TIDMTRAC
RNS Number : 4597D
T42 IOT Tracking Solutions PLC
03 March 2022
The information contained within this announcement is deemed by
the Company to constitute inside information pursuant to Article 7
of EU Regulation 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended.
03 March 2022
t42 IoT Tracking Solutions plc
("t42" or the "Company")
Full year results
t42 IoT Tracking Solutions plc (AIM: TRAC) ("t42" or the
"Company"), the real-time tracking, security and monitoring
solutions provider for the global container and freight market, is
pleased to announce its results for the 12 months ended 31 December
2021.
Financial Highlights
-- Revenues decreased by 16% to $4.2m (FY 2020: $5.04m)
-- Recurring SaaS revenues decreased by 3% to $2.1m (FY 2020: $2.2m)
-- Adjusted EBITDA* loss of $973,000 (FY 2020: loss of $370,000)
-- Gross margin for the period was 30% (FY 2020:33%) or c40% before one-off reduction of stock
-- General expenses reduced by 11% to $2.4m (FY 2020: $2.7m)
-- Statutory loss of $2.96m (FY 2020: $2.0m)
-- Net cash used in operating activities was approximately $0.38m (FY 2020 $0.4m)
*Adjusted EBITDA is earnings before interest, tax, depreciation,
amortisation and share-based payment expense and non-recurring
items.
Operational Highlights
-- Performance turnaround began at end of period 2021 and continued into 2022
-- agreement in Latin America signed in December 2021 to provide freight protection and monitoring solutions
-- agreement in the USA signed in January 2022 for distribution of t42 Tracking Lock Units
-- Sales of new smart padlock launched under the Lokies brand increased to 13% of total revenues from 5% the
previous year.
-- Group focused on its strategy to dominate the shipping container tracking business
-- Rebranding of company to reflect focus on the global shipping container market
-- Supply chain issues resulting from the impact of the global Covid 19 pandemic caused delays in deliveries and
electronic equipment global shortage in 2021 and into early 2022, but we have secured additional supplies of
microchips which should ensure minimal impact in the remainder of 2022
Avi Hartmann, CEO of t42, commented:
"2021 was a year of transition for t42 with a new strategy, a
new defined target market of the global shipping container market
and a new name and brand to reflect our ambition to provide a
comprehensive and unique solution for our customers.
"2021 was also a demanding year as we dealt with the challenges
of the pandemic and with the task of reorientating the business to
focus on the opportunity in our new target market, itself facing
huge challenges as global supply chains went from near dormancy to
frenzied levels of activity.
"We have begun 2022 with positive momentum from client wins,
which validate our new strategic direction, and we are now focused
on delivery and converting customer interest into contract wins.
Even with our best ever pipeline of potential new orders, we will
retain our focus on continuous product improvements and maintaining
high standards of customer care.
"We are optimistic about the opportunity ahead and wish to thank
our employees, shareholders and other partners for their support
during a difficult year during which, despite the challenges, we
feel we were able to lay the foundations of future success."
Contacts:
t42 IoT Tracking Solutions PLC
Michael Rosenberg, Chairman 07785 727595
Avi Hartmann, CEO +972 5477 35663
Allenby Capital Limited (AIM Nominated Adviser
and Joint Broker)
Jeremy Porter/Piers Shimwell 020 3328 5656
Peterhouse Capital Limited (Joint Broker)
Lucy Williams/Charles Goodfellow/Eran Zucker 020 7469 0930
Yellow Jersey PR (Financial PR) 020 3004 9512
Tom Randell/Henry Wilkinson/Annabelle Wills t42@yellowjerseypr.com
Notes to Editors
t42 IoT Tracking Solutions plc (AIM: TRAC), formerly Starcom
Systems plc, provides real-time tracking, analysis, monitoring and
security IoT solutions for the global container and freight market
and covers 55 countries, over 100 distributors and 50 logistics and
support partners.
t42's multi-sensor IoT tracking devices use a wide range of
detection capabilities with cloud-based analytics and alerts, with
real-time data transmission, analysis and actionable insights. Its
devices are used by ports, cargo owners, shipping companies,
freight forwarders, insurance companies, customs authorities and
homeland security and police for end-to-end global container
tracking and digital transformation of shipments.
For more information on the Company, please visit:
www.t42.co.uk/ .
Information required pursuant to rule 26 of the AIM Rules for
Companies can be found at www.starcomsystems.com .
CHAIRMAN'S STATEMENT
The results for 2021 reflect the negative ongoing impact of
COVID-19 and the many supply chain issues caused by this pandemic,
but later in the year saw the very positive move to rebrand the
Company and its products and success in signing two important
commercial contracts which are expected to dramatically improve the
revenue prospects of the Company over the next few years.
We had hoped for an improvement in revenues in the second half
of the year but as with many other companies it was not until the
end of the year that we began to see that happening. As a result,
the final revenues were $4.2m with negative EBITDA of $0.97m and an
effective gross margin of 40% following adjustments referred to
below. In view of the decision to rebrand products and focus on
those designed to protect freight and container units it was
decided to review the treatment of intangible assets and valuation
of stock. Appropriate adjustments have been made with those items
in the accounts and described below under the financial review.
During the year the supply of microchips and related long lead
times and costs increases continued to hold back our growth despite
the clear technological benefits provided by our products. As
reported in our interim statement our pipeline of new potential
deals was at an all time high and it is pleasing to be able to
report that some of these have indeed been secured as previously
reported. In December 2021 we reported the signing of an agreement
with a consortium in Latin America which will provide the Company's
solution to protecting and monitoring freight at various ports, and
which could generate over $40m of revenues if the maximum number of
product units indicated by the customer are deployed over a
five-year period. Early in January 2022 the Company reported
another agreement with OpenBox Ventures Inc in the USA which could
result in significant revenues over the next few years. Of course,
these are in addition to the continuing levels of business with
existing clients and the very important ongoing and recurring SaaS
revenues that come with the majority of our products.
During the year under review our HELIOS product range continued
to provide the majority of sales at around 57%, and although this
product range tends to be low margin business, it does create
ongoing SaaS revenues. However, we intend to focus on higher gross
margin products in the future such as the Lokies product and other
container tracking devices. We believe that currently our products
for this sector offer a unique solution to the problems faced by
the container and freight sectors, and while there is no doubt
others will develop similar products, we believe we have a first
mover advantage to secure a significant percentage of an enormous
market opportunity. In considering the best way forward to
capitalize on this we are examining alternative forms of finance
for that industry sector opportunity, since we believe that the
future lies in our ability to control the data provided by our
technology. This could involve providing a very low up-front cost
for our products but with increased monthly charges for usage.
Clearly this will involve the need to fund such a strategy if we
decide to proceed. Our objective is to test the market appetite for
such an approach over the next few months.
Sales of the smart padlock launched under the Lokies brand
increased to 13% of our revenues from only 5% in the previous year.
As previously announced, we were successful in winning the DHL
Smart Guard Innovation Challenge in Singapore earlier in the year
for the Lokies product and, after more trials, we secured our first
initial order for this product in January 2022 with the expectation
of further orders to follow.
We have been working closely with our advisers on the rebranding
of the Company and its products, and restructuring our sales team
to reflect the new focus as well as examining opportunities to
expand the Company both organically and where appropriate with
suitable alliances.
In November 2021, Mr Avi Engel, one of the non-executive
directors, stepped down from the board. Avi has served as a
director since August 2015 and we thank him for his valuable
contribution to the board and wish him every success in his other
activities.
We have successfully raised GBP1.35m new cash during the second
half of 2021 from new investors who recognize the opportunity for
more growth and are happy to support the company at increasing
share prices.
FINANCIAL REVIEW
Group revenues for the year were $4.2m, compared with $5.04m for
the year ended 31 December 2020, a decrease of 16%.
The gross margin for the year shown in the accounts was
approximately 30% but this reflected the one-time reduction in
stock levels. The ongoing gross margin would be nearer 40% without
this deduction. compared with 33% for 2020.
Total operating expenditure for the year was $3.98m (2020:
$3.4m), mainly due to non-cash expenses such as depreciation, share
option provisions and exceptional impairment made for intangible
assets.
Net loss after taxation for the year increased to $2.96m
compared with the 2020 net loss of $2.05m. The operating loss in
the period was $2.69m, compared to an operating loss of $1.78m in
2020.
The Group recorded an exchange rate loss of $0.1m resulting from
the strengthening of the Israeli Shekel compared with the US dollar
(2020: loss of $0.14m).
The Group balance sheet showed decrease in trade receivables of
$0.68m, compared with $1.1m as at 31 December 2020.
Group inventories at the period end were $1.8m, compared to
$2.1m as at the end of 2020. An exceptional provision for obsolete
stock was made of $0.38m.
As a part of the re-valuation of the intangible assets due to
rebranding and new strategy the company impaired $0.83m of
intangible asset value.
Trade payables at the year-end were stable at $1.55m, compared
with $1.6m as at 31 December 2020.
Net cash used in operating activities in the period was
approximately $0.38m, compared with $0.4m for the year ended 31
December 2020.
As detailed in notes 10, 12 and 13 of this financial report, t
he Company has loans with a leading Israeli Bank. The financial
covenants as detailed in note 12 were breached at the quarter
ending 31 December 202 1. The Company and the bank are monitoring
the position carefully, remain in close correspondence, and are
working
towards a solution.
OUTLOOK
The new contracts in Latin America and the USA recognize the
strength of our technology in the container and freight movement
market and are expected to lead to further contracts over the next
few months. While the supply chain issues continue to create delays
in deliveries, we have succeeded in securing additional supplies of
microchips which should enable a very strong performance in 2022
with an expected return to positive EBITDA and further growth in
succeeding years.
Michael Rosenberg OBE
Non-Executive Chairman
_______________
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
December 31,
Note 2021 2020
----- --------------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment, net 6 299 318
Rights-of-use assets, net 22 690 330
Intangible assets, net 7 1,034 1,900
Income tax authorities 57 56
Total Non-Current Assets 2,080 2,604
----- --------------
CURRENT ASSETS
Cash and cash equivalents 1,534 264
Short-term bank deposit 5 154 150
Trade receivables, net 3B 679 1,129
Other accounts receivable 3A 160 81
Inventories 4 1,790 2,127
Total Current Assets 4,317 3,751
----- --------------
TOTAL ASSETS 6,397 6,355
===== ==============
EQUITY AND LIABILITIES
EQUITY 14 193 2,101
----- ------
NON-CURRENT LIABILITIES
Long-term loans from banks, net of current
maturities 10 239 303
Long-term leasehold liabilities 22 558 236
Warrants at fair value 11 115 -
Conversion component of a convertible loan
at fair value 11 279 -
Amortized cost of a convertible loan 11 857 -
Total Non-Current Liabilities 2,048 539
------
CURRENT LIABILITIES
Short-term bank credit 24 25
Short-term bank loan 12 922 739
Current maturities of long-term loans from
banks 10 76 12
Trade payables 1,553 1,579
Other accounts payable 9 738 303
Leasehold liabilities 22 148 136
Conversion component of a convertible loan
at fair value 11 - 42
Amortized cost of a convertible loan 11 - 254
Warrants at fair value 11 3 10
Related parties 20 692 615
----- ------
Total Current Liabilities 4,156 3,715
----- ------
TOTAL EQUITY AND LIABILITIES 6,397 6.,355
===== ======
The accompanying notes are an integral part of the consolidated
financial statements.
03 March 2022 03 March 2022
---------------------------- ---------------- -------------
Date of Approval Igor Vatenmacher Avi Hartmann
of the Financial Statements CFO CEO
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. Dollars in thousands (except shares data)
Year ended December 31,
Note 2021 2020
------- ---------
Revenues 4,214 5,041
Cost of sales 15 (2,545) (3,374)
Inventory write-down (381) -
-------
Gross profit 1,288 1,667
------- ---------
Operating expenses:
Research and development (223) (206)
Selling and marketing (609) (580)
General and administrative expenses 16 (2,388) (2,680)
Other income (expenses) 17 (756) 24
------- ---------
Total operating expenses (3,976) (3,442)
------- ---------
Operating loss (2,688) (1,775)
Finance income 18A - 1
Finance expenses 18B (271) (271)
-------
Net finance expenses (271) (270)
------- ---------
Total comprehensive loss for the year (2,959) (2,045)
======= =========
Loss per share:
Basic and diluted loss per share 14, 19 (0.064) (0.0 47 )
The accompanying notes are an integral part of the consolidated
financial statements.
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
U.S. Dollars in thousands
Capital Reserve
in Regard
to Share-Based
Share Premium Payment Accumulated
Capital on Shares Capital Reserve Transactions Loss Total
-------- ---------- ---------------- ------------------ ------------ ---------
Balance as of
January
1, 2020 - 12,254 89 942 (9,394) 3,891
Proceeds from
issued
share capital,
net of
expenses - 74 - - - 74
Share based
payment - - - 181 - 181
Comprehensive
loss for
the year - - - - (2,045) (2,045)
-------- ----------- ---------------------- -------------------------- ------------- -------
Balance as of
December
31, 2020 - 12 ,328 89 1,123 (11,439) 2,101
Issuance of
shares to
a related party
in payment
of payable (see
Note
1 4c ) - 107 - - - 107
Conversion of
convertible
loan (see Note
11 b ) - 295 - - - 295
Issued share
capital,
net of expenses
(see
Note 1 4d ) - 621 - - - 621
Share based
payment (see
Note 14f) - - - 28 - 28
Comprehensive
loss for
the year - - - - (2,959) (2,959)
-------- ----------- ---------------------- -------------------------- ------------- -------
Balance as of
December
31, 2021 - 13,351 89 1,151 (14,398) 193
======== =========== ====================== ========================== ============= =======
The accompanying notes are an integral part of the consolidated
financial statements.
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Year Ended December
31,
2021 2020
---------- ---------
CASH FLOWS FOR OPERATING ACTIVITIES:
Loss for the year (2,959) (2,045)
Adjustments to reconcile loss for the
year to net cash used in operating
activities:
Depreciation and amortization 549 725
Interest expenses and exchange rate
differences (24) 50
Share-based payment expense 28 181
Inventory write down 381 -
Intangible Assets impairment 801 -
Changes in assets and liabilities:
Decrease (Increase) in inventories (44) 219
Decrease in trade receivables, net 450 857
Decrease (Increase) in other accounts
receivable (79) 88
Increase in Income Tax Authorities (1) (2)
Increase (Decrease) in trade payables 8 1 (502)
Increase in other accounts payable 43 5 40
Net cash used in operating activities (382) (389)
---------- ---------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property, plant and equipment ( 49 ) (18)
Increase in short-term deposits (4) (89)
Cost of intangible assets (283) (281)
Net cash used in investing activities (33 6 ) (388)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term bank credit,
net (1) (54)
Receipt of short-term bank loan, net 183 739
Receipt of convertible unsecured loans,
net 1,251 290
Proceeds from related parties, net 77 57
Payment for leasehold liabilities (137) (162)
Receipt of long-term loans - 312
Repayment of long-term loans (6) (299)
Consideration from issue of shares,
net 621 -
---------- ---------
Net cash provided by financing activities 1,988 883
---------- ---------
Increase in cash and cash equivalents 1,270 106
Cash and cash equivalents at the beginning
of the year 264 158
---------- ---------
Cash and cash equivalents at the end
of the year 1,534 264
========== =========
Appendix A Ð Additional Information
Interest paid during the year (49) (69)
========== =========
Appendix B Ð Non-Cash Financing
Activities
Issuance of shares to a related party
in payment of payable balance and convertible
loans 402 74
========== =========
Significant non-cash transactions (entering into new lease agreements)
are disclosed in Note 2 2
The accompanying notes are an integral part of the consolidated
financial statements.
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL
-
a. The Reporting Entity
1. t42 IoT Tracking Solutions PLC (formerly: Starcom
PLC) ("the Company") was incorporated in Jersey on
November 28, 2012. The Company and its subsidiaries
("the Group") specializes in easy-to-use practical
wireless solutions that combine advanced technology,
telecommunications and digital data for the protection
and management of people, fleets of vehicles, containers
and assets. The Group engages in production, marketing,
distribution, research and development of G.P.S. systems.
The Company fully owns Starcom G.P.S. Systems Ltd.,
an Israeli company, and Starcom Systems Limited, a
company incorporated in Jersey.
The Company's shares are admitted for trading on the
AIM market of the London Stock Exchange ("AIM").
The address of the official Company office in Israel
of t42 IoT Tracking Solutions is: 16A Ha'Taas Street,
Kfar Saba, Israel.
The address of the Company's registered office in
Jersey of Starcom Systems Limited is: Forum 4, Grenville
Street, St. Helier, Jersey, Channel Islands, JE4 8TQ.
b. Definitions in these financial statements:
1. International Financial Reporting Standards ("IFRS")
Ð Standards and interpretations adopted by
the International Accounting Standards Board ("IASB")
that include international financial reporting
standards (IFRS) and international accounting standards
(IAS), with the addition of interpretations to
these Standards as determined by the International
Financial Reporting Interpretations Committee (IFRIC)
or interpretations determined by the Standards
Interpretation Committee (SIC), respectively.
2. The Company - t42 IoT Tracking Solutions PLC (formerly:
Starcom PLC).
3. The Subsidiaries - Starcom G.P.S. Systems Ltd.
and Starcom Systems Limited.
4. Starcom Jersey Ð Starcom Systems Limited.
5. Starcom Israel Ð Starcom G.P.S. Systems Ltd.
6. The Group Ð t42 IoT Tracking Solutions PLC
(formerly: Starcom PLC). and the Subsidiaries.
7. Related Party - As determined in International
Accounting Standard No. 24.
T42 IOT TRACKING SOLUTIONS PLC (FORMERLY: STARCOM PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL (cont.)
-
c. Operating Turnover Period
The ordinary operating period turnover for the Group
is a year. As a result, the current assets and current
liabilities include items that are expected and intended
to be realized at the end of the ordinary operating
turnover period for the Group.
d. Functional and Presentation Currency
The consolidated financial statements are presented
in U.S. dollars (hereinafter: "dollars") that is the
functional currency of the Group and is rounded to
the nearest thousands, except when otherwise indicated.
The dollar is the currency that represents the economic
environment in which the Group operates.
The Group's transactions and balances denominated
in dollars are presented at their original amounts.
Non-dollar transactions and balances have been remeasured
to dollars. All transaction gains and losses from
remeasurement of monetary assets and liabilities denominated
in non-dollar currencies are reflected in the statements
of comprehensive income as financial income or expenses,
as appropriate.
NOTE 2A BASIS OF PREPARATION
-
a. Declaration in regard to implementation of International
Financial Reporting Standards (IFRS)
The consolidated financial statements of the Company
have been prepared in accordance with IFRS and related
clarifications published by the IASB.
The Company's Board of Directors authorized the 2021
Consolidated Financial Statements on March 3(rd) ,
2022.
b. Basis of Measurement
The consolidated financial statements have been prepared
on the historical cost basis, except for financial
instruments at fair value through profit or loss that
are stated at fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2B USE OF ESTIMATES AND JUDGMENTS
-
The preparation of financial statements in conformity
with IFRS requires management to make judgments, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these
estimates.
Upon formulation of accounting estimates used in preparation
of the Group financial statements, management is required
to make assumptions in regard to circumstances and events
that are significantly uncertain. Management arrives
at these decisions based on prior experiences, various
facts, external items and reasonable assumptions in accordance
with the circumstances related to each assumption.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised
and in any future periods affected.
Information about critical judgment in applying accounting
policies that have a significant effect on the amounts
recognized in the consolidated financial statements is
included in the following Notes:
Note 7 Ð Capitalization of development costs and
amortization of these costs.
Note 14 Ð Options issued.
Information about assumptions and estimations that have
significant risk of resulting in a material adjustment
is included in the following Notes:
Note 3B Ð Allowance for doubtful accounts.
Note 7 Ð Calculation of amortization and impairments.
Note 8 Ð Utilization of tax losses.
Note 11 Ð Financial liabilities of convertible loans
and warrants
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES
-
a. Basis of consolidation
All intra-Group transactions, balances, income and
expenses of the companies are eliminated on
consolidation.
b. Foreign currency and linkage basis
Balances stated in foreign currency or linked to a
foreign currency have been included in the consolidated
financial statements according to the prevailing representative
exchange rates at the balance sheet date. Balances
linked to the Consumer Price Index in Israel are included
in accordance with the Index published prior to balance
sheet date. Linkage and exchange rate differences
are included in the statement of comprehensive income
when incurred.
As of December 31,
2021 2020
CPI (in points) * 127.67 124.19
Exchange Rate of NIS in
U.S. $ 0.322 0.311
For the Year Ended December
31,
2021 2020
Change in CPI 2.8% (0.69%)
Change in Exchange Rate
of NIS 3.4% 7.6%
* Base Index 2002 = 100.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
c. Financial instruments
(i) Non-derivative financial assets
The Group initially recognizes loans and receivables
on the date that they are originated. All other financial
assets (including assets designated as at fair value
through profit or loss) are recognized initially on
the trade date, which is the date that the Group becomes
a party to the contractual provisions of the instrument.
The Group derecognizes a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially
all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred
financial assets that is created or retained by the
Group is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the
net amount presented in the statement of financial
position when, and only when, the Group has a legal
right to offset the amounts and intends either to
settle on a net basis or to realize the asset and
settle the liability simultaneously.
The Group classified non-derivative financial assets
into the following categories: Financial assets at
fair value, through profit or loss, held-to-maturity
financial assets, loans and receivables, and available-for-sale
financial assets.
Financial assets at fair value through profit or loss:
A financial asset is classified as at fair value through
profit or loss if it is classified as held for trading
or is designated as such on initial recognition. Financial
assets are designated as at fair value through profit
or loss if the Group manages such investments and
makes purchase and sale decisions based on their fair
value in accordance with the Group's documented risk
management or investment strategy. Attributable transaction
costs are recognized in profit or loss as incurred.
Financial assets at fair value through profit or loss
are measured at fair value and changes therein, which
take into account any dividend income, are recognized
in profit or loss.
Financial assets designated as at fair value through
profit or loss comprise equity securities that otherwise
would have been classified as available for sale.
Loans and receivables:
Loans and receivables are financial assets with fixed
or determinable payments that are not quoted in an
active market. Such assets are recognized initially
at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and
receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Loans and receivables are comprised of trade and other
receivables, excluding short -term trade and other
receivables where the interest amount is immaterial.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
c. Financial instruments (cont.)
(ii) Non-derivative financial liabilities
The Group initially recognizes debt securities issued
and subordinated liabilities on the date that they
originated. All other financial liabilities (including
liabilities designated as at fair value through profit
or loss) are recognized initially on the trade date,
which is the date that the Group becomes a party to
the contractual provisions of the instrument.
The Group derecognizes a financial liability when
its contractual obligations are discharged, cancelled
or expire.
The Group classifies non-derivative financial liabilities
into the other financial liabilities category. Such
financial liabilities are recognized initially at
fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these financial
liabilities are measured at amortized cost using the
effective interest method.
Other financial liabilities comprise loans and borrowings,
bank overdrafts, and trade and other payables.
(iii) Compound financial instruments
Compound financial instruments issued by the Company
comprised: an interest-bearing loan with a conversion
option issued to the lender.
The option component was recognized initially at its
fair value using a binomial calculation.
The liability component was recognized initially as
the difference between the loan amount and the option
component
Any directly attributable transaction costs are allocated
to the liability and equity components in proportion
to their initial carrying amounts.
Subsequent to initial recognition, the liability component
of a compound financial instrument is measured at
amortized cost using the effective interest method.
The equity component of a compound financial instrument
is not remeasured subsequent to initial recognition.
Interest related to the financial liability is recognized
in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
d. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits with maturities of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value and are used by
the Group in the management of its short-term commitments.
e. Share capital
Ordinary shares:
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary
shares are recognized as a deduction from equity,
net of any tax effects.
f. Property, plant and equipment
Property, plant and equipment are measured at cost
less accumulated depreciation.
Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets,
at the following annual rates:
%
-----------
Computers and software 33
Office furniture and equipment 7 - 15
Vehicles 15
Laboratory equipment 15
Leasehold improvements 10
Leasehold improvements are depreciated by the straight-line
method over the term of the lease, ten-year period,
(including option terms) or the estimated useful lives
of the improvements, unless it is reasonably certain
that the Group will obtain ownership by the end of
the lease term.
At each balance sheet date, the Group examines the
residual value, the useful life and the depreciation
method it uses. If the Group identifies material changes
in the expected residual value, the useful life or
the future pattern of consumption of future economic
benefits in the asset that may indicate that a change
in the depreciation is required, such changes are
treated as changes in accounting estimates. In the
reported periods, no material changes have taken place
with any material effect on the financial statements
of the Group.
g. Intangible assets: Research and
development
Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognized in profit
or loss as incurred.
Development activities involve a plan or design for
the production of new or substantially improved products
and processes. Development expenditure is capitalized
only if development costs can be measured reliably,
the product or process is technically and commercially
feasible, future economic benefits are probable, and
the Group intends and has sufficient resources to
complete development and to use or sell the asset.
The expenditure capitalized includes the cost of materials,
direct labor, overhead costs that are directly attributable
to preparing the asset for its intended use. Other
development expenditure is recognized in profit or
loss as incurred.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
g. Intangible assets: Research and development (cont.)
Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognized in profit
or loss as incurred.
Capitalized development expenditure is measured at
cost less accumulated amortization and accumulated
impairment losses. Amortization is calculated using
the straight-line method over the estimated useful
lives of the assets: ten years.
At each balance sheet date, the Group reviews whether
any events have occurred or changes in circumstances
have taken place, which might indicate that there
has been an impairment of the intangible assets. When
such indicators of impairment are present, the Group
evaluates whether the carrying value of the intangible
asset in the Group's accounts can be recovered from
the cash flows anticipated from that asset, and, if
necessary, records an impairment provision up to the
amount needed to adjust the carrying amount to the
recoverable amount.
h. Short-term deposit
Deposits with maturities of more than three months
but less than one year are included in short-term
deposits.
i. Leases
The Group assesses at contract inception whether a
contract is, or contains, a lease. That is, if the
contract conveys the right to control the use of an
identified asset for a period of time in exchange
for consideration.
Group as a lessee
The Group applies a single recognition and measurement
approach for all leases, except for short-term leases
and leases of low-value assets. The Group recognizes
lease liabilities to make lease payments and right-of-use
assets representing the right to use the underlying
assets.
1. Right-of-use assets
The Group recognizes right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured
at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made at
or before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets,
as follows:
Property - 5 years
Vehicles - 3 years
If ownership of the leased asset transfers to the
Group at the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the
asset.
The right-of-use assets are also subject to impairment.
Refer to the accounting policies in Note 2C(k).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
i. Leases (cont.)
2. Lease liabilities
At the commencement date of the lease, the Group recognizes
lease liabilities measured at the present value of
lease payments to be made over the lease term. The
lease payments include fixed payments (including in
substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on
an index or a rate, and amounts expected to be paid
under residual value guarantees. The lease payments
also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and
payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option
to terminate.
Variable lease payments that do not depend on an index
or a rate are recognized as expenses (unless they
are incurred to produce inventories) in the period
in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments,
the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate
implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease
term, a change in the lease payments (e.g., changes
to future payments resulting from a change in an index
or rate used to determine such lease payments) or
a change in the assessment of an option to purchase
the underlying asset.
3. Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition
exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term
of 12 months or less from the commencement date and
do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption
to leases of office equipment that are considered
to be low value. Lease payments on short-term leases
and leases of low value assets are recognized as an
expense on a straight-line basis over the lease term.
j. Inventories
Inventories are stated at the lower of cost or net
market value.
Cost is determined using the "first-in, first -out"
method.
Inventory write-downs are provided to cover risks
arising from slow-moving items, technological obsolescence,
excess inventories, and discontinued products and
for market prices lower than cost, if any. At the
point of loss recognition, a new lower cost basis
for that inventory is established.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
k. Impairment in value of assets
During every financial period, the Group examines
the book value of its tangible and intangible assets
to determine any signs of loss from impairment in
value of these assets. In the event that there are
signs of impairment, the Group examines the realization
value of the designated asset. In the event that the
realization cannot be measured for an individual asset,
the Group estimates realization value for the unit
where the asset belongs. Joint assets are assigned
to the units yielding cash on the same basis. Joint
assets are designated to the smallest groups of yielding
assets for which one can identify a reasonable basis
that is consistent with the allocation.
The realization value is the higher of net sale price
of the asset as compared with its useful life that
is determined by the present value of projected cash
flows to be realized from this asset and its realization
value at the end of its useful life.
In the event that the book value of the asset or cash-yielding
unit is greater than its realization value, a devaluation
of the asset has occurred in the amount of the difference
between its book value and its realization value.
This amount is recognized immediately in the statements
of comprehensive income.
In the event that prior devaluation of an asset is
nullified, the book value of the asset or of the cash-yielding
unit is increased to the estimated current fair value,
but not in excess of the asset or cash-yielding unit
book value that would have existed had there not been
devaluation. Such nullification is recognized immediately
in the statements of comprehensive income.
l. Revenue recognition
The Group generates revenues from sales of products,
which include hardware and software, software licensing,
professional services and maintenance. Professional
services include mainly installation, project management,
customization, consulting and training. The Group
sells its products indirectly through a global network
of distributors, system integrators and strategic
partners, all of whom are considered end-users, and
through its direct sales force.
Revenue from products and software licensing is recognized
when persuasive evidence of an agreement exists, delivery
of the product has occurred, the fee is fixed or determinable
and collectability is probable.
Revenues from maintenance and professional services
are recognized ratably over the contractual period
or as services are performed, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
Allowance for doubtful accounts
m
.
The Group evaluates its allowance for doubtful accounts
on a regular basis through periodic reviews of the
collectability of the receivables in light of historical
experience, adverse situations that may affect the
repayment abilities of its customers, and prevailing
economic conditions. This evaluation is inherently
subjective, as it requires estimates that are susceptible
to significant revision as more information becomes
available.
The Group performs ongoing credit evaluations of its
customers and generally does not require collateral
because (1) management believes it has certain collection
measures in-place to limit the potential for significant
losses, and (2) because of the nature of its customers
that comprise the Group's customer base. Receivables
are written off when the Group abandons its collection
efforts. An allowance for doubtful accounts is provided
with respect to those amounts that the Group has determined
to be doubtful of collection.
n. Concentrations of credit risk
Financial instruments that potentially subject the
Group to concentrations of credit risk consist principally
of cash and cash equivalents, short-term deposits
and trade receivables.
o. Provisions
Provisions are recognized when the Group has a current
obligation (legal or derived) as a result of a past
occurrence that can be reliably measured, that will
in all probability result in the Group being required
to provide additional benefits in order to settle
this obligation. Provisions are determined by capitalization
of projected cash flows at a rate prior to taxes that
reflects the current market preparation for the money
duration and the specific risks for the liability.
p. Employee benefits
The Group has several benefit plans for its employees:
1. Short-term employee benefits -
Short-term employee benefits include salaries,
vacation days, recreation and deposits to the National
Insurance Institute that are recognized as expenses
when rendered.
2. Benefits upon retirement -
Benefits upon retirement, generally funded by deposits
to insurance companies and pension funds, are classified
as restricted deposit plans or as restricted benefits.
All Group employees have restricted deposit plans,
in accordance with Section 14 of the Severance
Pay Law (Israel), whereby the Group pays fixed
amounts without bearing any legal responsibility
to pay additional amounts thereto even if the fund
did not accumulate enough amounts to pay the entire
benefit amount to the employee that relates to
the services he rendered during the current and
prior periods. Deposits to the restricted plan
are classified as for benefits or for compensation
and are recognized as an expense upon deposit to
the plan concurrent with receiving services from
the employee and no additional provision is required
in the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
-----------------------------------------------------------------------------------
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
q. Finance income and expenses
Finance income includes interest in regard to invested
amounts, changes in the fair value of financial assets
presented at fair value in the statements of comprehensive
income and gains from changes in the exchange rates
and interest income that are recognized upon accrual
using the effective interest method.
Finance expenses include interest on loans received,
changes in the time estimate of provisions, changes
in the fair value of financial assets presented at
fair value in the statements of comprehensive loss
and losses from changes in value of financial assets.
Gains and losses from exchange rate differences are
reported net. Exchange rate differences in regard
to issuance of shares are charged to equity.
r. Taxes
Tax expense comprises current and deferred tax. Current
tax and deferred tax are recognized in profit or loss
except to the extent that they relate to a business
combination, or items recognized directly in equity
or in other comprehensive income.
Current tax is the expected tax payable or receivable
on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable
in respect of previous years. Current tax payable
also includes any tax liability arising from the declaration
of dividends.
Deferred tax is recognized in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for taxation purposes.
Deferred tax is not recognized for:
-- Temporary differences on the initial recognition
of assets or liabilities in a transaction that is
not a business combination and that affects neither
accounting nor taxable profit or loss;
-- Temporary differences related to investments in subsidiaries
and jointly controlled entities to the extent that
it is probable that they will not reverse in the
foreseeable future; and
-- Taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are offset if
there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to taxes
levied by the same Tax Authority on the same taxable
entity, or on different tax entities, but they intend
to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will
be realized simultaneously.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
----------------------------------------------------------------------------------------------------------------------
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
r. Taxes (cont.)
Since there is uncertainty in regard to
existence
of taxable revenues in the near future,
a deferred
tax asset was not recognized.
A deferred tax asset is recognized for
unused tax
losses, tax credits and deductible
temporary differences
to the extent that it is probable that
future taxable
profits will be available against which
they can be
utilized. Deferred tax assets and
liabilities are
reviewed at each reporting date and are
reduced to
the extent that it is no longer
probable that the
related tax benefit (taxes on income)
will be realized.
s. Basic and Diluted Earnings per Share
Basic earnings per share are computed
based on the
weighted average number of common
shares outstanding
during each year.
Diluted earnings per share are computed
based on the
weighted average number of common
shares outstanding
during each year, plus dilutive
potential common shares
considered outstanding during the year.
t. Statement of cash flows
The statement of cash flows from
current operations
is presented using the indirect method,
whereby interest
amounts paid and received by the Group
are included
in the cash flows in current
operations.
u. Dividend distribution
Dividend distribution to the Company's
shareholders
is recognized as a liability in the
Group's financial
statements in the period in which the
dividends are
approved by the Group's shareholders.
v. Segment reporting
Segment results that are reported to
the CEO include
items directly attributable to a
segment as well as
those that can be allocated on a
reasonable basis.
Unallocated items comprise mainly
corporate assets,
head office expenses and tax.
w. Government grants
A government grant is not recognized
until there is
reasonable assurance that the Group
will comply with
the conditions attaching to it, and
that the grant
will be received. The Group received
government grants,
the nature of which is compensation for
a decrease
in revenues, the Group decided to
record the grants
received by the Government of Israel as
revenues.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 3A OTHER ACCOUNTS RECEIVABLE
-
December 31
2021 2020
------------ -----------
Government institutions 130 78
Prepaid expenses 30 3
------------ -----------
160 81
============ ===========
NOTE 3B TRADE RECEIVABLES, NET
-
December 31
2021 2020
------- ----------------
Group receivables 1,176 1,736
Allowance for doubtful
accounts (497) (607)
679 1,129
======= ================
NOTE 4 INVENTORIES
-
December 31
2021 2020
------ ------
Raw materials 1,117 1,284
Finished goods 673 843
------ ------
1,790 2,127
====== ======
NOTE 5 SHORT-TERM BANK DEPOSIT
-
The bank deposit sums of $154 and $150 as of December
31, 2021 and 2020, respectively, serve as a security
deposit for repayment of bank loans in accordance with
terms of the loans. The deposit bears yearly interest
at the rate of 0.02%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 6 PROPERTY, PLANT AND EQUIPMENT, NET
-
Office
Computers Furniture
and Software and Equipment Laboratory Leasehold
Equipment Improvements Vehicles* Total
-------------- -------------- ------------- --------------- ------------ --------
Cost:
Balance as
of January
c 1, 2021 200 127 285 60 152 824
Additions
during the
year 18 4 12 11 4 49
Balance as
of December 87
31, 2021 218 131 297 71 156 3
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1, 2021 177 93 123 23 90 506
Depreciation
during the
year 11 8 26 6 17 68
Balance as
of December
31, 2021 188 101 149 29 107 574
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31, 2021 30 30 148 42 49 299
============== ============== ============= =============== ============ ========
Office
Computers Furniture
and Software and Equipment Laboratory Leasehold
Equipment Improvements Vehicles* Total
-------------- -------------- ------------- --------------- ------------ --------
Cost:
Balance as
of January
c 1, 2020 194 121 279 60 152 806
Additions
during the
year 6 6 6 - - 18
Balance as
of December
31, 2020 200 127 285 60 152 824
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1, 2020 164 85 93 17 69 428
Depreciation
during the
year 13 8 30 6 21 78
Balance as
of December
31, 2020 177 93 123 23 90 506
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31, 2020 23 34 162 37 62 318
============== ============== ============= =============== ============ ========
* See also Note 13.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 7 INTANGIBLE ASSETS , NET
-
Total
-----------------
Cost:
Balance as of January 1, 2021 5,036
Additions during the year 283
Impairment * (3,601)
Balance as of December 31, 2021 1,718
-----------------
Accumulated Amortization:
Balance as of January 1 ,2021 (2,934)
Amortization during the year (348)
Impairment * 2,598
Balance as of December 31, 2021 (684)
-----------------
Net book value as of December 31,
2021 1,034
=================
Total
-----------------
Cost:
Balance as of January 1, 2020 4,755
Additions during the year 281
Balance as of December 31, 2020 5,036
-----------------
Accumulated Amortization:
Balance as of January 1, 2020 (2,434)
Amortization during the year (500)
Balance as of December 31, 2020 (2,934)
-----------------
Accumulated Impairment of assets (202)
-----------------
Net book value as of December 31,
2020 1,900
=================
The expenditure capitalized includes the cost of materials and
direct labor that are directly attributable to preparing the
assets for their intended use. Other development expenditure
is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost less
accumulated amortization and accumulated impairment losses.
Amortization is calculated using the straight-line method over
the estimated useful lives of the assets: ten years.
* The Group is undergoing a significant change in its business
model and new branding. As part of the process management is
reviewing its current product portfolio in order to focus on
those products developed in the past that management believes
have the potential for the future. Accordingly, it has decided
to impair some of its products, as of July 1(st) 2021, amounts
$801 thousand, net of accumulated amortization.
See also Note 2C g and Note 2C k.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 8 TAXES ON INCOME
-
a. Israeli taxation
1. The Israeli corporate tax rate for 2021 and 2020
is 23%.
2. Tax Benefits from the Encouragement of Capital
Investments Law, 1959 ("The Encouragement Law")
Starcom Israel presents its financial statements
to the tax authorities as an Approved Enterprise.
In the framework of the Law for Change of Priorities,
an increase in tax rates was approved, commencing
with 2014 and thereafter, on revenues from an approved
enterprise, as stated in the Encouragement Law
for an Approved Enterprise. An eligible company
in Development Area A was entitled to a tax rate
of 9% during 2015. During 2016 an amendment to
the law was confirmed according to which an eligible
company in Development Area A is entitled to a
tax rate of 7.5% as of 2017.
In an area that is not Development Area A, the
tax rate will be 16%.
Concurrently, the tax rate on dividend, for distribution
from January 1, 2014, the source of which is preferred
income as stated in the Encouragement Law, is 20%.
Starcom Israel is subject to a tax rate of 16%
for the years 2021 and 2020.
3. Starcom Israel has carryforward operating tax losses
of approximately NIS 39 million as of December
31, 2021 (NIS 30 million as of December 31, 2020).
As for deferred tax assets see Note 2C(r).
Starcom Israel has been assessed by the Income
Tax Authorities up to and including the year 201
7 .
b. Jersey taxation
Taxable income of the Company and Starcom Jersey is
subject to tax at the rate of zero percent for the
years 2021 and 2020.
c. Detail of tax income
Since the recording of a deferred tax asset is limited
to the amount of deferred tax liabilities, no deferred
tax income will be recorded in 2021 or was recorded
in 2020.
NOTE 9 OTHER ACCOUNTS PAYABLE
-
December 31
2021 2020
----------- -----------
Employees and payroll accruals 209 303
Advanced payments from trade 529 -
receivables
738 303
=========== ===========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 10 LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES
-
1. Composition: December 31
2021 2020
----------------------------------------------------- -----
Long-term liability 315 31 5
Less: current maturities (76) (12)
----------------------------------------------------- -----
239 303
===================================================== =====
2. Aggregate maturities of long-term loans for years subsequent
to December 31, 2021 are as follows:
Amount
-------------------
First year 76
Second year 78
Third year 81
Fourth onwards 80
315
===================
3. Additional information regarding long-term
loans:
Amount Annual Interest
Received Interest Loan Terms Payment
Date Received NIS (U. Rate and Terms
S. dollars) Maturity Dates
---------------- -------------- ----------- ---------------------- ------------
Dec 9, 2020 1,000 ($310) Prime 48 equal monthly Monthly
+ 1.5 installments commencing
including principal 09 Dec
and interest 2020
(once year
grace for principal)
*
See also Note 13.
* The loan is a state-guaranteed loan, received as assistance
due to the spread of the Covid -19 virus, the State pays
the interest for the first year. See also Note 25.
NOTE 11 FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS
-
a. During December 2021, The Company received from third
parties loans in the total amount of $1,251 thousand
(GBP925 thousand) in the form of convertible loans enabling
the lenders to convert the loans at an exercise price
of GBP0.15 per share at any time, under the limitations
of the AIM, Takeover Code and MAR regulations, up to
December 31, 2023.
The convertible loans bear interest at the rate of 8%
per annum calculated by reference to the principal amount
of the convertible loans. If not converted, the loans
will be repayable on December 31, 2023.
In addition, the lenders received fully vested warrants
to subscribe a total of 1,541,667 further shares at an
exercise price of GBP0.17 per share. Any unexercised
warrants expire at the end of two-years from grant.
In addition, the lenders received fully vested warrants
to subscribe a total of 1,541,667 further shares at an
exercise price of GBP0.19 per share. Any unexercised
warrants expire at the end of three-years from grant.
The loan was evaluated and divided into different components
by independent appraisers as follows:
Conversion component at fair value Ð $279 thousand
Warrants at fair value Ð $115 thousand
Amortized cost of a loan Ð $857 thousand
Transaction costs were allocated according to the component's
fair value ratio.
The part of the expenses that is attributed to the amortized
cost of the loan was reduced from its cost.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 11 FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS
- (cont.)
An effective interest rate was calculated for the liability
component of the loan, based on its amortization table.
The effective interest rate is 33 % per annum.
b. During March 2020, The Company received from Directors
Michael Rosenberg (via Montrose Securities Ltd), Avi Engel
and Igor Vatenmacher and an employee (hereinafter: "the
lenders") loans in the total amount of $290 thousand (GBP244
thousand) in the form of convertible loans enabling the
lenders to convert the loans at an exercise price of GBP0.0125
per share at any time up to September 30, 2021, as detailed
below:
Lender Value of Loan provided Number of
Warrants
granted
Montrose Securities Limited,
a company controlled by
Michael Rosenberg (Non-Executive
Chairman) GBP100,000 1,600,000
------------------------- ----------
429,330 Israeli
Shekels
Avi Engel (approximately
(Non-Executive Director) GBP100,000) 1,600,000
------------------------- ----------
100,000 Israeli
Igor Vatenmacher Shekels (approximately
(Chief Financial Officer) GBP21,800) 400,000
------------------------- ----------
100,000 Israeli
Shekels (approximately
Starcom Employee GBP21,800) 400,000
------------------------- ----------
The convertible loan bears interest at the rate of 8% per
annum calculated by reference to the principal amount of
the convertible loan. If not converted, the loans will
be repayable on September 30, 2021.
In addition, the lenders received fully vested warrants
to subscribe a total of 4 million further shares at an
exercise price of GBP0.015 per share. Any unexercised warrants
expire at the end of two-years from grant.
The loan was evaluated and divided into different components
by independent appraisers as follows:
Conversion component at fair value Ð $59 thousand
Warrants at fair value Ð $12 thousand
Amortized cost of a loan Ð $210 thousand
Transaction costs were allocated according to the component's
fair value ratio.
The part of the expenses that is attributed to the amortized
cost of the loan was reduced from its cost.
An effective interest rate was calculated for the liability
component of the loan, based on its amortization table.
The effective interest rate is 35.2% per annum.
During September 2021 the loans were converted to 19,488,000
(2,436,000 after shares consolidation) new ordinary shares
according to the conditions set-above.
See also Note 20.
Total revaluation expenses regarding these components in
the statement of comprehensive loss for the reported period
are as follows:
Loan component Option Warrant
--------------------- --------- ----------
Balance as of January
1, 2021 254 42 10
Additions during the
year 857 279 115
Finance (income) expenses 56 (42) (7)
Payments (17) - -
Conversion (293) - -
--------------------- --------- ----------
Balance as of December
31, 2021 857 279 118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 12 SHORT-TERM BANK LOAN
-
During July 2020, Starcom Israel signed a loan agreement
with an Israeli bank in order to receive loans and credits
in an aggregate principal amount that will not exceed
NIS 5 million (hereinafter Ð "the Loan").
During November 2021, the company signed an amendment
to the loan agreement which adjust the total loan amount
to NIS 3 million and adjust the interest the loan shall
bear to amount of Prime + 4% calculated and payable on
a monthly basis, to be repaid after a year.
In the framework of the financial agreement that was
signed, the Company is obligated to maintain financials
covenants in regard to the Groups' EBITDA and Equity.
As of December 31, 2021, the Company did not meet its
financial covenants, thus the bank has the right to demand
the repayment of the loan immediately.
NOTE 13 CHARGES
-
In respect of the short-term and long-term bank loans
set out in Notes 10 and 12 above-
1. A charge was placed on the Starcom Israel's vehicle.
2. A floating pledge was placed on the assets of Starcom
Israel.
3. A cross-Group charge was placed.
4. A Pledge on the bank deposit of Starcom Israel was
placed.
NOTE 14 EQUITY
-
a. During November 2021 the Company held a general meeting
which resulted with a decision to consolidated shares
by a ratio of 1:8 ("shares consolidation").
Composition - common stock of no-par value, issued
and outstanding 52,526,822 shares and 43,934,975 (Adjusted
to shares consolidation) shares as of December 31,
2021 and December 31, 2020, respectively.
b. A Company share grants to its holder voting rights,
rights to receive dividends and rights to net assets
upon dissolution.
c. During May 2021 the Company issued 9,686,775 (1,210,847
after shares consolidation) new ordinary shares in
lieu of 60% of director fees for 14-18 months ending
May 31 2021 in a total amount of GBP77 thousands ($109
thousands). The shares were issued at 0.8p per share,
being the most recent closing offer price for ordinary
shares.
d. During October 2021, the Company raised GBP450 ($621)
thousand before expenses
through a placing of 36,000,000 Ordinary Shares (4,500,000
after shares consolidation).
e. See Note 11b.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 14 EQUITY (cont.)
-
f. Share-based payment
The following table lists the number of share options
and warrants and the exercise prices of such during
the current and prior years:
2021 2020*
---------------------- --------------------
Weighted Weighted
average average
Number exercise Number of exercise
of options price options price
----------- --------- --------- ---------
GBP GBP
---------------------- --------------------
Share options outstanding
at beginning of year 6,244,243 0.22 6,161,743 0.22
Warrants granted during
the year 4,322,869 0.17 500,000 0.12
Options & Warrants exercised
during the year (445,000) - - -
Options & Warrants expired
during the year - - (417,500) 0.144
Share options & warrants
outstanding at end of year 10,122,112 0.206 6,244,243 0.22
=========== ========= ========= =========
Share options & warrants
exercisable at end of year 9,127,829 0.207 5,744,243 0.22
=========== ========= ========= =========
* The 2020 number of options and Weighted average exercise
price were revised in accordance with the share consolidation
.
I. During May 2021 the Company Issued 3,000,000 new
share options (375,000 after the shares consolidation)
to executive management and additional 1,000,000 share
options (125,000 after the shares consolidation) to other
employees. The executive management options will be exercisable,
subject to their continued employment with the Company,
over three years as to one third at 1.5p (12p after the
shares consolidation) per share from the first anniversary
of the date of grant, one third at 2p (16p after the
shares consolidation) per share from the second anniversary
of date of grant and one third at 2.5p (20p after the
shares consolidation) per share from the third anniversary
of date of grant.
The employees' options will become exercisable, subject
to their continued employment with the Company, at 1.25p
(10p after the shares consolidation) per share over three
years as to one third for each anniversary of the date
of grant.
II. During May 2021 the Company's CEO and its Board
of directors Chairman exercised 3,560,000 (445,000 after
the shares consolidation) options granted to them under
the Company's share option scheme in lieu of salary and
fees, as announced on 17 June 2019. The options were
exercisable at nil cost.
III. During July 2021 the Company issued 6,251,162 new
share options (781,395 after the shares consolidation)
to certain directors ("Fee Options") at a price of 1.075
pence per share in order to reduce fees by GBP5,600 per
month, for a twelve-month period until 31 May 2022. The
Fee Options vest month by month and can be exercised
from that date at nil cost per share, until 10 years
from date of grant.
Due to Mr Engel step down from the board of directors,
the number of shares was updated to 5,916,280 (739,535
after the shares consolidation), according to the mutual
agreement.
IV. See Note 11a.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 15 COST OF SALES
-
Year Ended December
31,
2021 2020
------------ ------------
Purchases and other 2,241 2,655
Amortization* 348 500
Decrease (Increase) in inventory (44) 219
2,545 3,374
============ ============
* See also Note 7 regarding the impairment of some of
the intangible assets.
NOTE 16 GENERAL AND ADMINISTRATIVE EXPENSES
-
Year Ended December
31,
2021 2020
-------- ------------
a.
Salaries and related expenses (see
also Note 20) 1,307 1,167
Professional services
(1) 548 557
Doubtful accounts and
bad debts 154 550
Depreciation 202 225
Office maintenance 104 112
Car maintenance 73 69
2,388 2,680
======== ============
(1) Including share-based payment to directors and senior
management in the amounts of $28 and $181 thousand for
the years ended December 31, 2021 and 2020, respectively.
See also Note 1 4 f
b . Average Number of Staff Members
by Category:
Year Ended December
31,
2021 2020
---------- ----------
Sales and marketing 6 5
Research and development 3 3
General and administrative 12 12
---------- ----------
21 20
========== ==========
NOTE 17 OTHER INCOME (EXPENSES)
-
Year Ended December
31,
2021 2020
----------- ---------
Intangible assets impairment (801) -
Other income 45 24
(756) 24
=========== =========
NOTE 18A FINANCE INCOME
-
Year Ended December
31,
2021 2020
---------- ----------
Interest from deposits - 1
NOTE 18B - FINANCE EXPENSES
Exchange rate differences (98) (140)
Interest to banks and
others (55) (62)
Bank charges (62) (43)
Interest to suppliers (46) (16)
Interest to related parties (10) (10)
(271) (271)
-------------- ----------
Net finance expenses (271) (270)
============== ==========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 19 LOSS PER SHARE
-
Weighted average number of shares used in computing basic
and diluted loss per share: (adjusted to shares consolidation)
Year Ended December 31,
2021 2020
------------------ ------------------
Number of shares 46,294,206 43,650,630
================== ==================
NOTE 20 RELATED PARTIES
-
a. The related parties that own shares in the Group are:
Mr. Avraham Hartman (10.25%), Mr. Uri Hartman (5.6
%), Mr. Doron Kedem (5.6%).
b. Short-term balances: December 31
2021 2020
---------- ---------
Credit balances
Avi Hartmann (38) (56)
Uri Hartmann (482) (444)
Doron Kedem (173) (173)
---------- ---------
Total Credit Balance (693) (673)
---------- ---------
Loans
Avi Hartmann 38 87
Uri Hartmann (236) (236)
Doron Kedem 199 207
---------- ---------
Total Loans 1 58
---------- ---------
(692) (615)
========== =========
c. Shareholders' credit balances are related to deferred
salaries and are linked to the New Israel Shekel ("NIS").
Loans from shareholders accrue 4% annual interest.
d. Transactions: Year Ended December
31,
2021 2020
------------ ----------
Key management compensation:
Total salaries and related expenses
for shareholders/related parties 543 450
============ ==========
Non-Executive directors' fees 141 90
============ ==========
Total share-based payment 22 80
============ ==========
Interest to related parties 10 10
============ ==========
e. Directors and the shareholders of the Group are each
entitled to benefits, in addition to salaries, that
include a vehicle, meals, cellular phones and a professional
enrichment fund. Concurrently, the Group deposits
for them amounts in a restricted benefit plan for
implementation upon completion of their employment.
f. For the purposes of the AIM Rules other transactions
with related parties are disclosed in notes 11a, 11b,14c,
14f(I), 14f(II) and 14f(III)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 21 FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
-
a. Financial Risk Factors:
The Group's operations expose it to a variety of financial
risks, including: market, currency, credit and liquidity
risks. The comprehensive Group plan for risk management
focuses on the fact that it is not possible to predict
financial market behavior and an effort to minimize
possible negative effects on Company financial performance.
In this Note, information is stated in regard to Group
exposure to each of the risks abovementioned and the
handling of these risks. Risk management and capital
are handled by the Group management that identifies
and evaluates financial risks.
1) Exchange rate risk
Group operations are exposed to exchange rate risks
arising mainly from exposure of loans that are
linked to the NIS from banks, suppliers and others.
2) Credit risk
Credit risks are handled at the Group level. These
risks arise from cash and cash equivalents, bank
deposits and unpaid receivable balances. The Group
settled a credit insurance with one of the biggest
credit insurance companies worldwide and manages
its credit risk accordingly. Cash and cash equivalent
balances of the Group are deposited in an Israeli
bank. Group management is of the opinion that there
is insignificant credit risk regarding these amounts.
3) Liquidity risks
Cautious management of liquidity risks requires
that there will be sufficient amounts of cash to
finance operations. Group management currently
examines projections regarding liquidity surpluses
deriving from cash and cash equivalents. This examination
is based on projected cash flows, in accordance
with procedures and limitations determined by the
Group.
Short term loan covenants compliance is closely
monitored by the financial department.
b. Linkage terms of financial instruments:
Group exposure to Index and foreign currency risks,
based on par value, except for derivative financial
instruments is as follows:
December 31, 2021
--------------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
----------------------- -------- ----- ------ --------------
Variable
Unlinked Interest Unlinked
----------- ---------- ----------------------------------- --------
Financial Assets:
Cash and cash equivalents 358 - 805 133 238 1,534
Short-term deposit - 154 - - - 154
Trade receivables,
net 128 - 533 - 18 679
Other accounts receivable 211 - - 5 - 216
Financial Liabilities:
Short-term bank credit - (24) - - - (24)
Short term bank loan - (922) - - - (922)
Trade payables - (1,220) (237) (94) (2) (1,553)
Other accounts payable (210) - (120) - (408) (738)
Leasehold liabilities - (706) - - - (706)
Related parties - (692) - - - (692)
Long-term loans from
banks - (315) - - - (315)
Financial liabilities
of convertible loans - (1,251) - - - (1,251)
487 (4,976) 981 44 (154) (3,618)
=========== ========== ======== ===== ============== ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2 FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
1 - (cont.)
December 31, 2020
--------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
----------------------- -------- -------- ----- ----------
Variable
Unlinked Interest Unlinked
----------- ---------- -------------------------
Financial Assets:
Cash and cash equivalents 2 - 251 - 11 264
Short-term deposit - 150 - - - 150
Trade receivables,
net 233 - 872 5 19 1,129
Other accounts receivable 132 - - 5 - 137
Financial Liabilities:
Short-term bank
credit - (25) - - - (25)
Short-term bank
loan - (739) - - - (739)
Trade payables - (1,018) (412) (146) (3) (1,579)
Other accounts payable (303) - - - - (303)
Leasehold liabilities - (372) - - - (372)
Related parties - (615) - - - (615)
Long-term loans
from banks - (315) - - - (315)
Financial liabilities
of convertible loans - (196) - (110) - (306)
---------- --------
64 (3,130) 711 (246) 27 (2,574)
=========== ========== ======== ======== ===== ==========
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the NIS:
5% Increase 5% Decrease
in in
Exchange Rate Exchange Rate
--------------- -------------------
For the Year Ended December
31
2021 (224) 224
2020 (153) 153
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the Euro:
5% Increase 5% Decrease
in in
Exchange Rate Exchange
Rate
--------------- -------------------
For the Year Ended December
31
2021 (8) 8
2020 1 (1)
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the GBP:
5% Increase 5% Decrease
in in
Exchange Rate Exchange Rate
--------------- -------------------
For the Year Ended December
31
2021 2 (2)
2020 (12) 12
c. Fair value
As of December 31, 2021, there was no significant
difference between the carrying amounts and fair values
of the Company's financial instruments that are presented
in the financial statements not at fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 22 Leases
-
Group as a lessee
The Group has lease contracts for various items of property
and vehicles used in its operations. The leases of property
have lease terms of 5 years, while motor vehicles have
lease terms of 3 years. The Group's obligations under
its leases are secured by the lessor's title to the
leased assets. Generally, the Group is restricted from
assigning and subleasing.
There are several lease contracts that include extension
and termination options, which are further discussed
below.
The Group also has certain leases of machinery with
lease terms of 12 months or less and leases of office
equipment with low value. The Group applies the 'short-term
lease' and 'lease of low-value assets' recognition exemptions
for these leases.
Below are the carrying amounts of right-of-use assets
recognized and the movements during the period:
Property Vehicles Total
--------- --------- ------
Balance at January 1, 2020 180 48 228
Additions 111 138 249
Depreciation expenses (85) (62) (147)
--------- --------- ------
Balance at December 31,
2020 206 124 330
Additions 629 - 629
Disposals (136) - (136)
Depreciation expenses (70) (63) (133)
--------- --------- ------
Balance at December 31,
2021 629 61 690
========= ========= ======
Below are the carrying amounts of lease liabilities
(included under Leasehold Liabilities) and the activities
during the period:
2021 2020
------ ------
As at January 1 (372) (250)
Additions (629) (249)
Disposals 162 -
Exchange rate differences and
others (9) (22)
Accretion of interest 5 (13)
Payments 137 162
------ ------
Balance at December 31 (706) (372)
Current (148) (136)
Non-Current (558) (236)
Maturity analysis - contractual undiscounted cash flows
Less than one year 170
One to five years 606
Total undiscounted lease liabilities
at December 31, 2021 776
====
The following are the amounts recognized in profit or loss:
2021 2020
------ ------
Depreciation expenses of right-of-use
assets (133) (147)
Interest income (expenses) on
lease liabilities (15) (13)
Accretion of interest 11 (22)
------ ------
Total amount recognized in profit
or loss (137) (182)
====== ======
Within More than Total
5 years 5 years
---------- ---------- ------
Extension options expected not
to be exercised - 720 720
Termination options expected to - - -
be exercised
---------- ---------- ------
December 31, 2021 - 720 720
----------- ---------- ------
Extension options expected not - - -
to be exercised
Termination options expected to - - -
be exercised
----------- ---------- ------
December 31, 2020 - - -
=========== ========== ======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 22 Leases (cont.)
-
The Group had total cash outflows for leases of $137 in 2021
($162 in 2020). The Group also had non-cash additions to right-of-use
assets and lease liabilities of $629 in 2021 ($249 in 2020)
The Group has several lease contracts that include extension
and termination options. These options are negotiated by management
to provide flexibility in managing the leased-asset portfolio
and to align with the Group's business needs. Management performs
significant judgment operations in determining whether these
extension and termination options are reasonably certain to be
exercised. Below are the undiscounted potential future rental payments
relating to periods following the exercise date of extension
and termination options that are not included in the lease term:
NOTE 23 CUSTOMERS AND GEOGRAPHIC INFORMATION
-
a. Major customers' data as a percentage of total consolidated
sales to unaffiliated customers:
Year Ended December
31,
2021 2020
---------- ---------
Customer A 10% 14%
Customer B 9% 12%
Customer C 6% 5%
b. Breakdown of consolidated sales to unaffiliated customers
according to geographic regions:
Year Ended December
31,
2021 2020
---------- ---------
Latin America 17% 15%
Europe 15% 16%
Africa 29% 33%
Asia 7% 9%
Middle East 23% 20%
North America 9% 7%
---------- ---------
Total 100% 100%
---------- ---------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 24 SEGMENTATION REPORTING
-
The Group has two main reportable segments, as detailed
below:
Reported operating segments include: Hardware and SaaS.
For each of the strategic divisions, the Group's CEO
reviews internal management reports on at least a quarterly
basis.
There are no inter-segment sales. Information regarding
the results of each reportable segment is included below.
Performance is measured based on segment gross profit
included in the internal management reports that are
reviewed by the Group's CEO. Segment profit is used to
measure performance, as management believes that such
information is the most relevant in evaluating the results
of certain segments.
Segment information regarding the reported segments:
Hardware SaaS
--------- ------
Year Ended 31.12.2021:
Segment revenues 2,069 2,145
Cost of sales (2,291) (254)
--------- ------
Gross profit (loss) (222) 1,891
Year Ended 31.12.2020:
Segment revenues 2,8 33 2,208
Cost of sales (3,070) (304)
--------- ------
1,90
Gross profit (237) 4
NOTE 25 SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (COVID-19)
-
Due to the pandemic outbreak since March 2020, most of
the countries across the globe have taken extra measures
to prevent and reduce COVID-19 exposure.
The unprecedented conditions resulted in a decrease in
revenues for the year. In addition, normal global component's
shortage, purchasing processes and difficult shipping
limitations created additional costs and delays which
impacted the Group ability to fully respond to the increased
business demand . To meet this demand, the Groups' management
made special arrangements to obtain sufficient components
for the future ongoing business through 2022.
The Group has taken actions to manage its liquidity,
including reducing operating expenses and strict cash
flow monitoring. Based on current operational assumptions,
the Group believes it has adequate liquidity beyond the
next twelve months.
In addition, the Group also managed to use the opportunity
of COVID-19 impact on freight movement from the other
hand and was able to conclude 2 significant distribution
contracts which are expected to contribute significantly
to revenues during 2022.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR KZGGFMZMGZZZ
(END) Dow Jones Newswires
March 03, 2022 02:00 ET (07:00 GMT)
t42 IoT Tracking Solutions (AQSE:TRAC.GB)
Gráfica de Acción Histórica
De Jun 2024 a Jul 2024
t42 IoT Tracking Solutions (AQSE:TRAC.GB)
Gráfica de Acción Histórica
De Jul 2023 a Jul 2024
