TIDMTRAC
RNS Number : 2781E
T42 IOT Tracking Solutions PLC
28 June 2023
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.
28 June 2023
t42 IoT Tracking Solutions plc
("t42" or the "Company")
Full year results
t42 IoT Tracking Solutions plc (AIM: TRAC) ("t42" or the
"Company"), the provider of global shipping containers tracking
solutions, is pleased to announce its results for the 12 months
ended 31 December 2022.
Contacts:
t42 IoT Tracking Solutions PLC
Michael Rosenberg, Chairman 07785 727595
Avi Hartmann, CEO +972 5477 35663
Strand Hanson Limited (Nominated Adviser
and Financial Adviser)
James Harris/ Richard Johnson/ Robert Collins 020 7409 3494
Peterhouse Capital Limited
Lucy Williams/Charles Goodfellow/Eran Zucker 020 7469 0930
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,
homeland security, and police for end-to-end global container
tracking and digital transformation of shipments.
The Annual Report will be made available to shareholders shortly
and be available from the CompanyÕs website at: www.t42.co.uk/
.
CHAIRMAN'S STATEMENT
We are pleased to report the audited results of t42 for the year
ended 31 December 2022: revenues were $4.04m (2021: $ 4.21m), gross
margin was 42% (2021: 40%), and net losses after tax were reduced
to $1.01m (2021: $2.96m).
A major contributing factor to these results, as stated in our
trading update in February 2023, is the continuation of post-Covid
and supply chain issues that have impacted our performance despite
several successful trials of our technology by potential customers.
We also experienced delays in the anticipated substantial orders
from our LATAM distributor caused by local political disturbances
but are hopeful that we will begin to see progress in the level of
demand in the latter part of this year.
Looking forward to the remainder of 2023, we are targeting a
significant improvement in revenues and gross margins. This
optimism is based on several business vectors and improvements,
which we initially highlighted last year. First, we have expanded
in the USA with initial orders for Tetis units based on monthly
payments for both devices and our software solutions. We see
significant business potential in offering this innovative method
to our product solutions and, assuming the required funding is
available, we expect to deliver increased revenues by offering this
payment solution in the USA and elsewhere.
Secondly, we have completed major software and hardware
improvements to meet clientsÕ needs and provide more holistic
solutions, particularly in times of a global chip shortage. We have
been working hard to make our products even better, faster, and
more reliable. We are confident these improvements will make a real
difference and help us stay ahead of the competition.
We have upgraded our entire product range to incorporate support
for LTE Cat-1 (which has much better world-wide 4G coverage than
previous devices with Cat-M1), as older generations of cellular
networks are being phased out worldwide. We have moved our cloud
infrastructure to Amazon Web Services (AWS), which will improve the
operational capability of our products. Furthermore, we have added
new features to our products, for example, new types of reports,
dashboards, and improvements to our control center, and enhanced
the security feature across our product range. These improvements
are expected to reduce manufacturing costs, thus improving our
gross margins.
Thirdly, in 2022, we introduced four new products to the market:
Tetis R Connect (Tetis R with BLE 4.2 support for scanning external
standalone sensors for temperature, humidity, etc.), the Lokies 2.0
(featuring a new design, BLE 5.2 support, a new CPU, and improved
energy efficiency), the new iteration of our Helios TT device, and
two new versions of Helios M (for 2G and 4G networks).
Finally, we have significantly expanded our presence at
specialized exhibitions related to our technology while
implementing multiple pilot schemes with new and existing
customers. This has provided the opportunity to engage in pilot
tests for our latest Lokies and Tetis products and receive valuable
customer feedback.
We are already beginning to see the positive result of these
improvements in the pipeline of potential business for the
remainder of 2023, which gives us confidence in a considerable
improvement in revenues and gross margin this year, with a second
half weighting. We continue to benefit from the recurring income
from software-as-a-service (SaaS) and expect this to increase
further this year. As recently announced, we have secured an
initial order of 1,000 units for our Lokies solution, with further
orders anticipated. In addition, we are expectant that orders from
Latin America (LATAM) will begin to materialize during 2023.
Although heavily focused on developing our presence in the
container protection sector, we continue to progress in our
traditional activity areas. Thus, during the year, we obtained
additional orders for Helios Hybrid, one of t42Õs superior
technology hardware products, combining GSM cellular and satellite
communication. Our target market for this product is homeland
security customers. We have secured additional orders within Africa
with other superior Helios units.
We are now in the final stages of formalizing additional funding
through a new $1.3m convertible loan stock with a third party.
These funds, if secured, would meet our cash requirements in the
medium term and enable the Company to fulfil existing orders in
hand. The agreement has been approved by all parties and formal
documents are in the process of being signed and the lender has
committed to provide the funds, subject to completion. The Company
expects significant further growth in orders over the next 12
months and should these be achieved, it may be necessary to review
cash requirements to enable them to be fulfilled and to ensure the
new leasing structure can be applied for future sales now being
adopted for some clients.
FINANCIAL REVIEW
Group revenues for the year were $4.04m, compared with $4.21m
for the year ended 31 December 2021, a decrease of 4%.
The gross margin for the year was approximately 42% compared
with 40% for 2021.
Total operating expenditure for the year was $3.01 m (2021:
$3.98m),
Net loss after taxation for the year decreased to $1.01m
compared with the 2021 net loss of $2.96m. The operating loss in
the period was $1.37m , compared to an operating loss of $2.69m in
2021.
The Group recorded an exchange rate gain of $0.45m resulting
from the weakness of the Israeli Shekel compared with the US dollar
(2021: exchange rate loss of $0.1m).
The Group balance sheet showed a decrease in trade receivables
to $0.49m, compared with $0.68m as at 31 December 2021.
Group inventories at the period end were $1.58m, compared to
$1.79m as of the end of 2021.
Trade payables at the year-end were stable at $1.14m, compared
with $1.55m as of 31 December 2021.
Net cash used in operating activities in the period was
approximately $0.95m, compared with $0.38m for the year ended 31
December 2021.
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 monitor the
position carefully, remain in close correspondence and work toward
a solution.
OUTLOOK
We commenced the first quarter of 2023 with some new orders for
our Tetis products using the new leasing structure and anticipate
further take-up of this new financing methodology over the rest of
2023. Meanwhile, we expect that several of the pilot projects
undertaken during 2022 will lead to orders being received during
the remainder of year. Despite the slow progress of orders from
LATAM, as set out above, we are expecting increased business in
this area during the second half of 2023.
Overall, assuming additional funding is secured on a timely
basis, we expect significant revenue and gross margin improvements
during 2023. With increased funding available to us we also believe
that previous constraints on growth due to supply chain issues will
be less of a feature in our future business opportunities.
Michael Rosenberg OBE
Non-Executive Chairman
CORPORATE GOVERNANCE STATEMENT
General
The Board has adopted the QCA Corporate Governance Code (Òthe
QCA CodeÓ), further detail of which is set out on the CompanyÕs
website. The following comments are intended to provide an update
on the application of these guidelines where appropriate. The
Company seeks to comply with the principles of the QCA Code that
the Board considers appropriate, given the size and nature of the
business. However, there may be certain cases where non-compliance
is appropriate due to the nature of the business and its non-UK
status, as explained further below.
Division of responsibilities
The T42 IoT Tracking Solutions PLC Board consists of four
directors, two of whom are non-executive, including the Chairman.
Although the Company is a relatively small company with a small
board, the roles of Chairman and Chief executive are separate,
clearly established roles, with a clear division of
responsibilities between them.
The Chairman
The Chairman is responsible for the leadership of the Board. The
Chairman sets the agenda for Board meetings and encourages an open
and constructive debate. Since the Company is based in Tel Aviv,
some Board meetings take place by conference call but normally at
least two meetings a year take place physically in Israel with all
Board members attending. The in-person Board meetings were
suspended during the recent pandemic and restrictions on travel but
now these have passed at least two physical Board meetings will be
held in 2023. During 2022, a total of 9 Board meetings were held
and all directors attended all meetings either in person or by
conference call. There were 2 audit committee meetings held during
the year under review, and all members of the committee attended.
There was 1 remuneration committee meeting held during the year
under review, which all members attended.
The Non-Executive directors
The Chairman is responsible for the leadership of the Board. The
Chairman sets the agenda for Board meetings and encourages an open
and constructive debate. Since the Company is based in Tel Aviv,
some Board meetings take place by conference call but normally at
least two meetings a year take place physically in Tel Aviv with
all Board members attending .
Time Commitment
Each non-executive director is required to be able to devote
sufficient time to his role as a director in the light of other
commitments external to the Board. In practice, despite their
limited contractual time obligations to the Board which in general
are one or two days a month, the non-executive directors devote
considerable time over and above their commitments to the Company
in support of the other executive members of the Board. On average,
they provide at least one day a week and sometimes more to assist
the management. The executive directors are fully committed to the
Company and spend as much time as is needed, both in normal working
hours and very often much more.
The business model and strategy
The strategic objectives of the Company are becoming clear in
the shipping container market. The CompanyÕs target is to reach
each and every container and convert it into a transmitting data
point. The Company is targeting to use the opportunity of the
present global environment of supply chain challenges and logistics
costs in order to penetrate the mass market. The CompanyÕs legacy
products and experience will support the business to challenge this
market and provide a comprehensive solution.
To understand and meet shareholder needs and expectations
The Board keeps in regular contact with investors with a view to
understanding their needs and expectations. During 2022, with the
assistance of the CompanyÕs brokers, presentations were made to a
number of investors and further presentations are planned together
with the release of these financial statements. In addition, the
Board welcomes contact from investors via the CompanyÕs brokers, PR
firm and via the website. In normal times shareholders are
encouraged to attend the CompanyÕs Annual General Meetings where
they can meet and directly communicate with the Board.
Taking into account wider stakeholder and social
responsibilities and their implications for long-term success
The CompanyÕs tracking products are sold via distributors;
therefore, the Company has little influence over individual product
sales. Therefore, although the Company continues to monitor
performance of its distribution network, it is not generally in
touch with end users and has limited influence over the processes
followed by distributors. However, the Board constantly reviews the
distribution network by measuring the performance of individual
distributors. Where products are manufactured by external firms,
the Company regularly inspects the production facilities and
processes used.
The Board is committed to reviewing and assessing stakeholder
expectations and guides the CompanyÕs senior management to act in
accordance with feedback received.
Embed effective risk management
The Board is fully aware of, and monitors closely, the risks
that may apply to the business. These include counterparty credit
risk, foreign exchange risk and, from time to time, political risks
in countries where the Company is actively marketing its products.
It is also influenced by the covenants imposed by its bankers on
credit risk for certain countries. Operational risks are identified
and assessed by management and are reported to the Board when
necessary. The Audit Committee also addresses these risks at its
regular meetings. During 2022, management has actively been seeking
to widen the manufacturing bases for the CompanyÕs products so as
to lessen reliance on any single manufacturer, thus minimizing risk
to the business. In order to monitor risk, regular visits are made
to the manufacturing facility and the Board is informed of any
issues that need addressing. The key risks facing the Company
together with any mitigation taken are considered further on pages
10-11 of this document.
Ensure that the directors have the necessary up-to-date
experience and skills
The Board currently comprises of two executive and two
non-executive directors with an appropriate balance of sector,
financial and public market skills, and experience. The experience
and knowledge of each of the directors gives them the ability to
constructively challenge strategy and to scrutinise performance. In
addition, the Chairman, Michael Rosenberg, brings further
strategic, commercial, transaction and leadership experience which
will be invaluable as the Board pursues the CompanyÕs growth
strategy and continues to transform the Company.
Ethical matters
As a small company, the directors are constantly in touch with
members of the staff. There are 20 members based in the office in
Israel and their needs and aspirations are regularly reviewed.
Main governance structures and processes
The Chairman, Michael Rosenberg, has responsibility for ensuring
proper corporate governance and can also rely on the support of the
CFO, Mr Vatenmacher, who is also very familiar with corporate
governance requirements.
Further information on the Board and its Committees:
Michael Rosenberg OBE (Non-Executive Chairman)
Michael has many years of experience both as a corporate
financier and as an entrepreneur, involved in a number of new
businesses in the healthcare, media and financial sectors. He has
considerable global experience, having been chairman of the UK DTI
committee on trade with Hong Kong and as member of the China
Britain Business Council. He was, for many years, also chairman of
the British Export Healthcare Association, now known as ABHI, and
led a number of UK trade missions overseas. He was a founder of the
investment bank now known as Numis Securities where he served as
chairman for a number of years until his retirement in 1999.
Over many years he has also served on the boards of other
Israeli companies listed on AIM, including Pilat Media Global PLC,
as well as several other non-listed companies.
Avi Hartmann (Chief Executive Officer)
Avi has spent his life as an entrepreneur focused on the
technology of tracking systems. He was a founder of Mobiltel
Communications Services, which was purchased by Pelephone in Israel
in 1999. Together with his son, Uri Hartmann, and his then partner,
Doron Kedem, he founded t42 IoT Tracking Solutions PLC in 2004.
Martin Blair (Non-Executive Director)
Martin qualified as a chartered accountant with Ernst &
Young in 1982 and between 1983 and 1986 also worked for PwC. He
then spent 15 years in a variety of senior financial roles,
primarily for media and technology companies, both in UK and the
US. Martin became the CFO for Pilat Media Global PLC, a company
which previously traded on both AIM and the Tel Aviv Stock
Exchange. Pilat Media Global developed, marketed and supported new
generation business management software solutions for content and
service providers in the media industry. Martin is also currently a
non-executive director and Chairman of the audit committees at Kape
Technologies PLC (AIM: KAPE) and Cake Box Holdings PLC (AIM:
CAKE).
Igor Vatenmacher (Chief Financial Officer)
Igor is a certified public accountant in Israel and has a
BachelorÕs degree in Economics from Ben Gurion University of the
Negev, and an executive MBA degree with honours, specializing in
financing, banking, capital markets and financial engineering, from
the Hebrew University in Jerusalem. He began his career with Ernst
and Young. Igor joined t42 IoT Tracking Solutions PLC in December
2017 and brings highly qualified accounting experience to the
Company, and, since his appointment, has assisted with the
development of more sophisticated internal systems and controls
essential to the growth of the business. He joined the Board of the
Company in January 2019.
Audit Committee
The Audit Committee consists of the non-executive directors,
Martin Blair and Michael Rosenberg, and is chaired by Martin Blair.
The Audit Committee, inter alia, determines and examines matters
relating to the financial affairs of the Company including the
terms of engagement of the CompanyÕs auditors and, in consultation
with the auditors, the scope of the annual audit. The Audit
Committee met twice during 2022. In March 2022 the Audit Committee
reviewed the financial statements for the year ended 31 December
2021, paying particular attention to the valuation of stock and the
level of debtors with a view to making provisions where necessary.
The Audit Committee met in September 2022 to consider the interim
financial statements for the six months ended 30 June 2022. Again,
the Committee focused on stock valuation and debtor levels, as well
as the reported gross margin. The Board considers that, given the
size and nature of the business, it is not beneficial to include a
full audit committee report in the annual report and accounts for
2022. This will be kept under annual review by the Board.
The Remuneration Committee reviews the performance of the
directors and makes recommendations to the Board on matters
relating to their remuneration and terms of employment. The
committee also makes recommendations to the Board on proposals for
the granting of share options and other equity incentives pursuant
to any share option scheme or equity incentive scheme in operation
from time to time. The committee meets as and when necessary to
assess the suitability of candidates proposed for appointment by
the Board, but not less than once per annum. Members of the
remuneration committee comprise Michael Rosenberg, who acts as
chairman of the committee, with Martin Blair as a member.
The Board considers that, given the size and nature of the
business, it is not beneficial to include a remuneration committee
report in the annual report and accounts for 2022. This will be
kept under annual review by the Board.
On behalf of the board,
M. Rosenberg, Chairman
_______________
t42 IoT Tracking Solutions PLC
Directors' Report
for the Year Ended December 31, 2022
The directors present the annual report together with the
financial statements and auditors' report for the year ended
December 31, 2022.
The Company was incorporated in Jersey and two wholly-owned
trading subsidiaries: Starcom Systems Limited and t42 Limited, were
incorporated in Jersey and in Israel, respectively.
Principal activities and review of business
The Group's principal activity is in the development of wireless
solutions for the remote tracking, monitoring and protection of
various types of assets and people. Further information on the
results of the Group for the period under review can be found in
the Chairman's Statement.
Accounts production
The financial statements for the year ended December 31, 2022,
have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU ("IFRS").
Dividends
The directors do not propose a final dividend.
Directors
Michael Rosenberg Appointed February 2013
Avi Hartmann Appointed February 2013
Igor Vatenmacher Appointed January 2019
Martin Blair Appointed May 2019
Remuneration of Directors
Remuneration of directors for the year ending 31 December 2022:
(All amounts presented in thousands of USD)
Executive Director Salary Pension Fees Total
and Related
Expenses
A Hartmann 186 14 - 200
I Vatenmacher 127 26 - 153
Non-Executive Directors
M Rosenberg - - 50 50
M Blair - - 45 45
-------- -------------- ----- -------
Total 2022 313 40 95 448
======== ============== ===== =======
Directors' remuneration in share options: (In thousands)
Total Vested/ Total Total Grant
Executive Director vested Exercised (Expired) Vested un-vested Total
a t 01/01/22 during at 31/12/22 at 31/12/22
the year
A Hartmann 1,199 (200) 83 1,082 83 1,165
I Vatenmacher 258 (50) 84 292 83 375
Non-Executive
Directors
M Rosenberg 1,200 (200) 182 1,182 - 1,182
M Blair 458 - 157 615 - 615
Further details regarding the grants are detailed in note 14
within the financial reports. Some of the directors were also
issued warrants as a part of the loan they provided to the Company,
as detailed in notes 11 and 14 within the financial report.
Charitable and Political Donations
The Group did not make any charitable or political contributions
during the year.
Corporate governance
The Company adopts the Quoted Company AllianceÕs (QCA) Corporate
Governance Code (ÒQCA CodeÓ) and the Board believes this is the
appropriate code for the Company to adhere to. The Board assesses
its compliance with the QCA Code on an annual basis.
In common with other organizations of a similar size, the
executive directors are heavily involved in the day to day running
of the business and meet regularly on an informal basis as well as
at Board Meetings.
The Board of directors meets regularly and is responsible for
formulating strategy, monitoring financial performance and
approving major items of capital expenditure.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable laws and
regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under that
law, the directors are required to prepare the Group and parent
Company financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the EU.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and parent Company
and of the profit and loss of the Group for that period.
In preparing each of the Group and parent Company financial
statements, the directors are required to:
i) Select suitable accounting policies and then apply them consistently;
ii) Make judgments and accounting estimates that are reasonable and prudent; and
iii) State whether they have been prepared in accordance with
IFRS as adopted by the EU, subject to any material departures
disclosed and explained in the parent Company financial statements;
and prepare the financial statements on the "going concern" basis
unless it is inappropriate to presume that the Group and the parent
Company will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy, at any time, the
financial position of the Group and parent Company and enable them
to ensure that the financial statements comply with the Companies
Act 2006 and Article 4 of the IAS Regulations. They have general
responsibility for taking such steps as are reasonably open to
safeguard the assets of the Group and parent Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Directors' Report to comply with that
law and those regulations.
In determining how amounts are presented within terms in the
income statement and balance sheet, the directors have regarded the
substance of the reported transaction or arrangement in accordance
with generally accepted accounting principles or practice.
So far as each of the directors is aware at the time the report
is approved:
There is no relevant audit information of which the Company's
auditors are unaware; and
The directors have taken all steps that they ought to have taken
to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
Going concern
The directors have prepared and reviewed sales forecasts and
budgets for the next twelve months and, having considered these
cash flows and the availability of other financing sources if
required, have concluded that the Group will remain a "going
concern." After this process and having made further relevant
enquiries, the directors have a reasonable expectation that the
Group and the Company have adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the "going concern" basis in preparing the
accounts.
Risks
Foreign exchange risks
Most of the GroupÕs sales and income are in US Dollars and the
US Dollar is the currency in which the Company reports. The
expenses, however, are divided between the US Dollar and the
Israeli Shekel. The cost of goods (components) are paid in US
Dollars and part of the operational costs, such as rent and other
service providers, quote their fees in Israeli Shekel. Labor costs
are paid in Israeli Shekels. The Company has, therefore, a partial
currency risk in the event that the Israeli Shekel strengthens
against the US Dollar, which could have an effect on the bottom
line of the Group's financial results.
The Group consults with foreign currency experts from main
Israeli banks regarding the main financial institutions'
expectations for foreign currency changes. Management reviews them
carefully and will consider with the board whether it should
purchase financial instruments sold by local banks to protect
itself from this foreign exchange risk. There are no financial
instruments in use at the date of this report .
Interest Rate Risks
The Company is exposed to interest risks as it uses credit lines
and loans from its banks. Changes in the effective Prime interest
rate published monthly by the Bank of Israel can influence the
Company's financing costs.
Credit Risk
The Group is exposed to credit risks if its customers fail to
pay for goods supplied by the Group. In order to minimize this
risk, the Group has a policy of:
(a) Selling only to respectable integrators and distributors and
not to the end customer.
(b) Orders from customers in certain regions are shipped only
after an approved letter of credit is received by the Group's
bank.
(c) New customers in common pays at least 30% before initial
shipping.
Capital Risk management
The Group manages its cash carefully. In order to reduce its
risk, the Group may take measures to reduce its fixed costs (labor)
if performance is below the directorsÕ expectations. The Group may
conduct a placing for new shares of the Company in order to raise
additional capital as required when monitoring its performance, and
to continue its operations.
Supplier payment policy
It is the Group's policy to settle the terms of payment with
suppliers when agreeing to the terms of the transaction, to ensure
that suppliers are aware of these terms and to abide by them.
CREST
The Company's ordinary shares are eligible for settlement
through CREST, the system for securities to be held and transferred
in electronic form rather than on paper. Shareholders are not
obliged to use CREST and can continue to hold and transfer shares
on paper without loss of rights.
Auditors
A resolution reappointing Barzily as the GroupÕs auditors will
be proposed at the AGM in accordance with S485 of the Companies Act
2006.
Electronic Communications
The Company may deliver shareholder information, including
Annual and Interim Reports, Forms of Proxy and Notices of General
Meetings, in an electronic format to shareholders.
If you would like to receive shareholder information in
electronic format, please register your request on the Company's
Registrar's electronic database at www.linkassetservices.com. You
will initially need your unique investor code which you will find
at the top of your share certificate. There is no charge for this
service. If you wish to subsequently change your mind, you may do
so by contacting the Company's Registrars by post or through their
website.
If you elect to receive shareholder information electronically,
please note that it is the shareholder's responsibility to notify
the Company of any change in his name, address, email address or
other contact details. Shareholders should also note that, with
electronic communication, the Company's obligations will be
satisfied when it transmits the notification of availability of
information, or such other document as may be involved, to the
electronic address it has on file. The Company cannot be held
responsible for any failure in transmission beyond its control any
more than it can be held responsible for postal failure.
In the event of the Company becoming aware that an electronic
notification is not successfully transmitted, a further two
attempts will be made. In the event that the transmission is still
unsuccessful, a hard copy of the notification will be mailed to the
shareholder. In the event that specific software is required to
access information placed on the Company's website, it will be
available via the website without charge.
Before electing for electronic communications, shareholders
should ensure that they have the appropriate equipment and computer
capabilities sufficient for this purpose. The Company takes all
reasonable precautions to ensure no viruses are present in any
communication it sends out but cannot accept responsibility for
loss or damage arising from the opening or use of any email or
attachments from the Company and recommends that shareholders
subject all messages to virus checking procedures prior to use. Any
electronic communication received by the Company that is found to
contain any virus will not be accepted.
Shareholders wishing to receive shareholder information in the
conventional printed form will continue to do so and need take no
further action.
Should you have any further questions in this regard, please
contact the Company's Registrars, Share Registrars Limited.
On behalf of the board,
M. Rosenberg, Chairman
________________
Jerusalem 27 June 2023
Report of Independent Auditors
to the Board of Directors and Stockholders of
t42 IoT Tracking Solutions PLC
We have audited the accompanying consolidated statements of financial
position of t42 IoT Tracking Solutions PLC and its subsidiaries
(hereinafter - Òthe GroupÓ) as of December 31, 2022 and
2021 and the related consolidated statements of comprehensive income,
changes in equity and cash flows for the years then ended. These
financial statements are the responsibility of the Group board of
directors and management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Israel, including those prescribed by the Israeli AuditorsÕ
Regulations (AuditorÕs Mode of Performance - 1973). Those standards
require that we plan and perform the audit to obtain reasonable
assurance as to whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used
and significant estimates made by the board of directors and management
as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of the Group as of December 31, 2022 and 2021
and the consolidated results of its operations, changes in equity
and cash flows for the years then ended in conformity with international
financial reporting standards (IFRS).
Without qualifying our conclusion, we draw attention to Note 25
in the financial statements regarding the Company's efforts to raise
additional funds.
Barzily & Co.
Certified Public Accountants.
A Member of MSI Worldwide
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
December 31,
Note 2022 2021
----- --------------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment, net 6 546 299
Rights-of-use assets, net 22 981 690
Intangible assets, net 7 1,021 1,034
Income tax authorities 57 57
Total Non-Current Assets 2,605 2,080
----- --------------
CURRENT ASSETS
Cash and cash equivalents 174 1,534
Short-term bank deposit 5 130 154
Trade receivables, net 3B 488 679
Other accounts receivable 3A 71 160
Inventories 4 1,581 1,790
Total Current Assets 2,444 4,317
----- --------------
TOTAL ASSETS 5,049 6,397
===== ==============
EQUITY /(DEFICIT) AND LIABILITIES
EQUITY /(DEFICIT) 14 (538) 193
----- -----
NON-CURRENT LIABILITIES
Long-term loans from banks, net of current
maturities 10 142 239
Long-term leasehold liabilities 22 790 558
Warrants at fair value 11 - 115
Conversion component of a convertible loan
at fair value 11C 27 279
Amortized cost of a convertible loan 11C 292 857
Total Non-Current Liabilities 1,251 2,048
-----
CURRENT LIABILITIES
Short-term bank credit 42 24
Short-term bank loan 12 719 922
Current maturities of long-term loans from
banks 10 70 76
Trade payables 1,144 1,553
Other accounts payable 9 260 738
Leasehold liabilities 22 112 148
Conversion component of a convertible loan
at fair value 11A 7 -
Amortized cost of a convertible loan 11A,B 1,161 -
Warrants at fair value 11A,B 77 3
Related parties 20 744 692
----- -----
Total Current Liabilities 4,336 4,156
----- -----
TOTAL EQUITY /(DEFICIT) AND LIABILITIES 5,049 6,397
===== =====
The accompanying notes are an integral part of the consolidated
financial statements.
, 2023
---------------------------- ---------------- ------------
Date of Approval Igor Vatenmacher Avi Hartmann
of the Financial Statements CFO CEO
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. Dollars in thousands (except shares data)
Year ended December 31,
Note 2022 2021
------- -------
Revenues 4,041 4,214
Cost of sales 15 (2,358) (2,545)
Inventory write-down - (381)
-------
Gross profit 1,683 1,288
------- -------
Operating expenses:
Research and development (125) (223)
Selling and marketing (652) (609)
General and administrative expenses 16 (2,250) (2,388)
Other expenses (29) (756)
------- -------
Total operating expenses (3,056) (3,976)
------- -------
Operating loss (1,373) (2,688)
Finance income 18A 814 49
Finance expenses 18B (447) (320)
-------
Net finance income (expenses) 367 (271)
------- -------
Total comprehensive loss for the year (1,006) (2,959)
======= =======
Loss per share:
Basic and diluted loss per share 14, 19 (0.019) (0.064)
The accompanying notes are an integral part of the consolidated
financial statements.
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
U.S. Dollars in thousands
Capital Reserve
in Regard
Premium to Share-Based
Share on Capital Payment Accumulated
Capital Shares Reserve Transactions Loss Total
------- ------- -------------------- ------------------- ------------ ---------
Balance as of
January
1, 2021 - 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
Issuance of share
capital
(net of expenses) 180 180
Share based payment 95 95
Comprehensive loss
for
the year (1,006) (1,006)
Balance as of
December
31, 2022 - 13,531 89 1,246 (15,404) (538)
======= ======= ==================== ========================== ============= =======
The accompanying notes are an integral part of the consolidated
financial statements.
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Year Ended December
31,
2022 2021
----------- --------
CASH FLOWS FOR OPERATING ACTIVITIES:
Loss for the year (1,006) (2,959)
Adjustments to reconcile loss for
the year to net cash used in operating
activities:
Depreciation and amortization 437 549
Interest expenses and exchange rate
differences (374) (24)
Share-based payment expense 95 28
Inventory write down - 381
Intangible Assets impairment - 801
Capital gain (24) -
Changes in assets and liabilities:
Decrease (Increase) in inventories 209 (44)
Decrease in trade receivables, net 191 450
Decrease (Increase) in other accounts
receivable 89 (79)
Increase in Income Tax Authorities - (1)
Increase (Decrease) in trade payables (90) 8 1
Increase (Decrease) in other accounts
payable (478) 43 5
Net cash used in operating activities (951) (382)
----------- --------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property, plant and equipment (318) ( 49 )
Increase (decrease) in short-term deposits 24 (4)
Cost of intangible assets (166) (283)
Net cash used in investing activities (460) (33 6 )
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term bank credit,
net (152) (1)
Receipt of short-term bank loan, net - 183
Receipt of convertible unsecured loans,
net 250 1,251
Proceeds from related parties, net 28 77
Payment for leasehold liabilities (174) (137)
Receipt of short-term loans -
Repayment of long-term loans (81) (6)
Consideration from issue of shares,
net 180 621
----------- --------
Net cash provided by financing activities 51 1,988
----------- --------
Increase in cash and cash equivalents (1,360) 1,270
Cash and cash equivalents at the beginning
of the year 1,534 264
----------- --------
Cash and cash equivalents at the end
of the year 174 1,534
=========== ========
Appendix A Ð Additional Information
Interest paid during the year 251 (49)
=========== ========
Appendix B Ð Non-Cash Financing
Activities
Issuance of shares to a related party
in payment of debt balance and convertible
loans - 402
=========== ========
Issuance of a convertible loan note
in lieu of settlement of a supplier
debt 319 -
=========== ========
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL
-
a. The Reporting Entity
1. t42 IoT Tracking Solutions 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.
See Note 25 regarding the Company's efforts to raise
additional funds.
The Company fully owns t42 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: 96 Dereh Ramatayim
Street, Hod Hasharon, Israel.
The address of the CompanyÕs registered office
in Jersey of Starcom Systems Limited is: Forum 4,
Grenville Street, St. Helier, Jersey, Channel Islands,
JE4 8TQ.
Definitions in these financial statements:
b.
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.
3. The Subsidiaries - t42 Ltd. and Starcom Systems
Limited.
4. Starcom Jersey Ð Starcom Systems Limited.
5. Starcom Israel Ð t42 Ltd.
6. The Group Ð t42 IoT Tracking Solutions PLC.
and the Subsidiaries.
7. Related Party - As determined in International
Accounting Standard No. 24.
T42 IOT TRACKING SOLUTIONS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL (cont.)
-
Operating Turnover Period
c.
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.
Functional and Presentation Currency
d.
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
-
Declaration in regard to implementation of International
a. 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 2022
Consolidated Financial Statements on 27 June, 2023.
Basis of Measurement
b.
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
-
Basis of consolidation
a.
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,
2022 2021
CPI (in points) * 134.39 127.67
Exchange Rate of NIS in
U.S. $ 0.284 0.322
Exchange Rate of GBP in
U.S. $ 1.204 1.351
For the Year Ended December
31,
2022 2021
Change in CPI 5.26% 2.8%
Change in Exchange Rate
of U.S. $ (11.6%) 3.4%
Change in Exchange Rate
of GBP (0.1%) (0.01%)
* Base Index 2002 = 100.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
Financial instruments
c.
(i) 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 financial assets at initial recognition,
as subsequently measured at amortized cost, fair value
through other comprehensive income (OCI) and fair
value through profit or loss.
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, as
well this category includes derivative instruments
and listed equity investments which the Group had
not irrevocably elected to classify at fair value
through OCI.
(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 at amortised cost (debt instruments):
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.)
-
Financial instruments (cont.)
c.
(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 and warrants
at fair value
Compound financial instruments issued by the Company
comprise with an interest-bearing loan and conversion
options issued to lenders
The option component of liabilities that are not denominated
in foreign currency or are linked to the CPI or to
foreign currency is recognized initially as an equity
component at its fair value using a binomial calculation
The liability components are recognized initially
as the difference between the loan amount and the
option component.
Any directly attributable transaction costs are allocated
to the liabilities 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.
Liabilities that are convertible into shares denominated
in foreign currency or are linked to the CPI or to
foreign currency are presented fully as a financial
liability.
The instrument is split into two components for measurement
purposes: A liability component without a conversion
future that is measured at amortized cost according
to the effective interest method, and a conversion
option that is an embedded derivative and is measured
at fair value at each reporting date.
As well, warrants issued by the Company that are convertible
into shares denominated in foreign currency or that
are linked to the CPI or to foreign currency are also
presented as a financial liability which is measured
at fair value at each reporting date.
Interest related to the financial liabilities is recognized
in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES (cont.)
-
Cash and cash equivalents
d.
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.
Share capital
e.
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.
Property, plant and equipment
f.
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 Ð 15
Vehicles 15
Laboratory equipment 15
Rights-of-use assets 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.)
-
Intangible assets: Research and development (cont.)
g.
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 GroupÕs 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.
Short-term deposit
h.
Deposits with maturities of more than three months
but less than one year are included in short-term
deposits.
Leases
i.
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 Ð 10 years (5 years prior year)
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.)
-
Leases (cont.)
i.
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.
Inventories
j.
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.)
-
Impairment in value of assets
k.
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.
Revenue recognition
l.
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 expected credit losses
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.
Concentrations of credit risk
n.
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.
Provisions
o.
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.
Employee benefits
p.
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.)
-
Finance income and expenses
q.
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.
Taxes
r.
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.)
-
Taxes (cont.)
r.
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.
Basic and Diluted Earnings per Share
s.
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.
Statement of cash flows
t.
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.
Dividend distribution
u.
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.
Segment reporting
v.
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.
Government grants
w.
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.
NOTE 2D CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
-
There were no new standards or amendments that are relevant for
the Group which
are effective for annual periods beginning on or after 1 January
2022.The Group has not early adopted any standard, interpretation
or amendment that has been issued but is not yet effective.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 3A OTHER ACCOUNTS RECEIVABLE
-
December 31
2022 2021
------------ -----------
Government institutions 58 130
Prepaid expenses 1 3 30
------------ -----------
71 160
============ ===========
NOTE 3B TRADE RECEIVABLES, NET
-
December 31
2022 2021
------------ -----------
Group receivables 938 1,176
Allowance for credit
losses (450) (497)
488 679
============ ===========
NOTE 4 INVENTORIES
-
December 31
2022 2021
------ ------
Raw materials 1,122 1,117
Finished goods 459 673
------ ------
1,581 1,790
====== ======
NOTE 5 SHORT-TERM BANK DEPOSIT
-
The bank deposit sums of $130 and $154 as of December
31, 2022 and 2021, 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 87
c 1, 2022 218 131 297 71 156 3
Additions
during the
year 22 25 2 269 - 318
Balance as
of December
31, 2022 240 156 299 340 156 1,191
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1, 2022 188 101 149 29 107 574
Depreciation
during the
year 15 8 32 2 14 71
Balance as
of December
31, 2022 203 109 181 31 121 645
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31, 2022 37 47 118 309 35 546
============== ============== ============= =============== ============ ========
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
============== ============== ============= =============== ============ ========
* 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, 2022 1,718
Additions during the year 166
Balance as of December 31, 2022 1,884
-----------------
Accumulated Amortization:
Balance as of January 1 ,2022
Amortization during the year (684)
Balance as of December 31, 2022 (179)
-----------------
(863)
Net book value as of December 31,
2022 1,021
=================
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)
-----------------
Accumulated Impairment of assets 1,034
-----------------
Net book value as of December 31,
2021 1,034
=================
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 has
review edits 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, which, as of July 1(st) 2021,
amounted to $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
-
Israeli taxation
a.
1. The Israeli corporate tax rate for 2022 and 2021
is 23%.
2. Tax Benefits from the Encouragement of Capital
Investments Law, 1959 ("The Encouragement Law")
t42 Israel was determined in the past as a company
which is entitled to a reduced tax rate.
The Group does not expect to pay taxes in Israel
in the next coming years.
3. t42 Israel has carryforward operating tax losses
of approximately NIS 42 million as of December
31, 2022 (NIS 39 million as of December 31, 2021).
As for deferred tax assets see Note 2C(r).
t42 Israel has been assessed by the Income Tax
Authorities up to and including the year 201 7
.
Jersey taxation
b.
Taxable income of the Company and Starcom Jersey is
subject to tax at the rate of zero percent for the
years 2022 and 2021.
Detail of tax income
c.
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 2022 or was recorded
in 2021.
NOTE 9 OTHER ACCOUNTS PAYABLE
-
December 31
2022 2021
----------- -----------
Employees and payroll accruals 237 209
Accrued expenses and notes payable 23 529
260 738
=========== ===========
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
2022 2021
----------------------------------------------------- -----
Long-term liability 212 315
Less: current maturities (70) (76)
----------------------------------------------------- -----
142 239
===================================================== =====
2. Aggregate maturities of long-term loans (including interest)
for years subsequent to December 31, 2022 are as follows:
Amount
----------------------
First year 76
Second year 76
Third year 69
221
======================
3. Additional information regarding long-term loans:
Amount Annual Interest
Received Interest Loan Terms and Payment
Date Received NIS (U. Rate Maturity Dates Terms
S. dollars)
In thousands
---------------- --------------- ----------- --------------------- ------------
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 paid
the interest for the first year.
As of December 31, 2022 the interest prime rate was 4.75%
After the reporting date and as of the date of signing
the financial statements, the annual prime interest rate
increased to the rate of 6.25%.
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, subject to compliance
with the AIM Rules, 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 an independent appraiser, the amounts as for December
31, 2022 are as follows:
Conversion component at fair value Ð $ 7 thousand
Warrants at fair value Ð $ 1 thousand
Amortized cost of a loan Ð $ 973 thousand
Transaction costs were allocated according to the component's
fair value ratio.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS
11 - (cont.)
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 33 % per annum.
b. During December 2022, the Israeli subsidiary entered into
a loan agreement with CSS Alpha Global Pte Ltd for the provision
of a 12-month secured US$500,000 debt facility. The Agreement
provides, inter alia, for interest at 2 per cent per month,
with 9 monthly repayments starting 3 months after drawdown.
Security is by way of a second charge on assets, a personal,
guarantee from the CompanyÕs CEO, limited to 20 per
cent of the loan, and a deposit with CSS of 3,000,000 new
t42 shares. In addition, warrants for a total of 2,976,185
shares in t42 have been issued to CSS, exercisable at 7p
per share over 5 years. The initial drawdown was provided
in December 2022, the second and last drawdown was provided
in January, 2023.
c. In December 2022, the Company issued a GBP265,000 convertible
loan note to a supplier, to be applied in lieu of settlement
of a supplier debt, assisting with the CompanyÕs cashflow
management. The CLN bears interest at 3% per annum, payable
quarterly, and is repayable by 31 December 2024. The CLN
is convertible at 9p per share at the discretion of the
holder. In addition, the Company has the right to enforce
conversion of GBP100,000 of the CLN in the event t42's share
price exceeds 12p and the balance if the share price exceeds
15p.
d. In March 2022, 500,000 ordinary shares of no par value
were issued at a price of 12p per share following the exercise
of warrants by directors.
e. For the Year ended December 31, 2022, the estimated fair
values of the various Warrants and Convertible components
were measured by an independent appraiser as follows:,
The level of the fair value hierarchy is level two.
Common Stock Market Value measured in calculation $0.065
Year ended
December 31,
2022
Expected term 1-5 years
Expected average volatility 40%
Expected dividend yield -
Risk-free interest rate 0.368%
Fair value at end of year 0.09p-2.13p
Total revaluation expenses regarding these components in
the statement of comprehensive loss for the reported period
are as follows:
Loan components Conversion Warrants
components
----------------- ------------ ---------
Balance as of January
1, 2022 857 279 118
Additions during the
year 480 27 77
Finance (income) expenses 131 (272) (117)
Payments (15) - -
Conversion - - -
----------------- ------------ ---------
Balance as of December
31, 2022 1,453 34 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 12 SHORT-TERM BANK LOAN
-
During July 2020, t42 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.
Based on mutual understanding between the bank and the
company the short term facility is being gradually amortized,
respectively reduced by $152 thousands during the audited
period.
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 t42 Israel's vehicle.
2. A floating pledge was placed on the assets of t42
Israel.
3. A cross-Group charge was placed.
4. A Pledge on the bank deposit of t42 Israel was placed.
4. Secondary floating pledge on t42 assets.
NOTE 14 EQUITY
-
Share composition - Common stock of no-par value,
a. issued and outstanding:
Year Ended December 31,
2022 2021
54,026,822 52,526,822
During November 2021 the Company consolidated shares
b. by a ratio of 1:8 ("shares consolidation").
Company share grants to its holder voting rights,
c. rights to receive dividends and rights to net assets
upon dissolution
During December 2022, the Company raised GBP90 ($100)
d. thousand before expenses through a placing of 1,000,000
Ordinary Shares.
See Note 11
e.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 14 EQUITY (cont.)
-
Share-based payment
f.
The following table lists the number of share options
and warrants and the exercise prices of such during
the current and prior years:
2022 2021
---------------------- ---------------------
Weighted Weighted
average average
Number exercise Number of exercise
of options price options price
----------- --------- ---------- ---------
GBP GBP
---------------------- ---------------------
Share options & warrants
outstanding at beginning
of year 10,122,112 0.206 6,244,243 0.22
Warrants granted during
the year 2,976,185 0.07 4,322,869 0.17
Options & Warrants exercised
during the year (500,000) 0.12 (445,000) -
Options & Warrants expired
during the year (53,075) 0.12 - -
Share options & warrants
outstanding at end of year 12,545,222 (0.177) 10,122,112 0.206
=========== ========= ========== =========
Share options & warrants
exercisable at end of year 12,215,555 0.171 9,127,829 0.207
=========== ========= ========== =========
See Note 11.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 15 COST OF SALES
-
Year Ended December
31,
2022 2021
--------- ------------
Purchases and other 1,970 2,241
Amortization 180 348
Decrease (Increase) in inventory 208 (44)
2,358 2,545
========= ============
* See also Note 7 regarding the impairment of some of
the intangible assets.
NOTE 16 GENERAL AND ADMINISTRATIVE EXPENSES
-
Year Ended December
31,
2022 2021
-------- ------------
Salaries and related expenses (see
also Note 20) 1,205 1,307
Professional services
(1) 555 548
Doubtful accounts and
bad debts (23) 154
Depreciation 257 202
Office maintenance 167 104
Car maintenance 89 73
2,250 2,388
======== ============
(1) Including share-based payment to directors and senior
management in the amounts of $ 95 and $28 thousand for
the years ended December 31, 2022 and 2021, respectively.
See also Note 1 4 f
b. Average Number of Staff Members
by Category:
Year Ended December
31,
2022 2021
---------- ----------
Sales and marketing 7 6
Research and development 3 3
General and administrative 12 12
---------- ----------
22 21
========== ==========
NOTE 17 OTHER INCOME (EXPENSES)
-
In 2021 the Company impaired the intangible asset in
the amount of $801 thousand.
NOTE 18A FINANCE INCOME
-
Year Ended December
31,
2022 2021
---------- ----------
Exchange rate differences, 455 -
net
Revaluation of financial
instruments 359 49
---------- ----------
814 49
---------- ----------
NOTE 18B - FINANCE EXPENSES
Exchange rate differences,
net - (98)
Interest to banks and
others (382) (104)
Bank charges (50) (62)
Interest to suppliers (5) (46)
Interest to related parties (10) (10)
(447) (320)
-------------- ----------
Net finance income (expenses) 367 (271)
============== ==========
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,
2022 2021
----------------------------------- -----------------------------------
52,830,858 46,294,206
=================================== ===================================
NOTE 20 RELATED PARTIES
-
The related parties that own shares in the Group are:
a.
Mr. Avraham Hartman (10. 33 %), Mr. Uri Hartman (5.
46 %),
Short-term balances: December 31
b.
2022 2021
--------- ---------
Credit balances
Avi Hartmann (20) (38)
Uri Hartmann (545) (482)
Doron Kedem * - - (173)
--------- ---------
Total Credit Balance (565) (693)
--------- ---------
Loans
Avi Hartmann 69 38
Uri Hartmann (248) (236)
Doron Kedem * - - 199
--------- ---------
Total Loans (179) 1
--------- ---------
(744) (692)
* As of June 30, 2022, Mr. Doron Kedem is
not considered a related party, and his
balances are not included for this date.
Shareholders' credit balances are related to deferred
c. salaries and are linked to the New Israel Shekel ("NIS").
Loans from shareholders accrue 4% annual interest.
Transactions: Year Ended December
d. 31,
2022 2021
----------- -----------
Key management compensation:
Total salaries and related expenses
for shareholders/related parties 381 543
=========== ===========
Non-executive directors' fees 95 141
=========== ===========
Total share-based payment 3 22
=========== ===========
Interest to related parties 10 10
=========== ===========
Directors and the shareholders of the Group are each
e. 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.
For the purposes of the AIM Rules other transactions
f. with related parties are disclosed in note14f.
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, 2022
-------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
----------------------- -------- ----- ----- --------------
Variable
Unlinked Interest Unlinked
----------- ---------- ---------------------------- --------
Financial Assets:
Cash and cash equivalents 2 - 171 - 1 174
Short-term deposit - 130 - - - 130
Trade receivables,
net 100 - 371 - 16 488
Other accounts receivable 129 - - - - 129
Financial Liabilities:
Short-term bank credit - (42) - - - (42)
Short term bank loan - (719) - - - (719)
) 583
Non Bank Loans - - ( - - (583)
Trade payables - (569) (478) (93) (5) (1,144)
( 260 ( 260
Other accounts payable ) - - - - )
Leasehold liabilities - (902) - - - (902)
Related parties - (744) - - - (744)
Long-term loans from
banks - (142) - - - (142)
Financial liabilities
of convertible loans - - (981) - - (981)
(29) (2,988) (1,499) (92) 12 (4,596)
=========== ========== ======== ===== ========== ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2 FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
1 - (cont.)
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)
=========== ========== ======== ===== ====== ========
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the NIS:
5% Increase 5% Decrease
in in
Exchange Exchange Rate
Rate
------------ -------------------
For the Year Ended December
31
2022 (149) 149
2021 (224) 224
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the Euro:
5% Increase 5% Decrease
in in
Exchange Exchange
Rate Rate
------------ -------------------
For the Year Ended December
31
2022 1 (1)
2021 (8) 8
Analysis of Sensitivity to Changes in the Exchange Rate of the
U.S. Dollar Against the GBP:
5% Increase 5% Decrease
in in
Exchange Exchange
Rate Rate
------------ -------------------
For the Year Ended December
31 (5) 5
2022
2021 2 (2)
Fair value
c.
As of December 31, 2022, 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 21 FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
- (cont.)
Changes in liabilities arising from financing activities
d.
Foreign
1 January Cash Additions/ exchange New 31 December
2022 flows (Disposals) movement leases Other 2022
------------ -------- -------------- ----------- --------- -------- --------------
Short-term loans
(excluding
items listed below) 998 (244) 187 1,008 1,949
Current lease
liabilities (Note
22) 148 (177) 141 112
Long-term loans
(excluding
items listed below) 1,096 319 (954) 461
Non-current lease
liabilities (Note
22) 558 - 457 (225) 790
Derivatives 397 103 (389) 111
Total liabilities
from financing
activities: 3,197 (421) 609 457 (419) 3,423
Foreign
1 January Cash exchange New 31 December
2021 flows Disposals movement leases Other 2021
------------ -------- -------------- ----------- --------- -------- --------------
Current interest-bearing
loans (excluding items
listed below) 1,005 183 - - - (190) 998
Current lease
liabilities (Note
22) 136 (136) - 9 - 139 148
Non-current
interest-bearing
loans (excluding items
listed below) 303 1,251 - - - (458) 1,096
Non-current lease
liabilities (Note
22) 236 - (162) (1) 629 (144) 558
Derivatives 52 - - - - 345 397
------------ -------- -------------- ----------- --------- -------- --------------
Total liabilities
from financing activities: 1,732 1,298 (162) 8 629 (308) 3,197
============ ======== ============== =========== ========= ======== ==============
The ÔOtherÕ column includes the effect of
reclassification of non-current portion of interest-bearing
loans and borrowings, including lease liabilities to
current due to the passage of time, and the effect
of accrued but not yet paid interest on interest-bearing
loans and borrowings, including lease liabilities and
the effect of changes in fair value. The Group classifies
interest paid as cash flows from financing activities.
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 GroupÕs obligations
under its leases are secured by the lessorÕs 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 Ôshort-term
leaseÕ and Ôlease of low-value assetsÕ
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, 2021 206 124 330
Additions 629 - 629
Disposals (136) - (136)
Depreciation expenses (70) (63) (133)
--------- --------- ------
Balance at December 31,
2021 629 61 690
Additions 417 38 455
Disposals - - -
Depreciation expenses (105) (59) (164)
--------- --------- ------
Balance at December 31,
2022 941 40 981
========= ========= ======
Below are the carrying amounts of lease liabilities
(included under Leasehold Liabilities) and the activities
during the period:
2022 2021
------ ------
As at January 1 (706) (372)
Additions (455) (629)
Disposals - 162
Exchange rate differences and
accretion of interest 84 (4)
Payments 175 137
------ ------
Balance at December 31 (902) (706)
Current (112) (148)
Non-Current (790) (558)
Maturity analysis Ð contractual undiscounted cash
flows
Less than one year (141)
One to five years (503)
Total undiscounted lease liabilities
at December 31, 2022 (644)
======
The following are the amounts recognized in profit or
loss:
2022 2021
------ ------
Depreciation expenses of right-of-use
assets (164) (133)
Interest expenses on lease liabilities 84 (4)
Total amount recognized in profit
or loss (80) (137)
====== ======
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 22 Leases (cont.)
-
The Group had total cash outflows for leases of $ 175
in 2022 ($137 in 2021). The Group also had non-cash
additions to right-of-use assets and lease liabilities
of $457 in 2022 ($629 in 2021)
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 GroupÕs
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:
Within More than Total
5 years 5 years
---------- ---------- ------
Extension options expected not
to be exercised
Termination options expected to - - -
be exercised
---------- ---------- ------
December 31, 2022 - - -
---------- ---------- ------
Extension options expected not
to be exercised - 720 720
Termination options expected to - - -
be exercised
---------- ---------- ------
December 31, 2021 - 720 720
=========== ========== ======
NOTE 23 CUSTOMERS AND GEOGRAPHIC INFORMATION
-
a. Major customersÕ data as a percentage of total
consolidated sales to unaffiliated customers:
Year Ended December
31,
2022 2021
---------- ---------
Customer A 14% 10%
Customer B 11% 9%
Customer C 8% 6%
Breakdown of consolidated sales to unaffiliated customers
b. according to geographic regions:
Year Ended December
31,
2022 2021
---------- ---------
Latin America 12% 17%
Europe 16% 15%
Africa 38% 29%
Asia 4% 7%
Middle East 22% 23%
North America 8% 9%
---------- ---------
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 31.12.2022:
Segment revenues 2,065 1,976
Cost of sales (2,105) (253)
--------- ------
Gross profit (loss) (40) 1,723
Year Ended 31.12.2021:
Segment revenues 2,069 2,145
Cost of sales (2,291) (254)
--------- ------
Gross profit (loss) (222) 1,891
.
NOTE 25 SIGNIFICANT EVENTS AFTER THE REPORTED PERIOD
-
During 2023, the Company received an additional significant
order of Tetis from a US-based customer and other.
The Company has negotiated additional funding by way
of a USD 1.3 million interest bearing convertible loan
with a third-party which will be repayable 18 months
from drawdown if not converted prior to that date. These
funds, if secured, will meet the cash requirements in
the medium term that will enable the Company to fulfil
existing orders in hand. The agreement has been approved
by all parties and formal documents are in the process
of being signed and the lender has committed to provide
the funds once completed. The Company expects significant
further growth in orders over the next 12 months and
should these be achieved, it may be necessary to review
cash requirements to enable them to be fulfilled and
to ensure the new leasing structure can be applied for
future sales now being adopted for some clients.
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END
FR PPUWPQUPWGCR
(END) Dow Jones Newswires
June 28, 2023 10:45 ET (14:45 GMT)
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