What changed in this filing

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Item 1. Business

2022-03-28 compared with 2021-02-19 · 260 added, 325 removed, 0 unchanged (100% of the section changed)

Parasol Investments Corporation was incorporated

in the State of Delaware on May 13, 2020.

Since inception, the Company has been engaged in organizational efforts and obtaining

initial financing.

The Company was formed as a vehicle to pursue a business combination.

The business purpose of the

Company is to seek the acquisition of or merger with, an existing company.

The Company selected December 31 st as its

fiscal year end.

The Company, based on proposed business

activities, is a “blank check”

Securities and Exchange Commission (the “SEC”) defines

those companies as “any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of

the Exchange Act, and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an

unidentified company or companies.”

Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a “shell

company,”

because it has no or nominal assets (other than cash) and no or nominal operations.

As of December 31, 2020, the

Company had $8,441 in cash, and its auditors have issued an opinion raising substantial doubt about its ability to continue as

a going concern.

Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check”

companies in their respective jurisdictions.

Management does not intend to undertake any efforts to cause a market to develop in

our securities, either debt or equity, until we have successfully concluded a business combination.

The Company intends to comply

with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements.

The Company was organized as a vehicle

to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being

a publicly held corporation.

The Company’s principal business objective for the next 12 months and beyond such time will

be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings.

Company will not restrict its potential candidate target companies to any specific business, industry or geographical location

and, thus, may acquire any type of business.

The Company has not conducted any active operations since inception, except for its

efforts to locate suitable acquisition candidates.

The Company’s plan of operation for the remainder of the fiscal year and

beyond such time shall be to continue its efforts to locate suitable acquisition candidates.

As of the date of this filing, the

Company has not identified any specific milestones to be achieved by any specific date.

During the remainder of the fiscal year

and beyond such time, we anticipate incurring costs related to the filing of Exchange Act reports, and investigating, analyzing

and consummating an acquisition.

We believe we will be able to meet these costs through the use of funds to be loaned by or invested

in us by our stockholders, management or other investors.

Our management and stockholders have indicated their intent to advance

funds on behalf of the Company as needed in order to accomplish its business plan and comply with its Exchange Act reporting requirements;

however, there are no agreements in effect between the Company and our management and stockholders specifically requiring that

they provide any funds to the Company.

As a result, there are no assurances that such funds will be advanced or that the Company

will be able to secure any additional funding as needed.

The analysis of new business opportunities

will be undertaken by or under the supervision of the Company’s management.

As of the date of this filing, the Company has

not entered into any definitive agreement with any party, nor have there been any specific discussions with any potential business

combination candidate regarding business opportunities for the Company.

While the Company has limited assets and no revenues, the

Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities in that it may

seek out a target company in any type of business, industry or geographical location.

In its efforts to analyze potential acquisition

targets, the Company will consider the following kinds of factors:

potential for growth, indicated by new technology, anticipated market expansion or new products;

competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

strength and diversity of management, either in place or scheduled for recruitment;

capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

the cost of participation by the Company as compared to the perceived tangible and intangible values and potentials;

the extent to which the business opportunity can be advanced;

the accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items.

In applying the foregoing criteria, no

one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based

on reasonable investigative measures and available data.

Potentially available business opportunities may occur in many different

industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of

such business opportunities extremely difficult and complex.

Due to the Registrant’s limited capital available for investigation,

the Registrant may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

In addition, we will

be competing against other entities that possess greater financial, technical and managerial capabilities for identifying and completing

business combinations.

In evaluating a prospective business combination,

we will conduct as extensive a due diligence review of potential targets as possible given the lack of information that may be

available regarding private companies and our limited personnel and financial resources.

We expect that our due diligence will

encompass, among other things, meetings with the target business’s incumbent management an inspection of its facilities,

as necessary and a review of financial and other information, which is made available to us.

This due diligence review will be conducted

either by our management or by unaffiliated third parties we may engage, including but not limited to attorneys, accountants, consultants

or other such professionals.

As of the date of this filing, the Company has not specifically identified any third parties that

it may engage.

The costs associated with hiring third parties as required to complete a business combination may be significant

and are difficult to determine as such costs may vary depending on a variety of factors, including the amount of time it takes

to complete a business combination, the location of the target company, and the size and complexity of the business of the target

While the Company does not intend to retain

any entity to act as a “finder”, the Company’s management, through its various contacts and affiliations with

other entities, including Montrose Capital Partners Limited (“Montrose Capital”), a privately held company that focuses

on identifying public markets venture capital investment opportunities in high-growth early-stage companies, may assist in making

introductions to candidates for a potential business combination.

Montrose Capital is sector agnostic;

through its principal owners,

it has identified and invested in a wide spectrum of global industries, including biotechnology, specialty pharmaceuticals, medical

devices, robotics, and technology.

Montrose Capital may further assist the Company with due diligence by identifying a business

combination target.

Ian Jacobs, a stockholder and director and the sole officer of the Company, is an associate of Montrose Capital.

Mark Tompkins, a stockholder and director of the Company, is an officer and principal owner of Montrose Capital.

Except as described

herein, there are currently no other agreements or preliminary understandings between us and Montrose Capital.

As of the date of

this filing, Montrose Capital has not introduced any specific candidate for a potential business combination to the Company.

Our limited funds and the lack of full-time

management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a target business

before we consummate a business combination.

Management decisions, therefore, will likely be made without detailed feasibility

studies, independent analysis, market surveys and the like which, if we had more funds available to us, would be desirable.

will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors or others associated

with the target business seeking our participation.

The time and costs required to select and

evaluate a target business and to structure and complete a business combination cannot presently be ascertained with any degree

of certainty.

The costs of a business combination transaction will be determined by the following factors:

(1) the amount of time

it takes to complete a business combination, (2) the location of the target company, (3) the size and complexity of the business

of the target company, (4) whether current stockholders of the Company will retain equity in the Company, (5) the scope of the

due diligence investigation required, (6) the involvement of the Company’s auditors in the transaction, (7) possible changes

in the Company’s capital structure in connection with the transaction, and (8) whether funds may be raised contemporaneously

with the transaction.

The time and costs required to complete a business combination can be estimated once a business combination

target has been identified.

Any costs incurred with respect to the evaluation of a prospective business combination that is not

ultimately completed will result in a loss to us.

Through information obtained from industry

professionals including attorneys, investment bankers, and other consultants with experience in the reverse merger industry, the

Company is aware that there are hundreds of shell companies seeking a business combination target.

As a result, the Company believes

it is in a highly competitive market for a small number of business opportunities, which could reduce the likelihood of consummating

a successful business combination.

We are, and will continue to be, an insignificant participant in the business of seeking mergers

with, joint ventures with and acquisitions of small private and public entities.

Many established and well-financed entities, including

small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target

candidates for us.

Nearly all these entities have significantly greater financial resources, technical expertise and managerial

capabilities than we do;

consequently, we will be at a competitive disadvantage in identifying possible business opportunities

and successfully completing a business combination.

These competitive factors may reduce the likelihood of our identifying and

consummating a successful business combination.

In addition, management is currently involved

with other blank check companies—namely, Patricia Acquisition Corp., Laffin Acquisition Corp.

and Parc Investments, Inc.,

and may become associated with additional blank check companies at any time in the future.

As a result, conflicts may arise during

the pursuit of business combinations with other such companies with which our management is involved or may become involved with

in the future if we and the other blank check companies that our officers and directors are affiliated with desire to take advantage

of the same business opportunity.

At this time, the Company has not identified

any specific factors or criteria that will be used to determine which entity will proceed with a proposed transaction in the event

of a conflict of interest.

Management reserves the right to use any such criteria as it determines to be relevant at the time a

proposed transaction is presented.

However, in the event a conflict of interest arises in connection with the identification of

a proposed business transaction, the Company’s management and board of directors will use their reasonable judgment and intend

to take all such actions as may be required in order to satisfy its fiduciary duties.

At this time, our management has not identified

any specific conflicts of interests.

We presently have no employees apart from

our management.

Our officer and directors are engaged in outside business activities and are employed on a full-time basis by other

Our officer and directors will be dividing their time amongst these entities and anticipate that they will devote very

limited time to our business until the acquisition of a successful business opportunity has been identified.

The specific amount

of time that management will devote to the Company may vary from week to week or even day to day;

therefore, the specific amount

of time that management will devote to the Company on a weekly basis cannot be ascertained with any level of certainty.

cases, management intends to spend as much time as is necessary to exercise its fiduciary duties as an officer and/or director

of the Company, and believes that it will be able to devote the time required to consummate a business combination transaction

as necessary.

We expect no significant changes in the

number of our employees other than such changes, if any, incident to a business combination.

Form of Acquisition

The manner in which the Registrant participates

in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Registrant and the promoters

of the opportunity, and the relative negotiating strength of the Registrant and such promoters.

It is likely that the Registrant will acquire

its participation in a business opportunity through the issuance of its Common Stock or other securities of the Registrant, which

could result in substantial dilution to the equity of stockholders of the Registrant immediately prior to the consummation of a

Although the terms of any such transaction have not been identified and cannot be predicted, it is expected that any

business combination transaction the Company may enter into would be structured as a “tax free”

reorganization.

should be noted that the criteria for determining whether or not an acquisition is a so-called “tax free”

reorganization

under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), depends upon the transaction

meeting certain statutory and non-statutory requirements.

There are different types of statutory

requirements for each type of tax-free reorganization and thus each transaction must be reviewed carefully to determine its eligibility

for a tax-free reorganization.

One of the statutory requirements in a tax-free reorganization is that at least a certain percentage

of the total consideration in the transaction must be voting stock of the acquirer corporation.

This could result in substantial

dilution to the equity of those who were stockholders of the Registrant prior to such reorganization.

In addition, post-transaction

dispositions of Registrant’s stock received as consideration could have implications for the tax-free nature of the transaction

The Company does not intend to supply disclosure to stockholders concerning a target company prior to the consummation

of a business combination transaction, unless required by applicable law or regulation.

In the event a proposed business combination

involves a change in majority of directors of the Company, the Company will file and provide to stockholders a Schedule 14F-1,

which shall include, information concerning the target company, as required.

The Company will file a current report on Form 8-K,

as required, within four business days of a business combination which results in the Company ceasing to be a shell company.

Form 8-K will include complete disclosure of the target company, including audited financial statements.

The present stockholders of the Registrant

will likely not have control of a majority of the voting securities of the Registrant following a reorganization transaction.

part of such a transaction, all or a majority of the Registrant’s directors may resign and one or more new directors may

be appointed without any vote by stockholders.

In the case of an acquisition, the transaction

may be accomplished upon the sole determination of management without any vote or approval by stockholders.

In the case of a statutory

merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders’

meeting and obtain

the approval of the holders of a majority of the outstanding securities.

The necessity of obtaining such stockholder approval may

result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal

rights to dissenting stockholders.

Most likely, management will seek to structure any such transaction so as not to require stockholder

The Company intends to search for a target

for a business combination by contacting various sources including, but not limited to, our affiliates, lenders, investment banking

firms, private equity funds, consultants and attorneys.

The approximate number of persons or entities that will be contacted is

unknown and dependent on whether any opportunities are presented by the sources that we contact.

Due to our management’s

affiliation with Montrose Capital, we expect that Montrose Capital may be able to assist the Company in identifying a business

combination target for us.

We currently do not have any agreements or preliminary agreements between us and any other entities

including but not limited to Montrose Capital.

It is anticipated that the investigation

of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and

other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others.

The costs that will be incurred are difficult to determine with any degree of specificity at this time, as such costs are expected

to be dependent on factors such as (1) the amount of time it takes to identify and complete a business combination transaction;

(2) the location, size and complexity of the business of the target company;

(3) whether current stockholders of the Company will

retain equity in the Company;

(4) the scope of the due diligence investigation required;

(5) the involvement of the Company’s

auditors in the transaction;

(6) possible changes in the Company’s capital structure in connection with the transaction;

(7) and whether funds may be raised contemporaneously with the transaction.

If a decision is made not to participate in a specific

business opportunity, the costs theretofore incurred in the related investigation might not be recoverable.

Furthermore, even if

an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may

result in the loss to the Registrant of the related costs incurred.

Other than as described below, the Company has not established

a timeline with respect to the identification of a business combination target.

Recent Development—Proposed Share

On February 9, 2021, the Company filed

with the SEC a Schedule 14F-1 Information Statement relating to an anticipated change in the composition of its board of directors

that is expected to occur in connection with a proposed share exchange to be completed by and among the Company, SmartKem Limited

(“SmartKem”) and the shareholders of SmartKem, pursuant to which the shareholders of SmartKem would exchange their

shares of SmartKem for shares of our Common Stock (the “Exchange”), with SmartKem becoming the Company’s wholly-owned

subsidiary, after which the Company would continue the business of SmartKem.

The Exchange would occur pursuant to a Share Exchange

Agreement expected to be entered into by and among the Company, SmartKem and the shareholders of SmartKem (the “Exchange

Agreement”).

SmartKem is a pioneer in the development

of materials and processes used to make organic thin-film transistors (OTFTs) for the manufacture of flexible electronics.

Pursuant to the terms of the proposed Exchange

Agreement, it is expected that all outstanding shares of SmartKem will be converted into shares of our Common Stock, such that

the holders of SmartKem equity before the proposed Exchange will own approximately 84% of the outstanding shares of our Common

Stock after the Exchange (before giving effect to a potential private placement offering of Common Stock by the Company that we

expect will be consummated simultaneously with or immediately after the proposed Exchange), resulting in a change of control of

Completion of a private placement financing is expected to be a condition to completion of the Exchange.

Certain other information regarding the

proposed Exchange and proposed changes to the management and share ownership of the Company is set forth in the Schedule 14F-1,

The foregoing description of the proposed

Exchange Agreement and potential Common Stock private placement and related matters does not purport to be complete and is qualified

in its entirety by the terms of the actual Exchange Agreement and of terms and documentation for a private placement, none of which

has yet been completed and executed.

The proposed Exchange is expected to be subject to satisfaction of a number of other conditions

precedent, and there can be no assurance that the Exchange Agreement will be signed or that the Exchange or Common Stock private

placement will be consummated or other such conditions satisfied.

If and when the Exchange Agreement is signed, it will be further

described in, and filed by the Company with the SEC as an exhibit to, a Current Report on Form 8-K.

If and when a Common Stock

private placement is consummated, it will be further described in, and material agreements relating thereto will be filed by the

Company with the SEC as exhibits to, a Current Report on Form 8-K.

Emerging Growth Company

The Company is an “emerging growth

company,”

as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and may take advantage

of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging

growth companies ”

including, but not limited to, not

being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act ,

and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934

to hold a nonbinding advisory vote of stockholders on executive compensation and any golden parachute payments not previously

The Company has elected to use the extended

transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

This election

allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private

companies until those standards apply to private companies.

As a result of this election, our financial statements may not be comparable

to companies that comply with public company effective dates.

We will remain an “emerging growth

company”

for up to five years , although we will lose that status sooner if our

revenues are $1.07 billion or more , if we issue more than $1 billion in non-convertible

debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as

of the end of the second quarter of any fiscal year following the anniversary of the initial reporting.

To the extent that we continue to qualify

as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify

as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available

to us as a smaller reporting company, including:

(1) not being required to comply with the auditor attestation requirements of

Section 404(b) of the Sarbanes Oxley Act;

(2) scaled executive compensation disclosures;

and (3) the requirement to provide only

two years of audited financial statements, instead of three years.

Risk Factors.

As a “smaller reporting company”

as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Unresolved Staff Comments.

As a “smaller reporting company”

as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Unless otherwise stated or the context otherwise indicates, references to “SmartKem” the “Company,” “we,” “our,” “us,” or similar terms refer to SmartKem, Inc.

and its subsidiaries.

We are a pioneer in the development of materials and processes used to make OTFTs for the manufacture of flexible electronics.

Our TRUFLEX® semiconductor technology deposits organic ink on a substrate at a temperature as low as 80°C, enabling manufacturers to use a range of low-cost flexible plastic substrates using existing industry standard equipment and infrastructure.

Our transistor stacks are flexible, bendable, wearable and lightweight and can be used in a number of different applications, including bendable smart-phone displays, curved automotive displays, e-paper displays, wearables, fingerprint sensors and printed biosensors.

Our Technology

The invention and development of FET devices has enabled the rapid expansion of electronics industry, particularly with the advent of the planar process essential for integrated circuitry.

This is due to the ability to create compact circuits with an ever-increasing capability, lower cost per logic function, and a higher frequency of operation.

Integrated circuits are present in almost all electronic devices today and there is a constant drive to embed smart features into a greater number of applications.

TFTs are a type of FET that can be processed on large area flat surfaces to make display screen backplanes, digital/analog electronics and sensor arrays for a wide range of consumer and industrial applications.

The manufacturing of silicon- based electronics either in wafer or thin-film form, such as a-Si on glass, requires a high temperature process (approximately 300°C).

Because plastic materials melt at high temperature, TFTs are manufactured on special glass that can withstand such high temperatures and are used to produce mainly rigid products.

Our OTFT technology comprises predominantly organic materials (such as polymers and organic small molecules) and can be solution coated at low temperature (as low as 80°C) onto a wide range of low-cost plastic substrates.

The similarity in stretchability and coefficient of thermal expansion between the substrate and our TRUFLEX® materials permits production of robust, bendable/flexible and lightweight devices.

Our OTFT performance, as measured by charge mobility, exceeds a-Si performance by a factor of four, which we believe offers product designers a significant extension of capability, by enabling them to transform flat, bulky objects into lightweight, robust and flexible products that we expect will appeal to consumers.

Our OSC materials use a polycrystalline small molecule with high mobility, together with a low molecular weight semiconducting polymer, to control the morphology, phase segregation and uniformity of the semiconducting layer and a solvent to deliver inks that are used to make devices with mobilities in excess of 4 cm2/Vs.

In addition, we have developed all the other layers that are necessary to form the complete transistor stack.

Plastic substrates, such as PET, PEN, TAC and COC have relatively low Tg in the range of 100°C to 200°C.

Using these plastics at temperatures above this level causes significant distortion and, in some instances, may even result in melting or thermal breakdown of the polymer.

Our OTFTs can be processed at temperatures as low as 80°C, enabling the use of polymer substrates that are optically clear and low-cost.

In addition, short duration processing at low temperature results in significant energy savings.

Also, plastics do not have the same risk of shattering as glass and therefore less strengthening around the edge of large area plastic-bases devices is necessary, such as the use of aluminum frames to support torsional rigidity.

Plastics can also be processed in very thin sheets (tens of microns) which saves space that can be used for increased battery capacity.

Thin plastic substrates also enable the device to conform very easily to non-planar surfaces such as the human body which makes them well suited for wearable sensor and display devices.

Thin plastic sheets are also conformable, allowing electronics to be curved around irregular surfaces.

Our BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating or slot-die coating which are widely used for the lithography processes used in TFT manufacturing.

As a result, our OTFT process can be integrated into existing manufacturing lines using standard industrial techniques without the need for large capital investment.

Furthermore, the solubility of our inks would permit customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs.

Products and Services

We have internally developed all the materials necessary to fabricate high-performance OTFT devices except for the contact metals and substrates on which those materials are deposited.

We supply our products as a set of stable liquid inks, with each ink forming a separate layer of the device.

Each of the inks forming these layers has been carefully designed to result in the device performance and electrical stability required by the customer.

We supply the ink set with a detailed POR for making the desired device.

Products have been scaled up for formulated ink supply to customers in packages sizes ranging from 100mL to several liters.

These are supplied with CoA and POR alongside device and design consultancy to ensure successful technology transfer.

We intend to offer foundry services to customers who wish to have electronic circuits manufactured for them.

Through arrangements with the United Kingdom’s CPI, we have access to a 2.5 generation (370mm x 470mm) foundry that we use for creating prototypes for evaluation by potential customers.

In 2022, we intend to introduce an option to have devices produced using digital lithography (maskless photolithography), which will reduce the time from CAD layout to prototype for new designs.

We do not have the ability to produce our flexible transistors at commercial scale and intend to seek relationships with existing foundries that are capable of producing our products at commercial scale to provide us with the ability to meet full production orders for customers that do not have their own facilities.

We use product prototyping services to demonstrate applications enabled by OTFT to prospective customers.

This allows potential customers seeking to evaluate physical samples of our materials prior to committing to purchase.

Advantages of Our TRUFLEX® Technology

The most widespread technology is a-Si which is principally used in the manufacture of backplanes for LCDs.

More recent developments in inorganic semiconductors include use of the metal oxide IGZO for backplanes for large area OLED TVs and LTPS for high resolution cell phones.

All these inorganic processes are operated at high temperatures and therefore require high-cost substrates, especially if they are to be processed on plastic.

All are subject to failure on bending, have limited flexibility, and require additional product engineering for protection during bending to prevent failure of the display.

This adds to the overall cost of production of a bendable or foldable device.

Our ability to employ TRUFLEX® materials at temperatures as low as 80°C enables manufacturers to use low-cost plastic substrates and the organic nature of our materials allows the transistors to be truly flexible.

We believe that robust and lightweight display screens which are capable of being bent or folded would enable manufacturers of mobile devices to create products more tailored to customer demand and that our TRUFLEX® OFTFs are uniquely suited for this application.

Our materials are organic and hence can withstand the strains experienced in severe bending such as a fold of a display.

In addition, the substrate does not require the degree of protection from the edges as glass displays do which can eliminate the weight and cost associated with aluminum frames.

Low temperature processing enables a wider range of plastic substrates to be used, allowing properties such as optical clarity to be optimized.

There are also opportunities to process the OTFT on top of other display elements, such as a micro-LED array since the low process temperature would not damage the emissive components.

We believe this ability to pattern the backplane on top of other components could lead to alternative display or sensor design configurations with advantages such as higher aperture ratio.

Market Opportunity

According to Markets and Markets, the global display market size was valued at $148.4 billion in 2021 and is projected to reach $177.1 billion by 2026, a CAGR of 3.6% during the forecast period.

Growth in the display market is driven primarily by increasing demand for consumer electronics, including smart phones, automotive products, e-readers and flat panel displays.

We believe that display manufacturers continue to seek product differentiation as a part of their marketing strategies.

Our TRUFLEX® materials enable customers to make backlight units that are both flexible and can drive high currents stably.

Over the last two years several manufacturers have launched TVs with mini-LED backlight units and a number of companies are developing a new generation of direct emission micro-LED displays, flexible OLED displays, and transparent OLED displays.

These new formats are supported by a variety of different backplanes using tiled versions of existing technologies or PCB backplanes.

We believe that TRUFLEX® materials can be used to provide active-matrix transistor arrays that can address all of these new product categories using low-cost, flexible substrates.

As products become more sophisticated and smart technology is implemented in wider use cases, we expect that manufacturers will seek technology solutions, such as our TRUFLEX® technology that enable them to implement the product designs that consumers will demand.

In addition, we believe that our OTFTs are suitable for applications where a relatively low number of transistors are required over a wide area such as sensors or distributed logic circuits.

Commercialization Strategy

A large sector of our target customers are large consumer electronics companies based in Asia (Taiwan, South Korea, Japan and China) that already own or have access to display backplane manufacturing lines and engage in large scale production of display products for TV or mobile/tablet markets using a-Si process lines.

We believe that these companies are continually seeking to create novel, higher added value electronics products that cannot be manufactured using a-Si glass backplanes.

We believe these potential customers will be attracted to our TRUFLEX® technology which would enable them to create novel, plastic-based products with improved robustness, higher flexibility and lighter weight using their existing production lines.

Other potential customers may not have access to display manufacturing lines and will seek a complete solution for their needs, including production capability.

These are often companies who will use displays as a component within their products and will buy from Asian manufacturers according to what is available at the time.

We can provide prototype production from the Gen 2.5 line at CPI.

We intend to scale this capability by partnering with one or more foundry providers to scale up our ability to meet full production orders for customers that do not have their own facilities.

Once the demand for our backplanes has exceeded our ability to supply products then the market pull would be sufficient to engage Asian display makers to transfer production to their facilities.

Our market strategy includes the identification of specific capabilities or products that we believe can most benefit from our TRUFLEX® technology.

This identification process may involve our marketing efforts or feedback and requests from potential customers.

As described below, once a commercial opportunity is identified, we will engage in a process of demonstration and evaluation with the potential customer.

Our strategy also involves the design and sale of materials for use as logic devices or circuits.

Once we have identified a specific application requirement, we expect to proceed with development work through an understanding of the product specifications and engineering work to calculate the size and capabilities of pixel TFTs and storage capacitors.

For digital logic applications, the situation is more complex, and circuits cannot be designed without access to supporting simulation, design and layout software.

In silicon IC design, EDA tools are used to predict the behavior of circuits made using foundry services.

This allows designers to simulate the behavior of prototype circuits and check their functionality ahead of the fabrication, therefore saving time and money.

We have developed an initial PDK for our process that is designed to be used by third parties in EDA software to allow them to design digital logic devices.

The PDK contains information such as design rules that are specific to our process equipment, and it will also incorporate models of OTFTs made using our materials set.

This will be used for digital device simulation and layout of circuit designs.

We continue to characterize the electrical performance of our materials and to use that data to improve the correlation between simulations produced using those tools and actual devices.

As part of this development, we expect to populate a library of reference designs for common gates used in digital electronic circuits to further simplify third party design processes.

Sales and Marketing

We have a direct sales force consisting of two employees located in Taiwan, and sales representation in China.

Our CEO and management team are also actively engaged in developing customer and partner relationships.

We believe that our initial customers will be located in Taiwan, Japan and the Peoples Republic of China.

Our sales team is supported by engineers and product specialists located at our headquarters in the U.K.

We intend to seek third-party distribution or sale-agent agreements with potential partners where we believe such agreements are justified by the potential market opportunity.

Our sales and marketing efforts have continued to be adversely impacted by the effects of the COVID-19 pandemic.

During the pandemic, travel to and from Asia and other regions has been significantly restricted.

As a result, we have had to cease virtually all business travel and have sought to increase our presence in affected markets through other means, including engaging sales representation in China.

In addition, many of our expected customers are located in Asia, which has imposed severe lock-down restrictions in an effort to combat the pandemic.

Those customers have reported supply shortages and manufacturing delays as a result of the pandemic and the related restrictions, which has had a material adverse impact on the expected markets for our products.

In addition, shipping costs have increased significantly as a result of limitations on other modes of transportation.

Our marketing efforts include attendance at significant industry tradeshows at which we demonstrate the capabilities of our TRUFLEX® technology and responding to requests for proposals and other inquiries from potential customers.

We also publish press releases and other announcements relating to our technical capabilities or achievements and include product information and related technical materials on our website.

In addition, we market through publications, events, conferences, presentations and technical papers.

We may also utilize electronic or print media advertising.

We expect that the time between the identification of a potential customer and the receipt of a purchase order or agreement for the sale of our products will be relatively long.

In certain instances, a potential customer may contact us seeking a generic sample of our materials for evaluation.

In other instances, a customer may come to us with specific performance specifications and inquire about our ability to provide products meeting their specifications after which we provide samples of materials or specific data for evaluation.

After the initial evaluation, the prospective customer may request a prototype of a specific design as a proof-of-concept.

We fabricate prototypes using the Gen 2.5 foundry access we have through our arrangement with CPI.

A significant proportion of all work done during this phase of our sales cycle would be done at our expense, with customers making a contribution in some cases.

Assuming successful prototyping is completed, we expect that we would negotiate and enter into a development agreement with an interested customer under which we would, in collaboration with the potential customer, engage in further engineering and design work.

We expect that we would receive compensation for those services.

We might also engage in pilot-scale level manufacturing of the products developed for the customer as part of that process.

After the satisfactory completion of development work and any related pilot project, an interested customer would then enter into a sales agreement with us under which we would either agree to manufacture products to the customer’s specifications from time to time as requested by the customer, including potential minimum quantity requirements, or we would agree to license our process to the customer for a fee based on a royalty of sales and enter into a supply agreement for our proprietary inks, utilizing a process owned and qualified by us, formulated into inks either in our own facilities or by third-party formulators and shipped directly to customers.

We expect that the sales cycle described above will take approximately 12-24 months.

During that period, we will be required to incur significant expenses without any assurance that a customer order will be obtained.

Accordingly, we will have a significant risk that we will incur those expenses without ever making a sale.

In October 2021, we entered into a joint development agreement with RiTdisplay, a Taiwan based developer of displays.

Under this agreement the two parties are collaborating on the production of a full color demonstration AMOLED display.

In February 2022, we entered into joint development agreement with Nanosys Inc., a leader in developing and delivering quantum dot and micro-LED technology.

Under this agreement the two parties will work together on a new generation of low-cost solution printed micro-LED and quantum dot materials for advanced displays.

Research and Development

We have focused our resources on the creation of high mobility semiconductors which have excellent uniformity, device stability and robustly satisfy the TFT performance specifications defined by customers.

We are constantly seeking to improve the performance of our organic semiconductors and are in the process of evaluating the performance of an extensive series of recently synthesized novel small molecule semiconductors.

Our chemistry team, led by our Chief Scientist, have in-depth knowledge of structure-property relationships for organic materials.

Dielectric and passivation material chemistries are also critical to enabling the OTFT device current to be maximized while ensuring stability during extended operation under voltage or current bias stress.

Some of the critical parameters for performance of an OTFT device include:

Charge mobility – the ability of the material to conduct charge under an electric field.

The higher the charge mobility number the greater the current that can be driven through the device for a given size.

Also, in circuits mobility determines the maximum switching frequency of a device from one logic state to another.

a-Si has a mobility of ~0.5 cm2/Vs, LTPS typically has mobility >50 cm2/Vs and crystalline silicon has a mobility of near 1000 cm2/Vs.

SmartKem’s OTFTs can achieve >3 cm2/Vs at channel length of 4 microns and >4cm2 at 10 microns.

On/off ratio – the ratio of the current driven by the transistor during its on state to the current passed during biasing in its off state.

On/off ratios of >10˄6 are typically required for TFTs used in display pixels so that the programmed voltage does not decay during the frame time.

Our OTFTs have on/off ratios in the order of 10˄7.

Turn on voltage (Vto) – the gate voltage at which the TFT starts to increase its current output.

Values close to zero volts are considered desirable for low power consumption products.

The device should also achieve its transition from off to on over as small a range of gate voltages as possible since this can reduce energy consumption and hence is desirable in battery powered devices.

Threshold voltage (Vth) - gate-source voltage at which the magnitude of the drain current reaches a specified low value (e.g., 10˄-9A).

Threshold voltage (Vth) stability – The ability of device to maintain a defined threshold or turn on voltage following a period of electrical stress (either at room temperature or elevated temperature).

Bias voltage shifts of <2V after 1 hour voltage stress at 60°C and +30V or -30V is a typical specification required for display applications.

We have demonstrated <1V Vth bias stress shift for NBTS and <2V for PBTS in R&D tests.

We are working on integrating this capability into our full five-mask device stack.

Once new materials have been characterized, our materials process development team at Manchester in the U.K.

customizes the formulations and process parameters to allow integration into the device process at CPI.

This team establishes the BKMs for each material and generates understanding of the parameters that can influence the performance.

Initial work may also be done to plan scale up routes for the materials in anticipation of the need to supply to customers.

The generation of fabrication processes and the integration of new materials is done at CPI under the direction of our Chief Technology Officer.

The toolsets at this site provide a rapid feedback loop between our chemistry R&D and industry relevant device performance data sets.

Additionally, the equipment set can be used to generate demonstrator OTFT backplane devices on plastic, OTFT driven displays, and sensors or circuits.

Technology transfer to customers’ pilot lines can also be supported by this team and they can help to diagnose and rectify process problems.

Process engineers also travel to customers’ sites to assist technology transfer alongside our field application engineering team in Taiwan.

This capability has been significantly hampered the COVID-19 pandemic.

In December 2021, we became a member of the University of California, Santa Barbara (UCSB) Solid State Lighting and Energy Electronics Centre (SSLEEC) which is conducting innovative research into the development of micro-LED displays.

As a member of the SSLEEC we have the right to obtain access to technologies and intellectual property developed by the Center in fields such as micro-LEDs and displays.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain intellectual property protection for our active organic semiconductors, formulated OSC and passive interlayer inks, processes and know-how that collectively comprise our TRUFLEX® technology, to operate without infringing the proprietary rights of third parties, and to prevent others from infringing our proprietary rights.

Over the past 10 years, we have been building and are continuing to build the intellectual property portfolio relating to our TRUFLEX® technology.

Our policy is to seek to protect our proprietary position by, among other methods, filing U.S.

and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business.

We also rely on trade secrets, know-how, and technological innovation to develop and maintain our proprietary position.

We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.

Our strategy for the protection of our proprietary technology is to file international (Patent Cooperation Treaty) patent application and pursue these in national jurisdictions that represent significant market opportunities.

However, we assess on a case-by-case basis whether it is strategically more favorable to maintain trade secret protection for our inventions and “know-how” rather than pursue patent protection the latter of which documents will ultimately be in the public domain.

Generally, patents have a term of twenty years from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed, and the patent has not been invalidated.

In certain jurisdictions, and in certain circumstances, patent terms can be extended or reduced.

We believe that we are a technology leader in the design, development, and production of active and passive electronic materials for use in organic electronic applications.

Our patent portfolio is distributed across 16 patent families as set forth in the table below and includes 122 issued patents, 15 pending patent applications and more than 30 trade secrets.

Our patents cover the active organic semiconductor materials, active and passive interlayer formulations, and deposition processes comprising our TRUFLEX® technology.

We also have numerous patent claims and pending patent applications covering a variety of electronic devices including a novel dual gate application that enables enhanced Vto control.

Because our patent portfolio covers all material aspects of our TRUFLEX® technology, we believe we have strong protection for our technology and a competitive advantage over potential competitors who may seek to duplicate our ability to create flexible transistors.

We also rely on trade-secret protection for our confidential and proprietary information, and we typically use non-disclosure agreements when commencing a relationship with a potential customer or partner.

We have an internal program to document our trade secrets for each major area of our technology and operations.

We cannot be sure that we can meaningfully protect our trade secrets on a continuing basis.

Others may independently develop substantially equivalent confidential and proprietary information or otherwise gain access to our trade secrets.

The TRUFLEX® trademark is granted and registered to the Company in its 10 commercially interesting jurisdictions including USA, China, Korea, Taiwan, Japan, and Europe.

We own substantive rights to the chemistry, process, and stack design rules necessary to implement our technology in all jurisdictions of commercial interest.

Manufacturing and Supply

We obtain strategic intermediates and final products from multiple sources who produce our active semiconductor materials to our specifications.

Our TRUFLEX® materials fall into two main categories, “active” organic semiconductor materials and “passive” interlayer materials.

Our active materials generally require high levels of process and product control, and therefore these are synthesized from start to end by us or a third party that has met certain certification requirements and then formulated by us into the organic semiconductor inks.

We validate active components internally before use.

Our passive interlayers inks use a range of commercially available intermediates, formulated to our specifications to meet differing end-use performance parameters depending on the intended use.

Our active and passive inks are proprietary to us.

We synthesize the active materials either internally or using third-party suppliers that meet specific certification requirements.

The raw materials used to produce the formulated passive interlayers are purchased from multiple suppliers and tested and validated internally before use.

The passive and active interlayer inks are presently manufactured internally in our formulation facility located in Manchester in the U.K.

We use our U.K.-based formulation activity to enable customers to validate our materials on their Gen1- Gen2.5 pilot lines.

Our TRUFLEX® inks typically comprise between 1.2% up to 25% by weight of solids with the remainder being made up by electronic grade solvents.

For commercial supply quantities, to avoid the shipping costs associated with large quantities of locally available solvents, we expect to supply fully formulated ink to customers from a formulation facility located close to the customer’s manufacturing facility.

We may also outsource the ink manufacture to an accredited third-party local formulator subject to our final QC testing of the formulated inks.

We have not experienced any supply shortages with respect to the materials used to formulate our proprietary inks.

In addition, we have not experienced scheduling delays in obtaining access to CPI’s foundry equipment.

To date, our manufacturing and supply operations have not been adversely impacted by the COVID-19 pandemic.

However, we may be impacted in the future as we seek to expand our operations and enter into foundry arrangements with third-party manufacturers.

CPI Agreement

We perform prototyping with our own employees using foundry equipment made available to us by CPI.

We use the CPI facility to produce test samples for internal evaluation and for the supply of demonstrators to potential customers and for general market development.

CPI is funded through a combination of U.K.

government grants, collaborative research and development projects funded by the private and public sector and contracts funded by businesses.

CPI provides services to companies engaged in translating ideas and inventions into commercially successful products and processes.

It operates seven national facilities in the Northeast of England and Scotland and provides industry relevant expertise and assets to its customers.

We have entered into a framework services agreement with the Centre For Process Innovation Limited (“CPIL”), the management company for CPI, pursuant to which we purchase services consisting primarily of access to CPI process equipment required for fabrication as well as access to CPI staff with specific skills, to the extent required, at specified costs, including a minimum annual spending requirement.

We have 16 employees at the CPI facility who operate the CPI equipment on our behalf.

Pursuant to the terms of this agreement, we utilize an online booking system to book usage of equipment for immediate use, subject to availability.

For critical equipment that other CPI customers may seek to use, we may book up to two weeks in advance to guarantee availability.

CPIL has agreed to use its reasonable commercial endeavors to supply the requested services.

The latest agreement with CPIL became effective upon the Closing and has a fixed term of three years.

The agreement may be terminated by either party in the event of a breach by the other party.

We also lease office space at CPI’s facility in Sedgefield, England.

We believe that competition in our targeted markets is based on a variety of factors, including capability, functionality, performance, reliability, ease of use and ability to supply in sufficient quantities.

We believe we can, or will be able to, compete effectively based on these factors.

a-Si technology is an inorganic process widely used in the manufacture of backplanes for LCDs.

More recent developments in inorganic semiconductors include use of the metal oxide IGZO for backplanes for large area OLED TVs and LTPS for high resolution cell phones.

All these inorganic processes are operated at high temperatures and therefore require high-cost substrates, especially if they are to be processed on plastic.

We believe all of these technologies are subject to failure on bending and have limited, if any, flexibility.

A number of competitors have engaged in the development of organic inks.

However, these competitors either opt to use polymeric semiconductors (BASF SE, Merck KGaA and Sumitomo Chemical Co., Ltd.) that process well but have a lower mobility than the polycrystalline organic materials in our TRUFLEX® materials, or polycrystalline semiconductors that have high mobility but relatively poor uniformity when processed.

We believe our proprietary technology, which combines a polycrystalline molecule with a matched semiconducting polymer, provides higher mobility and better processability over these technologies.

Many of our potential competitors could have substantial competitive advantages such as greater name recognition, longer operating histories, broader and deeper product portfolios, larger customer bases, substantially greater financial and other resources, and larger scale manufacturing operations.

However, we believe our products have the potential to compete with many of our competitors’ offerings through product performance, product reliability and satisfaction of customer qualifications and standards.

Government Regulation

In addition to customer specific requirements for safety health and the environment, our formulated materials also may be subject to government regulation during their use in the country of device manufacture and from regulations covering the materials in the finished device.

These could include the toxicity (potential for Carcinogenicity, Mutagenicity, and Teratogenicity) and restrictions from the Environmental Protection Agencies in the countries of manufacture.

All new chemicals we obtain are evaluated the time of order and a Control of Substances Hazardous to Health (“COSHH”) assessment is performed prior to commencement of any practical work with these materials.

The COSHH assessment considers chemical hazards associated with the material, its physical properties, the scale of the planned work and the nature of that work e.g., temperature and containment.

This process provides the first opportunity to screen out any materials that may be prohibited by the ultimate customer.

Any use of material in Health and Safety Executive COSHH hazard category E, all but gram scale uses of non-volatile material in hazard category D and use of material in hazard category C in quantities of more than 1kg would trigger a management review.

While it is possible that management authorization may be given to conduct research using materials in categories D & E, their use in a potential formulated product would be discouraged and an alternative sought at an early stage.

Materials are also screened against lists of banned and restricted materials provided by display manufacturers.

Any material present on the display manufacturers banned list would not be used in formulated product.

We work with a third-party service provider to create safety data sheets for our formulated products that are shipped to customers and other end users.

Our formulated products contain no materials that are restricted in the U.K.

and no permissions or exemptions are required.

Our OGI material is fluorinated and spun from a fluorosolvent listed under regulation (EC) No 428/2009 of 5 May 2009 under section 1C006d.

Export of formulations may require a Standard individual export license to be applied for and end use declaration made by the customer.

These can be obtained through the U.K.’s SPIRE system.

To the extent our products are or become subject to U.K.

export controls and regulations, these regulations may limit the export of our products and technology, and provision of our services outside of the U.K., or may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions, including annual or semi-annual reporting.

Export control and economic sanctions laws may also include prohibitions on the sale or supply of certain of our products to embargoed or sanctioned countries, regions, governments, persons, and entities.

In addition, various countries regulate the importation of certain products, through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products.

The exportation, re-exportation, and importation of our products and technology and the provision of services, including by our partners, must comply with these laws or else we may be adversely affected, through reputational harm, government investigations, penalties, and a denial or curtailment of our ability to export our products and technology.

Complying with export control and sanctions laws may be time-consuming and may result in the delay or loss of sales opportunities.

Although we take precautions to prevent our products and technology from being provided in violation of such laws, our products and technology may have previously been, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take.

If we are found to be in violation of U.K.

sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us.

Export or import laws or sanctions policies are subject to rapid change and have been the subject of recent U.K.

government actions.

Changes in export or import laws or sanctions policies, may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition and results of operations.

As of December 31, 2021, we had 41 full-time employees and 3 part-time employees of which 39 are based in the United Kingdom.

17 of our employees hold advanced degrees, including 11 Ph.Ds.

We believe that our scientists and technical experts are significant assets of our business, and we value and support hiring exceptional talent to further develop our TRUFLEX® technology and drive our business growth.

Corporate History

We were originally incorporated as Parasol Investments Corporation in the State of Delaware in May 2020.

Prior to the acquisition of SmartKem Ltd in February 2021, we were a “shell” company registered under the Exchange Act, with no specific business plan or purpose.

In accordance with “reverse merger” accounting treatment, our historical financial statements at period ends, and for periods ended, prior to our acquisition of SmartKem Limited were replaced with the historic financial statements of SmartKem Ltd in our SEC filings made after the acquisition.

Our principal executive offices are located at Manchester Technology Centre, Hexagon Tower, Delaunays Road, Blackley Manchester, M9 8GQ U.K.

Our telephone number is +44 (0)161 721 1514.

Additional Information

We maintain a website at www.smartkem.com, to which we regularly post copies of our press releases as well as additional information about us.

Our filings with the SEC will be available free of charge through the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC.

Information contained in our website is not a part of, nor incorporated by reference into, this Report or our other filings with the SEC, and should not be relied upon.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business