# EDGAR Filing Document

**Accession Number:** 0001940674
**File Stem:** 0001641172-25-025997
**Filing Date:** 2025-8
**Character Count:** 132880
**Document Hash:** 4ca4830cb6a6b33a9648b4966c8da62b
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001641172-25-025997.hdr.sgml**: 20250829

**ACCESSION NUMBER**: 0001641172-25-025997

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 49

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250829

**DATE AS OF CHANGE**: 20250829

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SMX (Security Matters) Public Ltd Co
- **CENTRAL INDEX KEY:** 0001940674
- **STANDARD INDUSTRIAL CLASSIFICATION:** MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 000000000
- **STATE OF INCORPORATION:** L2
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41639
- **FILM NUMBER:** 251281337

**BUSINESS ADDRESS:**
- **STREET 1:** MESPIL BUSINESS CENTRE, MESPIL HOUSE
- **STREET 2:** SUSSEX ROAD
- **CITY:** DUBLIN 4
- **STATE:** L2
- **ZIP:** D04 T4A6
- **BUSINESS PHONE:** 353 1 920 1000

**MAIL ADDRESS:**
- **STREET 1:** MESPIL BUSINESS CENTRE, MESPIL HOUSE
- **STREET 2:** SUSSEX ROAD
- **CITY:** DUBLIN 4
- **STATE:** L2
- **ZIP:** D04 T4A6

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Empatan Public Ltd Co
- **DATE OF NAME CHANGE:** 20220801

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 6-K**

**REPORT OF FOREIGN PRIVATE ISSUER**

**PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE**

**SECURITIES EXCHANGE ACT OF 1934**

**For the month of August 2025**

**Commission File Number: 001-41639**

**<u>SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY</u>**

**(Exact Name of Registrant as Specified in Charter)**

**Mespil Business Centre, Mespil House**

**Sussex Road, Dublin 4, Ireland**

**Tel: +353-1-920-1000**

(Address of Principal Executive Offices) (Zip Code)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

This Report on Form 6-K of SMX (Security Matters) Public Limited Company (the "Company") (1) includes a Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company for the six months ended June 30, 2025 and 2024, (2) certain other disclosures about the Company and (3) attaches as Exhibit 99.1 the unaudited interim condensed consolidated financial statements and related notes of the Company as of and for the six months ended June 30, 2025.

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

Certain statements in this Report on Form 6-K may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "forecast," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Report on Form 6-K may include, for example, statements about:

● the
 Company's financial performance and ability to raise capital;

● the
 ability to maintain the listing of the Company's Ordinary Shares on Nasdaq;

● changes
 in the Company's strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects
 and plans;

● the
 Company's ability to develop and launch products and services;

● the
 Company's ability to successfully and efficiently integrate future expansion plans and opportunities;

● the
 Company's ability to grow its business in a cost-effective manner;

● the
 Company's product development timeline and estimated research and development costs;

● the
 implementation, market acceptance and success of the Company's business model;

● developments
 and projections relating to the Company's competitors and industry;

● the
 Company's approach and goals with respect to technology;

● the
 Company's expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the
 rights of others;

● the
 impact of war, terror threats, or adverse public health developments on the Company's business;

● changes
 in applicable laws or regulations; and

● the
 outcome of any known and unknown litigation and regulatory proceedings.

These forward-looking statements are based on information available as of the date of this Report on Form 6-K, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing views as of any subsequent date, and no obligation is undertaken to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The risk factors and cautionary language referred to in this Report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in our forward-looking statements, including among other things, the items identified in the section entitled "*Risk Factors*" in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2024. You should review the factors and risks that the Company describes in the reports it has filed and will file from time to time with the SEC.

As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

● the
 outcome of any legal proceedings that may be instituted against the Company;

● the
 ability to maintain the listing of the Ordinary Shares on Nasdaq;

● our
 financial statements for the six months ended June 30, 2025, contains an explanatory paragraph regarding substantial doubt about
 our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all;

● changes
 in applicable laws or regulations;

● the
 effects of future pandemics, or other future health crises on the Company's business;

● the
 ability to implement business plans, forecasts, and other expectations, and identify and realize additional opportunities;

● the
 risk of downturns and the possibility of rapid change in the highly competitive industry in which the Company operates;

● the
 risk that the Company and its current and future collaborators are unable to successfully develop and commercialize its products
 or services, or experience significant delays in doing so;

● the
 risk that the Company may never achieve or sustain profitability;

● the
 risk that the Company will need to raise additional capital to execute its business plan, which may not be available on acceptable
 terms or at all;

● the
 risk that the Company experiences difficulties in managing its growth and expanding operations;

● the
 risk that third-party suppliers and manufacturers are not able to fully and timely meet their obligations;

● the
 risk that the Company is unable to secure or protect its intellectual property;

● the
 possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and

● other
 risks and uncertainties described in the Company's filings with the SEC from time to time, including those under the section
 entitled *"Risk Factors"* in the Company's Annual Report on Form 20-F for the fiscal year ended December 31,
 2024.

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion and analysis provide information which our management believes is relevant to an assessment and understanding of the Company's consolidated results of operations and financial condition. This discussion and analysis should be read together with our audited consolidated financial statements and related notes as of December 31, 2024, of our Company and our predecessor companies included in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2024. This discussion and analysis should also be read together with the section in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2024 entitled "Business". In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. See the section entitled "Cautionary Statement Regarding Forward-Looking Statements" elsewhere in this Report on Form 6-K. Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth elsewhere in this Report on Form 6-K.*

**Business**

The Company integrates chemistry, physics, and computer science to give materials memory and create a culture of transparency and trust across multiple industries. The Company's over 100 patents in various stages of application support unique marking, measuring, and tracking technologies allowing clients to seamlessly deploy transparency at all levels of development and provide stakeholders with a complete provenance of material composition and history, from virgin material to recycled, to address manufacturing challenges and ESG goals while maintaining sustainable growth. As a result, the Company's technologies are designed and developed to help companies address ESG commitments and transition more successfully to a low-carbon economy.

The Company's technology seeks to enable global companies across various industries to transition more successfully to a sustainable circular economy. By adopting our technology, they would be able to tangibly measure and track the raw material from origination, through the supply chain and at the end of life-where the amount of material recycled/reused from that product item can be measured and as well as the number of times that specific material/item has been recycled/reused.

The Company provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer.

Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. One reader can detect embedded data in various materials, from metals to fabrics to food and plastics, with all data logged onto the same digital platform. This versatility across materials sets the Company's technology apart from competitors. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.

The potential of the Company's technology application extends beyond merely tracing raw materials from origination to finished product for recycling and reuse. It has the potential to serve as a cornerstone for broader innovative markets, including through the use of the Company's planned plastic cycle token to establish a reliable, ethical digital credit platform, tapping into the vast potential of recyclable plastics credits in a new market.

**Recent Development**

On August 26, 2025, the Company amended its 2022 Incentive Equity Plan, as amended (the "Incentive Plan"), to increase the number of authorized Ordinary Shares under the Incentive Plan by an additional 7,130,000 ordinary shares (the "Amendment"). As a Foreign Private Issuer, Nasdaq Rule 5615(a)(3) allows the Company to rely on home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d) and, accordingly, the Company so elected to approve the Amendment without stockholder approval. Thereafter, the Company granted an aggregate of 5,630,000 restricted stock units and 1,500,000 stock options, in each case vesting 75% on the grant date and 25% on November 1, 2025,to its executive officers and directors, and to certain consultants, employees and advisors to the Company. The Board of Directors of the Company, separately, authorized the issuance of an aggregate of 500,000 ordinary shares and 100,000 stock options to satisfy certain liabilities the Company owed to third parties.

**History**

SMX Israel was incorporated in 2014 to provide brand protection and supply chain integrity solutions to businesses. It provides these solutions through the commercialization of the Source IP. The Source IP was initiated from Soreq. In January 2015, SMX Israel entered into the Isorad License Agreement with Isorad. Under the Isorad License Agreement, as amended, the Source IP can be utilized in almost any industry and with any product.

SMX Israel merged into Security Matters PTY to effect a listing on the Australian Securities Exchange under the symbol "ASX: SMX." At that time, Security Matters PTY had three wholly-owned subsidiaries: SMX Israel, SMX Fashion and Luxury (France), and SMX Beverages Pty Ltd. (Australia). It was also the record holder of 50% of Yahaloma and, as of October 3, 2023, 51.9% of trueGold.

On March 7, 2023, Security Matters PTY consummated a business combination with Lionheart III Corp., a Delaware corporation and special purpose acquisition company, pursuant to which, among other things:

● Security
 Matters PTY became a wholly owned subsidiary of a newly-formed Ireland public limited company, and the Ireland company became the
 holder of all of the issued shares in Security Matters PTY and Lionheart, with Security Matters PTY being delisted from the Australian
 Stock Exchange;

● The
 Ireland company, renamed SMX (Security Matters) Public Limited Company, had its Ordinary Shares listed on NASDAQ under the ticker
 SMX and public Warrants listed under the ticker SMXWW.

As a result of the business combination, the Company owns the entire share capital of Security Matters PTY. Accordingly, for financial reporting purposes, Security Matters PTY (the legal subsidiary) was the accounting acquirer and the Company (the legal parent) was the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition were issued under the name of the Company, but they were a continuance of the financial statements of Security Matters PTY and reflected the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the Business Combination, and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference between the fair value of the shares deemed to have been issued by Security Matters PTY and the fair value of the Company's identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

● On July 15, 2024, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 75:1 with a new CUSIP number of G8267K208 and ISIN code IE000IG23NR9. This reverse split consolidated every 75 shares into one new ordinary share and was aimed at meeting Nasdaq's minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately 44.8 million to approximately 597 thousand. Additionally, the par value of the Ordinary Shares increased from $0.0022 to $0.165 per share. The Company's options, warrants, and convertible securities were adjusted proportionately, and the Company's Constitution was amended to reflect these changes. All share, options and warrants amount in the Company's June 30, 2025 financial statements are presented post this reverse stock split.

● On January 15, 2025, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 28.5:1 with a new CUSIP number of G8267K158 and ISIN code IE000WZ90ZV5. This reverse split consolidated every 28.5 shares into one new ordinary share and was aimed at meeting Nasdaq's minimum bid price requirement of $1.00 per share, reducing the number of outstanding shares from approximately 33,155 thousand to approximately 1,163 thousand. Additionally, the par value of the Ordinary Shares increased from $0.165 to $4.70250014886352 per share. The Company's options, warrants, and convertible securities were adjusted proportionately, and the Company's Constitution was amended to reflect these changes. All share, options and warrants amount in the Company's June 30, 2025 financial statements are presented post this reverse stock split.

● On June 16, 2025, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 4.1:1 with a new CUSIP number of G8267K 166 and the new ISIN code IE000B8AU702. This reverse split consolidated every 4.1 shares into one new ordinary share, reducing the number of outstanding shares from approximately 4 million to approximately 1 million. Additionally, the par value of the ordinary shares increased from $0.00000000000001 to $0.000000000000041 per share. The Company's options, warrants, and convertible securities were adjusted proportionately, and the Company's Constitution was amended to reflect these changes. The basic and diluted loss per share attributable to shareholders in the Company's June 30, 2025 financial statements are presented post this reverse stock split.

● On August 7, 2025, after the balance sheet date, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 7:1 with a new CUSIP number of G8267K2174 and the new ISIN code IE000TB5RTG4. This reverse split consolidated every 7.0 shares into one new ordinary share, reducing the number of outstanding shares from approximately 9 million to approximately 1 million. Additionally, the par value of the ordinary shares were increased from $0.00000000000041 to $0.000000000000287 per share. The Company's options, warrants, and convertible securities were adjusted proportionately, and the Company's Constitution was amended to reflect these changes. The basic and diluted loss per share attributable to shareholders in the Company's June 30, 2025 financial statements are presented post this reverse stock split.

● On November 11, 2024, the ownership in the subsidiary SMX Circular Economy Platform PTE, Ltd. Decreased from 100% to 70%.

● On March 26, 2025, the Company established a fully owned entity incorporated in Dubai Multi Commodities Centre Authority, United Arab Emirates.

**Key Factors Affecting Operating Results**

The Company believes that its performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2024 titled "*Risk Factors*" and other filings the Company makes from time to time with the SEC.

Commercial Agreements

The Company's technology seeks to enable global companies across various industries to transition more successfully to a sustainable circular economy. By adopting our technology, they can be able to tangibly measure and track the raw material from origination, through the supply chain and at the end of life-where the amount of material recycled/reused from that product item can be measured and as well as the number of times that specific material/item has been recycled/reused.

Due to the fact that we aim our sales efforts at large multi-national market-leading conglomerates, our sale cycle is of several quarters and there is a risk associated with it that at any time, due to force majeure, or events like pandemics, natural disasters, cyberattacks, regional wars, global tension, global supply chain challenges and climate change, that are beyond our control, the sale cycle will be broken and all efforts will be lost.

The Company has received interest in its technology from several international market-makers conglomerates as well as parties interested in making such technology a market standard, which will greatly assist the creation of future income. Any delays in the successful completion of projects or the creation of a market standard, as well as the materialization of any of the risks described above or in the Company's filings with the SEC from time to time, may impact the ability to generate revenue.

***Components of Operating Results***

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included as an exhibit to this Report on Form 6-K.

***Revenue***

To date, we have not seen substantial revenue from our technology sales. This is partly because our focus has been on creating a seamless onboarding process for multinational clients, establishing a solid foundation to become an industry standard, and ensuring readiness for a full and rapid deployment as a global commercial service.

***Operating Expenses***

The Company's current operating expenses consist of the following components: research and development expenses, general and administrative expenses and selling and marketing expenses. The Company is working to maintain discipline on expenses over time.

***Research and Development Expenses, Net***

The Company's research and development expenses consist primarily of wage and salary related expenses, subcontractors and consultants, depreciation and amortization of equipment, research expenses and share-based compensation expenses. The Company expects that its research and development expenses will increase as the Company continues to develop its products and recruit additional research and development employees.

The Company is engaged in Proof of Concept (POC) agreements according to which it receives funds for financing research and development expenses from prospective customers. Those funds are reimbursements for expenses and therefore are offset against the related R&D expenses in profit or loss.

***General and Administrative Expenses***

General and administrative expenses consist primarily of professional services fees, wages and salary related expenses, share-based compensation, facility-related costs and other general and administrative expenses.

***Selling and Marketing Expenses***

Selling and marketing expenses consist primarily of wages and salary related expenses, digital advertising and marketing expenses.

***Finance Income and Expenses***

Finance expenses, net consist primarily of revaluation of financial liabilities and warrants at fair value, interest on borrowings, foreign exchange rate differences, and fees and commissions to banks.

***Gain from Remeasurement of investment in associated company***

Gain from remeasurement of investment in associated company arises due to the agreement the Company signed with trueGold on October 3, 2023 to acquire an additional 7.5% which increased the Company's holdings to 51.9% in trueGold and resulted in the Company gaining control over trueGold.

On July 10, 2024, in connection with the PMB LOI, Security Matters PTY's ownership in trueGold was increased from 51.9% to 52.9%. See "*Management's Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations – PMB Partners*."

***Foreign Currency***

The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company. The Company's functional currency is US Dollar. The functional currency of Lionheart is US Dollar. The functional currency of SMX Fashion and Luxury is EURO. The functional currency of trueSilver is Canadian Dollars. The functional currency of SMX (Security Matters) Ireland Limited is US Dollar. The functional currency of SMX Circular Economy Platform PTE, Ltd. is Singapore Dollar. Security Matters PTY's functional currency is Australian Dollars. The functional currency of SMX Israel is New Israeli Shekels. The functional currency of Security Matters Canada Ltd. is Canadian Dollars. The functional currency of SMX Beverages Pty Ltd is Australian Dollar. The functional currency of trueGold is Australian Dollar. The functional currency of SMX Circular Economy FZCO is Emirati Dirham.

Transactions and balances in foreign currencies are converted into US Dollars in accordance with the principles set forth by International Accounting Standard (IAS) 21 ("The Effects of Changes in Foreign Exchange Rates"). Accordingly, transactions and balances have been converted as follows:

● Assets
 and liabilities - at the rate of exchange applicable at the reporting date.

● Expense
 items - at annual average rate at the statements of financial position date.

● Share
 capital, capital reserve and other capital movement items were at rate of exchange as of the date of recognition of those items.

● Accumulated
 deficit was based on the opening balance for the beginning of the reporting period in addition to the movements mentioned above.

● Exchange
 gains and losses from the aforementioned conversion are recorded in exchange losses arising on translation of foreign operations
 in the consolidated statement of comprehensive loss.

***Comparison of the Six Months Ended June 30, 2025, and 2024***

The following table summarizes our historical results of operations for the periods indicated:

---

| | | | |
|:---|:---|:---|:---|
|  | | **For the Six-Month Period Ended** | **For the Six-Month Period Ended** |
|  | | **June 30, 2025** | **June 30, 2024** |
|  |<br>**Note** | **US$ in thousands**<br> **except share and per share data** | **US$ in thousands**<br> **except share and per share data** |
| General and administrative expenses |  | 18656 | 7248 \* |
| Selling and marketing expenses |  | 1380 | 319 \* |
| Research and development expenses, net |  | 1640 | 1689 |
| Amortization |  | 2075 | - |
| **Operating loss** |  | **(23751)** | **(9256)** |
| Finance income |  | 9854 | 1602 |
| Finance expenses |  | 10724 | 3232 |
| **Loss before income tax** |  | **(24621)** | **(10886)** |
| Income tax |  | - | - |
| **Net loss** |  | **(24621)** | **(10886)** |
| **Other comprehensive loss** |  | (1691) | 92 |
| **Total comprehensive loss** |  | **(26312)** | **(10794)** |
| **Net loss attributable to:** |  |  |  |
| Equity holders of the Company |  | (23638) | (10693) |
| Non- controlling interest |  | (983) | (193) |
| **Loss per share attribute to the shareholders** |  |  |  |
| Basic and diluted loss per share attribute to shareholders (in US dollar) | **7** | **\*\*(209)** | **\*\*(4)** |

---

\* Reclassification

 \*\* The share and per share information in these financial statements reflects the 1-for-75, 1-for-28.5, 1-for-4.1 and 1-for-7 reverse share splits became effective on July 15, 2024, January 15, 2025, June 16, 2025 and August 7, 2025, respectively, of the Company's issued and outstanding Ordinary Shares (the "Reverse Stock Splits") (see also Note 1.E – 1.H to the Company's unaudited financial statements for the six month period ended June 30, 2025, included as an exhibit to this Report on Form 6-K)

 ****

 ****

***General and Administrative Expenses***

The Company's general and administrative expenses amounted to $18,656 thousand for the six months ending June 30, 2025, an increase of $11,408 thousand, or 157%, compared to $7,248 thousand for the six months ending June 30, 2024. The increase was primarily attributable to $12,580 thousand in share-based compensation, an increase of $794 thousand in public company related expenses, offset by a decrease of $1,176 thousand in professional services, a decrease of $459 thousand in transaction cost, and a decrease of $274 thousand in wages and salaries related.

***Selling and Marketing Expenses***

The Company's selling and marketing expenses amounted to $1,380 thousand for the six months ending June 30, 2025, an increase of $1,061 thousand, or 333%, compared to $319 thousand for the six months ending June 30, 2024, and was primarily due to an increase of $748 thousand in share based compensation and an increase of $337 thousand in wages and salaries related.

 ****

***Research and Development Expenses***

The Company's research and development expenses amounted to $1,640 thousand for the six months ending June 30, 2025, a decrease of $49 thousand, or 3%, compared to $1,689 thousand for the six months ending June 30, 2024. The major changes in research and development expenses were a decrease of $933 thousand in wages and salaries, and a decrease of $682 thousand in service providers, offset by a decrease of $1,125 thousand in reimbursement from paid pilots and proof of concept projects and an increase of $252 thousand in share-based compensation expenses.

***Amortization***

The Company's amortization expenses amounted to $2,075 thousand for the six months ending June 30, 2025, an increase of $2,075 thousand, or 100%, compared to nil for the six months ending June 30, 2024. Beginning July 1, 2024, the Company recognized amortization of its intangible assets and technology assets due to their maturity to commercial stage and in active use.

 ****

***Finance Income and Expenses***

The Company's finance income for the six months ended June 30, 2025, totaled $9,854 thousand, an increase of $8,252 thousand, or 515%, compared to $1,602 thousand for the six months ended June 30, 2024. The increase is primarily due to warrants revaluation amounting to $5,043 thousand, foreign exchange rate changes of $4,415 thousand, offset by a decrease in notes and loan revaluations of $1,171 thousand.

The Company's finance expense for the six months ending June 30, 2025, totaled $10,724 thousand, an increase of $7,492 thousand, or 232%, compared to $3,232 thousand for the six months ended June 30, 2024. The increase is primarily due to warrants revaluations at fair value amounting to $3,278 thousand, a note financial liability revaluation of $1,760 thousand, interest on a loan $1,315 thousand, and $610 thousand due to share issuance cost to loan holders.

***Income Tax***

As of June 30, 2025, the Company estimated carry forward tax losses is approximately $106 million (June 30, 2024: $62 million) which may be carried forward and offset against taxable income for an indefinite period in the future. The Company did not recognize deferred tax assets relating to carry forward losses in the financial statements because their utilization in the foreseeable future is not probable.

***Net Loss***

As a result of the forgoing, the Company net loss for the six months ending June 30, 2025, was $24,621 thousand, compared to $10,886 thousand for the six months ended June 30, 2024, an increase of $13,735 thousand, or 126%.

**Liquidity and Capital Resources**

***Overview***

Since our inception through June 30, 2025, and thereafter, the Company has funded its operations principally through the issuance of Ordinary Shares, warrants, convertible notes, loans from investors and through reimbursement from prospected customers for paid pilots and proof-of-concept projects. As of June 30, 2025, the Company had cash and cash equivalents balance amounting to $750 thousand. In addition, during July 2025, the Company raised gross proceeds of approximately $2,125 thousand after OID and before deduction of issuance expenses from the issuance of promissory notes as the final tranche to a May 2025 agreement, and during August 2025 the Company signed a new agreement with the same investors to issue promissory notes and borrow $5,000 thousand after OID and before deduction of issuance expenses, with the possibility, subject to conditions, of raising an additional $6,000 thousand after OID and before deduction of issuance expenses.

The table below presents our cash flows for the periods indicated:

---

| | | |
|:---|:---|:---|
| | **For the Six Months Ended<br> June 30,** | **For the Six Months Ended<br> June 30,** |
| <br>*U.S. dollars in thousands* | **2025** | **2024** |
| Net cash used in operating activities | (4145) | (4536) |
| Net cash used in investing activities |  | (166) |
| Net cash provided by financing activities | 2689 | 4636 |
| Net increase (decrease) in cash and cash equivalents | (1456) | (66) |

---

***Operating Activities***

Net cash used in operating activities was $4,145 thousand during the six months ended June 30, 2025, compared to net cash used in operating activities of $4,536 thousand during the six months ended June 30, 2024. The $391 thousand decrease is mainly attributed to the increase in net loss for the period of $13,928 thousand, increase in Revaluation of financial liabilities at fair value of $567 thousand, offset by an increase in share-based compensation of $13,651 thousand.

***Investing Activities***

Net cash used in investing activities was nil during the six months ending June 30, 2025, as the Company did not purchase equipment, compared to the period during the six months ending June 30, 2024, where the Company equipment purchased totaled $166 thousand.

***Financing Activities***

Net cash provided by financing activities was $2,689 thousand during the six months ending June 30, 2025, compared to net cash provided by financing activities of $4,636 thousand during the six months ending June 30, 2024. The $1,947 thousand decrease is mainly attributed to decrease in $2,698 thousand in exercise of warrants into ordinary shares, $2,025 thousand proceeds from the issuance of a convertible note in April 2024 and $666 thousand of payments for bridge loans, short-term loans and convertible loans, offset by an increase of $3,076 thousand in proceeds from the issuance of convertible notes.

***Current Outlook***

The Company has incurred and continues to incur losses and continues to generate negative cash flows from operations since inception in 2015. Since the Company's inception, it has not generated significant revenue from the sale of its technology.

As of June 30, 2025, and December 31, 2024, the Company had $750 thousand and $2,343 thousand, respectively, in cash and cash equivalents. Since June 30, 2025, the Company has raised an additional approximately $7,125 thousand after OID and before deduction of issuance expenses in convertible note funding from various investors. In addition, the Company has approximately $14,451 thousand in existing payables and other liabilities related to expenses from the Company's 2023 business combination, in addition to liabilities to other services providers and employees. An additional approximately $7,740 thousand is due and owing to various lenders and investors. The Company expects to fund the payment of such amounts out of ongoing activities of the Company and other capital-raising efforts the Company is pursuing in the near future. Further, the Company's operating plans may change as a result of many factors that may currently be unknown to it, and it may need to seek additional funds sooner than planned. The Company financial statements for the six months ended June 30, 2025 contain an explanatory paragraph regarding substantial doubt about of the Company ability to continue as a going concern. This going concern assessment may prevent the Company from obtaining new financing on reasonable terms, if at all, and imperil the Company ability to continue operating as a going concern.

We are generating negative cash flow and requiring constant and immediate cash injections to continue to operate. We face significant uncertainty regarding the adequacy of our liquidity and capital resources and our ability to repay our obligations as they become due in cash. We are currently negotiating with certain of our debt holders and others we owe money to, to extend the term of their notes or other payment obligations and/or to convert some or all of such liabilities into our ordinary shares. However, there can be no assurance that our discussions will be successful. We expect to be able to obtain additional sources of debt and equity financing. However, such opportunities remain uncertain and are predicated upon events and circumstances which are outside the Company's control.

The Company's future capital requirements will depend on several factors, including:

● Commercial scaling and initial deployment of the technology, along with the progress and costs of our research and development activities;

● the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

● the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and

● the magnitude of our general and administrative expenses.

When and until the Company starts to generate significant recurring revenues and profit, the Company expects to satisfy its future cash needs through capital raising and shareholders' financial support. The Company cannot be certain that additional funding will be available when needed, on acceptable terms, if at all. The Company's outstanding warrants are generally either out of money or have nominal exercise prices; accordingly, the Company does not expect to raise any material additional funds from the exercise of outstanding warrants in at least the short-term. If funds are not available, the Company may be required to delay or reduce the scope of research or development plans.

We can give no assurances that we will be able to secure additional sources of funds to support our operations on acceptable terms, or at all, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders or increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur additional indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but may not be on terms that are favorable to us. Any of the foregoing could significantly harm our business, financial condition and results of operations. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to reduce the scope of the commercialization of our planned products or delay, scale back or discontinue the development of one or more of our product candidates.

We may also need to take certain other actions to allow us to maintain our projected cash and projected financial position, including but not limited to additional reductions in general and administrative costs, sales and marketing costs, and other discretionary costs. Although we believe such plans, if executed and coupled with the above-described sources of liquidity, should provide us with financing to meet our needs, successful completion of such plans is dependent on factors outside of our control.

We anticipate that we will continue to incur net losses into the foreseeable future as we continue our development of our product candidates and expand our corporate infrastructure.

***Going Concern***

As of June 30, 2025, we had incurred accumulated losses of $106 million and plan to continue to fund our operations through the sale of convertible securities, ordinary shares and warrants. There is no assurance that such financing would be available on acceptable terms or consummated. Considering the above, our dependency on external funding for our operations raises a substantial doubt about our ability to continue as a going concern. The interim condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

**Contractual Obligations**

***August 2025 Convertible Promissory Note Financing***

As of August 3, 2025, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with institutional investors (the "Investors") to issue and sell to each of the Investors a promissory note (the "Note"), for aggregate gross proceeds to the Company of up to $11.0 million, subject to conditions (the "Purchase Price"), before deducting fees to the Placement Agent (as defined below) and other expenses payable by the Company in connection with the offering (the "Offering").

The Purchase Price shall be paid as follows: $3,000,000 on the initial closing date (the "First Closing"); $3,000,000 on a second closing date prior to the effective date of the First Form F-1 (as defined below) (the "Second Closing"); $2,500,000 on a third closing upon the Third Closing Triggering Event (as defined below) (the "Third Closing"); and $2,500,000 on a fourth closing on a fourth closing date prior to the effective date of the Second Form F-1 (as defined below) (the "Fourth Closing").

The First Closing was on August 4, 2025. The Company register for resale the Ordinary Shares that may be issued upon conversion of the Note with respect to the First Closing and the Second Closing, and filed a Registration Statement on Form F-1 (the "First Form F-1") within ten business days of the First Closing. The "Third Closing Triggering Event" means the later of (a) the date that the Investors have converted all outstanding amounts owed under the Note from the First Closing and the Second Closing into the Company's Ordinary Shares and (b) the filing with the SEC of a second registration statement covering the resale of all Ordinary Shares issuable upon conversion of the Note with respect to the Third Closing and the Fourth Closing (the "Second Registration Statement"). In the event the Investors do not fully convert their Note with respect to the First Closing and the Second Closing, the Investors are not required to fund the Note with respect to the Third Closing or the Fourth Closing.

The Notes are in the aggregate principal amount of up to $13,750,000 (the "Principal Amount"), and carry an original issue discount of 20%. The maturity date of each Note is the 12-month anniversary of the issuance date, and is the date upon which the Principal Amount, as well as any other fees, shall be due and payable.

Each Investor has the right, at any time, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest if any (including any costs, fees and charges) into ordinary shares at a conversion price equal to the greater of $0.332 and 85% of the lowest daily volume weighted average price of the ordinary shares during the seven trading days immediately prior to the date of conversion. Any such conversion is subject to conversion limitations so each Investor beneficially owns less than 4.99% of the ordinary shares. Additionally, each Investor is limited from selling the ordinary shares issued upon conversion of the Note in an amount equal to 20% of the Company's trading volume during the same trading day, which may be waived from time to time.

Subject to exceptions described in the Purchase Agreement (the "Exempt Issuances"), including relating to the permitted issuance of Company securities if such securities remain restricted through the maturity date of the Note or its earlier conversion in full, the Company may not sell any equity or equity-linked securities during the term of the Note without the Investors' consent.

The Notes contain customary Events of Default for transactions similar to the transactions contemplated by the Purchase Agreement and the Note, which entitle each Investor, among other things, to accelerate the due date of the unpaid principal amount of the Note. Upon the first occurrence of an Event of Default with respect to the Note, the Principal Amount outstanding as of the Event of Default date shall be automatically increased by 20%. Additionally, from and after the occurrence and during the continuance of any Event of Default, each Note shall commence accruing interest at the rate of 20% per annum, and shall be due and payable on the first trading day of each calendar month during the continuance of such Event of Default.

On July 30, 2025, the Company entered into an engagement letter in connection with the Offering (the "Engagement Letter"), with RBW Capital, pursuant to which it agreed to serve as the placement agent for the issuance and sale of securities of the Company pursuant to the Purchase Agreement. As compensation for such placement agent services, the Company agreed to pay the Placement Agent, collectively with Aegis for its fees, an aggregate cash fee equal to 8.0% of the gross proceeds received by the Company from the Offering, plus up to $90,000 for its fees and expenses.

Further, pursuant to the Engagement Letter, RBW Capital is entitled to compensation with respect to any financing of the Company occurring within 12 months of the termination or expiration of the Engagement Letter when such financing is provided by investors whom RBW Capital actually introduced to the Company during the term of the Engagement Letter. The Engagement Letter also includes indemnification obligations of the Company and other provisions customary for transactions of this nature.

***May 2025 Convertible Promissory Note Financing***

On May 9, 2025, the Company entered into a securities purchase agreement with investors, pursuant to which it issued a convertible promissory note in the principal amount of $6,875 thousand, reflecting a 20% original issue discount, in consideration for total cash proceeds of $5,500 thousand (before deduction of issuance expenses) to be received in four installments in accordance with the terms of the agreement (an amount of $1,375 thousand was funded at the time of signing of the agreement; an amount of $1,375 thousand when certain SEC filing conditions were satisfied, and additional amounts of $625 thousand and $2,125 thousand upon the satisfaction of other conditions as described in the securities purchase agreement. Through June 30, 2025, the first three payments were received, and the fourth payment was received subsequent to the balance sheet date on July 3, 2025).

In addition, RBW Capital, the placement agent for the transaction, are entitled to warrants, at a rate of 5% of the number of shares actually be issued upon conversion of the convertible promissory note. The warrants are exercisable at a price of $0.368 per share, for a period of 5 years from the date of grant.

During the period after the balance sheet day of June 30, 2025, the investors converted all of the outstanding principal under the convertible promissory note in full. As a result, the Company issued to the investors an aggregate of 829,934 ordinary shares.

***March 2025 Promissory Note Financing***

On March 28, 2025, the Company entered into an agreement with 1800 Diagonal ("1800 Diagonal"), pursuant to which it issued a promissory note in the principal amount of $295.5 thousand, in consideration for net cash proceeds of approximately $250 thousand, after deduction of issuance expenses of approximately $7 thousand.

The note bears interest at an annual rate of 12% and is repayable in seven installments between September 2025 and March 2026, as follows: $163 thousand on September 30, 2025; and $27.2 thousand on each month-end from October 2025 to March 2026.

The note contains customary default provisions for similar transactions, under which, in the event of default: (i) it becomes immediately due and payable; (ii) the outstanding principal and interest increase by 150%; and (iii) it may be converted, at the sole discretion of 1800 Diagonal, into ordinary shares of the Company. In this regard, the conversion price is the lowest closing price of the Company's shares during the ten trading days preceding the conversion request, less a 25% discount. Conversion is subject to an ownership limitation of 4.99%.

The agreement also includes customary representations, undertakings, and indemnities in favour of 1800 Diagonal, its subsidiaries, and related entities.

***Leases***

SMX Israel is a party to a lease agreement dated January 14, 2020, and amended as of December 24, 2020 (the "Lease"). Under the Lease, it is obligated to pay ILS 253 thousand plus VAT per year. The Lease will expire on May 31, 2027, with an additional option of 5 years, unless terminated by the landlord due to a requirement of a governmental authority to modify or terminate the Lease, pursuant to the terms of the lease.

**Borrowings**

***Abri Advisors Loan Agreement***

On December 28, 2024, the Company entered into a loan agreement with Abri Advisors Ltd. ("**Abri**"), pursuant to which it borrowed $1,000 thousand. Under the agreement, the Company undertook to repay Abri by June 30, 2025, a total amount of $1,400 thousand, representing a 28.577% discount to the principal, plus 15% annual interest on the outstanding principal balance. The agreement stipulates that, while the loan remains outstanding, the Company may not issue any additional debt instrument ranking senior or equal to this loan, whether in payment priority or in collateral, without Abri's prior written consent. In addition, if the Company conducts a capital raise or issues any convertible securities (including ordinary shares, preferred shares, options, or warrants), it must repay 25% of the then-outstanding loan balance within three business days of the closing date ("Capital Raise Repayment"). Such repayment does not reduce or alter the final repayment amount due at maturity, regardless of the payment date.

The agreement includes customary nonpayment provisions. In the event of nonpayment, and if not cured within three business days, the outstanding obligation (including any Capital Raise Repayment) becomes immediately due and payable, multiplied by 150% ("nonpayment Amount"). The nonpayment Amount bears monthly interest at 5% from the nonpayment date until settlement. For accounting purposes, the loan is measured at amortized cost using the effective interest method, with an effective annual interest rate of 155.93% calculated on initial recognition. As of December 31, 2024, the carrying amount of the loan was $1,000 thousand.

On May 26, 2025, the Company repaid $200 thousand and on August 1, 2025, an additional $150 thousand. The Company and ABRI are in negotiations to postpone the remainder of the payments due.

***Alpha April 2024***

 ****

On April 11, 2024, the Company issued an unsecured promissory note to Generating Alpha Ltd. in the principal amount of $2,250 thousand (hereinafter: the "**Alpha April Note**" and "**Alpha**", respectively). In connection with the issuance, two additional warrants were granted to Alpha, which were fully exercised during 2024. The note was issued at a 10% discount, bore annual interest at a rate of 12%, and had a contractual maturity of 12 months from the issuance date.

The conversion option allows it to convert the outstanding principal and accrued interest into ordinary shares at the lower of $14,723 per share or a 15% discount to the 10-day volume-weighted average price (VWAP) preceding the conversion date, subject to customary adjustments.

During 2024, Alpha exercised its embedded conversion option and partially converted the Alpha April Note, whereby approximately $2,300 thousand of the outstanding principal and accrued interest was converted into 16,318 ordinary shares of the Company.

In addition, during the first half of 2025, Alpha exercised its embedded conversion option with respect to the remaining balance of the Alpha April Note, converting it into 6,656 ordinary shares of the Company, with a fair value at the conversion date of $842 thousand.

On April 2, 2025, the Company entered into a settlement agreement with Alpha, pursuant to which it issued 14,235 ordinary shares to Alpha, with a fair value at the issuance date of $787 thousand. As of June 30, 2025, the entire outstanding balance of the Alpha April Note had been converted into ordinary shares of the Company, and accordingly, no further liability to Alpha remains in respect of this note.

***PMB***

On September 4, 2024, the Company entered into an agreement with PMB Partners, LP ("**PMB**") to restructure a secured promissory note with a principal amount of $1,300 thousand, originally maturing on May 31, 2024, into two new debt instruments: (i) a convertible promissory note in the amount of $800 thousand, convertible into ordinary shares of the Company at a fixed conversion price of $8,588 per share; and (ii) a senior straight debt promissory note (the "Senior Note") in the amount of $500 thousand. Both notes bore annual interest at a rate of 15%, with default interest at a rate of 20% per annum.

On May 13, 2025, the parties executed an amendment, under which the maturity date of both notes was extended to November 30, 2025, the annual interest rate was increased to 18%, and the principal balance of each note was adjusted to include accrued and unpaid interest up to the date of the amendment.

In accordance with IFRS 9, the quantitative and qualitative effects of the amendment were assessed, and it was determined that the modification was non-substantial. Accordingly, the amortized cost of the liabilities was adjusted to reflect the revised contractual cash flows, discounted at the original effective interest rate, with the resulting difference recognized as finance expenses in profit or loss.

***Alpha July 2024***

On July 19, 2024, the Company issued a promissory note to Alpha with principal amount $1,150 thousand, at a 35% discount, with a contractual maturity of 12 months from the issuance date (hereinafter: the "**Alpha July Note**").

Alpha was granted an embedded conversion option, exercisable at any time, to convert all or part of the outstanding principal and any unpaid interest (including costs, fees, and charges) into ordinary shares of the Company, at the lower of: (i) $4,989 per share; or (ii) 80% of the 20-trading-day volume-weighted average price (VWAP) preceding the conversion date, subject to customary adjustments.

During the first half of 2025, Alpha exercised the embedded conversion option in full. As a result, the Company issued 13,287 ordinary shares to Alpha, with a fair value at the conversion date of $1,579 thousand.

***1800 Diagonal August 2024***

On August 30, 2024, the Company entered into an agreement with 1800 Diagonal for the issuance of a compound financial instrument in consideration for net proceeds (after fees and issuance expenses) of $194.5 thousand. The instrument comprised: (i) a host straight debt component, and (ii) an embedded conversion option exercisable only upon an event of default.

The instrument was fully repaid in cash during the first half of 2025 for an aggregate amount of approximately $246 thousand (comprising the original principal amount of $223.7 thousand and interest of $22.4 thousand).

**Legal Proceedings**

In January 2024, for a $5 million contract with R&I Trading, deploying cutting-edge technology to enhance supply chain transparency for a NATO member state, with plans to expand to additional NATO members. This partnership aims to establish new standards in brand protection, authentication, and ethical sourcing, particularly in the FMCG sector. Through this initiative, the Company is committed to promoting transparency and security in global supply chains, reflecting its dedication to ethical business practices and technological innovation. Subsequent to June 30, 2024, R&I Trading sent a termination notice to the Company and a demand for arbitration with respect to disputed payment amounts under the contract. The Company believes the termination of the contract is unlawful and has demanded that R&I Trading honor its obligations under the contract. The Company further believes R&I Trading's claims are without merit and intends to defend any action, if and when commenced, vigorously. The Company is currently engaged in an arbitration process with R&I Trading. The statements of claim by the parties to the arbitration proceedings were filed on January 6, 2025. R&I Trading's statement of claim demands full restitution of the amounts paid by it under the agreement. The Company's statement of claim alleges that R&I Trading breached the agreement and has requested the arbitrator to grant relief for the division of remedies in the event that the Company is presented with further expenses by suppliers and employees that have not yet been included in its damage estimate. The Company also raised claims regarding loss of opportunities and requested declaratory relief in favor of the Company. Prior to filing the statement of claim, on December 26, 2024, the Company filed a motion for declaratory relief. On January 9, 2025, R&I Trading responded to the motion. The Company had until January 23, 2025, to submit reply papers in connection with this motion practice. On March 6, 2025, the parties filed a request for the approval of a mutual procedural arrangement, under which, among other things, R&I Trading will file an affidavit stating that it is not using the Company's IP rights and has no intention of violating the Company's IP rights; the Company will withdraw the motion for a declaration and amend its statement of claim accordingly by March 30, 2025; the statements of defense will be filed by April 21, 2025; and the statements of reply will be filed by May 12, 2025. On March 7, 2025, the arbitrator approved the request, and on March 23, 2025, R&I Trading filed its affidavit. To the date of this report, the parties exchanged general affidavits of disclosure and requests for response to questionnaire and for disclosure of documents. At this preliminary stage, it is not possible to assess the chances of the Company's claim and the outcome of the arbitration proceedings.

**Government Grants**

As of June 30, 2025, and December 31, 2024, the Company has a contingent liability of $191 thousand and $177 thousand, respectively, for government grant it received for the use of research and development activities from Israel Innovation Authority (IIA). The Company is subject to paying 3% of its relevant revenues for the first three years, and 4% of the relevant revenues for further years, until repayment of the entire grant.

**Isorad License Agreement**

In January 2015, the Company entered into the Isorad License Agreement with Isorad Ltd. (a company wholly owned by the State of Israel with rights to exclusively commercialize the Soreq Research Center technology for civilian uses), according to which the Company was granted technological license in return for future royalties based on 2.2% of gross sales by the Company and its affiliates and after 25 years the license becomes royalty-free. Upon the occurrence of an M&A event (as such event is defined in the agreement to include mergers, sale of all or substantially all the assets of ours and similar event), in the first M&A event, the Company is to pay a consideration equal to 1% of the amount received or transferred and in the second M&A event, a consideration equal to 2% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter.

In January 2023, the Company signed an amendment to the Isorad License Agreement that provided for the following: (1) for the BCA with Lionheart, (a) Isorad was issued 864,000 options to purchase shares of the Company, which options were issued in January 2023 and valued using the Black-Scholes pricing model, with the main parameters used being: (1) risk-free rate: 3.42%; (2) expected volatility: 81.92%: (3) expected term: up to 3 years; and (4) expected dividend yield: 0%; and (b) Isorad will be entitled to 1% of any amount actually received against equity or other funding convertible into equity at the closing of the transaction and until 13 months thereafter (to be paid after reaching an aggregated received amount of $27 million, or at the end of such 13 months, the earlier thereof); and (2) Exit fee - in the occurrence of the first M&A event (as such event is defined in such agreement to include mergers, sale of all or substantially all the assets of the Company and similar event) after the closing of the BCA, the Company is to pay a cash amount equal to 1.5% of the amount received or transferred. This will not apply to any future offer of shares, merger or sale of assets thereafter. In the six months ended June 30, 2025, and in the twelve months ended December 31, 2024, based on the funds the Company actually received, the Company recognized a technology license intellectual property at the amount of $171 thousand and $158 thousand, respectively, against a liability that reflects the due amount.

**Quantitative and Qualitative Disclosures about Market Risk**

The Company is exposed to market risks in the ordinary course of business. Market risk represents the risk of loss that may impact on our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily with respect to the ILS, AUD, and SGD, which is discussed in detail in the following paragraph.

***Foreign Currency Exchange Risk***

The Company's operating expenses are denominated mainly in ILS, AUD, and SGD, and therefore are currently subject to foreign currency risk. We have been affected by changes in some of such rates compared to the U.S. dollar, We have been affected by changes in the rate of ILS currency compared to the U.S. dollar, as the ILS devaluated against the U.S. dollar by approximately 7.5% in the six months ended June 30, 2025 compared to a appreciation of 3.6% in the six months ended June 30, 2024. The AUD appreciated against the U.S. dollar by approximately 5.2% in the six months ended June 30, 2024, compared to a devaluation of 2.9% in the six months ended June 30, 2024. Lastly the SGD devalued against the U.S. dollar by approximately 10.4% and 2.1% in the six months ended June 30, 2025, and June 30, 2024, respectively

The Company's policy is not to perform currency hedging transactions, and we cannot assure you that we will not be adversely affected by currency fluctuations in the future.

***Credit Risk***

Credit risk is a risk of financial loss if a counterparty or customer fails to meet its contractual obligations. We closely monitor the activities of our counterparties and control the access to its intellectual property which enables it to ensure a prompt collection. Our main financial assets are cash and cash equivalents as well as other receivables and represent the Company's maximum exposure to credit risk in connection with its financial assets. Wherever possible and commercially practical, the Company holds cash with major and sound financial institutions in Israel and Australia.

***Liquidity Risk***

Liquidity risk is the risk that we will encounter in meeting our obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. The Company has procedures to minimize that risk by maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. For more details, please refer to the section titled, "Liquidity and Capital Resources".

**Critical Accounting Policies and Estimates**

***Reverse Acquisition Transaction***

The result of the merger between the Company and Security Matters PTY is that legally the Company owns the entire share capital of Security Matters PTY.

Accordingly, for financial reporting purposes, Security Matters PTY (the legal subsidiary) is the accounting acquirer, and the Company (the legal parent) is the accounting acquiree. The consolidated financial statements prepared following the reverse acquisition are issued under the name of the Company, but they are a continuance of the financial statements of Security Matters PTY and reflect the fair values of the assets and liabilities of the Company (the acquiree for accounting purposes), together with a deemed issuance of shares by Security Matters PTY at fair value based on the quoted opening share price of the Company in its first trading day following the closing of the business combination transaction ($11,599 thousand), and a recapitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of the Company) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Company). The difference, in the amount of $16,802 thousand, between the fair value of the shares deemed to have been issued by Security Matters PTY and the fair value of the Company's identifiable net assets represent a payment for the service of obtaining a stock exchange listing for its shares and it is therefore expensed immediately to profit or loss at the closing date.

The Company is initially consolidated in the financial statements from the Closing Date of the Business Combination. Substantially all of the assets and liabilities of the Company were comprised of marketable securities held in a trust account ($4,921 thousand) and trade and other payables and warrants ($10,127 thousand) respectively, with fair values that were equivalent to their carrying amounts. Below are the implications of the accounting treatment on the financial statements:

1. The
 assets and liabilities of Security Matters PTY have been recognized and measured in the consolidated financial statements of the
 Company for the year ended December 31, 2023, at their pre-combination carrying amounts.

2. The
 retained earnings and other equity balances recognized in the consolidated financial statements of the Company for the year ended
 December 31, 2023, are the retained earnings and other equity balances of Security Matters PTY immediately before the Business Combination.

3. The
 amount recognized as issued equity instruments in the consolidated financial statements of the Company for the year ended December
 31, 2023, has been determined by adding to the issued equity of Security Matters PTY immediately before the Business Combination
 the fair value of the deemed issuance of shares, as described above. However, the equity structure (the number and type of shares
 issued) reflects the equity structure of the Company, including the shares issued by the Company through recapitalization. Accordingly,
 the equity structure of Security Matters PTY (issued capital and addition paid in capital) in comparative periods is restated using
 the exchange ratio established in the Business Combination to reflect the number and par value of shares of the Company issued in
 the reverse acquisition transaction.

4. The
 statement of comprehensive loss in the consolidated financial statements of the Company for the year ended December 31, 2023, reflects
 that of Security Matters PTY for the full period together with the post-acquisition results of the Company from the Closing Date.
 Loss per share of Security Matters PTY for periods prior to the acquisition date is restated such the denominator of the historical
 loss per share calculation is adjusted by multiplying the weighted-average shares used in each historically reported loss per share
 calculation by the exchange ratio established in the Business Combination.

***trueGold Business Combination***

On October 3, 2023, the Company has signed an agreement with trueGold shareholders to acquire an additional 7.5% which increased the Company's holdings to 51.9% in true-Gold and resulted in the Company's gain of control over trueGold. trueGold uses the Company's advanced next-generation technology to invisibly mark and store multiple data types at a molecular level as well as its blockchain digital platform. This strategic transaction through gaining control of trueGold diversifies the Company's operations into trueGold's pioneering ventures in research and development and revenue commercialization.

The Company previously held 44.4% of the shares of trueGold which, up to the acquisition date and the beginning of consolidation, were treated as an investment in a joint venture which accounted for under the equity method. At the time the transaction was completed, and control was obtained, the balance of the investment was remeasured at fair value of $22,164 thousand and a gain was recognized in the amount of $22,164 thousand, which was recorded in the statement of comprehensive loss (the carrying amount of the previous investment in true-Gold was approximately nil). This fair value amount was added to the consideration transferred for the calculation of goodwill, as described below.

The Company has elected to measure the non-controlling interests in trueGold at full fair value which includes also the non-controlling interests' share in the entire goodwill of trueGold. The fair value of the non-controlling interests in trueGold was based on the fair value of trueGold as a whole, as described above, and was estimated using the discounted cash flow method of the income approach, as trueGold is a private company and therefore quoted market prices of its share were unavailable. The fair value has been determined by management with the assistance of a valuation performed by an external and independent valuation specialist using valuation techniques and assumptions as to estimates of projected net future cash flows of trueGold and estimate of the suitable discount rate for these cash flows. The significant assumptions used in estimating the fair value of trueGold are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. After-tax
 net cash flow discount rate (weighted average cost of capital) of 24.8%.

2. Terminal
 value cash flow multiple of 4.59 and terminal growth rate of 3%.

3. Discount
 for lack of marketability of 25.2% (or $11.17), resulting in a fair value of $33.12 per ordinary share of true-Gold).

The total cost of the business combination comprised a full forgiveness of the outstanding payables from trueGold to the Company which amounted to AUD 475 thousand (approximately $307 thousand) at acquisition date. The calculating of any goodwill upon acquisition included also the fair value of the previous investment in trueGold.

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| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 99.1 | [Interim Condensed Consolidated Financial Statements as of June 30, 2025](ex99-1.htm) |
| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 29, 2025

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| | |
|:---|:---|
| **SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY** | **SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY** |
| By: | */s/ Haggai Alon* |
| Name: | Haggai Alon |
| Title: | Chief Executive Officer |

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## Exhibit 99.1

?xml version='1.0' encoding='ASCII'?

**Exhibit 99.1**

**<u>SMX (SECURITY MATTERS)</u>**

**<u>PUBLIC LIMITED COMPANY</u>**

**<u>INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</u>**

**<u>AS OF JUNE 30, 2025</u>**

**<u>UNAUDITED</u>**

**<u>SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY</u>**

**<u>INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</u>**

**<u>AS OF JUNE 30, 2025</u>**

**<u>UNAUDITED</u>**

**<u>**TABLE OF CONTENTS**</u>**

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| | |
|:---|:---|
|  | **Page** |
| [Interim condensed consolidated statements of financial position](#a_001) | 3 |
| [Interim condensed consolidated statements of comprehensive loss](#a_002) | 4 |
| [Interim condensed consolidated statements of changes in shareholders' equity (deficit)](#a_003) | 5-6 |
| [Interim condensed consolidated statements of cash flows](#a_005) | 7-8 |
| [Notes to the unaudited interim condensed consolidated financial statements](#a_006) | 9-21 |

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| | |
|:---|:---|
| **SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**<br> **UNAUDITED INTERIM CONDENSED CONSOLIDATED**<br> **STATEMENTS OF FINANCIAL POSITION** | ![](ex99-1_001.jpg) |

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| | | | |
|:---|:---|:---|:---|
|  | | **As of**<br> **June 30, 2025** | **As of**<br> **December 31, 2024** |
|  |<br>**Note** | **US$ in thousands** | **US$ in thousands** |
| <u>Current assets</u> |  |  |  |
| Cash and cash equivalents |  | 750 | 2343 |
| Other current receivables |  | 1000 | 1993 |
| **Total current assets** |  | **1750** | **4336** |
| <u>Non-current assets</u> |  |  |  |
| Intangible assets, net |  | 10451 | 12328 |
| Goodwill |  | 26144 | 26144 |
| Property, plant and equipment, net |  | 107 | 268 |
| Right of use assets |  | 347 | 348 |
| Investment in associated companies |  | 111 | 105 |
| **Total non-current assets** |  | **37160** | **39193** |
| **Total assets** |  | **38910** | **43529** |
| <u>Current liabilities</u> |  |  |  |
| Trade payables |  | 10311 | 9432 |
| Other payables |  | 4140 | 4350 |
| Short term loan | 3 | 2115 | 1000 |
| Convertible notes | 4 | 5084 | 3651 |
| Warrants - derivative financial liability |  | 9 | 1384 |
| Bridge loans liabilities |  | 532 | 902 |
| Lease liabilities |  | 62 | 81 |
| **Total current liabilities** |  | **22253** | **20800** |
| <u>Non-current liabilities</u> |  |  |  |
| Lease liabilities |  | 365 | 337 |
| **Total non-current liabilities** |  | **365** | **337** |
| **Total liabilities** |  | **22618** | **21137** |
| <u>Equity</u> |  |  |  |
| Issued capital and additional paid in capital | 6 | 110188 | 89976 |
| Foreign currency translation reserve |  | (3421) | (1797) |
| Transaction with non-controlling interest reserve |  | 258 | 258 |
| Accumulated losses |  | (105664) | (82026) |
| **Total equity attributable to owners of the parent** |  | **1361** | **6411** |
| Non- controlling interest |  | 14931 | 15981 |
| **Total equity** |  | **16292** | **22392** |
| Total liabilities and shareholders' equity |  | **38910** | **43529** |

---

---

| | | |
|:---|:---|:---|
| /s/ Amir Bader | /s/ Haggai Alon | August 29, 2025 |
| Amir Bader<br> Interim Chief Financial Officer | Haggai Alon<br> Chief Executive Officer | Date of approval of<br> financial statements |

---

**The accompanying notes are an integral part of the financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**UNAUDITED INTERIM CONDENSED CONSOLIDATED**

**STATEMENTS OF COMPREHENSIVE LOSS**

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| | | | |
|:---|:---|:---|:---|
|  | | **For the Six-Month Period Ended** | **For the Six-Month Period Ended** |
|  | | **June 30, 2025** | **June 30, 2024** |
|  |<br>**Note** | **US$ in thousands<br> except share and per share data** | **US$ in thousands<br> except share and per share data** |
| General and administrative expenses |  | 18656 | 7248 \* |
| Selling and marketing expenses |  | 1380 | 319 \* |
| Research and development expenses, net |  | 1640 | 1689 |
| Amortization |  | 2075 | - |
| **Operating loss** |  | **(23751)** | **(9256)** |
| Finance income |  | 9854 | 1602 |
| Finance expenses |  | 10724 | 3232 |
| **Loss before income tax** |  | **(24621)** | **(10886)** |
| Income tax |  | - | - |
| **Net loss** |  | **(24621)** | **(10886)** |
| **Other comprehensive loss** |  | (1691) | 92 |
| **Total comprehensive loss** |  | **(26312)** | **(10794)** |
| **Net loss attributable to:** |  |  |  |
| Equity holders of the Company |  | (23638) | (10693) |
| Non- controlling interest |  | (983) | (193) |
| **Loss per share attribute to the shareholders** |  |  |  |
| Basic and diluted loss per share attribute to shareholders (in US dollar) | **7** | **\*\*(209)** | **\*\*(4)** |

---

\* Reclassification \*\* The share and per share information in these financial statements reflects the 1-for-75, 1-for-28.5, 1-for-4.1 and 1-for-7 reverse share splits became effective on July 15, 2024, January 15, 2025, June 16, 2025 and August 7, 2025, respectively, of the Company's issued and outstanding Ordinary Shares (the "Reverse Stock Splits") (see also Note 1.E – 1.H) 

**The accompanying notes are an integral part of the consolidated financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS'**

**EQUITY (DEFICIT)**

**(US$ in thousands)**

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Issued**<br> **capital and**<br> **Additional**<br> **paid-in**<br> **capital** | **Transaction<br> with<br> non-controlling<br> interest** | **Foreign<br> currency<br> translation<br> reserve** | **Accumulated** <br> **loss**  | **Total<br> equity<br> attributable<br> to owners<br> of the<br> parent** | **Non- controlling<br> interests** | **Total<br> equity** |
| **Balance as of January 1, 2025** | 89976 | **258** | **(1797)** | **(82026)** | **6411** | **15981** | **22392** |
| **Comprehensive loss** |  |  |  |  |  |  |  |
| Loss after income tax for the period |  |  |  | (23638) | (23638) | (983) | (24621) |
| Other comprehensive loss for the period | - | - | (1624) | - | (1624) | (67) | (1691) |
| Total comprehensive loss for the period | - | - | (1624) | (23638) | (25262) | (1050) | (26312) |
| Conversion of convertible promissory note into ordinary shares | 3204 |  |  |  | 3204 |  | 3204 |
| Equity issuance to investors | 1734 |  |  |  | 1734 |  | 1734 |
| Share based compensation | 15274 | - | - | - | 15274 | - | 15274 |
| **Balance as of June 30, 2025** | 110188 | 258 | (3421) | (105664) | 1361 | 14931 | 16292 |

---

**The accompanying notes are an integral part of the consolidated financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**UNAUDITED INTERIM CONDENSED CONSOLIDATED CHANGES IN SHAREHOLDERS'**

**EQUITY (DEFICIT)**

**(US$ in thousands)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Issued<br> capital and**<br> **Additional<br> paid-in<br> capital** | **Transaction<br> with<br> non-controlling<br> interest** | **Foreign<br> currency<br> translation <br> reserve** | **Accumulated<br> loss** | **Total<br> equity<br> attributable<br> to owners<br> of the<br> parent** | **Non- controlling<br> interests** | **Total<br> equity** |
| **Balance as of January 1, 2024** | **62901** | **-** | **(491)** | **(50934)** | **11476** | **20768** | **32244** |
| **Comprehensive loss** |  |  |  |  |  |  |  |
| Net loss |  |  |  | (31092) | (31092) | (4309) | (35401) |
| Other comprehensive loss | - | - | (1306) | - | (1306) | 41 | (1265) |
| Total comprehensive loss | - | - | (1306) | (31092) | (32398) | (4268) | (36666) |
| Issuance of ordinary shares, net | 1684 |  |  |  | 1684 |  | 1684 |
| Share-based compensation | 3657 |  |  |  | 3657 |  | 3657 |
| Conversion of convertible notes into ordinary shares | 7529 |  |  |  | 7529 |  | 7529 |
| Conversion of bridge loan into ordinary shares and warrants | 128 |  |  |  | 128 |  | 128 |
| Conversion of pre-paid advanced into ordinary shares | 527 |  |  |  | 527 |  | 527 |
| Issuance of investment units | 2699 |  |  |  | 2699 |  | 2699 |
| Exercise of warrants and options into ordinary shares, net | 10590 |  |  |  | 10590 |  | 10590 |
| Transaction with non-controlling interests | 261 | 258 |  |  | 519 | (519) |  |
| **Balance as of December 31, 2024** | **89976** | **258** | **(1797)** | **(82026)** | **6411** | **15981** | **22392** |

---

**The accompanying notes are an integral part of the consolidated financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** 

**(US$ in thousands)**

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| | | |
|:---|:---|:---|
|  | **For the Six Months Ended** | **For the Six Months Ended** |
|  | **June 30, 2025** | **June 30, 2024** |
|  | **US$ in thousands** | **US$ in thousands** |
| ***<u>Cash flows from operating activities:</u>*** |  |  |
| Net Loss | (24621) | (10693) |
| Share-based compensation | 15274 | 1623 |
| Issuance of restricted shares to investors | 610 |  |
| Depreciation and amortization | 2274 | 111 |
| Decrease / (Increase) in other receivables | 699 | 246 |
| Decrease / (Increase) in trade payables | (549) | 1155 |
| Decrease / (Increase) in other payables | (375) | 1238 |
| Revaluation of financial liabilities at fair value | (1516) | (949) |
| Financial expenses due to bridge loans principal amounts | 23 | (53) |
| Interest on leases | 18 | 32 |
| Interest expenses / (income) and revaluation of convertible notes | 2277 | 1871 |
| Interest expenses due to short term loan | 1315 |  |
| Issuance of ordinary shares due to commitment fee |  | 460 |
| Issuance of ordinary shares due to underwriter's fee |  | 238 |
| Issuance cost due to inducement |  | 185 |
| Issuance of warrants to the placement agent | 426 | - |
| **Net cash flow used in operating activities** | **(4145)** | **(4536)** |
| ***<u>Cash flows from investing activities:</u>*** |  |  |
| Purchase of property, plant and equipment |  | (166) |
| Capitalized development cost | - | - |
| **Net cash flow used in investing activities** | **-** | **(166)** |

---

**The accompanying notes are an integral part of the consolidated financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** 

**(US$ in thousands)**

---

| | | |
|:---|:---|:---|
|  | **For the Six Months Ended** | **For the Six Months Ended** |
|  | **June 30, 2025** | **June 30, 2024** |
|  | **US$ in thousands** | **US$ in thousands** |
| ***<u>Cash flows from financing activities:</u>*** |  |  |
| Payment of lease liabilities | (41) | (40) |
| Proceeds from issuance of convertible notes and security | 3426 | 350 |
| Repayment of bridge loans | (250) | (30) |
| Proceeds from the issuance of Alpha new Note, warrants and derivative financial liability |  | 2025 |
| Proceeds from (repayment of) Pre-Paid Advance |  | (423) |
| Proceeds from the issuance of shares and warrants |  | 2698 |
| Exercise of warrants into ordinary shares |  | 35 |
| Overdraft |  | 21 |
| Repayment of short-term loan | (200) |  |
| Repayment of convertible notes | (246) | - |
| **Net cash flow from financing activities** | **2689** | **4636** |
| **Increase (decrease) in cash and cash equivalents** | **(1456)** | **(66)** |
| Cash and cash equivalents at beginning of period | **2343** | **168** |
| Exchange rate differences on cash and cash equivalent | (137) | (102) |
| **Cash and cash equivalents at end of period** | **750** | **-** |

---

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| | | |
|:---|:---|:---|
|  | **For the Six Months Ended** | **For the Six Months Ended** |
|  | **June 30, 2025** | **June 30, 2024** |
|  | **US$ in thousands** | **US$ in thousands** |
| **Appendix A – Non-Cash transactions during the period:** | | |
| Conversion of financial liability into ordinary shares |  | 597 |
| Conversion of warrants into ordinary shares |  |  |
| Conversion of bridge loans and derivative financial liability into ordinary shares and warrants |  | 128 |
| Exercise of warrants into ordinary shares |  | 458 |
| Conversion of convertible notes into ordinary shares | 3204 | 2346 |
| Issuance cost due to inducement Alpha warrants B's exercise price |  | 107 |
| Issuance of warrants to the placement agent – issuance expenses against additional paid in capital | (698) |  |

---

**The accompanying notes are an integral part of the consolidated financial statements.**

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 1 - GENERAL:**

A. SMX
 (Security Matters) Public Limited Company ("Security Matters" or " SMX" or the "Company" and
 together with its subsidiaries, the "Group") was incorporated in July 1, 2022 under the laws of Ireland with registered
 number 722009 and its registered office at Mespil Business Center, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6. The Company
 was incorporated in 2022 as part of the Business Combination (see Note 1.B).

The Group provides one solution to solve both authentication and track challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer. Its proprietary marker system embeds a permanent or removable (depending on the needs of the customer) mark on solid, liquid or gaseous objects or materials. Each marker is comprised of a combination of marker codes such that each marker is designed to be unique and unable to be duplicated. The marker system is coupled with an innovative patented reader that responds to signals from the marker and, together with a patented algorithm, captures the details of the product retrieved and stored on a blockchain digital ledger. Each marker can be stored, either locally on the reader and on private servers, cloud servers or on a blockchain ledger, to protect data integrity and custody.

B. The
 SPAC transaction:

On March 7, 2023 (the "Closing Date") the Company completed its SPAC transaction (the "Business Combination") with Lionheart III Corp ("Lionheart"), following that Lionheart and Security Matters PTY Ltd. (formerly named Security Matters Limited, which was incorporated in May 2018 under Australian law) became the Company's wholly-owned subsidiaries and the Company listed its ordinary shares and public warrants on the NASDAQ stock market under the tickers SMX and SMXWW, respectively. On July 26, 2022, Security Matters PTY Ltd. and Lionheart, a publicly traded special purpose acquisition company (SPAC), entered into a business combination agreement (the "BCA") and accompanying scheme implementation deed ("SID"). Under the BCA, the existing Lionheart stockholders received the Company's shares and warrants in exchange for their existing Lionheart shares and warrants and all shares existed in Security Matters PTY Ltd. were cancelled in return for the Company's shares and resulting in Security Matters PTY Ltd. becoming a wholly owned subsidiary of the Company. Security Matters PTY Ltd. shareholders received consideration of 1 ordinary share per 10.3624 Security Matters PTY Ltd. shares, having an implied value of $10.00 per ordinary share and the Company became the holder of all of the issued shares in Security Matters PTY Ltd. and Lionheart, with Security Matters PTY Ltd. being delisted from the Australian Stock Exchange. The Business Combination resulted in 97.58% redemption by Lionheart's public shareholders which resulted in leaving $3,061 of funds remaining in the trust account.

C. As
 of June 30, 2025, the Company incurred accumulated losses of approx. $106 million and continued to incur operating losses and negative
 cash flows from operating activities. The Company has not yet generated revenue and is required to obtain additional financing in
 order to continue to operate. The accompanying consolidated financial statements have been prepared assuming that the Company will
 continue as a going concern. During the period, the Company entered into ordinary share offering agreement of up to $6,875 of which
 $4,219 was received as of June 30, 2025 and $2,656 was received on July 3, 2025. Further the Company entered into convertible security
 agreement in the amount of $295.5 . On August 1, 2025, the Company signed a convertible note to raise up to $13,750 (See note 9.4.)
 The Company plans to continue the issuance of shares and warrants and secure convertible notes and other funding sources as described
 in Note 9. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources that
 are required for the Company's long-term business plan. Considering the above, the Company's dependency on external funding
 for its operations raises a substantial doubt about the Company's ability to continue as a going concern. The consolidated
 financial statements do not include any adjustments that might result from the outcome of these uncertainties.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 1 – GENERAL (CONT.):**

D. The
 Company operates primarily through the following wholly owned subsidiaries and one majority owned, all of which have been consolidated
 in these consolidated financial statements.

SCHEDULE OF COMPANIES SUBSIDIARIES

---

| | | | |
|:---|:---|:---|:---|
| **Controlled entity** | **Country of**<br> **Incorporation** | **Percentage Owned**<br> **June 30, 2025** | **Percentage Owned**<br> **December 31, 202**4 |
| Security Matters (SMX) PLC | Ireland | 100% | 100% |
| Security Matters PTY Ltd.<br> (Formerly - Security Matters Limited) | Australia | 100% | 100% |
| Lionheart III Corp | USA | 100% | 100% |
| SMX (Security Matters) Ireland Limited | Ireland | 100% | 100% |
| SMX Fashion and Luxury | France | 100% | 100% |
| TrueSilver SMX Platform Ltd. | Canada | 100% | 100% |
| SMX (Security Matters) Israel Ltd.<br> (Formerly - Security Matters Ltd.) | Israel | 100% | 100% |
| Security Matters Canada Ltd. | Canada | 100% | 100% |
| SMX Beverages Pty Ltd. | Australia | 100% | 100% |
| SMX Circular Economy Platform PTE, Ltd. | Singapore | 70% | 70% |
| True Gold Consortium Pty Ltd. | Australia | 52.9% | 52.9% |
| SMX Circular Economy FZCO | UAE | 100% |  |

---

In addition, the Company's has the following investments in associated companies:

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| | | |
|:---|:---|:---|
| **Entity** | **Percentage Owned<br> June 30, 2025** | **Percentage Owned<br> December 31, 2024** |
| Yahaloma Technologies Inc. Canada | 50% | 50% \* |

---

The proportion of ownership interest is equal to the proportion of voting power held.

E. On
July 15, 2024, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 75:1 under
the symbol "SMX," with a new CUSIP number of G8267K208 and ISIN code IE000IG23NR9. Approved by shareholders and Board of
Directors on June 11, 2024. This reverse split consolidated every 75 shares into one new ordinary share and was aimed at meeting Nasdaq's
minimum bid price requirement of $1.00 per share , reducing the number of outstanding shares from approximately 44.8 million to approximately 597 thousand. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally, the par value of the
Ordinary Shares increased from $0.0022 to $0.165 . The Company's options, warrants, and convertible securities were adjusted proportionately,
and the Public Limited Company Constitution was amended to reflect these changes. All share, options and warrants amount in these June
30, 2025, financial statements are presented post this reverse stock split.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 1 – GENERAL (CONT.):**

F. On
 January 15, 2025, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 28.5:1
 under the symbol "SMX," with a new CUSIP number of G8267K158 and ISIN code IE000WZ90ZV5. Approved by shareholders and
 Board of Directors on December 10, 2024. This reverse split consolidated every 28.5 shares into one new ordinary share and was aimed
 at meeting Nasdaq's minimum bid price requirement of $1.00 per share , reducing the number of outstanding shares from approximately 33,155 thousand to approximately 1,163 thousand. Fractional shares resulting from the split were aggregated and sold at market prices.
 Additionally, the par value of the Ordinary Shares increased from $0.165 to $4.70250014886352 . The Company's options, warrants,
 and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect these
 changes. All share, options and warrants amount in these June 30, 2025, financial statements are presented post this reverse stock
 split.

G. On
 June 16, 2025, the Company's Ordinary Shares began trading on the Nasdaq Capital Market post-reverse stock split of 4.1:1 under
 the symbol "SMX," with a new CUSIP number of G8267K 166 and the new ISIN code IE000B8AU702. Approved by shareholders
 and Board of Directors on April 15, 2025, this reverse split consolidated every 4.1 shares into one new ordinary share and was aimed
 at meeting Nasdaq's minimum bid price requirement of $1.00 per share , reducing the number of outstanding shares from approximately 4 million to approximately 1 million. Fractional shares resulting from the split were aggregated and sold at market prices. Additionally,
 the par value of the ordinary shares will be increased from $0.00000000000001 to $0.000000000000041 . The Company's options,
 warrants, and convertible securities were adjusted proportionately, and the Public Limited Company Constitution was amended to reflect
 these changes. The Basic and diluted loss per share attributable to shareholders amount in these June 30, 2025, financial statements
 are presented post this reverse stock split.

H. On
 August 7, 2025, after the balance sheet date, the Company's Ordinary Shares began trading
 on the Nasdaq Capital Market post-reverse stock split of 7:1 under the symbol "SMX,"
 with a new CUSIP number of G8267K2174 and the new ISIN code IE000TB5RTG4. Approved by shareholders
 and Board of Directors on July 10, 2025, this reverse split consolidated every 7.0 shares
 into one new ordinary share and was aimed at meeting Nasdaq's minimum bid price requirement
 of $1.00 per share , reducing the number of outstanding shares from approximately 9 million
 to approximately 1 million. Fractional shares resulting from the split were aggregated and
 sold at market prices. Additionally, the par value of the ordinary shares will be increased
 from $0.00000000000041 to $0.000000000000287 . The Company's options, warrants, and
 convertible securities were adjusted proportionately, and the Public Limited Company Constitution
 was amended to reflect these changes. The Basic and diluted loss per share attributable to
 shareholders amount in these June 30, 2025, financial statements are presented post this
 reverse stock split. See note 7.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:**

**A.** **Basis of preparation** 

The Company's accompanying interim condensed consolidated financial statements have been prepared in a condensed format in accordance with IAS 34 Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of consolidated financial statements and should be read in conjunction with the annual consolidated financial statements as of December 31, 2024, of the Company (the "Annual Financial Statements"). There have been no changes in the Company's significant accounting policies during the six-month period ended June 30, 2025, as compared to the Annual Financial Statements.

**B.** **Functional currency** 

The consolidated financial statements are prepared in US Dollars, which is the functional and presentation currency of the Company.

**C.** **Application of accounting policies** 

The Group has applied the same accounting policies and methods of computation in its interim condensed consolidated financial statements as in the Annual Financial Statements. Several amendments to IFRS Standards apply for the first time in 2024, but do not have an impact on the interim condensed consolidated financial statements.

**D.** **Reverse stock split** 

The presentation of loss per share amounts and all share, options and warrants amounts has been retrospectively adjusted to give effect to the reverse stock split which occurred after the balance sheet date on August 7, 2025. See also Note 9.5.

**E.** **New standards, interpretations and amendments not yet effective** 

In April 2024, the IASB issued IFRS 18 "Presentation and Disclosure in Financial Statements" replacing IAS 1 to improve the usefulness of information presented and disclosed in financial statements. IFRS 18 introduces three sets of new requirements. The standard defines categories for income and expenses, such as operating, investing and financing, and requires entities to provide new defined subtotals, including operating profit. IFRS 18 also requires entities that define entity-specific measures that are related to the income statement to disclose explanations of those measures. In addition, it sets out enhanced guidance on how to organize information and whether to provide it in the primary financial statements or in the notes and requires entities to provide more transparency about operating expenses. These new requirements are to improve entities' reporting of financial performance and give investors a better basis for analysing and comparing entities. The standard carries forward many requirements from IAS 1 unchanged. The standard is effective for annual periods beginning on or after January 1, 2027, with early adoption applicable whereby the Group has decided not to adopt early. The Group is currently evaluating the potential impact that the adoption of the standard will have on its consolidated financial statements.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 3 - SHORT TERM LOAN**

On December 28, 2024, the Company entered into a loan agreement with Abri Advisors Ltd. ("**Abri**"), pursuant to which it borrowed $1,000. Under the agreement, the Company undertook to repay Abri by June 30, 2025, a total amount of $1,400, representing a 28.577% discount to the principal, plus 15% annual interest on the outstanding principal balance. The agreement stipulates that, while the loan remains outstanding, the Company may not issue any additional debt instrument ranking senior or equal to this loan, whether in payment priority or in collateral, without Abri's prior written consent. In addition, if the Company conducts a capital raise or issues any convertible securities (including ordinary shares, preferred shares, options, or warrants), it must repay 25% of the then-outstanding loan balance within three business days of the closing date ("Capital Raise Repayment"). Such repayment does not reduce or alter the final repayment amount due at maturity, regardless of the payment date.

The agreement includes customary nonpayment provisions. In the event of nonpayment, and if not cured within three business days, the outstanding obligation (including any Capital Raise Repayment) becomes immediately due and payable, multiplied by 150% ("nonpayment Amount"). The nonpayment Amount bears monthly interest at 5% from the nonpayment date until settlement. For accounting purposes, the loan is measured at amortized cost using the effective interest method, with an effective annual interest rate of 155.93% calculated on initial recognition. As of December 31, 2024, the carrying amount of the loan was $1,000.

On May 26, 2025, the Company repaid $200 and in August 1, 2025, additional $150. On June 30, 2025, the Company entered into an event of nonpayment (failure to make the required full payment on that date). The nonpayment was not cured within the contractual period, and under the agreement, the outstanding obligation immediately prior to nonpayment - $1,410 - was multiplied by 1.5, resulting in a revalued liability amount of $2,115. As of the date of issuance of these financial statements, the Company is engaged in negotiations with Abri to settle the outstanding debt.

**NOTE 4 – CONVERTIBLE NOTES**

A. On
 April 11, 2024, the Company issued an unsecured promissory note to Generating Alpha Ltd.
 in the principal amount of $2,250 (hereinafter: the "**Alpha April Note** "
 and "**Alpha** ", respectively). In connection with the issuance, two additional
 warrants were granted to Alpha, which were fully exercised during 2024. The note was issued
 at a 10 % discount, bore annual interest at a rate of 12 %, and had a contractual maturity
 of 12 months from the issuance date.

The conversion option allowing it to convert the outstanding principal and accrued interest into ordinary shares at the lower of $14,723 per share or a 15% discount to the 10-day volume-weighted average price (VWAP) preceding the conversion date, subject to customary adjustments.

During 2024, Alpha exercised its embedded conversion option and partially converted the Alpha April Note, whereby approximately $2,300 of the outstanding principal and accrued interest was converted into 16,318 ordinary shares of the Company.

As of December 31, 2024, the remaining balance of the host straight debt component was $72, and the fair value of the embedded conversion option was $48. The fair value of the embedded conversion option was determined using a Monte Carlo simulation model, based on an expected volatility of 39.78% and a risk-free interest rate of 4.37%.

In addition, during the first half of 2025, Alpha exercised its embedded conversion option with respect to the remaining balance of the Alpha April Note, converting it into 6,656 ordinary shares of the Company, with a fair value at the conversion date of $842.

On April 2, 2025, the Company entered into a settlement agreement with Alpha, pursuant to which it issued 14,235 ordinary shares to Alpha, with a fair value at the issuance date of $787**.** As of June 30, 2025, the entire outstanding balance of the Alpha April Note had been converted into ordinary shares of the Company, and accordingly, no further liability to Alpha remains in respect of this note.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 4 – CONVERTIBLE NOTES (CONT.):** 

B. On
 September 4, 2024, the Company entered into an agreement with PMB Partners, LP ()"**PMB** ")
 to restructure a secured promissory note with a principal amount of $1,300 , originally maturing
 on May 31, 2024, into two new debt instruments: (i) a convertible promissory note in the
 amount of $800 , convertible into ordinary shares of the Company at a fixed conversion price
 of $8,588 per share; and (ii) a senior straight debt promissory note (the "Senior
 Note") in the amount of $500 . Both notes bore annual interest at a rate of 15 %, with
 default interest at a rate of 20 % per annum.

On May 13, 2025, the parties executed an amendment, under which the maturity date of both notes was extended to November 30, 2025, the annual interest rate was increased to 18%, and the principal balance of each note was adjusted to include accrued and unpaid interest up to the date of the amendment.

In accordance with IFRS 9, the quantitative and qualitative effects of the amendment were assessed, and it was determined that the modification was non-substantial. Accordingly, the amortized cost of the liabilities was adjusted to reflect the revised contractual cash flows, discounted at the original effective interest rate, with the resulting difference recognized as finance expenses in profit or loss.

The amortized cost including interest of the convertible promissory note in the principal amount of $800 and the promissory note in the principal amount of $500, in aggregate, was $1,433 as of June 30, 2025, and $1,359 as of December 31, 2024*.*

C. On
 July 19, 2024, the Company issued a promissory note to Alpha with principal amount $1,150 ,
 at a 35 % discount, with a contractual maturity of 12 months from the issuance date (hereinafter:
 the "**Alpha July Note** ").

Alpha was granted an embedded conversion option, exercisable at any time, to convert all or part of the outstanding principal and any unpaid interest (including costs, fees, and charges) into ordinary shares of the Company, at the lower of: (i) $4,989 per share; or (ii) 80% of the 20-trading-day volume-weighted average price (VWAP) preceding the conversion date, subject to customary adjustments.

For accounting purposes, the Alpha July Note was bifurcated into two components: (i) a host straight debt component, classified as a financial liability measured at amortized cost; and (ii) an embedded conversion option, classified as a derivative financial liability measured at fair value through profit or loss.

As of December 31, 2024, the carrying amount of the host straight debt component was $520, and the fair value of the embedded conversion option was $527. The fair value of the embedded conversion option was determined using a Monte Carlo simulation model, incorporating an expected volatility of 58.7% and a risk-free interest rate of 4.28%.

During the first half of 2025, Alpha exercised the embedded conversion option in full. As a result, the Company issued 13,287 ordinary shares to Alpha, with a fair value at the conversion date of $1,579.

D. On
 August 30, 2024, the Company entered into an agreement with 1800 Diagonal Lending LLC ()"**1800 Diagonal**") for the issuance of a compound financial instrument in consideration
 for Net proceeds (after fees and issuance expenses) of $194.5 . The instrument comprised:
 (i) a host straight debt component, and (ii) an embedded conversion option exercisable only
 upon an event of default.

As of December 31, 2024, the carrying amount of the host straight debt component was $147 and the fair value of the embedded conversion option was $121.

The instrument was fully repaid in cash during the first half of 2025 for an aggregate amount of approximately $246 (comprising the original principal amount of $223.7 and interest of $22.4)

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 4 – CONVERTIBLE NOTES (CONT.):**

E. On
 March 28, 2025, the Company entered into an agreement with 1800 Diagonal ("1800 Diagonal
 March"), pursuant to which it issued a promissory note with a par value of $295.5 in consideration for net cash proceeds of approximately $250 , after deduction of issuance
 expenses of approximately $7 .

The note bears interest at an annual rate of 12% and is repayable in seven instalments between September 2025 and March 2026, as follows: (1) $163 on September 30, 2025; (2)-(7) $27.2 on each month-end from October 2025 to March 2026.

The note contains customary default provisions for similar transactions, under which, in the event of default: (i) it becomes immediately due and payable; (ii) the outstanding principal and interest increase by 150%; and (iii) it may be converted, at the sole discretion of 1800 Diagonal March, into ordinary shares of the Company. In this regard, the conversion price is the lowest closing price of the Company's shares during the ten trading days preceding the conversion request, less a 25% discount. Conversion is subject to an ownership limitation of 4.99%.

The agreement also includes customary representations, undertakings, and indemnities in favour of 1800 Diagonal March, its subsidiaries, and related entities.

For accounting purposes, the promissory note is a compound financial instrument, bifurcated on initial recognition into: (i) a host straight debt component, classified as a financial liability measured at amortized cost, with an effective interest rate at initial recognition of 107.46%; and (ii) an embedded conversion option, classified as a derivative financial liability measured at fair value through profit or loss.

As of March 28, 2025, the carrying amount of the host straight debt component was $204.

The fair value of the embedded conversion option at initial recognition was estimated at $47, as determined by management with the assistance of an independent appraiser using a Monte Carlo simulation, incorporating an expected volatility of 60.37% and a risk-free interest rate of 4.04%. As conversion is permitted only upon an event of default, the appraiser estimated the probability of such an event at 8.962%, and the fair value was calculated accordingly as this percentage of the full conversion value.

As of June 30, 2025, the fair value of the embedded conversion option was estimated at $47, based on an expected volatility of 49.62% and a risk-free interest rate of 4.125%, as determined using the Monte Carlo simulation model. At that date, the amortized cost of the host straight debt component was $246.

F. On
 May 9, 2025, the Company entered into an agreement with RBW Capital ("RBW May"),
 pursuant to which it issued a promissory note with a par value of $6,875 , reflecting a 20 %
 discount, in consideration for total cash proceeds of $5,500 (before deduction of issuance
 expenses) to be received in instalments in accordance with the terms of the agreement. (an
 amount of $1,375 at the time of signing the agreement; an amount of $1,375 near the time
 of submitting the draft prospectus (Registration Statement) to the SEC, and additional amounts
 of $625 and $2,125, no later than the effective date of the Form F-1, up to June 30, 2025
 — the first three payments were received).

In addition, the underwriters are entitled to warrants, at a rate of 5% of the number of shares that will actually be issued within each funding round. The warrants are exercisable at a price of $0.368 per share, for a period of 5 years from the date of grant. The contractual maturity date for repayment of the principal is May 9, 2026.

Under the terms of the note, no interest applies unless an event of default occurs. The note includes customary default provisions for similar transactions, under which, in the event of default: (i) the principal amount increases automatically by 20%; (ii) default interest of 20% per annum applies; and (iii) all outstanding debt may be declared immediately due and payable. The principal is convertible at the Company's option at any time, at a conversion price equal to the higher of $0.32 per share or the lowest closing price of the Company's shares during the seven trading days preceding the conversion request. Conversion is subject to an ownership limitation of 4.99%.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 4 – CONVERTIBLE NOTES (CONT.)**

For accounting purposes, each instalment of proceeds received under the agreement is treated as a separate compound financial instrument, bifurcated on initial recognition into: (i) a host straight debt component, classified as a financial liability measured at amortized cost; and (ii) an embedded conversion option, classified as a derivative financial liability measured at fair value through profit or loss.

As of June 30, 2025, three out of the four scheduled instalments had been received, and accordingly, three host straight debt components were recognized, together with three corresponding embedded conversion options.

As of the initial recognition date of each payment, the amortized cost of the first, second, and third payments was $486, $519$, and $38, respectively; on the other hand, the fair value of the conversion components of the first, second, and third payments was $550, $539, and $221, respectively.

In this regard, management with the assistance of an independent appraiser estimated the fair value of each embedded conversion option using a Monte Carlo simulation, incorporating expected volatilities of 62.03%, 62.13%, and 47.84%, and risk-free interest rates of 4.05%, 4.15%, and 4.06% for the first, second, and third instalments, respectively.

As of June 30, 2025, the amortized cost of the debt component in respect of the first, second, and third payments is $582, $591, and $39, respectively; on the other hand, the fair value of the conversion option in respect of the first, second, and third payments is $487, $487, and $221, respectively. The fair value of the conversion option as of June 30, 2025, was assessed by the management with the assistance of an external independent appraiser, using a Monte Carlo model, employing a standard deviation of 47.84% and a risk-free interest rate of 4.06%.

**NOTE 5 - MATERIAL EVENTS DURING THE PERIOD COMMITMENTS AND CONTINGENT LIABILITIES**

1. On February 21, 2025, the Company filed a "shelf" registration statement on Form F-3 with the U.S. Securities and Exchange
Commission, registering for sale from time to time, up to $45,000 of any combination of the securities described in the Form F-3, either
individually or in units. The Company may also offer ordinary shares or preferred shares upon conversion of debt securities, ordinary
shares upon conversion of preferred shares, or ordinary shares, preferred shares or debt securities upon the exercise of warrants or rights.

2. On March 26, 2025, the Company established a fully owned entity incorporated in Dubai Multi Commodities Centre Authority, United Arab
Emirates with the name and style of "SMX Circular Economy FZCO".

3. On
 May 2, 2025, the Company's shareholders approved the subdivision of its ordinary shares
 into 1 ordinary share of $0.00000000000001 par value (pre June 16, 2025 and August 7, 2025
 reverse splits) with the same rights as each current ordinary share, and 470,250,014,886,351
 new deferred shares of US$0.00000000000001 par value with the following rights: (i) each
 new deferred share shall not entitle the holder thereof to receive notice, attend or vote
 at general meetings of the Company; (ii) each New Deferred Share shall not entitle the holder
 thereof to participate in any dividends declared or paid by the Company; and (iii) on a return
 of capital on a winding up or otherwise, each New Deferred Share shall entitle the holder
 thereof to receive an amount of US$0.00000000000001 on each deferred share after an amount
 of $1,000,000,000 has been paid in respect of each ordinary share.

4. On
 January 12, 2024, the Company announced that it had entered into a $5 million contract with
 R&I Trading of New York ("R&I Trading"). The purpose of the agreement
 was to provide supply chain management services to a NATO member state. Following June 30,
 2024, R&I Trading issued a notice of termination and initiated arbitration proceedings
 concerning disputed payment amounts under the contract. The Company considers the termination
 to be unlawful and has demanded that R&I Trading fulfil its contractual obligations.
 Furthermore, the Company believes R&I Trading's claims lack merit and intends to
 vigorously

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 5 - MATERIAL EVENTS DURING THE PERIOD COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)**

defend itself should formal proceedings commence. The Company is currently engaged in arbitration with R&I Trading. Both parties submitted their statements of claim on January 6, 2025. R&I Trading is seeking full restitution of the amounts it paid under the agreement. In contrast, the Company alleges that R&I Trading breached the contract and has requested the arbitrator to allocate remedies, particularly in the event that the Company incurs additional expenses from suppliers and employees not yet reflected in its damage estimate. The Company has also raised claims for loss of business opportunities and requested declaratory relief in its favor. On March 6, 2025, the parties filed a request for the approval of a mutual procedural arrangement, under which, among other things, R&I Trading will file an affidavit stating that it is not using the Company's IP rights and has no intention of violating the Company's IP rights; the Company will withdraw the motion for a declaration and amend its statement of claim accordingly by March 30, 2025; the statements of defense will be filed by April 21, 2025; and the statements of reply will be filed by May 12, 2025. On March 7, 2025, the arbitrator approved the request, and on March 23, 2025, R&I Trading filed its affidavit. To the date of this report, the parties exchanged general affidavits of disclosure and requests for response to questionnaires and for disclosure of documents.

At this preliminary stage, it is not possible to assess the chances of the Company's claim and the outcome of the arbitration proceedings

**NOTE 6 - SHAREHOLDERS' EQUITY**

**A. Share capital:**

** 

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of shares \*** | **Number of shares \*** | **Number of shares \*** | **Number of shares \*** |
|  | **June 30, 2025** | **June 30, 2025** | **December 31, 2024** | **December 31, 2024** |
|  | **Authorized** | **Issued and outstanding** | **Authorized** | **Issued and outstanding** |
| Ordinary shares <br> USD 0.000000000000287 par value | 348083623693379791533527 | 379504 | 592761 | 40535 |
| Preferred shares <br> USD 0.0001 par value | 200000000000 |  | 200000000000 |  |
| Deferred shares <br> Euro 1 par value | 25000 | 25000 | 25000 | 25000 |
| New Deferred shares <br> USD 0.00000000000001 par value | 7999999999999982413677 |  |  |  |

---

\* The share and per share information in these financial statements reflects the 1-for-75, 1-for-28.5, 1-for-4.1 and 1-for-7 reverse share splits became effective on July 15, 2024, January 15, 2025, June 16, 2025 and August 7, 2025, respectively, of the Company's issued and outstanding Ordinary Shares (the "Reverse Stock Splits") see also notes 1.E – 1.H.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 6 - SHAREHOLDERS' EQUITY (CONT.)**

 

*Ordinary shares*

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value per share of $0.000000000000287 and the Company does not have a limited amount of authorised capital.

*New Deferred shares*

The new deferred shares of $0.00000000000001 par value with the following rights: (i) each new deferred share shall not entitle the holder thereof to receive notice, attend or vote at general meetings of the Company; (ii) each New Deferred Share shall not entitle the holder thereof to participate in any dividends declared or paid by the Company; and (iii) on a return of capital on a winding up or otherwise, each New Deferred Share shall entitle the holder thereof to receive an amount of US$0.00000000000001 on each deferred share after an amount of $1,000,000,000 has been paid in respect of each ordinary share.

 

*Preferred shares*

Preferred shares of a nominal value of $0.0001 with such designation, rights and preferences as may be determined from time to time by the Company's Board of Directors.

*Deferred shares Euro 1 par value*

 

Immediately prior to consummation of the Business Combination pursuant to the BCA and the SID, the Company had issued and paid-up share capital of (i) €25,000 representing 25,000 deferred shares of €1.00 each and (ii) $0.0001 representing one Ordinary Share of $0.0001 each in the capital of the Company, in order to satisfy statutory capitalization requirements for all Irish public limited companies.

**B.** **Changes in share capital:** 

1. During the six-month period ending June 30, 2025, the investor
converted all the principal amount of Alpha April Note and Alpha July Note into 20,891 and 13,287 ordinary shares respectively. The derecognition
of the debts components and convertible features of these notes caused a net increase in equity of 3,204 $. As of June 30, 2025, all outstanding
indebtedness between the Company and Alpha has been fully repaid.

2. During
 the six-month period ending June 30, 2025, the Company issued RSU to certain investors at
 a cost of $610 . Additionally, as part of the RBW May agreement the Company issued warrants
 to the underwriters at a cost of $1,124 (see Note 4.F).

**C.** **Incentive Equity Plan** 

1. On
 February 24, 2025, the Company amended its 2022 Incentive Equity Plan ("2022 Incentive
 Equity Plan") to increase the number of authorized Ordinary Shares under the 2022 Incentive
 Equity Plan to 83,508 from 239 . Thereafter, the Company granted an aggregate of 60,976 restricted
 stock units and 18,641 stock options, to its executive officers and directors, and to certain
 consultants, employees and advisors to the Company.

2. On
 March 17, 2025, the Company amended the 2022 Incentive Equity Plan, to further increase the
 number of authorized Ordinary Shares under the 2022 Incentive Equity Plan to 88,211 from 83,508 . Thereafter, the Company granted 4,704 stock options to certain consultants of the
 Company.

3. On
 June 17, 2025, the Company amended its 2022 Incentive Equity Plan, as amended, to increase
 the number of authorized Ordinary Shares under the 2022 Incentive Equity Plan to 609,640 from 88,211 . Thereafter, the Company granted an aggregate of 330,715 restricted stock units
 and 190,714 stock options to its executive officers and directors, and to certain consultants,
 employees and advisors to the Company.

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 6 - SHAREHOLDERS' EQUITY (CONT.)**

The share-based payment expenses due to RSU and options granted to employees, directors, advisory board and service providers that were recognized in the six-month period ended June 30, 2025, and June 30, 2024, amounted to $15,274 and $1,693, respectively.

**NOTE 7 - LOSS PER SHARE** 

****

---

| | | |
|:---|:---|:---|
|  | **Six month period ended** | **Six month period ended** |
|  | **June 30, 2025** | **June 30, 2024** |
| Net loss attributable to the owners of the Company | $**(23638)** | $**(10693)** |
| **Basic and diluted loss per share \*** | **(209)** | **(4)** |
| Weighted average number of ordinary shares used in calculating basic and diluted loss per share (in thousands) \* | 113 | 1 |

---

\* The share and per share information in these financial statements reflects the 1-for-75, 1-for-28.5, 1-for-4.1 and 1-for-7 reverse share splits became effective on, July 15, 2024, January 15, 2025, June 16, 2025 and August 7, 2025, respectively, of the Company's issued and outstanding Ordinary Shares (the "Reverse Stock Splits"). see also notes 1.E – 1.H.

**NOTE 8 - RELATED PARTIES:**

**Key Management Personnel Compensation and other related party transactions and balances:**

The key management personnel, among others, include board members, CEO and CFO.

The totals of remuneration paid to Key Management Personnel and related parties during the years are as follows**:**

****

---

| | | |
|:---|:---|:---|
| **1. Transactions with related parties:** | **June 30, 2025** | **June 30, 2024** |
| Short-term salary and fees | 290 | 379 |
| Share based payments | 7797 | 900 |
| Post-employment retirement benefits | 39 | 39 |
| Non-monetary benefits | 17 | 21 |
| Payments for legal services |  | 180 |
| Revaluation of financial liabilities at fair value |  | 344 |
| Payments for consultant services | - | 566 |
| Key management personnel compensation | **8143** | **2429** |

---

---

| | | | |
|:---|:---|:---|:---|
| **2. Balance with related parties:** |  | **June 30, 2025** | **December 31, 2024** |
| Key management | Salary and related | (202) | (166) |
| Directors | Consultant services | (134) | (83) |
| Joint Ventures | Investment in subsidiary | 111 | 105 |
| Joint Ventures | Other receivables | 15 | 15 |
|  |  | **(210)** | **(129)** |

---

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 9 - SUBSEQUENT EVENTS**

Since the reporting date, the following significant events have occurred:

1. On
 July 3, 2025, the Company amended its 2022 Incentive Equity Plan, as amended, to increase
 the number of authorized Ordinary Shares under the 2022 Incentive Equity Plan to 665,354 from 609,640 . Thereafter, the Company granted an aggregate of 50,714 restricted stock units
 and 5,000 stock options to certain consultants, employee and advisors to the Company.

2. On
 July 3, 2025, the Company issued 79,286 Ordinary Shares to certain consultants and debt providers.

3. On
 July 3, 2025, the last scheduled instalment payment an amount of $2,125 relating to the RBW
 May 7, 2025 agreement was received. During the period after balance sheet day RBW May exercised
 the embedded conversion option in full. As a result, the Company issued to RBW an aggregate
 amount of 829,934 ordinary shares.

4. On
 August 1, 2025, the Company signed a Securities Purchase Agreement (the "August RBW
 Agreement") with Secure Net Capital LLC and Target Capital 16 LLC (the "Selling
 Stockholders") to sell a promissory note (the "August RBW Note") for up
 to $11.0 million in gross proceeds, pending certain conditions.

The August RBW Purchase Price shall be paid as follows: $3,000 at the First Closing (August 4, 2025), $3,000 at the Second Closing before the First Form F-1, $2,500 at the Third Closing upon the Third Closing Triggering Event, and $2,500 at the Fourth Closing before the Second Form F-1.

The Company will register Ordinary Shares for resale from the August RBW Note at the First Closing and Second Closing and file a Registration Statement (First Form F-1) within ten (10) business days post-First Closing. The "Third Closing Triggering Event" occurs when the Stockholders convert all amounts owed under the Note and file a second registration statement for the Third and Fourth Closings.

If the Selling Stockholders do not fully convert their Notes from the First and Second Closings, they are not required to fund the Third and Fourth Closings.

The Company intends to use the net proceeds (after fees and issuance expenses) for working capital, corporate purposes, and to reduce existing liabilities.

RBW acted as the placement agent, while Aegis Capital Corp served as the exclusive advisor. The aggregate principal amount of the Notes is up to $13,750, with a 20% original issue discount, maturing on August 1, 2026.

Stockholders can convert outstanding amounts into Ordinary Shares at a conversion price of the greater of $0.332 or 85% of the lowest volume-weighted average price during the preceding seven (7) trading days. Conversions are capped to ensure each Stockholder owns less than 4.99% of Ordinary Shares.

The Company cannot sell equity during the Note's term without Selling Stockholders' consent, subject to exceptions.

Standard Events of Default apply, allowing acceleration of the Note's principal. If an Event of Default occurs, the principal amount increases by 20%, and interest accrues at 20% per annum.

On July 30, 2025, the Company engaged RBW as the placement agent, agreeing to pay an 8.0% cash fee on gross proceeds plus expenses. RBW is also entitled to fees for financing activities involving introduced investors within 12 months of post-Engagement Letter expiration.

During the month of August 2025, RBW funded the Company with the First and Second Closings, total of $6,000 (before fees and issuance expenses).

**SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY**

**NOTES TO THE UNAUDITED INTERIM CONDENSED**

**CONSOLIDATED FINANCIAL STATEMENTS**

**(US$ in thousands except share and per share data)**

**NOTE 9 - SUBSEQUENT EVENTS (CONT.)**

5. On
 August 7, 2025, after the balance sheet date, the Company's Ordinary Shares began trading
 on the Nasdaq Capital Market post-reverse stock split of 7:1 under the symbol "SMX,"
 with a new CUSIP number of G8267K2174 and the new ISIN code IE000TB5RTG4. Approved by shareholders
 and Board of Directors on July 10, 2025, this reverse split consolidated every 7.0 shares into one
 new ordinary share and was aimed at meeting Nasdaq's minimum bid price requirement
 of $1.00 per share, reducing
 the number of outstanding shares from approximately 9 million to approximately 1 million. Fractional
 shares resulting from the split were aggregated and sold at market prices. Additionally,
 the par value of the ordinary shares will be increased from $0.00000000000041 to $0.000000000000287 per share.
 The Company's options, warrants, and convertible securities were adjusted proportionately,
 and the Public Limited Company Constitution was amended to reflect these changes. The Basic
 and diluted loss per share attributable to shareholders amount in these June 30, 2025, financial
 statements are presented post this reverse stock split.

6. On
 August 26, 2025, the Company amended its 2022 Incentive Equity Plan, as amended, to increase
 the number of authorized Ordinary Shares under the 2022 Incentive Equity Plan to 7,795,354 from 665,354 . Thereafter, the Company granted an aggregate of 5,630,000 restricted stock
 units and 1,500,000 stock options to its executive officers and directors, and certain consultants,
 employee and advisors to the Company.

7. On
 August 26, 2025, the Company issued 500,000 Ordinary Shares to debt providers and 100,000 stock options to a certain consultant (not part of the 2022 Incentive Equity Plan).