SmartKem, Inc. Leases Disclosure
6. LEASES:
The Company has operating leases consisting of office space, lab space, and equipment with remaining lease terms of less than 3 years, subject to certain renewal options as applicable.
The Company evaluates the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the right of use asset and lease liability based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.
On May 22, 2025, the Company renewed its lease for research & development, engineering, testing and corporate offices in Manchester, England. The renewed lease term expires in 2028 with an option for the Company to end the lease in 2027.
On July 14, 2025, the Company entered into a sublease agreement for its office in Taoyuan City, Taiwan. The lease term expires in 2028 and can be terminated with 60 days’ notice.
The Company is not the lessor in any lease agreement, and no related party transactions for lease arrangements have occurred.
The table below presents certain information related to the lease costs for the Company’s operating leases for the periods ended:
Year Ended December 31, | ||||||
(in thousands) | | 2025 | | 2024 | ||
Operating lease cost | $ | 297 | $ | 293 | ||
Short-term lease cost |
| 40 | 29 | |||
Total lease cost | $ | 337 | $ | 322 | ||
The total lease cost is included in the consolidated statements of operations as follows:
Year Ended December 31, | ||||||
(in thousands) | | 2025 | | 2024 | ||
Research and development | $ | 328 | $ | 293 | ||
General and administrative |
| 9 |
| 29 | ||
Total lease cost | $ | 337 | $ | 322 | ||
Right of use lease assets and lease liabilities for our operating leases were recorded in the consolidated balance sheets as follows:
| December 31, | December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Assets | |
| | |||
Right of use assets - Operating Leases | $ | 607 | $ | 120 | ||
Total lease assets | $ | 607 | $ | 120 | ||
Liabilities |
| |
| | ||
Current liabilities: |
| |
| | ||
Lease liability, current - Operating Leases | $ | 271 | $ | 47 | ||
Noncurrent liabilities: |
| |
| |||
Lease liability, non-current - Operating Leases |
| 312 |
| 25 | ||
Total lease liabilities | $ | 583 | $ | 72 | ||
The Company had no right of use lease assets or lease liabilities classified financing leases as of December 31, 2025 and 2024.
The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating leases as of the period ended:
Year Ended December 31, | ||||||
| 2025 | | 2024 | |||
Weighted average remaining lease term (in years) – operating leases | 2.27 | 1.47 | ||||
Weighted average discount rate – operating leases |
| 10.64% |
| 10.31% | ||
Undiscounted operating lease liabilities as of December 31, 2025, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows:
December 31, | |||
(in thousands) | 2025 | ||
2026 | $ | 323 | |
2027 | 310 | ||
2028 | 23 | ||
Total undiscounted lease payments | 656 | ||
Less imputed interest | (73) | ||
Total net lease liabilities | $ | 583 | |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 8, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 27, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 28, 2022 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.