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 September 30, 2024

☐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		(I.R.S. Employer
incorporation or organization)		Identification Number)

Manchester Technology Centre, Hexagon Tower.

Delaunays Road, Blackley

Manchester, M9 8GQ U.K.

(Address of Principal Executive Offices)

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 November 8, 2024, there were 1,780,472 of the registrant’s shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page

Part I	Financial Information	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023	4

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2024 and 2023	5-6

	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	7

	Notes to the Unaudited Interim Condensed Consolidated Financial Statements	8-23

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	29

Part II	Other Information	30

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

Exhibit Index		33
Signatures		34

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Item 1. Financial Statements

SMARTKEM, INC.

Condensed Consolidated Balance Sheets

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


	September 30,		December 31,
	2024		2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,783	$	8,836
Accounts receivable		—		268
Research and development tax credit receivable		1,163		610
Prepaid expenses and other current assets		804		811
Total current assets		3,750		10,525
Property, plant and equipment, net		353		455
Right-of-use assets, net		197		285
Other assets, non-current		6		7
Total assets	$	4,306	$	11,272

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	1,463	$	1,178
Lease liabilities, current		165		230
Other current liabilities		367		360
Total current liabilities		1,995		1,768
Lease liabilities, non-current		31		19
Warrant liability		—		1,372
Total liabilities		2,026		3,159

Commitments and contingencies (Note 7)		—		—

Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, 856 and 13,765 shares issued and outstanding, at September 30, 2024 and December 31, 2023, respectively		—		—
Common stock, par value $0.0001 per share, 300,000,000 shares authorized, 1,780,472 and 889,668 shares issued and outstanding, at September 30, 2024 and December 31, 2023, respectively		—		—
Additional paid-in capital		113,374		104,757
Accumulated other comprehensive loss		(1,297)		(1,578)
Accumulated deficit		(109,797)		(95,066)
Total stockholders' equity		2,280		8,113
Total liabilities and stockholders’ equity	$	4,306	$	11,272

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

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SMARTKEM, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	—	$	3	$	40	$	27
Cost of revenue		—		1		32		23
Gross profit		—		2		8		4

Other operating income		287		257		725		695

Operating expenses
Research and development		1,504		1,568		3,938		4,104
Selling, general and administrative		1,578		1,268		4,784		4,025
(Gain)/loss on foreign currency transactions		43		118		75		186
Total operating expenses		3,125		2,954		8,797		8,315

Loss from operations		(2,838)		(2,695)		(8,064)		(7,616)

Non-operating income/(expense)
Gain/(loss) on foreign currency transactions		—		(787)		(249)		248
Transaction costs allocable to warrants		—		—		—		(198)
Change in fair value of the warrant liability		—		458		672		461
Interest income/(expense)		(4)		2		5		8
Total non-operating income/(expense)		(4)		(327)		428		519

Loss before income taxes		(2,842)		(3,022)		(7,636)		(7,097)
Income tax expense		—		—		(1)		—
Net loss	$	(2,842)	$	(3,022)	$	(7,637)	$	(7,097)

Net loss	$	(2,842)	$	(3,022)	$	(7,637)	$	(7,097)
Other comprehensive loss:
Foreign currency translation		125		850		281		(123)
Total comprehensive loss	$	(2,717)	$	(2,172)	$	(7,356)	$	(7,220)

Common share data:
Basic net loss per common share*	$	(0.86)	$	(1.78)	$	(2.49)	$	(5.82)
Diluted net loss per common share*	$	(0.86)	$	(1.78)	$	(4.80)	$	(5.82)
Dividend per common share	$	—	$	—	$	(2.31)	$	—

Weighted average number of basic shares outstanding*		3,308,975		1,701,166		3,068,110		1,219,450
Weighted average number of diluted shares outstanding*		3,308,975		1,701,166		3,068,110		1,219,450

* reflects a one-for-thirty-five (1:35) reverse stock split effected on September 21, 2023

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

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SMARTKEM, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(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
Balance at January 1, 2024	13,765	$	—	889,668	$	—	$	104,757	$	(1,578)	$	(95,066)	$	8,113
Stock-based compensation expense	—		—	—		—		107		—		—		107
Issuance of stock awards	—		—	3,400		—		21		—		—		21
Issuance of common stock to vendor	—		—	50,000		—		53		—		—		53
Conversion of Preferred stock into common stock	(3,817)		—	436,294		—		—		—		—		—
Exchange of Preferred stock into common stock warrants	(6,356)		—	—		—		—		—		—		—
Deemed dividend on extinguishment of Preferred stock	—		—	—		—		7,069		—		(7,094)		(25)
Cashless exercise of warrants into common stock	—		—	388		—		—		—		—		—
Foreign currency translation adjustment	—		—	—		—		—		(18)		—		(18)
Net loss	—		—	—		—		—		—		(1,696)		(1,696)
Balance at March 31, 2024	3,592	$	—	1,379,750	$	—	$	112,007	$	(1,596)	$	(103,856)	$	6,555
Stock-based compensation expense	—		—	—		—		207		—		—		207
Issuance of common stock to vendor	—		—	50,000		—		48		—		—		48
Conversion of Preferred stock into common stock	(2,486)		—	284,150		—		—		—		—		—
Exercise of warrants into common stock	—		—	8,000		—		3		—		—		3
Fair value of warrants reclassified from liability to equity	—		—	—		—		700		—		—		700
Foreign currency translation adjustment	—		—	—		—		—		174		—		174
Net loss	—		—	—		—		—		—		(3,099)		(3,099)
Balance at June 30, 2024	1,106	$	—	1,721,900	$	—	$	112,965	$	(1,422)	$	(106,955)	$	4,588
Stock-based compensation expense	—		—	—		—		257		—		—		257
Issuance of common stock to vendor	—		—	30,000		—		152		—		—		152
Conversion of Preferred stock into common stock	(250)		—	28,572		—		—		—		—		—
Foreign currency translation adjustment	—		—	—		—		—		125		—		125
Net loss	—		—	—		—		—		—		(2,842)		(2,842)
Balance at September 30, 2024	856	$	—	1,780,472	$	—	$	113,374	$	(1,297)	$	(109,797)	$	2,280

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SMARTKEM, INC.

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(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
Balance at January 1, 2023	—	$	—	771,054	$	—	$	92,933	$	(483)	$	(86,567)	$	5,883
Stock-based compensation expense	—		—	—		—		293		—		—		293
Issuance of common stock to vendor	—		—	2,937		—		55		—		—		55
Foreign currency translation adjustment	—		—	—		—		—		(456)		—		(456)
Net loss	—		—	—		—		—		—		(2,048)		(2,048)
Balance at March 31, 2023	—	$	—	773,991	$	—	$	93,281	$	(939)	$	(88,615)	$	3,727
Stock-based compensation expense	—		—	—		—		119		—		—		119
Issuance of preferred stock, net of issuance costs	14,149		—	—		—		11,027		—		—		11,027
Foreign currency translation adjustment	—		—	—		—		—		(517)		—		(517)
Net loss	—		—	—		—		—		—		(2,027)		(2,027)
Balance at June 30, 2023	14,149	$	—	773,991	$	—	$	104,427	$	(1,456)	$	(90,642)	$	12,329
Stock-based compensation expense	—		—	—		—		119		—		—		119
Conversion of Preferred stock into common stock	(270)		—	30,859		—		—		—		—		—
Exercise of warrants into common stock	—		—	71,428		—		25		—		—		25
Foreign currency translation adjustment	—		—	—		—		—		850		—		850
Net loss	—		—	—		—		—		—		(3,022)		(3,022)
Balance at September 30, 2023	13,879	$	—	876,278	$	—	$	104,571	$	(606)	$	(93,664)	$	10,301

* reflects a one-for-thirty-five (1:35) reverse stock split effected on September 21, 2023

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

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SMARTKEM, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flow from operating activities:
Net loss	$	(7,637)	$	(7,097)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		194		122
Stock-based compensation expense		592		531
Issuance of common stock to vendor		253		55
Right-of-use asset amortization		201		197
Loss on foreign currency transactions		283		(66)
Transaction costs allocable to warrants		—		198
Change in fair value of the warrant liability		(672)		(461)
Change in operating assets and liabilities:
Accounts receivable		269		(24)
Research and development tax credit receivable		(499)		697
Prepaid expenses and other current assets		43		(159)
Other non-current assets		1		—
Accounts payable and accrued expenses		149		713
Lease liabilities		(166)		(201)
Income tax payable		—		(23)
Other current liabilities		(20)		(102)
Net cash used in operating activities		(7,009)		(5,620)

Cash flows from investing activities:
Purchases of property, plant and equipment		(75)		(12)
Net cash used by investing activities		(75)		(12)

Cash flow from financing activities:
Proceeds from the issuance of preferred stock in private placement		—		12,386
Proceeds from the issuance of warrants in private placement		—		1,763
Payment of issuance costs		—		(1,483)
Proceeds from the exercise of warrants		3		25
Net cash provided by financing activities		3		12,691

Effect of exchange rate changes on cash		28		(84)

Net change in cash		(7,053)		6,975

Cash, beginning of period		8,836		4,235
Cash, end of period	$	1,783	$	11,210

Supplemental disclosure of cash and non-cash investing and financing activities
Issuance of common shares for consulting services	$	253	$	55
Initial classification of fair value of warrants	$	—	$	1,837
Right-of-use asset and lease liability additions	$	82	$	50

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

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SMARTKEM, INC.

Notes to Condensed Consolidated Financial Statements

1.	ORGANIZATION, BUSINESS, GOING CONCERN AND BASIS OF PRESENTATION

Organization

SmartKem, Inc. (the “Company”) formerly known as Parasol Investments Corporation (“Parasol”), was formed on May 13, 2020, and is the successor of SmartKem Limited, which was formed under the Laws of England and Wales. The Company was founded as a “shell” company registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with no specific business plan or purpose until it began operating the business of SmartKem Limited following the closing of the transactions contemplated by the Securities Exchange Agreement (the “Exchange Agreement”), dated February 21, 2021, 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 and SmartKem Limited became a wholly owned subsidiary of Parasol (the “Exchange”).

Business

The Company is seeking to reshape the world of electronics with its disruptive organic thin-film transistors (“OTFTs”) that have the potential to revolutionize the display industry. The Company’s patented TRUFLEX® liquid semiconductor polymers are used to make a new type of transistor that can be used in a number of display technologies including next generation microLED displays. The Company’s inks enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost displays that outperform existing technology. The Company develops its materials at its research and development facility in Manchester, UK and provides prototyping services at the Centre for Process Innovation (“CPI”) at Sedgefield, UK. The Company entered into a technology transfer agreement (TTA) with the Industrial Technology Research Institute (ITRI) in Taiwan for product prototyping on its Gen2.5 fabrication line and it also has a field application office in Taiwan. The Company has an extensive IP portfolio including 125 granted patents across 19 patent families and 40 codified trade secrets.

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 development 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.

The Company has access under a framework agreement to equipment which is used in the manufacturing of demonstrator products employing the Company’s inks. If the Company lost access to this fabrication facility, it would materially and adversely affect the Company’s ability to manufacture prototypes and demonstrate products for potential customers. The loss of this access could significantly impede the Company’s ability to engage in product development and process improvement activities. Alternative providers of similar services exist but would take effort and time to bring into the Company’s operations.

Going Concern

The Company has incurred continuing losses including net losses of $7.6 million for the nine months ended September 30, 2024. The Company’s cash as of September 30, 2024 was $1.8 million with net cash used in operating activities of $7.0 million for the nine months ended September 30, 2024. 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 $1.8 million as of September 30, 2024, will not be sufficient to fund its operating expenses and capital expenditure requirements for the 12 months from the issuance of these financial statements and that the Company will require additional capital funding to continue

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SMARTKEM, INC.

Notes to Condensed Consolidated Financial Statements

its operations and research development activity thereafter. It is possible this period could be shortened if there are any significant increases in spending or more rapid progress of development programs than anticipated.

The Company’s future viability is 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 and to fund its sales and marketing efforts, research and development expenditures, and business development activities. 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, 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 September 30, 2024 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 September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023 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, 2023 (the “Annual Report”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2024 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 September 30, 2024 and 2023; 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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SMARTKEM, INC.

Notes to Condensed Consolidated Financial Statements

Reverse Stock Split

All share numbers and per share amounts presented in these financial statements, including these footnotes reflect a one-for-thirty-five (1:35) reverse stock split effected on September 21, 2023.

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.

The Company records, when necessary, deemed dividends for: (i) the exchange of preferred shares for pre-funded warrants, based on the fair value of the pre-funded warrants in excess of the carrying value of the preferred shares and (ii) the amendment of preferred stock accounted for as an extinguishment, based on the fair value of the preferred stock immediately before and after the amendments.

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 warrant 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.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures which will require companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”). The pronouncement is effective for annual filings for the year ended December 31, 2024. The Company is still assessing the impact of the adoption of this standard.

On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures which applies to all entities subject to income taxes. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to provide more detailed income tax disclosures. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is still assessing the impact of the adoption of this standard but does not expect it to have a material impact on its results of operations, financial position or cash flows.

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SMARTKEM, INC.

Notes to Condensed Consolidated Financial Statements

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


	September 30,		December 31,
(in thousands)	2024		2023
Prepaid insurance	$	292	$	274
Research grant receivable		20		160
Prepaid facility costs		230		101
VAT receivable		201		104
Prepaid software licenses		44		24
Prepaid professional service fees		—		68
Other receivable and other prepaid expenses		17		80
Total prepaid expenses and other current assets	$	804	$	811

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


	September 30,		December 31,
(in thousands)	2024		2023
Plant and equipment	$	1,662	$	1,584
Furniture and fixtures		113		108
Computer hardware and software		104		24
		1,879		1,716
Less: Accumulated depreciation		(1,526)		(1,261)
Property, plant and equipment, net	$	353	$	455

Depreciation expense was $194.4 thousand and $121.7 thousand for the nine months ended September 30, 2024 and 2023, respectively and is classified as research and development expense.

5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:


	September 30,		December 31,
(in thousands)	2024		2023
Accounts payable - trade	$	747	$	355
Payroll liabilities		404		375
VAT payable		116		—
Accrued expenses – audit & accounting fees		—		182
Accrued expenses – technical fees		33		91
Accrued expenses – other		163		175
Total accounts payable and accrued expenses	$	1,463	$	1,178

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

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SMARTKEM, INC.

Notes to Condensed Consolidated Financial Statements

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2024		2023		2024		2023
Operating lease cost	$	58	$	70	$	193	$	209
Short-term lease cost		5		—		11		7
Variable lease cost		—		53		—		118
Total lease cost	$	63	$	123	$	204	$	334

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2024

2023

2024

2023

Research and development