock	0.0426
Expected volatility
FAIR VALUE MEASUREMENTS
Fair value of derivative liability and preferred stock	0.50	0.50
Fair value of preferred stock	0.50
Expected dividend yield
FAIR VALUE MEASUREMENTS
Fair value of derivative liability and preferred stock	0	0
Fair value of preferred stock	0

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STOCKHOLDERS' EQUITY - Preferred Stock (Details) $ / shares in Units, $ in Thousands		3 Months Ended
	Mar. 30, 2026 USD ($) Vote D $ / shares shares	Mar. 31, 2026 USD ($) $ / shares shares	Feb. 05, 2026 $ / shares shares	Dec. 31, 2025 $ / shares shares
STOCKHOLDERS' EQUITY
Preferred stock, shares authorized (in shares) | shares		10,000,000		10,000,000
Preferred stock, par value (in dollars per share)		$ 0.0001		$ 0.0001
Preferred stock, shares issued (in shares) | shares		21,411.5		0
Warrants to purchase shares of common stock | shares			385,130
Exercise price per share			$ 2.75
Private placement
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.0001
Conversion price	$ 0.5812
Preferred stock, shares issued (in shares) | shares	11,411.5
Preferred stock stated value per share	$ 1,000
Warrants to purchase shares of common stock | shares	24,542,982
Exercise price per share	$ 0.5812
Purchase price paid in exchange for notes | $	$ 2,600
Net proceeds from issuance of equity | $	$ 4,600	$ 4,630
Series A Preferred Stock
STOCKHOLDERS' EQUITY
Preferred stock, shares authorized (in shares) | shares	31,412
Preferred stock, par value (in dollars per share)	$ 1,000
Number of votes, preferred shares | Vote	0
Conversion price	$ 0.5812
Conversion floor price		$ 0.045
Beneficial ownership limit	4.99%
Prior notice period requirement	61 days
Preferred stock, dividend rate, percentage	15.00%
Liquidation preference premium, percentage	125.00%
Series A Preferred Stock | Maximum
STOCKHOLDERS' EQUITY
Beneficial ownership limit	9.99%
Series A Preferred Stock | Alternate conversion
STOCKHOLDERS' EQUITY
Percent of shareholder approval required	90.00%
Threshold trading days | D	5
Series A Preferred Stock | Triggering event
STOCKHOLDERS' EQUITY
Percent of shareholder approval required	80.00%
Percentage of threshold premium	125.00%

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STOCKHOLDERS' EQUITY - Common Stock (Details)		3 Months Ended
	Mar. 20, 2026 USD ($) $ / shares shares	Mar. 31, 2026 USD ($) Vote shares	Mar. 30, 2026 USD ($) shares	Dec. 31, 2025 shares
STOCKHOLDERS' EQUITY
Voting rights per share | Vote		1
Common shares, issued (in shares)		21,202,911		6,839,689
Preferred shares, issued (in shares)		21,411.5		0
March 2026 Registered Direct Offering
STOCKHOLDERS' EQUITY
Common shares, issued (in shares)	11,365,350
Purchase price of common stock | $ / shares	$ 0.2303
Gross proceeds received | $	$ 2,600,000	$ 2,617,000
Equity line of credit
STOCKHOLDERS' EQUITY
Amount of maximum commitment | $			$ 500,000,000
Percentage of share issuance			19.99%
Percentage of threshold on volume-weighted average price			90.00%
Preferred shares, issued (in shares)			10,000

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STOCKHOLDERS' EQUITY - Common Stock Warrants (Details) - $ / shares	3 Months Ended
	Mar. 31, 2026	Feb. 05, 2026	Dec. 31, 2025
Number of shares
Exercise price per share		$ 2.75
Common stock warrants
Number of shares
Warrants outstanding at beginning of the year	3,021,274
Issued	24,542,982
Expired	(28,161)
Warrants outstanding at end of the year	27,536,095
Weighted-Average Exercise Price
Warrants outstanding at beginning of the year	$ 6.28
Issued	0.58
Expired	70
Warrants outstanding at end of the year	$ 1.14
Weighted Average Remaining Contractual Term (years)
Warrants outstanding at beginning of the year	2 years 9 months 21 days
Warrants outstanding at end of the year	2 years 11 months 15 days
Common stock warrants | Minimum
Number of shares
Exercise price per share	$ 0.35		$ 0.35
Common stock warrants | Maximum
Number of shares
Exercise price per share	$ 8.75		$ 70
Warrants
Number of shares
Issued	24,542,982
Expired	28,161
Exercise price per share	$ 0.5812
Pre funded warrants
Number of shares
Warrants outstanding at beginning of the year	1,532,251
Issued	1,032,131
Exercised	(1,930,877)
Warrants outstanding at end of the year	633,505
Exercise price per share	$ 0.0001
Weighted-Average Exercise Price
Warrants outstanding at beginning of the year	0.0097
Issued	0.0001
Exercised	0.0001
Warrants outstanding at end of the year	$ 0.0232
Weighted Average Remaining Contractual Term (years)
Cashless exercise of warrants into common stock (in shares)	1,930,524

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SHARE-BASED COMPENSATION - Additional Information (Details) - USD ($) $ in Millions	Feb. 23, 2021	Mar. 31, 2026	May 28, 2025	May 27, 2025	Aug. 25, 2023	Aug. 24, 2023
SHARE-BASED COMPENSATION
Unrecognized compensation costs		$ 1.4
2021 Plan
SHARE-BASED COMPENSATION
Maximum aggregate number of shares under grant (in shares)	65,000
Annual share increase (in shares)	65,000
Percentage of annual increase in outstanding shares (in %)	4.00%		4.00%
Reserved for future issuance (in shares)			1,643,692	843,692	743,106	125,045

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SHARE-BASED COMPENSATION - Share Option Activity (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2026	Dec. 31, 2025
Number of Shares
Options outstanding at beginning	1,643,122
Exercised	(5,089)
Forfeited	(36,524)
Options outstanding at end	1,601,509	1,643,122
Options exercisable at March 31, 2026	898,017
Weighted-Average Exercise Price
Options outstanding at beginning	$ 5.9
Exercised	0.04
Forfeited	4.76
Options outstanding at end	5.95	$ 5.9
Options exercisable at March 31, 2026	$ 8.06
Weighted-Average Remaining Contractual Term (Years)
Options outstanding weighted-average remaining contractual term (in years)	8 years 6 months 18 days	8 years 11 months 12 days
Options exercisable weighted average remaining contractual term (in years)	8 years 2 months 8 days
Weighted- Average Fair Value at Grant Date
Weighted- Average Fair Value at Grant Date at beginning (in $ per share)	$ 3.12
Weighted- Average Fair Value at Grant Date at end (in $ per share)	$ 2.92	$ 3.12
Aggregate Intrinsic Value, Options exercisable	$ 360

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SHARE-BASED COMPENSATION - Stock Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
SHARE-BASED COMPENSATION
Total stock-based compensation	$ 255	$ 250
Research and development
SHARE-BASED COMPENSATION
Total stock-based compensation	57	72
General and administrative
SHARE-BASED COMPENSATION
Total stock-based compensation	$ 198	$ 178

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BASIC AND DILUTED LOSS PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
NET LOSS PER COMMON SHARE
Antidilutive securities excluded from computation of earnings per share	65,284,987	7,035,432
Common stock warrants
NET LOSS PER COMMON SHARE
Antidilutive securities excluded from computation of earnings per share	26,843,310	4,450,324
Assumed conversion of preferred stock
NET LOSS PER COMMON SHARE
Antidilutive securities excluded from computation of earnings per share	36,840,168	1,973,200
Employee Stock Option
NET LOSS PER COMMON SHARE
Antidilutive securities excluded from computation of earnings per share	1,601,509	611,908

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DEFINED CONTRIBUTION PENSION - Pension cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
DEFINED CONTRIBUTION PENSION
Total	$ 42	$ 41
Research and development
DEFINED CONTRIBUTION PENSION
Total	20	21
General and administration
DEFINED CONTRIBUTION PENSION
Total	$ 22	$ 20

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SEGMENT REPORTING - Net losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
SEGMENT REPORTING
Revenue	$ 20	$ 23
Cost of revenue	4	1
Gross profit	16	22
Other operating income	34	251
Operating expenses
Research and development	913	1,497
General and administrative	1,664	2,009
Loss / (gain) on foreign currency transactions	46	(95)
Total operating expenses	2,623	3,411
Loss from operations	(2,573)	(3,138)
Total non-operating (expense) / income	(16,796)	979
Loss before income taxes	(19,369)	(2,159)
Income tax refund		25
Net loss	$ (19,369)	$ (2,134)

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SEGMENT REPORTING - Additional information (Details)	3 Months Ended
	Mar. 31, 2026 segment
SEGMENT REPORTING
Number of operating segments	1
Number of reportable segments	1

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SUBSEQUENT EVENTS (Details) - Subsequent events - USD ($)	2 Months Ended
	May 21, 2026	Apr. 23, 2026
Subsequent Event [Line Items]
Exercise of warrants into common stock (in shares)	243,302
Number of warrants exercised	243,302
Convertible Debt
Subsequent Event [Line Items]
Aggregate principal		$ 2,300,000
Interest rate		5.00%
Originate fee paid		$ 200,000
Common stock | Class C Warrants
Subsequent Event [Line Items]
Common stock warrants outstanding	0