Overview

SmartKem Limited, a subsidiary of SmartKem, Inc., entered Creditors’ Voluntary Liquidation and was deconsolidated from the company’s financial statements on June 12, 2026. As a result, the development and manufacturing of SmartKem’s custom electronic materials is now handled by SmartKem, Inc. directly. The company continues to operate with an international footprint, providing materials development, prototyping, and technical support to customers and collaborators globally.

Financial Performance

Revenue and Cost of Revenue:

• The company had no revenue or cost of revenue in the three months ended June 30, 2026, compared to $32,000 in revenue and $28,000 in cost of revenue for the same period in 2025. This was due to the deconsolidation of SmartKem Limited.
• For the six months ended June 30, 2026, the company had $20,000 in revenue and $4,000 in cost of revenue, compared to $55,000 in revenue and $29,000 in cost of revenue for the same period in 2025.

Operating Expenses:

• Operating expenses decreased by 69.9% in the three months ended June 30, 2026 compared to the same period in 2025, from $4.7 million to $1.4 million.
• For the six months ended June 30, 2026, operating expenses decreased by 50.1% to $4.0 million, down from $8.1 million in the same period in 2025.
• The decreases were primarily due to lower research and development expenses and general and administrative expenses following the deconsolidation of SmartKem Limited.

Non-Operating Income/Expense:

• The company recorded a $45.6 million loss for the write-off of bad debts and a $43.3 million gain for the investment in SmartKem Limited due to the deconsolidation of the subsidiary.
• There was also a $3.3 million loss on foreign currency related to the revaluation of intercompany loans and interest.
• The company incurred $11.9 million in costs related to the execution of an equity line of credit (ELOC) and $3.8 million in losses related to the extinguishment of debt.

Liquidity and Capital Resources

• As of June 30, 2026, the company had $3.7 million in cash and cash equivalents, up from $0.4 million at the end of 2025.
• However, the company believes its current cash balance will not be sufficient to fund operations for the next 12 months and will require additional capital funding to continue operations and research and development.
• The company plans to finance its working capital needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing/licensing arrangements.

Outlook

The deconsolidation of SmartKem Limited has significantly impacted the company’s financial performance, leading to decreases in revenue, cost of revenue, and operating expenses. The company faces liquidity challenges and will need to secure additional capital to continue its operations and research and development activities. Management is evaluating the company’s strategy, including its display prototyping, materials formulation, and potential new materials, as it seeks to stabilize the business and position it for future growth.