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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-28 · 193 added, 165 removed, 365 unchanged (50% of the section changed)

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Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.

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Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

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

As of the end of the year covered by this Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) pursuant to Rule 13a-15 of the Exchange Act.

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Changes in Internal Control over Financial Reporting

During the year ended December 31, 2020 and for interim reporting periods during the year ended December 31, 2021, our management and our independent registered public accounting firm identified material weaknesses related to (i) the fact that certain members of our finance team and personnel are able to operate across a number of different functions and have user access that gives rise to segregation of duties risks in connection with our information technology infrastructure and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place, or not operating effectively.

Under the direction of the Audit Committee, management has developed a plan of remediation to the overall design and operation of our internal control environment, as well as to policies and procedures to improve the overall

effectiveness of internal controls in the final quarter of the year ending December 31, 2021.

Under the remediation plan, we;

● recruited additional finance personnel including those with expertise in generally accepted accounting principles and controls over financial reporting;

● implemented measures to restrict system access, designed and operated enhanced controls including IT General Controls;

● documented the policies and procedures covering our accounting and reporting functions;

● engaged external advisors to provide expert assistance with these efforts and with the evaluation of the effectiveness of our internal controls over financial reporting.

In August 2022, we determined that we made an error in the presentation and accounting of our consolidated statement of cashflows in our annual and interim consolidated financial statements during 2021 and 2022.

The effect of this error was to overstate net cash used in operating activities and effect of exchange rate changes on cash for each reported period.

For the year ended December 31, 2021, the effect of this error was to overstate net cash used in operating activities and effect of exchange rate changes on cash by $0.8 million, respectively.

The error and the required restatement had no effect on our cash flow from investing activities, financing activities, net change in cash or cash and cash equivalents as of the reporting date and had no impact on our consolidated balance sheet, our consolidated statements of operations and comprehensive loss and our consolidated statements of stockholders’ equity.

As a result, we determined that there was a material error in the cash flow statement that required a restatement of the financial statements for the fiscal year ended December 31, 2021 and to our Form 10-Qs for the periods ended

September 30, 2021 and March 31, 2022 (including comparative information for March 31, 2021) to restate the previously issued financial statements, with comparatives for June 30, 2021 restated in our Form 10-Q for the period ended June 30, 2022 to restate the previously issued financial statements.

This was due to inadequate design and implementation of controls to evaluate and monitor the presentation and compliance with accounting principles generally accepted in the United States of America related to the cash flow statement.

Under the direction of the Audit Committee, management has actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness in respect of inadequate design and implementation of controls to evaluate and monitor the presentation and compliance with accounting principles generally accepted in the United States of America related to the cash flow statement.

The remediation plan included enhancement of our existing monitoring and review controls over the preparation of financial statements, including designing and documenting additional procedures, reconciliations and analysis to evaluate and monitor presentation of the cash flow statement.

As of December 31, 2022, management, with the participation of our Chief Executive Officer and Chief Financial Officer, has determined that the material weaknesses identified in prior years and in the first three quarters of 2022 have been remediated.

Management believes that progress continues to be made towards improving the effective internal control environment, on a quarterly basis, as we continue to design and implement common policies, IT general controls, procedures and controls for financial reporting.

We have many individual policies, procedures and controls already in place and appropriate financial systems has been implemented to establish an effective internal control environment.

As of December 31, 2021, management, with the participation of our Chief Executive Officer and Chief Financial Officer, have determined that the material weaknesses identified in prior years and in the first three quarters of 2021 have been remediated.

We have many individual policies, procedures and controls already in place and appropriate financial systems have been implemented to establish an effective internal control environment.

Under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of our internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal controls during each of the quarters and the year ending December 31, 2023.

Other than the changes to remediate the material weaknesses noted above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for nonaccelerated filers and emerging growth companies from the internal control audit requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

Other Information

On March 29, 2023, the Company entered into an employment agreement with Barbra Keck, the Company’s Chief Financial Officer (the “Keck Employment Agreement”) setting forth the terms and conditions of her employment and her expectations as Chief Financial Officer.

The Keck Employment Agreement provides, among other things, for:

(i) a term of three years beginning from December 14, 2022, the date of Ms.

Keck’s appointment as Chief Financial Officer, subject to automatic renewal for successive one year terms unless either party provides sixty (60) days prior written notice of its intent not to renew;

(ii) an annual base salary of $300,000 (subject to adjustment upwards to $350,000 in the board of director’s discretion, but at the latest immediately upon the listing of the Company’s common stock on either The Nasdaq Stock Market or the NYSE American Exchange);

(iii) eligibility for an annual bonus having a maximum of 40% of her then base salary;

and (iv) in the event that Ms.

Keck’s employment is terminated without “cause” or she resigns “for good reason” (each as defined in the Keck Employment Agreement), or her employment is terminated at the end of the any term as the result of the Company providing notice of non-renewal, subject to execution and non-revocation of a release of claims in the Company’s favor, Ms.

Keck will be eligible for:

(a) payments equal to twelve (12) months of her base salary (at the rate in effect immediately prior to the date of termination), less applicable withholdings and authorized deductions, to be paid in equal installments in accordance with our customary payroll practices), (b) a pro-rata bonus for the year of termination and (c) in the event Ms.

Keck timely elects to continue any health insurance employee benefits pursuant to COBRA, monthly payments equal to the applicable COBRA costs for a period of six (6) months.

Keck is subject to non-compete and non-solicit provisions, which apply during the term of her employment and for a period of twelve (12) months following termination of her employment for any reason.

The Keck Employment Agreement also contains customary confidentiality and assignment of inventions provisions.

The description of the Keck Employment

Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Keck Employment Agreement, which has been filed as Exhibit 10.25 to this Annual Report and is incorporated herein by reference.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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The following table sets forth the names, positions and ages of our executive officers and directors as of March 24, 2023:

Chairman of the Board and Chief Executive Officer

Chairman of the Board, Chief Executive Officer and President

Chief Financial Officer and Director

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Chief Technology Officer

Simon King, Ph.D.

Klaas de Boer (1) (2) (3)

Keck (1)(2)(3)

Steven DenBaars, Ph.D.

(1) Member of the Audit Committee.

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Executive Officers

Ian Jenks has served as our Chief Executive Officer since December 2017 and as a member of our board of directors since February 2021.

Ian Jenks has served as our Chief Executive Officer and President since December 2017 and as a member of our board of directors since February 2021.

Jenks has more than 30 years of board-level experience in the industrial technology industry and has served as chief executive officer of companies operating in the United States and Europe.

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Jenks’s past directorships include Techstep ASA, a provider of managed mobile services in the Nordics, Paysafe plc., an international provider of payment processing services, and Brady plc, a provider of commodity trading software.

Jenks also has served and continues to serve as a director of a number of private companies.

Jenks has also served and continues to serve as a director of a number of private companies.

Jenks received a B.Sc.

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Jenks’ significant management experience and experience in the technology industry qualify him to serve on our board of directors.

Robert Bahns has served as our Chief Financial Officer since February 2020 and as a member of our board of directors since February 2021.

From November 2018 until January 2020, he was the chief financial officer of WaveOptics, Ltd., a developer of waveguides and projectors for augmented reality glasses.

From April 2005 until he joined WaveOptics full-time, he was an investment partner at Imperial Innovations Ltd., a business investing in university technology start-ups, which was acquired by IP Group plc in December 2017 at which point he became a partner of IP Group plc.

Bahns received an M.A.

in Electrical Sciences from the University of Cambridge and an M.B.A.

We believe that Mr.

Bahns’ experience as a chief financial officer and his understanding of the financial and operating challenges of companies like ours qualify him to serve on our board of directors.

Keck has served as our Chief Financial Officer since December 2022 and has served as a member of our board of directors since February 2021.

From February 2021 to December 2022, Ms.

Keck served as the chief financial officer of Deverra Therapeutics, Inc., a developer of cell therapies.

From January 2009 until May 2020, she held positions of increasing responsibility at Delcath Systems, Inc., an interventional oncology company, starting as controller and ultimately becoming a senior vice president in March 2015 and chief financial officer in February 2017.

Keck received an M.B.A.

in Accountancy from Baruch College and a Bachelor of Music in Music Education from the University of Dayton.

We believe that Ms.

Keck’s significant management experience, including as our Chief Financial Officer, qualifies her to serve on our board of directors.

Beverley Brown, Ph.D.

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She provides services to us through her consulting company, B Brown Consultants Ltd.

Prior to joining our company, she held a number of research and development positions with increasing responsibilities at Imperial Chemical Industries Ltd., Zeneca Group PLC and at the Avecia Group PLC.

Prior to joining our company, she held a number of research and

development positions with increasing responsibilities at Imperial Chemical Industries Ltd., Zeneca Group PLC and at the Avecia Group PLC.

She formed BAB Consultants Ltd in 2006 and for approximately eight years provided consulting services to a number of chemical companies, as well as to the U.K.

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Non-Employee Directors

Simon King, PhD.

has served as a member of our board of directors since February 2021 and prior to that served as a member of the board of directors of SmartKem Limited since 2014.

Since January 2012, Dr.

King has been a member of and since May 2019 a partner of Octopus Ventures, a venture capital fund and affiliate of Octopus Investments Limited.

King received his M.A.

in Physics from Cambridge University and his Ph.D.

in Physical Chemistry from Imperial College London.

We believe that Dr.

King’s investment experience and expertise in organic semiconductors qualify him to serve on our board of directors.

Klaas de Boer has served as a member of our board of directors since February 2021 and has served as a member of the board of directors of SmartKem Limited since 2017.

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de Boer served as the managing partner of Entrepreneurs Fund Management LLP, a venture capital firm.

de Boer served as a director of

Lifeline Scientific Inc., Heliocentris Energy Solutions AG and serves as chair of AIM listed Xeros Technology Group plc.

de Boer served as a director of Lifeline Scientific Inc., Heliocentris Energy Solutions AG and serves as chair of AIM listed Xeros Technology Group plc.

de Boer has been a venture capitalist for more than 20 years.

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de Boer’s venture capital experience, experience with complex technology companies and previous experience as a director of publicly traded companies qualify him to serve on our board of directors.

Keck has served as a member of our board of directors since February 2021.

Since February 2021, Ms.

Keck has served as the Chief Financial Officer of Deverra Therapeutics, Inc., a developer of cell therapies.

From January 2009 until May 2020, she held positions of increasing responsibility at Delcath Systems, Inc., an interventional oncology company, starting as Controller and ultimately becoming a senior vice president in March 2015 and chief financial officer in February 2017.

Keck received an M.B.A.

in Accountancy from Baruch College and a Bachelor of Music in Music Education from the University of Dayton.

We believe that Ms.

Keck’s prior experience as a chief financial officer of a public company and her status as an audit committee financial expert qualify her to serve on our board of directors.

Steven DenBaars has served as a member of our board of directors since June 2022.

Professor DenBaars is a Distinguished Professor of Materials and Co-Director of the Solid-State Lighting and Energy Electronics Center at University of California, Santa Barbara.

Professor DenBaars joined UCSB in February 1991, and currently holds the Mitsubishi Chemical Chair in Solid State Lighting and Displays.

He has served on the board of directors of Akoustis Technologies, Inc.

(NASDAQ:AKTS), a developer and manufacturer of radio frequency filters for mobile devices, since May 2015 and has served on its technology committee since July 2017.

He has also been a member of the board of directors of Aeluma, Inc., a privately held start-up engaged in the manufacture high performance sensors for mobile devices and vehicles, since June 2021.

Professor DenBaars was formerly a co-founder and board member of privately held technology start-up companies, Soraa Inc.

and Soraa Laser Diode Inc.

Professor DenBaars has a Bachelor of Science in Metallurgical Engineering from the University of Arizona and a Master of Science and a Ph.D.

in Material Science and Electrical Engineering from the University of Southern California.

Professor DenBaars is a member of the National Academy of Engineering, and a Fellow of IEEE and National Academy of Inventors.

We believe that Professor DenBaars’s years of experience in the electronics industry and his extensive research involving semiconductors qualify him to serve on our board of directors.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our employees, officers and directors.

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

A current copy of our code is posted on our website, which is located www.smartkem.com.

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We evaluate independence by the standards for director independence set forth in the Nasdaq Marketplace Rules.

Under such rules, our board of directors has determined that all members of the board of directors, except Messrs.

Jenks and Bahns, are independent directors.

Jenks nor Mr.

Bahns are independent directors under these rules because they are executive officers of our company.

Under such rules, our board of directors has determined that all current members of the board of directors, except Mr.

Jenks and Ms.

Keck, are independent directors.

Jenks nor Ms.

Keck are independent directors under these rules because they are executive officers of the Company.

Robert Bahns, who resigned from the board of directors in September of 2022, was not an independent director, because he was an executive officer of the Company.

Simon King, who served as a director until our 2022 annual meeting of stockholders, was an independent director.

In making such independence determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

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There are no family relationships among any of our directors and executive officers .

At the time, if any, that shares of our common stock are listed on Nasdaq or another national securities exchange, we intend to comply with any applicable requirements of such exchange with respect to the composition of our board of directors.

Classified Board of Directors

In accordance with the terms of our amended and restated certificate of incorporation, our board of directors is divided into three staggered classes of directors as follows:

● Class I director is Dr.

● Class II directors are Mr.

Bahns and Mr.

● Class I director is Mr.

● Class II director is Mr.

● Class III directors are Mr.

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At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring.

The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2022 for Class I directors, 2023 for Class II directors and 2024 for Class III directors.

The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2025 for the Class I director, 2023 for the Class II director and 2024 for Class III directors.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that the number of directors will be fixed from time to time by a resolution of a majority vote of the directors then in office.

Any increase or

decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of our directors.

Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of our directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of our management or a change in control.

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As our common stock is not presently listed for trading or quotation on a national securities exchange, we are not presently required to have board committees.

However, our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates pursuant to a charter adopted by our board of directors.

Members serve on these committees until their resignation or until otherwise determined by the board of directors.

The composition and functioning of all of our committees complies with all applicable requirements of the Sarbanes-Oxley Act and SEC rules and regulations, and we intend to comply with those of Nasdaq.

The composition and functioning of all of our committees complies with all applicable requirements of the Sarbanes-Oxley Act and SEC rules and regulations and, at the time, if any, that shares of our common stock are listed on Nasdaq or another national securities exchange, we intend to comply with any applicable requirements of such exchange with respect to the composition of our committees of the board of directors.

Audit Committee

de Boer serve on the audit committee, which is chaired by Ms.

Our board of directors has determined that each has sufficient knowledge in financial and auditing matters to serve on the audit committee and that Ms.

de Boer are “independent” for audit committee purposes as that term is defined under SEC and Nasdaq Marketplace Rules.

Our board of directors has designated Ms.

DenBaars and Mr.

de Boer serve on the audit committee, which is chaired by Mr.

Our board of directors has determined that each has sufficient knowledge in financial and auditing matters to serve on the audit committee and that each are “independent” for audit committee purposes as that term is defined under SEC and Nasdaq Marketplace Rules.

Prior to her employment as our Chief Financial Officer, the board of directors had designated Ms.

Keck as an “audit committee financial expert,” as defined under the applicable rules of the SEC.

King is a representative of one of our largest stockholders that beneficially owns more than 10% of our common stock, Dr.

King is deemed to be affiliated persons of our company pursuant to SEC Rule 10A-3 and therefore does not meet the heightened independence requirements established by Nasdaq and the SEC for membership on our audit committee.

However, we have included Dr.

King on the audit committee because of his financial expertise and his status as a non-employee director.

At the time, if any, that shares of our common stock are listed on Nasdaq or another national securities exchange, we expect that the composition of our audit committee will satisfy any applicable independence requirements.

At the time she became our Chief Financial Officer, Ms.

Keck no longer met the independence requirements for membership on the audit committee and stepped down as a member.

As a result, the audit committee currently does not have an “audit committee financial expert.” At the time, if any, that shares of our common stock are listed on Nasdaq or another national securities exchange, we intend to comply with any applicable requirements of such exchange with respect to the composition of our audit committee, including the requirement to have an “audit committee financial expert.”

The audit committee’s responsibilities include, but are not limited to:

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Compensation Committee

Keck serve on the compensation committee, which is chaired by Dr.

DenBaars and Mr.

de Boer serve on the compensation committee, which is chaired by Mr.

Our board of directors has determined that each member of the compensation committee is “independent” as defined under the Nasdaq Marketplace Rules.

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Nominating and Corporate Governance Committee

King serve on the nominating and corporate governance committee, which is chaired by Mr.

de Boer and Mr.

DenBaars serve on the nominating and corporate governance committee, which is chaired by Mr.

Our board of directors has determined that each member of the nominating and corporate governance committee is “independent” under the Nasdaq Marketplace Rules.

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From our inception to the closing of the Exchange, no compensation was earned by or paid to our executive officers.

SmartKem became our wholly owned subsidiary upon the closing of the Exchange on February 23, 2021, and its senior management became our senior management.

The following table shows the compensation awarded to or earned by our principal executive officer during the fiscal year ended December 31, 2021, our two other most highly compensated executive officers who were serving as executive officers as of December 31, 2021, and up to two additional individuals for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer as of December 31, 2021.

SmartKem Limited became our wholly owned subsidiary upon the closing of the Exchange on February 23, 2021, and its senior management became our senior management.

The following table shows the compensation awarded to or earned by our principal executive officer during the fiscal year ended December 31, 2022 and December 31, 2021, our two other most highly compensated executive officers who were serving as executive officers as of December 31, 2022 and December 31, 2021, and up to two additional individuals for whom disclosure would have been provided but for the fact that the individual was not serving as an executive officer as of December 31, 2022.

The persons listed in the following table are referred to herein as the “named executive officers.”

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Chief Executive Officer

Robert Bahns (3)

Chief Financial Officer

Beverly Brown (3)

Chief Scientist

Chief Technology Officer

(1) The amounts reported represent the aggregate grant-date fair value of the stock options awarded to the named executive officer, calculated in accordance with ASC 718.

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(2) Represents our contributions to our workplace pension scheme and private healthcare insurance.

Bahns joined our company in February 2020.

(3) Represents consulting fees paid to Dr.

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In accordance with the Pensions Act, all eligible employees are automatically enrolled upon joining our company unless they advise they wish to opt out.

As defined by the Pensions Act, current required contributions are 5% employee and 3% employer.

As defined by the Pensions Act, the current required contributions are 5% employee and 3% employer.

We match employee contributions to a maximum of 6% of base salary.

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Jenks timely elects to continue his health insurance employee benefits pursuant to COBRA, monthly payments equal to the applicable COBRA costs for a period of six (6) months.

Jenks is subject to non-compete and

non-solicit provisions, which applies during the term of his employment and for a period of 12 months following termination of his employment for any reason.

Jenks is subject to non-compete and non-solicit provisions, which applies during the term of his employment and for a period of 12 months following termination of his employment for any reason.

The Jenks Employment Agreement also contains customary confidentiality and assignment of inventions provisions.

We entered into a service agreement with Mr.

Bahns, dated as of February 23, 2021 (the “Bahns Employment Agreement”).

The Bahns Employment Agreement provides, among other things, for:

(i) a three-month probationary period (the “Probationary Period”) whereby Mr.

Bahns may be terminated at any time during such period upon one week’s notice or payment in lieu of notice;

(ii) upon the completion of the Probationary Period by Mr.

Bahns, the Bahns Employment Agreement will continue until terminated (a) by either party giving not less than six months’ prior notice in writing, (b) by SmartKem electing to make a “Payment in Lieu” whereby SmartKem pays to Mr.

Bahns an amount equal to his salary which he would have been entitled to receive during the notice period referenced in clause (a), or (c) for “cause”;

(iii) an annual base salary of $204,735;

Bahns’ participation in our pension program and death in service (life insurance) scheme.

We entered into a consultancy agreement with B Brown Consultants Ltd, Dr.

Brown’s consultancy company, dated as of February 23, 2021 (the “Brown Consultancy Agreement”).

The Brown Consultancy Agreement provides, amongst other things, for:

The Brown Consultancy Agreement provides, among other things, for:

Brown (or, with the approval of our board a substitute) is to provide defined services to SmartKem;

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SmartKem also agreed to reimburse certain expenses incurred in connection with the services to be provided under the Brown Consultancy Agreement.

We entered into a service agreement with Dr.

Ogier, dated as of February 23, 2021 (the “Ogier Employment Agreement”).

The Ogier Employment Agreement provides, among other things, for:

(i) a three-month Probationary Period whereby Dr.

Ogier may be terminated at any time during such period upon one week’s notice or payment in lieu of notice;

(ii) upon the completion of the Probationary Period by Dr.

Ogier, the Ogier Employment Agreement will continue until terminated (a) by either party giving not less than six months’ prior notice in writing, (b) by SmartKem electing to make a “Payment in Lieu” whereby SmartKem pays to Dr.

Ogier an amount equal to his salary which he would have been entitled to receive during the notice period referenced in clause (a), or (c) for “cause”;

(iii) an annual base salary of $163,788;

Ogier’s participation in SmartKem’s pension program and death in service (life insurance) scheme.

Outstanding Equity Awards at December 31, 2022

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Option Expiration Date (1)

Beverly Brown (2)

(1) The expiration date shown is the normal expiration date and the latest date that options may be exercised subject to certain extraordinary events.

(2) Consists of SmartKem Unapproved Options held by Dr.

Brown’s consultancy company.

Brown’s consulting company.

Director Compensation

The following table sets forth information concerning the compensation paid to our non-employee directors during 2021.

Outside Director Name

The following table sets forth information concerning the compensation paid to our directors during 2022.

Director Name

Cash Compensation

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All Other Compensation

Barbra Keck (2)

Klaas de Boer (5)

Steven DenBaars (6)

Simon King (7)

The amounts reported represent the aggregate grant-date fair value of the stock options awarded to the named executive officer, calculated in accordance with ASC 718.

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Keck was 474,000.

Options to purchase 450,000 shares of common stock were issued to Ms.

Keck in connection with her appointment as our Chief Financial Officer.

Represents amounts paid for board service prior to Ms.

Keck’s appointment as our Chief Financial Officer on December 14, 2022.

Keck has served as our Chief Financial Officer since December 14, 2022.

Pursuant to the Keck Employment Agreement, Ms.

Keck is entitled to an annual base salary of $300,000 and an annual bonus of up to 40% of her base compensation subject to achievement of key performance indicators as determined by the board of directors.

Keck was not paid any additional compensation for her services as a director subsequent to her appointment as our Chief Financial Officer.

Keck is currently an executive officer, but is not a “named executive officer.”

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2022 held by Mr.

de Boer was 24,000.

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2022 held by Mr.

DenBaars was 18,000.

King served as a member of our board of directors until our 2022 annual meeting of stockholders, which occurred on June 30, 2022.

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2022 held by Dr.

King was nil.

Robert Bahns resigned from the board of directors effective September 19, 2022 and had also served as our Chief Financial Officer until such time.

Bahns was an executive officer of our Company, but is not a “named executive officer.” Mr.

Bahns received no additional compensation for services provided as a director.

Non-Employee Director Compensation

On March 31, 2021, the Board, upon recommendation of the Compensation Committee, adopted a non-employee director compensation policy (the “Policy”), pursuant to which each non-employee employee director is entitled to receive an annual cash retainer of $36,000.

On March 31, 2021, the board of directors, upon recommendation of the Compensation Committee, adopted a non-employee director compensation policy (the “Policy”), pursuant to which each non-employee employee director is entitled to receive an annual cash retainer of $36,000.

In addition, each non-employee director was initially granted options to purchase 18,000 shares of common stock, which will vest 25% on the one-year anniversary of the grant date and the remainder in equal monthly installments over three years and is entitled in each subsequent year to receive options to purchase 6,000 shares of common stock, which will vest on the one-year anniversary of the grant date.

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Except as indicated in the footnotes below, and subject to applicable community property laws, we believe, based on the information furnished to us, the persons and entities named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

Percentage of beneficial ownership is based on 26,566,809 shares of our common stock outstanding as of March 14, 2022.

In computing the number of shares beneficially owned by a person or entity and

the percentage ownership of that person or entity, we deemed to be outstanding all shares of our common stock as to which such person or entity has the right to acquire within 60 days of March 14, 2022, through the exercise of any option or other right.

The percentage of beneficial ownership is based on 27,034,996 shares of our common stock outstanding as of March 24, 2023.

In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity, we deemed to be outstanding all shares of our common stock as to which such person or entity has the right to acquire within 60 days of March 24, 2023, through the exercise of any option or other right.

We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person or entity.

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Ian Jenks (4)

Robert Bahns (5)

Simon Ogier (6)

Beverley Brown (6)

Simon King (8)

Simon Ogier (7)

Klaas de Boer (8)

Steven DenBaars

All directors and current executive officers as a group (6 persons)

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Entrepreneurs Fund General Partner disclaims beneficial ownership of the shares of our common stock held by Entrepreneurs Fund except to the extent of its indirect pecuniary interest therein.

(3) Consists of (i) 1,592,000 shares of our common stock held by AIGH Investment Partners, LP (“AIGH LP”), (ii) 708,000 shares of our common stock held by WVP Emerging Manager Onshore Fund, LLC — AIGH Series (“WVP AIGH”), and (iii) 232,000 shares of our common stock held by WVP Emerging Manager Onshore Fund, LLC — Optimized Equity Series (“WVP OES”).

Excludes (i) pre-funded warrants to purchase an aggregate of 1,468,000 shares of our common stock held by AIGH LP (ii) pre-funded warrants to purchase an aggregate of 662,500 shares of our common stock held by AIGH Investment Partners, LLC (“AIGH LLC”), (iii) pre-funded warrants to purchase an aggregate of 25,000 shares of our common stock held by HLH Holdings LLC (“HLH Holdings”), and (iv) pre-funded warrants to purchase an aggregate of 12,500 shares of our common stock held by Woodcourt Capital LLC (“Woodcourt”), none of which are exercisable within 60 days of March 14, 2021 as a result of the provisions contained therein which prevent the holder of such pre-funded warrants from exercising them if such exercise would result in the holders thereof, or certain related

parties, having beneficial ownership of more than 9.99% of our common stock.

Orin Hirschman is the managing member of AIGH Capital Management, LLC, a Maryland limited liability company (“AIGH CM”), which is an advisor or sub-advisor with respect to the securities held by AIGH LP, WVP AIGH, and WVP OES, and president of AIGH LLC.

Hirschman has voting and investment control over the securities indirectly held by AIGH CM and directly by AIGH LP and AIGH LLC and may be deemed to have voting and investment control over the securities held by each of HLH Holdings and Woodcourt.

(4) Includes 633,880 shares of our common stock held and options to acquire 149,281 shares of our common stock exercisable within 60 days of March 14, 2022.

(5) Includes 118,852 shares of our common stock and options to acquire 34,412 shares of our common stock exercisable within 60 days of March 14, 2022.

(3) Based upon information contained in a Schedule 13G/A filed by AIGH Capital Management, LLC (“AIGH CM”) and Mr.

Orin Hirschman on February 15, 2023.

Consists of shares of common our common stock held by AIGH Investment Partners, L.P.

(“AIGH LP”), WVP Emerging Manger Onshore Fund, LLC (“WVP”) and by AIGH Investment Partners, LLC (“AIGH LLC”).

Excludes pre-funded warrants to purchase up to an aggregate of 2,130,500 shares of our common stock, none of which are exercisable within 60 days of March 14, 2021 as a result of the provisions contained therein which prevent the holder of such pre-funded warrants from exercising them if such exercise would result in the holders thereof, or certain related parties, having beneficial ownership of more than 9.99% of our common stock.

Hirschman is the managing member of AIGH CM, which is an advisor or sub-advisor with respect to the securities held by AIGH LP and WVP, and president of AIGH LLC.

Hirschman has voting and investment control over the securities indirectly held by AIGH CM and directly by AIGH LP and AIGH LLC.

(4) Includes 633,880 shares of our common stock held and options to acquire 311,003 shares of our common stock exercisable within 60 days of March 24, 2023.

(5) Consists of options to acquire 9.375 shares of our common stock exercisable within 60 days of March 24, 2023.

(6) Includes 20,002 shares of our common stock held by B Brown Consultants Ltd and options to acquire 275,274 shares of our common stock exercisable within 60 days of March 24, 2023, held by Dr.

Brown exercises dispositive and voting power over the securities owned by B Brown Consultants Ltd.

King is one of the five partners of Octopus.

(7) Includes 198,087 shares of our common stock held and options to acquire 97,189 shares of our common stock exercisable within 60 days of March 24, 2023.

(8) Consists of 200,000 shares of our common stock purchased by Mr.

de Boer’s spouse in the Offering and options to acquire 9,375 shares of our common stock exercisable within 60 days of March 24, 2023.

(10) Consists of options to acquire 4,500 shares of our common stock exercisable within 60 days of March 14, 2022 .

Certain Relationships and Related Transactions, and Director Independence

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● any of our directors, executive officers or beneficial owners of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest, other than compensation and other arrangements that are described in the section titled “Executive Compensation.”

Service Agreement with Robert Bahns

On September 19, 2022, we entered into a service agreement with Robert Bahns pursuant to which Mr.

Bahns provided advisory services to the Company on a part-time basis for a salary of £62,700 per annum.

Bahns served as our Chief Financial Officer and as a member of our board of directors until September 19, 2022.

Bahns no longer provides services to the Company.

Registration Rights Agreement

In connection with the Exchange and the Offering, the Company (“we”) entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to file, no later than 60 calendar days from the closing of the Offering a registration statement covering, among other things, (i) the shares of our common stock issued in the Offering (including shares of our common stock issuable upon the exercise of the pre-funded warrants sold in the Offering);

Following the closing of the Exchange, on February 23, 2021, we sold 10,162,000 shares of our common stock and pre- funded warrants to purchase up to 2,168,000 shares of our common stock for aggregate gross proceeds of $24.6 million pursuant to a private placement offering of our common stock (or pre-funded warrants in lieu thereof) at a purchase price of $2.00 per share or $1.99 per pre-funded warrant, as applicable.

Pursuant to the offering, we offered to certain purchasers whose purchase of shares of our common stock in the offering would otherwise have resulted in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the closing of the offering, the opportunity to purchase, if any such purchaser so chose, pre-funded warrants in lieu of shares of our common stock that would otherwise have resulted in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock, at a purchase price of $1.99 per pre-funded warrant.

Each pre-funded warrant is exercisable for one share of our common stock at an exercise price of $0.01 per share.

In connection with the Exchange and the Offering, we entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to file, no later than 60 calendar days from the closing of the Offering a registration statement covering, among other things, (i) the shares of our common stock issued in the Offering (including shares of our common stock issuable upon the exercise of the pre-funded warrants sold in the Offering);

(ii) the shares of our common stock issuable upon exercise of the warrants issued to the placement agent in the Offering;

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(iv) 2,500,000 shares of our common stock held by the stockholders of Parasol prior to the Exchange;

and (v) 50,000 shares of our common stock issued to certain advisors in connection with the Exchange and the Offering ((i)-(v) collectively, the “Registrable

We must use commercially reasonable efforts to keep the such registration statement effective for the earlier of (i) five years from the date it is declared effective by the SEC, (ii) the date on which all Registrable Shares have been transferred other than to certain enumerated permitted assignees under the Registration Rights Agreement, or (iii) the date on which no Registrable Securities are outstanding.

All of our directors, executive officers and holders of more than 5% of our capital stock are parties to the Registration Rights Agreement.

and (v) 50,000 shares of our common stock issued to certain advisors in connection with the Exchange and the Offering ((i)-(v) collectively, the “Registrable Shares”).

We must use commercially reasonable efforts to keep such registration statement effective for the earlier of (i) five years from the date it is declared effective by the SEC, (ii) the date on which all Registrable Shares have been transferred other than to certain enumerated permitted assignees under the Registration Rights Agreement, or (iii) the date on which no Registrable Securities are outstanding.

All of our directors, except Mr.

DenBaars, executive officers and holders of more than 5% of our capital stock are parties to the Registration Rights Agreement.

Octopus Share Purchase

In connection with the Offering, the Company (“we”) entered into an agreement (the “Octopus Letter Agreement”), with Octopus Titan VCT plc and certain related parties (the “Octopus Investors”), a holder of more than 5% of our common stock, pursuant to which the Octopus Investors agreed to purchase $2.0 million of our common stock on the same economic terms as the shares of common stock sold in the Offering subject to the satisfaction of certain U.K related tax requirements (the “Octopus Share Purchase”).

In connection with the Offering, we entered into an agreement (the “Octopus Letter Agreement”), with Octopus Titan VCT plc and certain related parties (the “Octopus Investors”), a holder of more than 5% of our common stock, pursuant to which the Octopus Investors agreed to purchase $2.0 million of our common stock on the same economic terms as the shares of common stock sold in the Offering subject to the satisfaction of certain U.K related tax requirements (the “Octopus Share Purchase”).

The Octopus Share Purchase was conditioned on, among other things, the requirement that our gross assets must be less than £15.0 million at the time of the purchase and less than £16.0 million after giving effect to the Octopus Share Purchase.

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We are required to use commercially reasonable efforts to cause such registration statement to be declared effective within 150 calendar days after the closing of the Octopus Share Purchase.

We must use commercially reasonable efforts to keep such registration statement effective for the earlier of (i) five years from the date it is declared effective by the SEC, (ii) the date on which all Octopus Shares have been transferred other than to certain enumerated permitted assignees under the Octopus Registration Rights Agreement, or (iii) the date on which no Octopus Shares are outstanding.

Octopus Shares have been transferred other than to certain enumerated permitted assignees under the Octopus Registration Rights Agreement, or (iii) the date on which no Octopus Shares are outstanding.

Related Party Transactions with Parasol Investments Corporation

On May 14, 2020, the Company (“we”) issued (i) an aggregate of 4,750,000 shares of common stock to Mark Tompkins, a director of our company, for an aggregate purchase price equal to $475 representing amounts advanced by Mr.

Tompkins to our counsel in connection with the formation and organization of the Company and (ii) an aggregate of 250,000 shares of common stock to Ian Jacobs, an officer and director of our company, for an aggregate cash purchase price equal to $25, pursuant to the terms and conditions set forth in the Common Stock Purchase Agreement with each person.

On May 14, 2020, in connection with advances made in connection with costs incurred by us, we issued a promissory note to Mark Tompkins, a stockholder and director of our company, pursuant to which we agreed to repay Mr.

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In the event of an Event of Default, the entire note would automatically become due and payable (the “Default Date”) and starting from five (5) days after the Default Date, interest on the note would accrue at the rate of eighteen percent (18%) per annum.

As of the Closing, 2021, the total amount due under the note was $47,500 which was paid in full at the Closing.

Prior to the Closing, we used the office space and equipment of our management at no cost.

The total amount due under the note was $47,500 which was paid in full at the closing of the Exchange.

Prior to the closing of the Exchange, we used the office space and equipment of our management at no cost

Related Party Transactions with SmartKem Limited

Commencing in June 2019 and continuing through September 2019, SmartKem issued and sold an aggregate of $3.7 million of its convertible loan notes (the “Convertible Loan Notes”).

The Convertible Loan Notes bore interest at a rate of 10% per annum and outstanding interest and principal thereon was convertible into SmartKem’s A ordinary shares at a conversion price of $0.017031 per A ordinary share.

Certain of SmartKem’s directors, executive officers and beneficial owners of 5% or more of SmartKem’s capital stock purchased Convertible Loan Notes in that offering as shown in the table below.

Principal Amount

Octopus Titan VCT plc

Entrepreneurs Fund LP

In January and February 2020 SmartKem issued a total of 209,862,051 of its A ordinary shares for $4.3 million.

In connection therewith, $4.0 million of outstanding principal and interest on the Convertible Loan Notes was converted into an aggregate of 245,540,150 A ordinary shares.

In addition, $8.8 million of outstanding principal and interest of outstanding convertible notes issued in 2018 was converted into 542,767,502 A ordinary shares.

In connection with these transactions, in February 2020 SmartKem simplified its share capital by converting (i) 6,451,915 growth shares, held by founding shareholders and which benefited only from the increase in value of SmartKem above a specified level (the “Growth Shares”), into ordinary shares, (ii) 66,385,787 ordinary shares into deferred shares with no voting rights and an aggregate value of $1.40 (the “Deferred Shares”), (iii) 137,310,817 A ordinary shares into Deferred Shares, and (iv) 83,076,995 A ordinary shares into ordinary shares.

In connection with these transactions, in April 2020 the share capital was further simplified by the conversion into Deferred Shares of an additional 91,540,545 A ordinary shares and 20,887,272 ordinary shares.

In July 2020, SmartKem issued an additional 16,025,641 A ordinary shares to Entrepreneurs Fund LP for $313,000.

In connection with this transaction, in July 2020 91,540,545 Deferred Shares were converted back into A ordinary shares and 20,887,272 Deferred Shares were converted back into ordinary shares.

The following directors, executive officers and beneficial owners of more than 5% of SmartKem’s capital stock effected the following transactions as part of the transactions described above:

Consideration

Octopus Titan VCT

Loan conversion

344,932,672 A ordinary shares

Octopus Titan VCT

191,346,155 A ordinary shares

Entrepreneurs Fund LP

Loan conversion

246,551,742 A ordinary shares

Entrepreneurs Fund LP

32,051,282 A ordinary shares

In connection with SmartKem’s January 2020 funding raising round, SmartKem simplified its share capital initially by converting into ordinary shares on a one-for one basis 83,076,695 A ordinary shares and all 6,451,915 Growth Shares.

In February 2020, a further 137,310,817 A ordinary shares and 66,385,787 ordinary shares were converted into Deferred Shares.

In April 2020, 91,540,545 A ordinary shares and 20,887,272 ordinary shares were converted into Deferred Shares, then back again in July 2020.

On February 23, 2021, at the direction of the holders of such A ordinary shares provided in accordance with SmartKem’s articles of association 876,884,527 A ordinary shares were reclassified as ordinary shares.

On February 23, 2021, at the direction of the holders of A ordinary shares, which consisted of shares held by Octopus Titan VCT and Entrepreneurs Fund LP, beneficial owners of more than 5% of SmartKem Limited’s capital stock, provided in accordance with SmartKem Limited’s articles of association 876,884,527 A ordinary shares were reclassified as ordinary shares.

On February 23, 2021, conditional on the consummation of the Exchange, the holders of EMI Options covering 124,497,910 ordinary shares exercised them for $18,916, with options covering 123,087,910 shares exercised at a price of $0.000014 per share and the options covering the remaining 1,410,000 shares exercised at a price of $0.0122 per share.

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Any request for us to enter into a transaction with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to our Audit Committee, or in certain circumstances the chairman of our Audit Committee, for review, consideration and approval.

In approving or rejecting any such proposal, our Audit Committee, or the chairman of our Audit Committee, is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the

availability of other sources of comparable products or services and the extent of the related party’s interest in the transaction.

Director Independence

Our securities are not listed on a national securities exchange or on any inter-dealer quotation system that has a requirement that a majority of directors be independent.

We evaluate independence by the standards for director independence set forth in the Nasdaq Marketplace Rules.

Under such rules, our board of directors has determined that all

current members of the board of directors, except Mr.

Jenks and Ms.

Keck, are independent directors.

Jenks nor Ms.

Keck are independent directors under these rules because they are executive officers of the Company.

Robert Bahns, who resigned from the board of directors in September of 2022, was not an independent director, because he was an executive officer of the Company.

Simon King, who served as a director until our 2022 annual meeting of stockholders, was an independent director.

In considering the independence of the directors listed above, our board of directors considered the association of our directors with the holders of more than 5% of our common stock.

There are no family relationships among any of our directors and executive officers.

Principal Accountant Fees and Services

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The Audit Committee has established a policy regarding pre-approval of all auditing services and the terms thereof and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor.

However, the pre-approval requirement may be waived with respect to the provision of non-audit services for us if the “de minimus” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied.

However, the pre-approval requirement may be waived with respect to the provision of non-audit services for us if the “de minimums” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied.

The Audit Committee has considered whether the provision of Audit-Related Fees, Tax Fees, and all other fees as described above is compatible with maintaining BDO LLP’s independence and has determined that such services for fiscal year 2021 were compatible.

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Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Description of Securities

Description of Securities (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed on March 28, 2022)

Engagement Letter, dated December 15, 2020, by and between GP Nurmenkari Inc.

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(incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Licence of Office Space, dated September 16, 2020, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Licence of Office Space, dated April 21, 2020, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

License of Office Space, dated September 16, 2020, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

License of Office Space, dated April 21, 2020, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Lease of The Whole of the 8 th Floor, Hexagon Tower, Manchester, M9 8GP, dated April 16, 2019, between AG Hexagon BV and SmartKem Limited.

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Registration Rights Agreement, dated January 27, 2022, by and between the Company and the Purchasers (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 27, 2022)

Contract Variation relating to the Framework Services Agreement, dated February 23, 2021, by and between SmartKem Limited and CPI Innovation Services Limited

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement Report on Form S-1 (File No.

333-254222) filed on March 12, 2021)

Consent of BDO LLP, independent registered public accounting firm (BDO LLP:

Contract Variation relating to the Framework Services Agreement, dated February 23, 2021, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.21 to the Company’s Current Report on Form 10-K/A filed on August 23, 2022)

Renewal Lease by Reference of Lease of The Whole of the 8th Floor, Hexagon Tower, Manchester, M9 8GP, dated April 12, 2022, between AG Hexagon BV and SmartKem Limited (incorporated by reference to Exhibit 10.3 on the Company’s Quarterly Report on Form 10-Q filed on May 13, 2022)

Service Agreement, dated September 7, 2022, by and between SmartKem Limited and Nigel Prue.

(incorporated by reference to Exhibit 10.1 on the Company’s Current Report on Form 8-K filed September 8, 2022)

Service Agreement, dated September 19, 2022, by and between SmartKem Limited and Robert Bahns (incorporated by reference to Exhibit 10.1 on the Company’s Current Report on Form 8-K filed September 19, 2022)

Employment Agreement, dated as of December 14, 2022, by and between the Registrant and Barbra Keck

List of Subsidiaries

Consent of BDO LLP, independent register public accounting firm (BDO LLP:

London, United Kingdom:

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/s/ Ian Jenks

President, Chief Executive Officer

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

/s/ Robert Bahns

Executive Vice President, Chief Financial Officer

/s/ Barbra C.

Chief Financial Officer

(Principal Financial Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ian Jenks and Robert Bahns, jointly and severally, his or her true and lawful attorneys-in-fact and agent, each with the power of substitution, for him in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ian Jenks and Barbra C.

Keck, jointly and severally, his or her true and lawful attorneys-in-fact and agent, each with the power of substitution, for him in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

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March 30, 2023

/s/ Robert Bahns

Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ Barbra C.

Chief Financial Officer and Director

(Principal Financial Officer)

March 30, 2023

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March 30, 2023

March 28, 2022

/s/ Barbra C.

/s/ Steven DenBaars

Steven DenBaars

March 30, 2023

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 9A. Controls and Procedures