Item 1. Business
Item 1. Business
Unless otherwise stated or the context otherwise indicates, references to “SmartKem” the “Company,” “we,” “our,” “us,” or similar terms refer to SmartKem, Inc. and its subsidiaries.
Overview
We are seeking to change the world of electronics with a new class of transistor developed using our proprietary advanced semiconductor materials that we believe has the potential to revolutionize the display industry. Our TRUFLEX® semiconductor polymers enable low temperature printing processes that are compatible with existing manufacturing infrastructure to deliver low-cost, high-performance displays. Our semiconductor platform can be used in a range of display technologies including MicroLED, miniLED and AMOLED, as well as in applications in advanced chip packaging, sensors, and logic.
We design and develop our materials at our research and development facility in Manchester, UK and provide prototyping services at the Centre for Process Innovation (“CPI”) in Sedgefield, UK. We also operate a field application office in Hsinchu, Taiwan, close to our collaboration partner, The Industrial Technology Research Institute of Taiwan (“ITRI”). With our collaboration partners, we are developing a commercial-scale production process and EDA tools for our materials to demonstrate the commercial viability of manufacturing a new generation of displays using our materials. We have an extensive IP portfolio including 138 granted patents across 17 patent families, 16 pending patents and 40 codified trade secrets.
Our Technology
The invention and development of OTFT devices has enabled the rapid expansion of the electronics industry, particularly with the advent of the planar process essential for integrated circuitry. This is due to the ability to create compact circuits with an ever-increasing capability, lower cost per logic function, and a higher frequency of operation. Integrated circuits are present in almost all electronic devices today and there is a constant drive to embed more smart features into a greater number of applications.
TFTs are a type of FET that can be processed on large area flat surfaces to make display screen backplanes, digital/analog electronics, and sensor arrays for a wide range of consumer and industrial applications. The manufacturing of silicon-based electronics either in wafer or thin-film form, such as a-Si on glass, requires a high temperature process (approximately 300°C). Because most polymer substrates melt or degrade at these high temperatures, TFTs are mainly manufactured on special glass that can withstand such high temperatures resulting in the production of mainly rigid products.
Our OTFT technology comprises predominantly organic materials (such as polymers and organic small molecules) that can be solution coated at low temperature (as low as 80°C) using existing manufacturing infrastructure onto a wide range of low-cost plastic substrates, as well as onto traditional substrate materials. The similarity in the coefficient of thermal expansion between the substrate and our TRUFLEX® materials permits production of robust, bendable/flexible and lightweight devices. Our OTFT performance, as measured by charge mobility, exceeds a-Si performance by a factor of four, which we believe offers product designers a significant extension of capability, by enabling them to transform flat, bulky objects into lightweight, robust, and flexible products that we expect will appeal to consumers. Our device stability under positive and negative thermal bias stress testing (60°C for 1 hour at +/-30V) achieves <2V change in threshold voltage even without device encapsulation. The current driving ability of the short channel OTFT devices has been shown to be able to drive mini and MicroLED displays at >100,000 nits making the technology attractive for use in emissive display applications. Our recent demonstration of monolithic integration (OTFT backplane processed on top of GaN mini/microLED arrays) proved the viability of using a monolithic manufacturing process that is more efficient than existing manufacturing techniques.
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Our OSC materials combine a high mobility polycrystalline small molecule with a low molecular weight semiconducting polymer. The polymer controls the morphology, phase segregation and uniformity of the semiconducting layer and a solvent is included to deliver inks that are used to fabricate devices with mobilities of approximately 4 cm 2 /Vs. In addition, we have developed all the other interlayer polymers that are necessary to form the complete transistor stack.
Polymeric plastic substrates, such as PET, PEN, TAC and COC have relatively low glass transition temperatures (Tg) in the range of 100°C to 200°C. Using these plastics at temperatures above this level causes significant distortion and, in some instances, may even result in melting or thermal breakdown of the polymer. Our OTFTs can be processed at temperatures as low as 80°C, enabling the use of polymer substrates that are optically clear, flexible and less expensive than glass or temperature resistant polymers. In addition, short duration processing at low temperature results in significant energy savings. Also, plastics do not have the same risk of shattering as glass and therefore less strengthening around the edge of large area plastic-based devices is necessary, such as the use of aluminum frames to support torsional rigidity in glass substrates. Plastics can also be processed in very thin sheets (tens of microns) which saves space within the final product, allowing for increased battery capacity. Thin plastic substrates also enable the device to conform very easily to non-planar surfaces such as the human body which makes them well suited for wearable sensors and display devices. Thin plastic sheets are also conformable, allowing electronics to be formed around irregular surfaces, for example, curved pillars in buildings.
Our unique materials set comprising BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating which is widely used for the lithography processes used in TFT manufacturing. As a result, our OTFT process is intended to be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment. Furthermore, the solubility of our inks enables customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs.
Advantages of Our TRUFLEX® Technology
The most widespread display backplane technology currently in use is a-Si which is principally used in the manufacture of LCDs. More recent developments in inorganic semiconductors include the use of the metal oxide IGZO for backplanes for large area OLED TVs and LTPS for high resolution cellphones. Inorganic TFTs are fabricated using high temperatures for the plasma-enhanced chemical vapor deposition (PECVD) SiNx (often exceeding 300°C). They therefore require high-cost, temperature resistant polymers (e.g., polyimide) substrates, especially if they are to be used to manufacture plastic-based screens. All inorganic TFTs can be subject to damage on bending and require additional product engineering for protection during bending to prevent failure of the display. This adds to the overall cost of production of a bendable or foldable device .
We believe that our ability to employ TRUFLEX® materials at temperatures as low as 80°C will enable manufacturers to use low-cost plastic substrates and the polymeric nature of our materials will allow the transistors to be truly flexible. We believe that robust and lightweight display screens, which are capable of being curved, flexed or folded to tight bend radii, would enable manufacturers of mobile devices to create products more tailored to customer demand and that our TRUFLEX® OTFTs are well suited for this application. Our materials are organic and polymer-like and hence can withstand the mechanical strains experienced in severe bending such as a fold of a display. In addition, the substrate does not require the degree of protection from the edges as glass displays do, which can eliminate the weight and cost associated with aluminum frames. Low temperature processing enables a wider range of plastic substrates to be used, allowing properties such as optical clarity to be optimized.
Our low-temperature OTFTs also permit them to be poured on top of other display elements, such as a MicroLED array, since the low process temperature would not damage the emissive components. We believe this ability to pattern the backplane on top of other components could lead to alternative display or sensor design configurations with advantages such as higher aperture ratio. We also believe that our ability to build the backplane in-situ over the MicroLED array (the ‘chip-first’ approach) — which would eliminate the critical front and backplane hybridization step — has the potential to increase the yield of the display fabrication process while also reducing manufacturing cost. The small size of MicroLEDs (normally under 100 microns and evolving down to <20 microns) and tight pixel
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pitches make it challenging to ensure each MicroLED aligns perfectly with the corresponding pixel driver on the backplane. Electrical connection of the MicroLEDs on top of the display backplane requires the use of eutectic
bonds through a metal junction containing at least one low melting point metal. Deposition and patterning of the low melting point metal for the bumping process typically uses thermal evaporation and lift-off processes, which are not typically used in display backplane fabs, therefore creating uncertainty over the scale up of this approach. Our chip-first integration route makes use of high precision and well-established photolithography processing and/or dry etching to form vias through one of our dielectric layers and then a metal contact is deposited through the via to connect to the MicroLED pads. The metallization process uses sputtering, photolithography and wet etching, all of these are scalable techniques used in current display manufacturing.
The difficulty of manufacturing MicroLEDs with existing technology has led to delays in the rollout of the MicroLED displays. For example, in March 2024, Apple Inc. reported that it had cancelled its project to develop MicroLED displays in-house for wearable devices, including the Apple Watch. Because a number of development projects were delayed, scaled back or postponed in the wake of Apple’s action, media reports speculated that Apple’s setback might affect continued development of MicroLED technology. However, development of MicroLED technology has continued at a rapid pace with Samsung Electronics Co., Ltd.’s (“Samsung”) “The Wall” being a prominent example of a commercially available MicroLED display, while Sony Group Corporation (“Sony”) also produces MicroLED video walls and cinema screens. Additional global display manufacturers who continue to pioneer MicroLED display technology include LG Corporation (“LG”), AUO Corporation (“AUO”) and BOE Technology Group Co., Ltd. and it is widely acknowledged that next generation displays will inevitably migrate to MicroLED technology due to its higher brightness and resolution.
Products and Services
We have developed in-house the materials necessary to fabricate high-performance OTFT devices, other than the
contact metals and substrates on which those materials are deposited. We supply our products as a set of stable liquid inks, with each ink forming separate layers of the device. Each of the inks forming these layers has been carefully designed to result in the device performance and electrical stability specified by the customer. We supply the ink set with a detailed process of record (“POR”) for making the desired device. In addition to supplying our OTFT stack materials as a package, prospective customers also evaluate the use of our range of interlayer materials as single layers in new and existing chip and display products (in so-called advanced semiconductor packaging). The interlayer materials are being tested as redistribution layers, pixel definition layers, permanent resists and organic dielectric layers due to their favorable processability, patternability, planarity and other properties of our materials when compared with existing materials. During 2023, we began developing a range of customized dielectric inks for customers’ advanced electronics packaging applications.
Products have been scaled up for formulated ink supply to customers in package sizes ranging from 100ml to several liters, all supplied from our Manchester facility. These are supplied with a certificate of analysis (CoA) and POR, alongside device and design consultancy to ensure successful technology transfer.
We intend to offer foundry services to customers who wish to have electronic circuits manufactured for them, with the choice of two facilities, depending on the application size and quantity. Through our current agreement, expiring on March 31, 2025, with the United Kingdom’s CPI, we have access to a 300mm x 300mm foundry that we use for creating prototypes for evaluation by potential customers. In 2022, we began process characterization using a maskless aligner at CPI to reduce the time from CAD layout to prototype for new designs. Additionally, in partnership with ITRI, we have successfully demonstrated the direct patterning of one of our interlayer dielectric materials using digital lithography technology (“DLT”). In 2023, we entered into a transfer technology agreement with ITRI pursuant to which ITRI is developing Gen 2.5 scale (370mm x 470mm) commercial manufacturing processes for a range of our OTFT materials. The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI. We believe that the successful development of commercial manufacturing processes and their validation on ITRI’s equipment will help to accelerate the adoption of our materials technology and process concepts by display manufacturers. During 2024, we continued to develop the process of establishing the
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fabrication of our OTFT-based devices, including by conducting the set-up of the recipes for the individual device layers.
We do not have the in-house capability to produce our flexible transistors at commercial scale and intend to partner with existing foundries to provide us with the ability to meet full production orders for customers that do not have their own facilities. We use product prototyping services to demonstrate applications enabled by OTFT to prospective customers. This allows potential customers to evaluate physical samples of our materials prior to committing to final design and long-term supply agreements.
During 2023, we announced the successful creation of the first monolithic MicroLED display using OTFTs, which was the result of our collaboration with Prof. Xiaojun Guo’s group at Shanghai Jiao Tong University, China. This breakthrough was published in November 2023 in the peer-reviewed journal, Nature Communications . In 2024 we showed the first flexible samples of MicroLEDs using our chip-first approach at the International Meeting on Information Display (IMID). We believe that this new method of processing our thin-film transistor backplane on top of Gallium Nitride LEDs has the potential to accelerate the commercialization of MicroLED displays by demonstrating the ability to efficiently manufacture MicroLED displays by simplifying the process of connecting transistors to LEDs. Consumer electronics companies are actively developing MicroLED displays because such displays promise higher brightness, lower power consumption and longer lifetime than current display technology. The existing manufacturing processes for creating MicroLED displays use physical transfer of LEDs from the wafer upon which they are manufactured to the TFT display backplane, where they must be laser welded to the contact pad of the transistor to make an electrical connection. Because millions of tiny LEDs need to be transferred from one place to another and welded into place, error rates from misplacement reduce the efficiency of these processes leading to significant and costly rework and low yields.
Our low temperature process makes it possible for OTFT transistors to be processed directly on top of the MicroLEDs. This “chip first” approach eliminates the mass transfer and laser welding process, and the fabrication of OTFTs can use existing low-cost manufacturing tools currently used for LCD backplane manufacturing. We believe that the improvements available through the adoption of our process will be particularly important for portable powered displays such as smartwatches and AR/VR displays which cannot readily accommodate large, heavy batteries.
Market Opportunity
The main market for our technology is in the display industry. According to Omdia, the global display market size is forecast to exceed 200 million square meters of area in 2025, with over 75% of this in the TV and public display segments. The overall global display market was estimated at around $150 billion in 2024. Advances in display technology focus on improving image quality and power consumption and the development of new form factors, such as flexible/foldable or curved displays.
MicroLED technology is a focus of leading OEMs because it offers higher brightness, better energy efficiency and longer lifespans compared to traditional displays. MicroLED Technology is being targeted at a range of applications including premium TV, commercial signage and automotive applications. Markets and Markets Research Pvt. Ltd. projects that the MicroLED market will grow from $592 million in 2021 to over $21 billion by 2027—a 81.5% compound annual growth rate (CAGR). According to a research report from Grand View Research, Inc., 34% of MicroLED revenue in 2023 came from the 3,000 to 5,000 pixel per inch segment (smartphones, smartwatches and VR devices) while the greater than 5,000 pixel per inch segment is expected to grow at a 79% CAGR from 2024 to 2030, driven by rising demand for high-resolution displays in AR/VR headsets like Apple’s Vision Pro and the Meta Quest Pro. The Business Research Private Ltd. reported that it expects the smartwatch market to grow from $91.01 billion in 2024 to $106 billion in 2025, a 17% CAGR. In addition, Maximize Market Research PVT. Ltd. has reported that the automotive display market was valued at 8.4 billion in 2023, and that total automotive display revenue is expected to grow at a CAGR of 18.26 % from 2024 to 2030, reaching nearly $27.2 billion by 2030. We believe that our technology can offer single or complete materials sets and novel process and architecture solutions (e.g., chip-first for OTFT backplanes) for most display segments.
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Our proprietary TRUFLEX® organic materials set enable customers to make backlight units and direct emissive displays that are both flexible and capable of driving stable currents, combined with the benefits of low temperature processing. Recently, several manufacturers have launched TVs with mini-LED backlight units, and a number of companies are developing a new generation of direct emission MicroLED displays (including Samsung, with ‘The Wall’ offering unparalleled brightness and visual clarity, Sony, LG and AUO), flexible OLED displays, and transparent OLED displays. These new formats are supported by a variety of different backplanes using tiled versions of existing technologies or PCB backplanes. We believe that our TRUFLEX® materials can be used to provide active-matrix transistor arrays that can address these new product categories using low-cost, flexible substrates.
Our customized inks can be made with low viscosity, low processing temperatures and without the use of hazardous solvents. In addition, our organic inks offer low film stress and shrinkage/warpage versus many established materials.
We believe there are other markets in which our materials may offer advantages. For example, we believe that our OTFTs are suitable for applications where a relatively low number of transistors are required over a wide area such as chemical/biological sensors or distributed logic circuits. We believe the growth in Internet of Things (IoT) devices also offer opportunities for low cost, mass manufacturable, printable logic devices, as can be made possible by our technology platform. We believe that our strategy of targeting low cost of prototyping and an ability to rapidly transition from design to device will help drive the development of these technologies with our customers.
Commercialization Strategy
Our commercialization strategy rests on three pillars: continuous improvement of our polymer materials, development of EDA tools, and development of robust commercial manufacturing processes.
We intend to seek to work with leading display makers, end users and chip packaging players to undertake joint validation programs and support, through a structured technology transfer process and the development of a scalable manufacturing capability with our partners. In the case of advanced semiconductor packaging dielectrics, we intend to seek to partner with equipment companies – who have well-established channels to the outsourced semiconductor assembly and test (OSAT) customers in Asia - formulating ink specific to the workstation design (e.g., for inkjet printing). Initial volumes of inks will come from our Manchester materials technology center and later we expect to establish one or more accredited materials manufacturing plants that will supply our client base.
Continued Development of Our Materials
We design and develop our materials at our research and development facility in Manchester, UK, where we respond to customer inquiries and anticipate market trends. In response to requests from potential customers, our chemistry team has focused on the development of a range of specialized dielectric polymer interlayers. Additional specialty dielectric polymer formulations are being designed for use in advanced mobile communications operating at frequencies in excess of 5GigaHz (5G applications and beyond). Interlayer inks are also being provided to potential customers for evaluation across a wide range of advanced electronics packaging applications. We believe that our knowledge base and experience in the design and characterization of OTFTs gives us the ability to respond rapidly to customer preferences and emerging market trends.
Development of EDA Tools
We have developed an initial PDK for our process that is designed to be used by third parties in EDA software to allow them to design digital logic devices. The PDK contains information such as design rules that are specific to our process equipment, and it will also incorporate models of OTFTs made using our materials set. This will be used for digital device simulation and layout of circuit designs. We continue to characterize the electrical performance of our materials and to use that data to improve the correlation between simulations produced using those tools and actual devices. As part of this development, we expect to populate a library of reference designs for common gates used in digital electronic circuits to further simplify third party design processes. At this time, our circuit layout work is done by hand by skilled engineers.
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Once we have identified a specific application requirement, we expect to proceed with development work through an understanding of the product specifications and engineering work to calculate the size and capabilities of pixel TFTs and storage capacitors. For digital logic applications, the situation is more complex, and circuits cannot be designed without access to supporting simulation, design, and layout software. In silicon IC design, EDA tools are used to predict the behavior of circuits made using foundry services. This allows designers to simulate the behavior of prototype circuits and check their functionality ahead of the fabrication, therefore saving time and money.
We believe that the development of proprietary EDA tools that permit customers to efficiently design circuits using our processes and materials is an important requirement for our commercial success. We have entered into a four-year collaboration with Flexible Integrated Circuits S.L. (FlexiIC) with the aim of configuring open-source or low-cost paid for EDA tools for our OTFTs.
Development of Robust Commercial Manufacturing Processes
Our BL, SAM, OSC, OGI, SRL and PV inks can be deposited using standard coating techniques such as spin-coating or slot-die coating which are widely used for the lithography processes used in TFT manufacturing. As a result, our OTFT process can be integrated into existing manufacturing lines using standard industrial techniques without the need for additional large capital investment. Furthermore, the solubility of our inks would permit customers to digitally print the features of the OTFT device, which we believe may be attractive to potential customers seeking to lower manufacturing costs.
While we can provide prototype foundry services for potential customers through our access to CPI and ITRI we do not have the capability to provide commercial-scale foundry services. We believe that many customers will produce circuits using our OTFT materials either directly or through their existing third-party foundry arrangements, including ITRI. Accordingly, we believe the development of robust commercial manufacturing processes that use existing foundry equipment and that can be easily transferred to commercial foundries is an important part of our commercialization strategy.
Through our relationship with ITRI, we have successfully demonstrated the direct patterning of one of our interlayer dielectric materials using DLT, a common commercial manufacturing technology. In 2023, we entered into a transfer technology agreement with ITRI pursuant to which ITRI is developing Gen 2.5 scale (370mm x 470mm) commercial manufacturing processes for a range of our OTFT materials. The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI. We believe that the successful development of commercial manufacturing processes will help to accelerate the adoption of our technology by display manufacturers in Taiwan and other areas of Asia.
2025 Management Goals
Our management has established a number of 2025 operational goals for our company in furtherance of our efforts to commercialize our products:
● Commence development work on a rollable, transparent MicroLED display with our partner, AUO – commenced in January 2025;
● Complete the first sale of our TRUFLEX® materials to Chip Foundation under the terms of our co-development agreement – completed in January 2025;
● Extend our technology transfer agreement with RiTdisplay to transfer our OTFT process from ITRI to RiTdisplay’s Gen2.5 line;
● Enter into a joint development agreement for a “chip-first” MicroLED display;
● Enter into additional collaboration and/or co-development agreements that further advance our technology toward commercialization; and
● Produce a demonstration of a MicroLED display using our OFT technology.
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These goals are primarily aspirational in nature and may be subject to modification, alteration or elimination as a result of a number of factors, such as changes in market trends, access to capital, changes in potential customer preferences, performance by our collaboration partners, and technological developments, many of which are out of our control. There can be no assurance that we will achieve the goals described above or that our achievement of those goals will result in the successful commercialization of our products. Accordingly, investors are cautioned not to place undue reliance on these goals in making an investment decision about our company. For additional information, see “Cautionary Note on Forward-Looking Statements” and “Risk Factors” elsewhere in this report.
Sales and Marketing
The majority of our target customers are large consumer electronics companies based in Asia (Taiwan, South Korea, Japan and China) that already own or have access to display backplane manufacturing lines and engage in large scale production of display products for TV or mobile/tablet markets using a-Si process lines. Many of these target companies are already seeking to develop MicroLED technology. We believe that these customers are seeking to create novel, higher added value electronics products that cannot be manufactured using a-Si glass backplanes. We believe display manufacturers will be attracted to our TRUFLEX® technology which would enable them to create novel, plastic-based products with improved robustness, higher flexibility and lighter weight using their existing production lines. The same region is also a source of new inquiries for evaluation of use of our unique dielectrics in the advanced chip packaging sector.
We have a direct sales force consisting of two employees located in Taiwan, assisted by two technology transfer engineers, and sales representation in China. Our technical specialists and senior management team also play an active role in promotional events and engage with strategic partners in Asia. We believe that our initial customers will be located in Taiwan, South Korea, Japan and China but we are also directly working with OEMs located in North America, Europe and elsewhere in Asia who have the ability to require their suppliers to use our materials. Our sales team is supported for new program delivery by engineers and product specialists located the materials technology center in Manchester, our ITRI production validation facility in Taiwan and our prototyping and development site in Sedgefield. We anticipate building up our sales and marketing resources through a mixture of new in-house and specialist agencies.
Our marketing efforts include attendance at significant industry trade shows (including in 2024: the IMID, the International Conference on Flexible and Printed Electronics (ICFPE), the PlayNitride MicroLED Technology Forum, SEMICON Taiwan and MicroLED Connect) at which we demonstrate the capabilities of our TRUFLEX® technology and respond to requests for proposals and other inquiries from potential customers. We publish technical papers that explain our products and technology to inform and engage with potential customers. We have also entered into several joint development agreements to demonstrate the capabilities of our materials and to show the feasibility of utilizing our products in specific applications. In addition, we make presentations at trade events to showcase our technology and familiarize potential customers with the value we believe our technology adds to various applications. We also publish press releases and other announcements relating to our technical capabilities or achievements and include product information and related technical materials on our website.
We expect that the time between the identification of a potential customer and the receipt of a purchase order or agreement for the sale of our products will be relatively long. In certain instances, a potential customer may contact us seeking a generic sample of our materials for evaluation. In other instances, a customer may come to us with specific performance specifications and inquire about our ability to provide products meeting their specifications after which we provide samples of materials or specific data for evaluation. After the initial evaluation, the prospective customer may request a prototype of a specific design as proof-of-concept. We fabricate prototypes using the foundry access we have through our existing arrangements with CPI in the UK (for smaller sizes) and ITRI in Taiwan (for Gen 2.5). A significant proportion of all work done during this phase of our sales cycle would be done at our expense, with customers making a contribution in some cases.
Assuming successful prototyping is completed, we expect that we would negotiate and enter into a development agreement with an interested customer under which we would, in collaboration with the potential customer, engage
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in further engineering and design work. We expect that we will receive compensation for those services. We could also engage in a pilot-scale level of manufacturing for the products developed for the customer as part of that process.
After the satisfactory completion of development work and any related pilot project, an interested customer would then enter into a sales agreement with us under which we would either agree to manufacture products to the customer’s specifications from time to time as requested by the customer, including potential minimum quantity requirements, or we would agree to license our process to the customer for a fee based on a royalty of sales and enter into a supply agreement for our proprietary inks, utilizing a process developed by ITRI and owned and qualified by us, formulated into inks either in our own facilities or by third-party formulators and shipped directly to customers.
We expect that the sales cycle described above will take approximately 12-24 months. During that period, we will be required to incur significant expenses without any assurance that a customer order will be obtained. Accordingly, we will have a significant risk that we will incur those expenses without ever making a sale.
Research and Development
Our research and development efforts have focused on ensuring that we have a broad, future-proofed portfolio of best-in-class organic semiconductor materials that are patent protected. Some critical OTFT device parameters include:
● Charge mobility – the ability of the material to conduct charge under an electric field. The higher the charge mobility number the greater the current that can be driven through the device for a given size. Also, in circuits mobility determines the maximum switching frequency of a device from one logic state to another. a-Si has a mobility of ~0.5 cm2/Vs, LTPS typically has mobility >50 cm2/Vs and crystalline silicon has a mobility of near 1000 cm2/Vs. SmartKem’s OTFTs can achieve >3 cm2/Vs at channel length of 4 microns and >4cm2 at 10 microns.
● On/off ratio – the ratio of the current driven by the transistor during its on state to the current passed during biasing in its off state. On/off ratios of >10˄6 are typically required for TFTs used in display pixels so that the programmed voltage does not decay during the frame time. Our OTFTs have on/off ratios in the order of 10˄7 and have even demonstrated 10˄9 on/off ratios in devices having large W/L.
● Turn on voltage (“Vto”) – the gate voltage at which the TFT starts to increase its current output. Values close to zero volts are considered desirable for low power consumption products. The device should also achieve its transition from off to on over as small a range of gate voltages as possible since this can reduce energy consumption and hence is desirable in battery powered devices.
● Threshold voltage (“Vth”) – gate-source voltage at which the magnitude of the drain current reaches a specified low value (e.g., 10˄-9A).
● Threshold voltage stability – The ability of device to maintain a defined threshold or turn on voltage following a period of electrical stress (either at room temperature or elevated temperature). Bias voltage shifts of <2V after 1 hour voltage stress at 60°C and +30V or -30V is a typical specification required for display applications. We have demonstrated <1V Vth bias stress shift for NBTS and <2V for PBTS in R&D tests.
Since 2023, our chemistry team has switched its focus from the development of organic semiconductors to the development of a range of specialized photoimageable dielectric polymers. Some of these dielectric materials are intended for use in the display industry as redistribution layers, passivation layers, MicroLED interlayers and as pixel definition layers. In response to requests from potential customers, we have also directed our efforts to the development of customized dielectric materials to be used in the field of Advanced Electronics packaging. Some of the technical challenges facing the development of these dielectrics include tuning interfacial adhesion between a broad range of different interlayers including polymer-to-polymer, polymer-to- metal and polymer-to-silicon interfaces. Another important aspect of the development of novel dielectric inks for advanced packaging applications
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is the need for them to be capable of being deposited using a range of coating /printing techniques, including use in additive printing such as industrial ink jet printing.
Once new dielectric materials have been characterized, our materials development team customizes the formulations and process parameters to allow integration into the fabrication processes at CPI. This team establishes the BKMs for each material and generates an understanding of the parameters that can influence the performance. Customers frequently request detailed materials data packages for our customized dielectric materials which once approved by them should enable them to quickly process our polymer inks at their in-house facilities. At any given time, our dielectric inks are under evaluation by a number of potential end users. Initial work is also being done to scale up routes and identify potential supply chains for our materials in anticipation of customer needs.
The generation of fabrication processes and the integration of new materials is carried out at CPI under the direction of our Chief Technology Officer. The toolsets at this site provide a rapid feedback loop between our chemistry R&D and industry relevant device performance data sets. Additionally, the equipment sets can be used to generate demonstrator OTFT backplane devices on plastic, OTFT driven displays, sensors or circuits and a wide range of other device prototypes. Technology transfer to customers’ pilot lines can also be supported by this team and they can help to diagnose and rectify process problems. Process engineers also travel to customers’ sites to assist technology transfer alongside our field application engineering team in Taiwan. Through this work, we believe we have developed a novel method for integration of OTFT backplanes and MicroLED devices. We believe this process is feasible due to the low temperature processing of OTFT. We believe that the use of higher temperature materials, such as a-Si, LTPS and IGZO, would damage the LED devices. As a result, current practice is to attach the MicroLEDs after the backplane is fabricated. Using our process, we have demonstrated active-matrix backplanes driving MicroLEDs using OTFT at high brightness (>100,000 nits). We have sought patent protection for our processes. In addition, the Company has successfully integrated OTFT and OLED (AMOLED) in a 200ppi display. We are working to integrate our process into the ITRI facility in Taiwan at Gen 2.5 scale, which should permit commercial-scale processing compared with CPI at a lower defectivity. The ITRI line running our OTFT process is located close to a number of our current and potential future customers and is expected to simplify the process of transferring the technology into manufacturing.
CPI Agreement
We perform prototyping with our own employees using foundry equipment made available to us by CPI. We use the CPI facility to produce test samples for internal evaluation and for the supply of demonstrators to potential customers and for general market development. CPI is funded through a combination of U.K. government grants, collaborative research and development projects funded by the private and public sector and contracts funded by businesses. CPI provides services to companies engaged in translating ideas and inventions into commercially successful products and processes. It operates seven national facilities in the Northeast of England and Scotland and provides relevant industry expertise and assets to its customers.
We have entered into a framework services agreement with CPI Innovation Services Limited (“CPIIS”), the commercial trading company for CPI, pursuant to which we purchase services consisting primarily of access to CPI process equipment required for fabrication as well as access to CPI staff with specific skills, to the extent required, at specified costs, including a minimum annual spending requirement. We have 11 employees at the CPI facility who operate or support operations and OTFT developments using the CPI equipment on our behalf. Pursuant to the terms of this agreement, we utilize an online booking system to book equipment for immediate use, subject to availability. For critical equipment that other CPI customers may seek to use, we may book up to two weeks in advance to guarantee availability. CPIIS has agreed to use its reasonable commercial endeavors to supply the requested services.
The current agreement with CPIIS expires on March 31, 2025 but has been extended until May 31, 2025 as described in the next paragraph. The agreement may be terminated by either party in the event of a breach by the other party. We also lease space at CPI’s facility in Sedgefield, England.
CPIIS is in the process of reviewing the operation of the clean room facility used by Smartkem and is seeking to reduce the facility’s operating costs by, among other things, consolidating its clean rooms and seeking to pass more of its operating costs to users including us. On March 28, 2025, we entered into an agreement with CPIIS pursuant to
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which the term of the current CPIIS agreement was extended until May 31, 2025. We intend to use the extension period to complete negotiations with CPIIS regarding a longer-term agreement. Under the terms of the extension, we have agreed to an increase in our share of the costs of the CPI facility and to increased minimum usage obligations during the extension period. We expect that any longer-term agreement with CPIIS will require us to bear additional costs. If we are unable to reach a new agreement with CPIIS on terms that are satisfactory to us, we intend to find an alternative facility. We believe that there are adequate alternative sites available at which we could conduct our prototyping operations. In the event that we decide to move our prototyping operation to an alternative facility, we believe that the move would take between two and nine months, depending on equipment availability and any required facility modifications, during which time we would incur additional costs to prepare the new facility and install any necessary equipment. In such event, we intend to schedule our prototyping activities to minimize any disruption to those operations and would use ITRI’s prototyping line as an interim facility for such work.
Collaboration Agreements
In October 2021, we entered into a joint development agreement with RiTdisplay, a Taiwan based developer of displays. Under this agreement the two parties are collaborating on the production of a full color demonstration AMOLED display. In 2023, we entered into a technology transfer agreement with RiTdisplay commencing a joint project to develop the world’s first commercially ready active-matrix OLED display using OTFT technology. If successful, we believe the project with RiTdisplay will result in the development of the world’s first commercially ready active-matrix OLED display using OTFT technology. In 2025, we entered into a memorandum of understanding with RiTdisplay for the extension of our existing technology transfer agreement which, when finalized, will include the integration of our OTFT process on to RiTdisplay’s Gen 2.5 Pilot Line which will enable us to provide product prototyping of the world's first commercially ready AMOLED display using OTFT technology on a commercial Gen2.5 OTFT product manufacturing line at RiTdisplay’s existing state-of-the-art facility in Hsinchu, Taiwan. The memorandum of understanding is non-binding and there can be no assurance as to whether or when a definitive agreement will be executed by the parties or as to the ultimate terms of any such agreement.
In 2022, we entered into a joint development agreement with a Taiwan-based company for the development of a new generation of miniLEDs signage. This collaboration is expected to lead to the development of a roll-to-roll process for the manufacture of large format LED displays.
In 2023, we entered into a joint development agreement with a company in Taiwan for the development of a microLED-based display using our OTFT backplane.
In July 2023, we entered into a three-year technical services agreement with ITRI. Pursuant to this technical services agreement, ITRI is developing Gen 2.5 scale (370mm x 470mm) commercial manufacturing processes for a range of our OTFT materials. The goal of our agreement with ITRI is to develop robust commercial scale manufacturing processes that will enable potential customers to develop prototypes on ITRI’s Gen2.5 line using our OTFT technology before transferring the manufacturing process to their own lines or to a third-party foundry, including ITRI. We believe that the successful development of commercial manufacturing processes will help to accelerate the adoption of our technology by display manufacturers in Taiwan and other areas of Asia. We have two employees supporting this work in Taiwan in addition to support from our staff in the UK.
In February 2024, we entered into a joint development agreement with Tianma Microelectronics, Co, Ltd. to integrate our organic thin-film transistor technology with Tianma’s oxide transistors to develop OTFT-based microarray biochips.
Also in February 2024, we entered into a collaboration agreement with FlexiIC to develop low-cost, rapid turnaround custom circuits using organic transistor technology. A few months later we signed a multi-year agreement with FlexiIC to develop a new generation of CMOS for smart sensors.
In March 2024, we entered into a technology collaboration agreement with ITRI to enable product prototyping on ITRI's Gen 2.5 equipment using our technology.
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In September 2024, we entered into a joint development agreement with Chip Foundation to co-develop a new generation of MicroLED backlight technology for Liquid Crystal Displays.
In November 2024, we partnered with AUO to develop a new generation of rollable, transparent MicroLED displays using our technology.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain intellectual property protection for our active organic semiconductors, formulated OSC and passive dielectric interlayer inks, processes and know-how that collectively comprise our TRUFLEX® technology, to operate without infringing the proprietary rights of third parties, and to prevent others from infringing our proprietary rights. Over the past 11 years, we have been building and are continuing to build the intellectual property portfolio relating to our TRUFLEX® technology. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how, and technological innovation to develop and maintain our proprietary position. We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology.
Our strategy for the protection of our proprietary technology is to file international (Patent Cooperation Treaty) patent applications and pursue these in national jurisdictions that represent significant market opportunities. However, we assess on a case-by-case basis whether it is strategically more favorable to maintain trade secret protection for our inventions and “know-how” rather than pursue patent protection the latter of which documents will ultimately be in the public domain. Generally, patents have a term of twenty years from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed, and the patent has not been invalidated. In certain jurisdictions, and in certain circumstances, patent terms can be extended or reduced.
We believe that we are a technology leader in the design, development, and production of active and passive electronic materials for use in organic electronic applications. Excluding licensed-in IP, our patent portfolio comprises 17 patent families with 138 granted patents, 16 pending patents and 40 codified trade secrets. Our patents cover the active organic semiconductor materials, passive interlayer formulations, and deposition processes comprising our TRUFLEX® technology. We also have numerous patent claims and pending patent applications covering a variety of electronic devices including a novel dual gate application that enables enhanced Vto control and recent applications include MicroLED devices and improved processes. Because our patent portfolio covers all material aspects of our TRUFLEX® technology, we believe we have strong protection for our technology and a competitive advantage over potential competitors who may seek to duplicate our ability to create flexible transistors.
We also rely on trade-secret protection for our confidential and proprietary information, and we typically use non-disclosure agreements when commencing a relationship with a potential customer or partner. We have an internal program to document our trade secrets for each major area of our technology and operations. We cannot be sure that we can meaningfully protect our trade secrets on a continuing basis. Others may independently develop substantially equivalent confidential and proprietary information or otherwise gain access to our trade secrets. The TRUFLEX® trademark is granted and registered to the Company in its 10 commercially interesting jurisdictions including USA, China, Korea, Taiwan, Japan, and Europe.
We own substantive rights to the chemistry, process, and stack design rules necessary to implement our technology in all jurisdictions of commercial interest.
Manufacturing and Supply
We obtain strategic intermediates and final products from multiple sources who produce our active semiconductor materials to our specifications. Our TRUFLEX® materials fall into two main categories, “active” organic
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semiconductor materials and “passive” interlayer materials. Our active materials generally require high levels of process and product control, and therefore these are synthesized from start to end by us or a third party that has met certain certification requirements and then formulated by us into organic semiconductor inks. We validate active components internally before use. Our passive interlayers inks use a range of commercially available intermediates, formulated to our specifications to meet differing end-use performance parameters depending on the intended use. Our active and passive inks are proprietary to us.
We synthesize the active materials either internally or using third-party suppliers that meet specific certification requirements. The raw materials used to produce the formulated passive interlayers are purchased from multiple suppliers and tested and validated internally before use. The passive and active interlayer inks are presently manufactured internally in our formulation facility located in Manchester in the U.K. We are also evaluating a base layer material manufactured on a larger scale by a third-party contractor. Initial results have been promising, and we are continuing our testing and evaluation.
We use our U.K.-based formulation activity to enable customers to validate our materials on their Gen 1- Gen 2.5 pilot lines. Our TRUFLEX® inks typically comprise between 1.2% up to 25% by weight of solids with the remainder being made up by electronic grade solvents. For commercial supply quantities, to avoid the shipping costs associated with large quantities of locally available solvents, we expect to supply fully formulated ink to customers from a formulation facility located close to the customer’s manufacturing facility. We may also outsource the ink manufacture to an accredited third-party local formulator subject to our final QC testing of the formulated inks.
We have not experienced any supply shortages with respect to the materials used to formulate our proprietary inks.
Competition
We believe that competition in our targeted markets is based on a variety of factors, including capability, functionality, performance, reliability, ease of use and ability to supply in sufficient quantities. We believe we can, or will be able to, compete effectively based on these factors.
a-Si technology is an inorganic process widely used in the manufacture of backplanes for LCDs. More recent developments in inorganic semiconductors include use of the metal oxide IGZO for backplanes for large area OLED TVs and LTPS for high resolution cell phones. All these inorganic processes are operated at high temperatures and therefore require high-cost substrates, especially if they are to be processed on plastic. We believe that integration of TFTs with temperature sensitive devices will be made easier with our OTFT inks due to their lower temperature requirements. In addition, we believe all inorganic TFT based active-matrix technologies face challenges in bending compared with organic TFTs resulting in higher manufacturing costs.
A number of competitors have engaged in the development of organic inks. However, these competitors either opt to use polymeric semiconductors (BASF SE, Merck KGaA and Sumitomo Chemical Co., Ltd.) that process well but have a lower mobility than the polycrystalline organic materials in our TRUFLEX® materials, or polycrystalline semiconductors that have high mobility but relatively poor uniformity when processed. We believe our proprietary technology, which combines a polycrystalline molecule with a matched semiconducting polymer, provides higher mobility, particularly at short channel lengths and better processability over these technologies.
Many of our potential competitors could have substantial competitive advantages such as greater name recognition, longer operating histories, broader and deeper product portfolios, larger customer bases, substantially greater financial and other resources, and larger scale manufacturing operations. However, we believe our products have the potential to compete with many of our competitors’ offerings through product performance, product reliability and satisfaction of customer qualifications and standards.
Government Regulation
In addition to customer specific requirements for safety health and the environment, our formulated materials may also be subject to government regulation during their use in the country of device manufacture and from regulations
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covering the materials in the finished device. These could include the toxicity (potential for Carcinogenicity, Mutagenicity, and Teratogenicity) and restrictions from the environmental protection agencies in the countries of manufacture.
All new chemicals we obtain are evaluated at the time of order and a Control of Substances Hazardous to Health (“COSHH”) assessment is performed prior to commencement of any practical work with these materials. The COSHH assessment considers chemical hazards associated with the material, its physical properties, the scale of the planned work and the nature of that work e.g., temperature and containment. This process provides the first opportunity to screen out any materials that may be prohibited by the ultimate customer. Any use of material in Health and Safety Executive COSHH hazard category E, all but gram scale uses of non-volatile material in hazard category D and use of material in hazard category C in quantities of more than 1kg would trigger a management review. While it is possible that management authorization may be given to conduct research using materials in categories D & E, their use in a potentially formulated product would be discouraged and an alternative sought at an early stage. Materials are also screened against lists of banned and restricted materials provided by display manufacturers. Any material present on the display manufacturers banned list would not be used in formulated product.
We work with a third-party service provider to create safety data sheets for our formulated products that are shipped to customers and other end users. Our formulated products contain no materials that are restricted in the U.K. and no permissions or exemptions are required.
Our OGI material is fluorinated and spun from a fluorosolvent listed under regulation (EC) No 428/2009 of 5 May 2009 under section 1C006d. Export of formulations may require a Standard individual export license to be applied for and end use declaration made by the customer. These can be obtained through the U.K.’s SPIRE system.
To the extent our products are or become subject to U.K. export controls and regulations, these regulations may limit the export of our products and technology, and provision of our services outside of the U.K., or may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions, including annual or semi-annual reporting. Export control and economic sanctions laws may also include prohibitions on the sale or supply of certain of our products to embargoed or sanctioned countries, regions, governments, persons, and entities. In addition, various countries regulate the importation of certain products through import permitting and licensing requirements and have enacted laws that could limit our ability to distribute our products. The exportation, re-exportation, and importation of our products and technology and the provision of services, including by our partners, must comply with these laws or else we may be adversely affected, through reputational harm, government investigations, penalties, and a denial or curtailment of our ability to export our products and technology. Complying with export control and sanctions laws may be time-consuming and may result in the delay or loss of sales opportunities. Although we take precautions to prevent our products and technology from being provided in violation of such laws, our products and technology may have previously been, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. If we are found to be in violation of U.K. sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us. Export or import laws or sanctions policies are subject to rapid change and have been the subject of recent U.K. and non-U.K. government actions. Changes in export or import laws or sanctions policies may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition and results of operations.
Employees
As of December 31, 2024, we had 27 full-time employees and two part-time employees of which 23 are based in the United Kingdom. We believe that our scientists and technical experts are significant assets of our business, and we value and support hiring exceptional talent to further develop our TRUFLEX® technology and drive our business growth.
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Corporate History
We were originally incorporated as Parasol Investments Corporation (“Parasol”) in the State of Delaware in May 2020. Prior to the acquisition of SmartKem Limited in February 2021, we were a “shell” company registered under the Exchange Act, with no specific business plan or purpose. In accordance with “reverse merger” accounting treatment, our historical financial statements at period ends, and for periods ended, prior to our acquisition of SmartKem Limited were replaced with the historic financial statements of SmartKem Limited in our SEC filings made after the acquisition.
Our principal executive offices are located at Manchester Technology Centre, Hexagon Tower, Delaunays Road, Blackley Manchester, M9 8GQ U.K. Our telephone number is +44 161 721 1514.
Additional Information
We maintain a website at www.smartkem.com. On our website, investors can obtain, free of charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file such material electronically with, or furnish it to, the SEC. None of the information posted on our website is incorporated by reference into this Report. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically.
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