Company Status and Financial Needs - The Company is classified as an "emerging growth company" and will maintain this status until it reaches total annual gross revenue of $1.07 billion or other specified conditions [148]. - The Company anticipates needing additional capital in the future to meet financial obligations and pursue business objectives, which may not be available on favorable terms [150]. - Future issuances of debt or equity securities may dilute existing shareholders and adversely affect the market price of the Ordinary Shares [156]. - The Company may lose its foreign private issuer status, resulting in increased regulatory and compliance costs, including the need to comply with GAAP [164]. - The Company is subject to the risk of being delisted from Nasdaq if it fails to meet continued listing standards, which could lead to reduced liquidity and increased regulatory scrutiny [154]. Currency and Operating Expenses - The Company's operating expenses are primarily in ILS, and it has experienced a 13% decrease in ILS against the U.S. dollar in 2022, following a 26% increase in 2021 [303]. - The Company does not engage in currency hedging transactions, exposing it to potential adverse effects from future currency fluctuations [304]. Legal and Compliance Costs - The Company may incur significant legal and compliance costs due to U.S. reporting requirements, which could adversely affect its operating results [153]. - The Company has not guaranteed that the exemptions under the JOBS Act will lead to significant savings, and opting out of these exemptions may increase compliance costs [149]. - The Company is currently exempt from certain SEC rules and will file less information than U.S. companies, which may limit the availability of public information [165]. Technology and Innovation - In 2022, the company successfully completed a trial of marking recycled plastics, demonstrating the viability of industrial scale adoption [308]. - The company verified a marker substance for natural rubber in tires, enabling transparency in the supply chain and responsible sourcing verification [310]. - A joint initiative with Perth Mint aims to develop a mine-to-marketplace ethical gold supply chain technology, promoting transparency in responsible mining [313]. - The company launched a Fashion Sustainability Competence Centre to help fashion brands transition to a sustainable circular economy [328]. - The company is collaborating with luxury fashion conglomerates on R&D projects to trace the origin of raw materials in their supply chains [328]. - The company is exploring the integration of marker technology with blockchain for tamper-free monitoring of compliance in the natural rubber supply chain [312]. - The company has established a new entity, Yahaloma Technologies Inc., for the commercialization of trace technology in the diamonds and precious stones industry [321]. Patent Portfolio and Intellectual Property - Since 2015, the company has protected its technology with over 20 patent families and more than 100 patents filed globally [329]. - SMX has registered multiple patents related to X-ray fluorescence marking and authentication, with expiration dates extending to 2038 and beyond [330]. - The company has a total of 13 patent families filed under the PCT, covering various technologies including supply chain management and blockchain applications [332]. - The US patent US10539521B2, related to a system and method for reading X-ray fluorescence, is set to expire in July 2036 [330]. - The patent US11446951B2 for the authentication of metallic objects is registered and will expire in January 2040 [330]. - The company has pending applications for several patents, including a method for detecting mishandling and misuse of food products [332]. - The patent US11112372B2 for an X-ray fluorescence system is published and will expire in June 2038 [332]. - The company is actively expanding its patent portfolio, with applications filed in multiple countries including Australia, China, and Europe [332]. - The patent US11221305B2 for an object marking system is registered and will expire in October 2038 [332]. - The company has filed a patent for a system based on blockchain architecture for virtual currency, indicating a focus on innovative financial technologies [332]. - The management of recyclable goods and their source materials is also a focus area, with an application filed in October 2020 [332]. - The company has filed multiple patents related to X-ray fluorescence (XRF) technology, including a system for reading XRF markings and methods for authentication of precious stones, with expiration dates extending to 2038 [334][338]. - Patent applications include a method for managing recyclable goods and their source materials, indicating a focus on sustainability and innovation in product lifecycle management [335]. - The company is developing traceable composite polymers and methods for providing transparency in production value chains, highlighting advancements in material science [336][340]. - A novel XRF analyzer capable of identifying multiple solid objects simultaneously has been granted, which could enhance operational efficiency in various industrial applications [341]. - The company is pursuing a blockchain-based system for managing transactions of marked objects, indicating a strategic move towards integrating digital solutions with physical product authentication [346]. - The expiration dates for several key patents extend into the late 2030s, suggesting a long-term commitment to maintaining competitive advantages in XRF technology [338][341]. - The company has a pending patent for a method of labeling products with XRF identifiable labels, which could improve traceability and safety in food and cosmetic industries [344]. - The focus on anti-counterfeit techniques through XRF analysis demonstrates the company's commitment to enhancing product security and consumer trust [338]. - The company has filed for patents in multiple countries, including the US, Canada, and Europe, indicating a strategic approach to global market expansion [335][336]. - The development of XRF-identifiable transparent polymers suggests potential applications in various industries, enhancing product functionality and compliance [345]. Market Strategy and Partnerships - The company is focusing on the U.S. market for future sales and marketing efforts, including recruitment of sales and marketing personnel [371]. - The company has established partnerships with industry leaders to advance proof-of-concept pilots and further develop its innovative technology [372]. - The company targets leading brands and manufacturers to create a new market standard for circular economy solutions, brand authentication, and supply chain integrity [372]. - The company has significant investment in the development of marking and reading capabilities, with a focus on achieving commercial contracts following successful proof-of-concept pilots [361]. - The company believes that adequate technical and financial resources are available to complete development, with a high probability of commencing commercial agreements after successful pilots [373]. - The company has capitalized development activities that focus on creating a digital platform for end-to-end traceability from raw material to final product [375]. - The company estimates that customization for clients' specific needs will be completed in approximately two years, at which point amortization will commence [378]. - The company has a strategy to create strategic partnerships with market leaders across its main segments of activity, indicating a strong potential market for its development [372]. Financial Reporting and Asset Management - The company utilizes a Black-Scholes model for measuring share-based expenses and fair value of financial liabilities [363][364]. - The company has a comprehensive financial system in place to reliably measure expenditures attributable to intangible assets during development [374]. - Intangible assets with a finite useful life are amortized over their estimated useful lives and reviewed for impairment at least annually [379]. - The carrying amount of intangible assets is assessed for recoverability whenever events indicate potential impairment [380]. - Impairment is measured as the difference between carrying value and fair value of the impaired asset [380]. - Development expenditures are capitalized only if they lead to new or substantially improved products and are commercially feasible [380]. - All other expenditures to maintain intangible assets are expensed as incurred [381]. - Recent accounting pronouncements are discussed in "Note 2—Significant Accounting Policies" of the Annual Report [382].
Security Matters(SMX) - 2022 Q4 - Annual Report