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Item 9A. Controls and Procedures

2024-03-27 compared with 2023-03-30 · 229 added, 178 removed, 380 unchanged (52% of the section changed)

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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.

As of the end of the year covered by this Report, 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.

Based upon, and as of the date of, this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2023, were effective.

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Changes in Internal Control 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 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.

In connection with the preparation of our financial statements for the second quarter of 2023, a material weakness in our internal control over financial reporting was identified relating to the complex financial reporting and accounting associated with the June 2023 PIPE, a non-cash item.

None of the Company’s filed financial statements were impacted.

Management implemented measures designed to ensure that the control deficiency contributing to the material weakness was remediated, such that the controls are designed, implemented, and operating effectively.

The remediation actions included the enhancement of control activity evidence, improvement of management review controls, and recording of the fair value of the warrant liability.

In addition to the reviews the Company was already performing on the valuation models provided by the outside consultants, the Company has implemented one additional

step in its review process.

The initial review is conducted by the VP, Finance and with the CFO performing a final review and approving the valuation before the entry is booked.

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, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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.

None of the Company's directors and officers adopted , modified , or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended December 31, 2023 (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Chairman of the Board, Chief Executive Officer and President

Chief Financial Officer and Director

Chief Financial Officer

Beverley Brown, Ph.D.

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Steven DenBaars, Ph.D.

Melisa Denis (1) (2) (3)

Sriram Peruvemba

(1) Member of the Audit Committee.

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Jenks’ significant management experience and experience in the technology industry 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.

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

From February 2021 to December 2022, Ms.

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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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From April 2007 to July 2015, Dr.

Ogier was Head of Research and Development within the U.K.’s Printable Electronics Technology Centre (“PETEC”) at CPI.

Ogier was Head of Research and

Development within the U.K.’s Printable Electronics Technology Centre (“PETEC”) at CPI.

He was responsible for the establishment of the PETEC facility and for developing the technical programs of work to build a capability within the U.K.

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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.

Denis has served as a member of our board of directors since November 2023.

Since November 20, 2020, she has served as a member of the audit committee and mergers and acquisitions committee of the board of directors of Hydrofarm Holdings Group, Inc.

Denis previously served as a partner at KPMG from 1998 to October 2020, including as National Tax Leader for Consumer Goods and as the leader of the Consumer and Industrial Market for Dallas.

Denis has served as a member of the Board of Regents and chair of the audit committee for the University of North Texas System since January 2020, an advisory board member of Women Corporate Directors since 2011, and a board member of Enactus, a global non-profit, since 2019.

Denis is a Certified Public Accountant and received her degree in accounting and her Bachelor of Science and Master of Science from the University of North Texas.

We believe that Ms.

Denis’s accounting and public company experience qualifies her to serve on our board of directors.

Sriram Peruvemba has served as a member of our board of directors since July 2023.

From September 2019 until his appointment to the Board, Mr.

Peruvemba served as a consultant to the Company.

Since July 2014, he has served as the chief executive officer of Marketer International Inc., a consulting services firm specializing in the global high-tech industry.

Prior to that, from December 2009 to April 2013, Mr.

Peruvemba was the chief marketing officer for E Ink Holdings, a company specializing in electronic paper displays.

Since June 2020, Mr.

Peruvemba has served on the board of directors of WiSA Technologies, Inc.

WISA), an audio wireless technology company.

He has also served as a board member of Visionect d.o.o, an electronics company in Slovenia since September 2017.

Peruvemba has also served as chairman of the board of Omniply, a Montreal-based electronics and display company since May 2020 and as board member of Edgehog Advanced Technologies an anti-reflective technology company in

Canada since January 2023.

Peruvemba has a B.S.

College of Engineering, Bangalore, an M.B.A.

from Barton School of Business, WSU and a post-graduate diploma in management from Indira Gandhi National University.

We believe that Mr.

Peruvemba’s experience in the technology industry qualifies him to serve on our board of directors.

Code of Business Conduct and Ethics

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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.

Pursuant to the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

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

Jenks and Mr.

Jenks is not an independent director under these rules because he is an executive officers of the Company.

Peruvemba is not an independent director under these rules, because, prior to his appointment to the board of directors, he served as a consultant to the Company and had earned compensation from the Company in excess of $120,000 during any period of twelve consecutive months within the last three years.

Keck, who resigned from the board of directors in November of 2023, was not an independent director under these rules because she is an executive officer of the Company.

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

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● Class II director is Mr.

de Boer and 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 2025 for the Class I director, 2023 for the Class II director 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, 2026 for the Class II directors 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.

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DenBaars and Mr.

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

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 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.

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 board of directors had designated Ms.

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

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

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Compensation Committee

DenBaars and Mr.

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

DenBaars, Mr.

de Boer and Ms.

Denis 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

de Boer and Mr.

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

DenBaars, and Ms.

Denis 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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Summary Compensation Table

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

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 following table shows the compensation awarded to or earned by our principal executive officer during the fiscal year ended December 31, 2023 and December 31, 2022, our two other most highly compensated executive officers

who were serving as executive officers as of December 31, 2023 and December 31, 2022, 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, 2023.

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

Officer Name and Principle Position

Option Awards (1)

All Other Compensation (2)

Compensation (2)

Chief Executive Officer

Barbra Keck (4)

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.

Such grant-date fair value does not take into account any estimated forfeitures related to service-based vesting conditions.

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

(2) Represents our contributions to our workplace pension scheme, the 401(k) Plan (as defined below) and private healthcare insurance.

(3) Represents consulting fees paid to Dr.

Brown’s consulting company.

(4) Includes a payment of $14,773 for 2022 salary paid in January 2023.

In accordance with the U.K.

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Contributions made by us vest immediately.

We sponsor a 401(k) savings plan (the “401(k) Plan”) for all eligible employees.

Under the 401(k) Plan, we do make matching contributions into the 401(k) Plan other than the annual required safe harbor match.

Employment and Change in Control Agreements

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

In September 2023, the compensation

committee approved an increase to Mr.

Jenks’ annual base salary to $400,000 from $300,000, effective September 1, 2023, and increased Mr.

Jenks’ annual target bonus percentage to 50% of his base salary from 30% of his base salary.

On March 29, 2023, we entered into an employment agreement with Ms.

Keck (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.

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

and (iv) in the event that Ms.

Keck will be eligible for:

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.

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

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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.

One-Time Bonuses

On September 6, 2023, the compensation committee, approved one-time bonuses (the “Bonuses”) to Mr.

Jenks and Ms.

Keck in amounts equal to $100,000 and $75,000, respectively.

Fifty percent of the Bonuses were paid upon approval, and the remaining 50% will be paid upon the listing of the shares of the Company’s common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange.

Outstanding Equity Awards at December 31, 2023

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Unexercisable

Option Exercise Price ($)

Option Expiration Date (1)

Beverly Brown (2)

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Director Name

Cash Compensation

Stock Option Awards (1)

All Other Compensation

Barbra Keck (2)

Klaas de Boer (1)

Steven DenBaars (2)

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.

Such grant-date fair value does not take into account any estimated forfeitures related to service-based vesting conditions.

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

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.”

Sri Peruvemba (3)

Melisa Denis (4)

Barbra Keck (5)

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2023 held by Mr.

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DenBaars was 515.

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.

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2023 held by Mr.

Peruvemba was 1,887.

Denis was appointed to our board of directors in November 2023.

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2023 held by Ms.

Denis was zero.

Keck, our Chief Financial Officer, resigned as a member of our board of directors in November 2023.

Keck, who is our Chief Financial Officer, received no additional compensation for services provided as a director in 2023.

The aggregate number of shares of common stock underlying stock options outstanding as of December 31, 2023 held by Ms.

Keck was 13,545.

Options to purchase 12,858 shares of common stock were issued to Ms.

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

Non-Employee Director Compensation

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.

options to purchase 6,000 shares of common stock, which will vest on the one-year anniversary of the grant date.

All equity awards granted pursuant to Policy are subject to the terms and conditions of the Company’s 2021 Equity Incentive Plan and/or the UK Tax-Advantaged Sub-Plan.

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The following table provides information with respect to our compensation plans under which equity compensation was authorized as of December 31, 2023.

Number of securities remaining

Number of securities to

Weighted average

available for future issuance

be issued upon exercise

exercise price of

under equity compensation plans

of outstanding options,

outstanding options,

(excluding securities reflected in

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)

Weighted average exercise price of outstanding options, warrants and rights (b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) c) (2)

warrants and rights (a)

warrants and rights (b)

column a) c) (2) (3)

Equity compensation plans approved by security holders (1)

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(2) In accordance with the “evergreen” provision in our 2021 Plan, an additional 35,586 shares were automatically made available for issuance on the first day of 2024, which represents 4.0% of the number of shares outstanding on December 31, 2023;

these shares are excluded from this calculation.

these shares are included in this calculation.

(3) At the 2023 Annual Meeting, the Company’s stockholders approved an amendment (the “2021 Plan Amendment”) to the Company’s 2021 Plan, increasing the number of the shares of Common Stock, reserved for issuance under the 2021 Plan from 125,045 shares to 743,106 shares.

The Board had previously approved the 2021 Plan Amendment, subject to stockholder approval.

Security Ownership of Certain Beneficial Owners and Management

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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.

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

The percentage of beneficial ownership is based on 1,305,361 shares of our common

stock outstanding as of March 27, 2024.

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.

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Name of Beneficial Owner

Shares Beneficially Owned (#)

Percentage Beneficially Owned (%)

5% Stockholders:

Octopus Investments Limited, 33 Holborn, London EC1N 2HT (1)

Entrepreneurs Fund LP, 2nd Floor, Windward House, La Route de la Liberation,

St Helier, Jersey, JE2 3BQ, The Channel Islands (2)

Octopus Investments Limited, 33 Holburn, London ECIN 2HT (1)

Entrepreneurs Fund LP, 2nd Floor, Windward House, La Route de la Liberation, St Helier, Jersey, JE2 3BQ, The Chanel Islands (2)

Orin Hirschman, 6006 Berkeley Ave., Baltimore, MD 21209 (3)

Mark Tompkins Apt.

1, Via Guidino 23, 6900 Lugano-Paradiso Switzerland

Named Executive Officers and Directors:

The Hewlett Fund, LP (4)

Five Narrow Lane (5)

Executive Officers and Directors:

Ian Jenks (6)

Barbra Keck (7)

Beverley Brown (8)

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Steven DenBaars (11)

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

Sri Peruvemba (12)

Melisa Denis (13)

All directors and current executive officers as a group:

* Less than 1%

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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.

Orin Hirschman on February 7, 2024 and other information known to the Company.

Consists of shares of 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.

Excludes, after giving effect to the 9.99% beneficial ownership blockers, shares of common stock issuable upon the conversion of Series A-1 Preferred Stock and the exercise of certain warrants.

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.

Based upon information known to the Company.

Excludes, after giving effect to the 9.99% beneficial ownership blockers, shares of common stock issuable upon the conversion of Series A-1 Preferred Stock and the exercise of certain warrants.

Based upon information contained in a Schedule 13G filed by Five Narrow Lane LP on February 1, 2024 and other information known to the Company.

Excludes, after giving effect to the 9.99% beneficial ownership blockers, shares of common stock issuable upon the conversion of Series A-1 Preferred Stock and the exercise of certain warrants.

Includes 10,511 shares of our common stock held and options to acquire 15,115 shares of our common stock exercisable within 60 days of March 28, 2024.

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

Includes of 100 shares of our common stock held and options to acquire 5,030 shares of our common stock exercisable within 60 days of March 28, 2024.

Includes 672 shares of our common stock held by B Brown Consultants Ltd and options to acquire 9,788 shares of our common stock exercisable within 60 days of March 28, 2024, held by Dr.

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Includes 5,760 shares of our common stock held and options to acquire 4,699 shares of our common stock exercisable within 60 days of March 28, 2024.

(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.

Includes (i) 5,715 shares of our common stock purchased by Mr.

de Boer’s spouse in our private placement that closed in February 2021, (ii) options to acquire 476 shares of our common stock exercisable within 60 days of March 28, 2024, (iii) 5,715 shares of common stock issuable upon conversion of Series A-2 Preferred Stock held by Mr.

de Boer’s spouse (iv) 5,715 shares of common stock issuable upon exercise of certain warrants held by Mr.

de Boer’s spouse and (v) 100 shares of common stock held by Mr.

Includes 815 shares of our common stock held and options to acquire 236 shares of our common stock exercisable within 60 days of March 28, 2024.

Includes 100 shares of our common stock held and options to acquire 1,887 shares of our common stock exercisable within 60 days of March 28, 2024.

Includes 100 shares of our common stock held.

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.

Consulting Agreement with Sriram Peruvemba

Prior to his appointment as a director, Mr.

Peruvemba served as a consultant to the Company, pursuant to a consultancy agreement entered into on September 13, 2019, by and between the SmartKem Limited and Marketer International (“Marketer”), a company controlled by Mr.

Peruvemba (the “Consulting Agreement”).

During the fiscal years ended December 31, 2022 and 2021, the Company paid Marketer $120,000 and $130,000, respectively.

From January 1, 2023 through Mr.

Peruvemba’s appointment to the board of directors on July 13, 2023, the Company paid Marketer $65,000.

In addition, in connection with the services provided pursuant to the Consulting Agreement, on February 23,

Peruvemba was granted options to purchase 66,029 shares of the Company’s common stock with an exercise price of $2.00 per share.

The options vested immediately upon grant and expire on the 10th anniversary of the date of grant.

On July 12, 2023, prior to Mr.

Peruvemba’s appointment to the Board, the Consulting Agreement was terminated.

Registration Rights Agreement

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.

In connection with the transactions contemplated by that certain Share Exchange Agreement with SmartKem Limited, whereby all of the equity interests in SmartKem Limited, except certain “deferred shares” which had no economic or voting rights and which were purchased by us for an aggregate purchase price of $49.00, were exchanged for shares of our common stock and SmartKem Limited became our wholly owned subsidiary (the “Exchange”).

Following the closing of the Exchange, on February 23, 2021, we sold, in a private placement (the “Offering”) 290,343 shares of our common stock and pre- funded warrants to purchase up to 61,945 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 $70.00 per share or $69.65 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 $69.65 per pre-funded warrant.

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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.

DenBaars, Mr.

Peruvemba and Ms.

Denis, executive officers, except Ms.

Keck 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, 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 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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Pursuant to the Subscription Agreement, we issued the Octopus Investors an aggregate of 28,572 shares of common stock (the “Octopus Shares”), at a purchase price of $70.00 per share.

On January 27, 2022, we also entered into a registration rights agreement (the “Octopus Registration Rights Agreement”) with the Octopus Investors, pursuant to which we agreed, subject to customary exceptions, to file, no later than fifteen (15) calendar days after we file our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, a registration statement with the SEC covering the Octopus Shares.

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.

Related Party Transactions with Parasol Investments Corporation

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.

Tompkins the sum of any and all amounts that Mr.

Tompkins may advance to us on or before the date that we consummate a business combination with a private company or reverse takeover transaction or other transaction after which we would cease to be a shell company (as defined in Rule 12b-2 under the Exchange Act).

We have used the proceeds from the note to cover our expenses.

Tompkins had no obligation to advance funds to us under the terms of the note, we anticipated that he might do so as fees and expenses were incurred.

As a result, we issued the note in anticipation of such advances.

Interest did not accrue on the outstanding principal amount of the note except if an Event of Default (as defined in the note) occurred.

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.

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

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.

On January 27, 2022, we also entered into a registration rights agreement with the Octopus Investors, pursuant to which we agreed, subject to customary exceptions, to file, no later than fifteen (15) calendar days after we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, a registration statement with the SEC covering the Octopus 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 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.

June 2023 PIPE and Conversion Agreement

On June 14, 2023, we and certain investors entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company sold an aggregate of (i) 9,229 shares of Series A-1 Convertible Preferred Stock at a price of $1,000 per share (the “Series A-1 Preferred Stock”), (ii) 2,950 shares of the Company’s Series A-2 Convertible Preferred Stock at a price of $1,000 per share (“Series A-2 Preferred Stock” and together with the Series A-1 Preferred Stock, the “Preferred Stock”), (iii) Class A Warrants to purchase up to an aggregate of 1,391,927 shares of common stock (the “Class A Warrant”), and (iv) Class B Warrants to purchase up to an aggregate of 798,396 shares of common stock (the “Class B Warrant” and together with the Class A Warrant, the “Warrants”) for aggregate gross proceeds of $12.2 million (the “June 2023 PIPE”).

On June 22, 2023 (the “Second Closing Date”), in a second closing of the June 2023 PIPE, we sold an aggregate of (i) 1,870.36596 Series A-1 Preferred Stock, (ii) 100 shares of Series A-2 Preferred Stock, and (iii) Class A Warrants to purchase up to an aggregate of 225,190 shares of Common Stock pursuant to the Purchase Agreement for aggregate gross proceeds of $2.0 million.

In addition, 8,572 Class B Warrants were issued in lieu of cash payments for consulting services related to the offering.

Each Class A Warrant has an exercise price of $8.75 and each Class B Warrant has an exercise price of $0.35, both subject to adjustments in accordance with the terms of the Warrants.

The Warrants expire five years from the issuance date.

In connection with the June 2023 PIPE, we entered into a Registration Rights Agreement (the “2023 Registration Rights Agreement”) pursuant to which we agreed to register for resale (i) the Conversion Shares, (ii) the Class A Warrant Shares, (iii) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Preferred Stock or the Class A Warrants, (iv) any shares of Common Stock issued in lieu of cash dividends on the Series A-1 Preferred Stock and (v) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing (together, the “ 2023 Registrable Securities”).

Under the terms of the 2023 Registration Rights Agreement, the Company is required to file a registration statement with the SEC covering the resale of the Conversion Shares and the Series A Warrant Shares on or before the 45-day anniversary of the earlier of (x) the Second Closing Date and (y) the Offering Termination Date and to use its commercially reasonable efforts to cause such registration statement to declared effective by the SEC by the 135-day anniversary of the of the earlier of (x) the Second Closing Date and (y) the Offering Termination Date and to keep such registration statement continuously effective until the date that all 2023 Registrable Securities covered by such registration statement (a) have been sold, thereunder or pursuant to Rule 144, or (b) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

The Company will be obligated to pay certain liquidated damages to the Purchasers if the Company fails to file such registration statement when required, fails to cause such registration statement to be declared effective by the SEC when required, or fails to maintain the effectiveness of such registration statement pursuant to the terms of the Registration Rights Agreement.

The 2023 Registration Rights Agreement also provides the Purchasers with “piggy-back” registration rights in certain circumstances if there is not an effective registration statement covering all of the Registerable Securities.

On January 26, 2024, we entered into a Consent, Conversion and Amendment Agreement (the “Consent Agreement”) with each holder of the Series A-1 Preferred Stock.

Pursuant to the Consent Agreement, each holder of Series A-1 Preferred Stock converted, subject to the terms and conditions of the Consent Agreement, 90% of its Series A-1 Preferred Stock (the “Conversion Commitment”) into shares of Common Stock, except as provided below for the Exchanging Holders (as defined below).

Pursuant to the Consent Agreement, in the event the conversion of all of the Series A-1 Preferred Stock held by a Holder would have resulted in such Holder acquiring shares of Common Stock in excess of its Beneficial Ownership Limitation (as defined in the Purchase Agreement) (an “Exchanging Holder”), such Exchanging Holder agreed to (i) convert its shares of Series A-1 Preferred Stock subject to its Conversion Commitment into shares of Common Stock up to its Beneficial Ownership Limitation, and (ii) exchange all of its remaining shares of Series A-1 Preferred Stock subject to its Conversion Commitment for Class C warrants (each a

“Class C Warrant”) covering the shares of Common Stock that would have been issued to such Holder but for the Beneficial Ownership Limitation (the “Exchange”).

The Class C Warrants have an exercise price of $0.0001, were exercisable upon issuance and will expire when exercised in full.

The Series C Warrants may be exercised for cash or on a cashless basis at the election of the Exchanging Holder.

The Class C Warrants may not be exercised to the extent that the Exchanging Holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the Exchanging Holder, 9.99%) of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the Exchanging Holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.

Under the Consent Agreement, we issued (i) 412,293 shares of Common Stock and (ii) Class C Warrants to purchase up to 726,344 shares of Common Stock upon the conversion or exchange of an aggregate of 9,963 shares of Series A-1 Preferred Stock.

In connection with the Consent Agreement, on January 26, 2024, we and the Holders entered into a Registration Rights Agreement (the “2024 Registration Rights Agreement”) pursuant to which the Company agreed to register for resale (i) the shares of Common Stock issuable upon exercise of the Class B Warrants and Class C Warrants (ii) any additional shares of Common Stock issued and issuable in connection with any anti-dilution provisions in the Class B Warrants and the Class C Warrants, and (iii) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing (together, the “2024 Registrable Securities”).

Under the terms of the 2024 Registration Rights Agreement, the Company is required to file a registration statement with the SEC covering the resale of the 2024 Registrable Securities on or before the earlier of (x) the 45th day following the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 2023 and (y) April 11, 2024, to use its commercially reasonable efforts to cause such registration statement to declared effective by the SEC by the 60-day anniversary of the filing date (or the 75-day anniversary of the filing date in the case of a “full review” by the SEC), and to keep such registration statement continuously effective until the date that all 2024 Registrable Securities covered by such registration statement (a) have been sold, thereunder or pursuant to Rule 144, or (b) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.

The Company will be obligated to pay certain liquidated damages to the Holders if the Company fails to file such registration statement when required, fails to cause such registration statement to be declared effective by the SEC when required, or fails to maintain the effectiveness of such registration statement pursuant to the terms of the 2024 Registration Rights Agreement.

The 2024 Registration Rights Agreement also provides the Holders with “piggy-back” registration rights in certain circumstances if there is not an effective registration statement covering all of the Registerable Securities.

Orin Hirschman and his affiliates, The Hewlett Fund, LP and Five Narrow Lane, all of whom are beneficial holders of more than 5% of our capital stock, participated in the June 2023 PIPE Orin Hirschman and his affiliates purchased 5,029 shares of Series A-1 Preferred Stock, Series A Warrants to purchase 574,744 shares of Common Stock and Series B Warrants to purchase 596,800 shares of Common Stock in the June 2023 PIPE for $5.0 million.

The Hewlett Fund purchased 2,500 shares of Series A-1 Preferred Stock, Series A Warrants to purchase 285,715 shares of Common Stock and Series B Warrants to purchase 160,000 shares of Common Stock in the June 2023 PIPE for $2.5 million.

Five Narrow Lane purchased 1,200 shares of Series A-1 Preferred Stock, and Series A Warrants to purchase 137,143 shares of Common Stock in the June 2023 PIPE for $1.2 million.

In connection with the June 2023 PIPE, we also issued The Hewlett Fund, LP additional Series B Warrants to purchase 42,858 shares of Common Stock pursuant to a consulting agreement.

Orin Hirschman and his affiliates, The Hewlett Fund, LP and Five Narrow Lane were also parties to the Consent Agreement and the 2024 Registration Rights Agreement.

In connection with the Consent Agreement, we issued to Orin Hirschman and his affiliates Series C Warrants to purchase 469,201 shares of Common Stock and The Hewlett Fund Series C Warrants to purchase 257,143 shares of Common Stock.

Policies and Procedures for Related Party Transactions

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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.

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

Jenks and Mr.

Jenks is not an independent director under these rules because he is an executive officers of the Company.

Keck, who resigned from the board of directors in November of 2023, was not an independent director under these rules because she is an executive officers of the Company.

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

Principal Accountant Fees and Services

The following table summarizes the fees paid for professional services rendered by BDO LLP, our independent registered public accounting firm, for each of the last two fiscal years:

The following table summarizes the fees paid for professional services rendered by Marcum, LLP and BDO, LLP, our independent registered public accounting firms, for each of the last fiscal years:

For the Years End December 31,

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Represents fees, including out of pocket expenses, for professional services provided in connection with the audit of our annual financial statements, the review of our quarterly financial statements, accounting consultations or advice on accounting matters necessary for the rendering of an opinion on our financial statements, services provided in connection with the offerings of our securities and audit services provided in connection with other statutory or regulatory filings.

Tax fees represent fees billed for tax compliance and consultation and planning services.

Procedures for Approval of Fees

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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.

All such services were approved by the Audit Committee pursuant to Rule 2-01 of Regulation S-X under the Exchange Act to the extent that rule was applicable.

The Audit Committee is responsible for reviewing and discussing the audited financial statements with management, discussing with the independent registered public accountants the matters required in Auditing Standards No.

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Share Exchange Agreement, dated as of February 23, 2021, among the Registrant, SmartKem Limited and the shareholders of SmartKem Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Amended and Restated Certificate of Incorporation of the Registrant, as amended to date

Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

F orm of Registration Rights Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Form of Registration Rights Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

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 (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.

and SmartKem Limited (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Description of Securities

Form of Class A Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 15, 2023)

Form of Class B Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 15, 2023)

Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 15, 2023)

Form of Class C Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 29, 2024)

2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Tax Advantaged Sub-Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Form of Subscription Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Employment Agreement, dated as of February 23, 2021, by and between the Registrant and Ian Jenks (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Employment Agreement, dated as of February 23, 2021, by and between SmartKem Limited and Robert Bahns (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Employment Agreement, dated as of February 23, 2021, by and between SmartKem Limited and Simon Ogier (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

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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.

(incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

Framework Services Agreement, dated February 23, 2021, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on February 24, 2021)

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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:

PCAOB ID # 1295)

Employment Agreement, dated as of December 14, 2022, by and between the Registrant and Barbra Keck (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed on March 30, 2023)

Form of Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 15, 2023)

Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 15, 2023)

Technical Service Agreement, dated July 1, 2023, by and between SmartKem Limited and Industrial Technology Research Institute (incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-1 filed on July 24, 2023)

License of Office Space, dated May 31, 2023, by and between SmartKem Limited and CPI Innovation Services Limited (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2023)

Amendment to the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 28, 2023)

Form of Consent Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 29, 2024)

Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 29, 2024)

Framework Supply Agreement, dated March 22, 2024, by and between SmartKem Limited and CPI Innovation Services Limited

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K filed on March 30, 2023)

Consent of Marcum LLP, independent register public accounting firm (Marcum LLP, New York, USA, PCAOB ID # 688)

Consent of BDO LLP, independent register public accounting firm (BDO LLP, London, United Kingdom, PCAOB ID # 1295)

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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/s/ Barbra C.

Chief Financial Officer and Director

(Principal Financial Officer)

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

March 27, 2024

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March 27, 2024

/s/ Sri Peruvemba

Sri Peruvemba

March 27, 2024

/s/ Melisa Denis

March 27, 2024

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