REG - T42 IOT Tracking Sol - 2023 Final Results
26/06/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240626:nRSZ8567Ta&default-theme=true
RNS Number : 8567T T42 IOT Tracking Solutions PLC 26 June 2024
26 June 2024
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 audited results for the 12 months ended 31 December 2023.
Financials Highlights
· Revenues $4.01m (2022: $4.04m), with greater contribution from the
supply chain solution products rather than vehicle tracking solutions.
· Adjusted EBITDA gain of $341,000 (2022: EBITDA loss of $812,000).
· Gross margin for the period was 53% (2022: 42%).
· General expenses decreased to $1.3m (H1 2022: $1.5m).
Post-period Highlights
· 4 major long term commercial agreements, representing total potential
orders of up to 100,000 units, the majority of which are from customers in
LATAM, which, subject to full delivery and deployment within the contract
timeframes, would contribute c. $20m hardware and SaaS revenue over 3 years.
· Continued implementation of the new strategy focusing on the supply
chain markets, based on SaaS model
Avi Hartmann, CEO of t42, commented:
"We offer a comprehensive, cutting edge, technological solution for monitoring
and securing containers, effectively addressing a critical challenge in
maritime, land transportation and air cargo. Our solution guarantees
reliability, security, and economic feasibility while significantly reducing
implementation time and accelerating return on investment for our customers.
We are actively pursuing business opportunities in key markets such as South
and North America, evident from recent agreements signed and the substantial
business potential they represent."
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) 020 7409 3494
James Harris/ Richard Johnson/ Robert Collins
Peterhouse Capital Limited 020 7469 0930
Lucy Williams/Charles Goodfellow/Eran Zucker
The Annual Report will be made available to shareholders shortly and be
available from the Company's website at: www.t42.co.uk/
(http://www.t42.co.uk/) . A notice of AGM will be despatched to shareholders
in due course.
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.
CHAIRMAN'S STATEMENT
We are pleased to report the audited financial statements for the year ended
31st December 2023.
Revenues were $4.01m (2022: $4.04m). However, we are pleased to report a gross
margin of 53% for the year compared to 42% for the previous year, and a
reduced net loss $0.42m for the year (2022: $1.01m loss). All in all, the
financials indicators continue to show stability and improvement, with a
decrease in expenses and loss which have led to a positive adjusted EBITDA of
$0.34m for the reporting period. These improvements are encouraging as they
demonstrate stabilization in the business and progress in the Company's
strategy. The Company has focused on long-term significant agreements and has
concluded 4 of these since the end of reporting period as summarised below.
· In February 2024 a follow-up agreement was signed with a
distributor, originally contracted in 2023 to whom 2,000 Lokies units had been
delivered. Under the new agreement it was agreed to supply up to 30,000 units
over 3 years, which we estimated would deliver up to $7.5m in revenues,
including SaaS revenues, if fully ordered and deployed.
· In April 2024 we announced a further significant agreement, with
a Mexican distributor, involving the application of the tracking system for
the control of a large number of petrol and diesel transporters enabling
significant controls to be installed.
· In May 2024 another long-term agreement was entered into with a
leading company in Brazil within the transportation and logistics security
tracking sector. The agreement is for tracking units over a 3 year period and
is expected by the Company to have a total value of c. $4.5m over the
agreement period on the basis of full deployment. The agreement was achieved
after a long systems development process and is expected to produce an order
for 10,000 tracking units during 2024.
· Later in May 2024 the Company concluded another agreement under
which an initial order of 3,500 units (combination of Lokies and Tetis) has
been received, as part of total expected orders of 10,000 units during 2024.
The agreement has an estimated total value of c. $7m over 3 years, for both
hardware and SaaS revenues.
After a significant period of testing and comparing different solutions, DHL
Israel have recently chosen Lokies as their standard solution in the field.
After a testing period of over a month, DHL Israel has placed their first
commercial order for Lokies, which will be implemented immediately in their
fleet. This order marks a new and significant opportunity for the Company, and
we expect it will open up additional commercial opportunities from DHL Israel.
During the reported period, t42 has significantly advanced its R&D efforts
to enhance its product offerings and meet the evolving needs of its clients.
We have successfully incorporated additional 4G modules from diverse
suppliers, improving both pricing and availability. Our commitment to product
reliability has been strengthened through the implementation of new and
improved testing methods in our manufacturing processes.
In July 2023, we initiated a notable collaboration with a leading global firm
providing sustainable solutions across the cold chain. Furthermore, we
migrated our location by cellular antennas feature to our proprietary cloud
infrastructure. This strategic move provides greater flexibility in selecting
cellular module providers and reduces additional costs.
Our Lokies and Helios Pro products have been extended to support a variety of
external BLE sensors, acting as gateways to supply users with comprehensive
information from the device surroundings. Additionally, we released a new
version of our flexible shackle for Lokies, specifically designed for a global
retail company, enhancing security solutions across a broader range of trucks.
On the cloud and portal side, we have expanded our services to allow clients
to use our systems as Data as a Service (DaaS), integrating seamlessly with
their existing infrastructure. This initiative has attracted over 20 clients,
opening new market segments. We also introduced a custom-made reporting
system, integrated third-party devices for Latin American customs authorities,
and added new security layers, including two-factor authentication for both
web and mobile platforms. Our dashboards and reports now offer more business
insights for our clients.
Special projects during 2023 included a tailored high-accuracy impact
detection solution for an American company using Kylos and an extended portal
for a client's special project requirements in Tanzania. We have also
continued our close integration with Zero Motorcycles, enhancing the
information they provide to their clients.
These R&D advancements emphasize our commitment to innovation and
excellence, ensuring we remain at the forefront of the IoT tracking and
security industry.
FINANCIAL REVIEW
Group revenues for the year were $4.01m, compared with $4.04m for the year
ended 31 December 2022, a decrease of 1%.
The gross margin for the year increased to 53% (2022: 42%).
Total operating expenditure for the year reduced to $2.24m (2022: $3.01m),
Net loss after taxation for the year decreased to $0.42m compared with the
2022 net loss of $1.01m.
The reduced operating loss in the period was $0.1m compared to an operating
loss of $1.37m in 2022.
The Group recorded an exchange rate gain of $27k resulting from the weakness
of the Israeli Shekel compared with the US dollar (2022: exchange rate loss of
$450k).
The Group balance sheet showed an increase in trade receivables to $0.89m,
compared with $0.49m as of 31 December 2022.
Group inventories at the period end were $1.44m, compared to $1.58m as of the
end of 2022.
Trade payables at the year-end decreased at $0.84m, compared with $1.14m as of
31 December 2022.
Net cash used in operating activities in the period was approximately $0.22m,
compared with $0.95m for the year ended 31 December 2022.
Post-period, in March 2024, the Company reached an agreement over the
extension of its £925k unsecured convertible loans until January 2025 under
new terms.
The auditors report draws attention to the deficit in current liabilities as
of 31 December 2023. However, given the significant additional sales referred
to in this report, the Board are confident that additional funding, if
required, will be available. In addition, the Company has non-binding
indications from the holders of the convertible loan notes maturing in January
2025 that they would convert or extend the loans, subject to agreeing terms.
OUTLOOK
We are expecting further growth in revenues during 2024 based on our current
pipeline of potential new orders. The focus on long-term agreements
demonstrates the market demand for our products and solutions, stemming from
the strength of our R&D and technological advantages.
It is pleasing to have concluded four long-term agreements this year to date
concluded as we continue to collaborate with market leaders to promote t42's
strategy in accessing mass markets. We are confident that our cutting-edge
technology will be translated into further contracts in in the short- to
mid-term.
As our strategic decision to focus on the shipping container market evolves,
we believe that the technological advantages of our Helios solution will allow
us to secure further development projects and opportunities.
Michael Rosenberg OBE
Non-Executive Chairman
_______________
CORPORATE GOVERNANCE STATEMENT
General
The Board has adopted the QCA Corporate Governance Code ("the QCA Code"),
further detail of which is set out on the Company's 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. However, given the
current troubles in Israel it was decided to hold all meetings in 2023 by
conference call. During 2023, a total of 11 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 one 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. However, given the
current troubles in Israel it was decided to hold all meetings in 2023 by
conference call
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 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 Company's 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 Company's
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 2023, with the assistance of the
Company's 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
Company's brokers, and via the website. Shareholders are encouraged to attend
the Company's 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 Company's tracking products are sold via distributors; therefore, the
Company has little influence over individual product sales. Thus, 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 Company's 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 2023, management has actively been seeking to widen the
manufacturing bases for the Company's 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 11-12 of
this document.
Ensure that the directors have the necessary up-to-date experience and skills
The Board currently comprises 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 Non-Executive Chairman, Michael Rosenberg,
brings further strategic, commercial, transaction and leadership experience
which will be invaluable as the Board pursues the Company's 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 about 20 members based in the office in Israel and their
needs and aspirations are regularly reviewed.
Main governance structures and processes
The Non-Executive 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 non-executive Chairman of the
Board and Audit Chair at Cake Box Holdings PLC (AIM: CAKE).
Igor Vatenmacher (Chief Financial Officer)
Igor is a certified public accountant in Israel and has a bachelor's 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. Since his appointment, he 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 Company's auditors and, in
consultation with the auditors, the scope of the annual audit. The Audit
Committee met twice during 2023. In June 2023, the Audit Committee reviewed
the financial statements for the year ended 31 December 2022, paying
particular attention to the level of debtors. The Audit Committee met in
September 2023 to consider the interim financial statements for the six months
ended 30 June 2023. Again, the Committee focused on stock valuation and debtor
levels. 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 2023. 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 plan
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 2023. This will be kept under annual review by the Board.
On behalf of the Board,
M. Rosenberg, Non-Executive Chairman
_______________
t42 IoT Tracking Solutions PLC
Directors' Report
for the Year Ended December 31, 2023
The directors present the annual report together with the financial statements
and auditors' report for the year ended December 31, 2023.
The Company was incorporated in Jersey and two wholly-owned trading
subsidiaries: Starcom Systems Limited and t42 Ltd, were incorporated in Jersey
and in Israel, respectively.
Principal activities and review of business
t42 pioneering Advanced Real-Time Tracking and Management Solutions
t42 is a global leader in the field of advanced, automated real-time systems,
specializing in the remote tracking and management of vehicles, containers,
and assets. Our commitment to innovation is underpinned using cutting-edge
Artificial Intelligence (AI) and Machine Learning (ML) technologies. We offer
a unique and revolutionary real-time cargo tracking solution that caters to a
diverse clientele.
At the forefront of our product line are the revolutionary Tetis, Lokies, and
Kylos products. These products provide a comprehensive 360 degree view of
containers and goods throughout the entire supply chain. Our commitment to
excellence is evident in the strength, stability, and continuous performance
of all our systems.
Accounts production
The financial statements for the year ended December 31, 2023, 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 2023: (All amounts
presented in thousands of USD)
Executive Director Salary Pension and Related Expenses Fees Total
A Hartmann 165 13 - 178
I Vatenmacher 105 25 - 130
Non-Executive Directors
M Rosenberg - - 50 50
M Blair - - 45 45
Total 2023 270 38 95 403
Directors' remuneration in share options: (In thousands)
Total vested Vested/ (Expired) during the year Total Vested at 31/12/23 Total Un-vested at 31/12/23 Grant Total
Executive Director at 01/01/23 Exercised
A Hartmann 1,082 - 41 1,123 42 1,165
I Vatenmacher 292 - 41 333 42 375
Non-Executive Directors
M Rosenberg 1,182 (279) (89) 814 - 814
M Blair 615 (251) - 364 - 364
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 Alliance's (QCA) Corporate Governance
Code ("QCA Code") 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 a 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 Group's 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.
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 directors' 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.
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, Non-Executive Chairman
________________
Jerusalem, 25 June 2024
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 - "the
Group") as of December 31, 2023 and 2022 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 Auditors'
Regulations (Auditor's 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, 2023 and 2022 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 1e in the
financial statements regarding the Company's accumulated losses of 16M USD
from operations since inception, the current convertible loans to be repaid by
January 2025 and the management efforts to raise additional funds required.
These factors indicate that there may be an uncertainty as to the Company's
ability to continue as a going concern. The management is on the opinion
that due to the growth in activity and other actions taken the Company will
have the sufficient cash flow it requires to fund its ongoing operations as
well as solve the requirement to repay the convertible loans.
Key Audit Matters
Key audit matters are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to
the board of directors and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgements. We determined that there are
no key audit matters.
Barzily & Co.
Certified Public Accountants.
AMember of MSI Worldwide
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
December 31,
Note 2023 2022
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment, net 6 422 546
Right-of-use assets, net 22 1,044 981
Intangible assets, net 7 952 1,021
Income tax authorities - 57
Total Non-Current Assets 2,418 2,605
CURRENT ASSETS
Cash and cash equivalents 186 174
Short-term bank deposit 5 35 130
Trade receivables, net 3 892 488
Other accounts receivable 27 71
Inventories 4 1,439 1,581
Total Current Assets 2,579 2,444
TOTAL ASSETS 4,997 5,049
DEFICIT AND LIABILITIES
14 (939) (538)
DEFICIT
NON-CURRENT LIABILITIES
Long-term loans from banks, net of current maturities 10 88 142
Long-term leasehold liabilities 22 814 790
Conversion component of a convertible loan at fair value 11A,D 31 27
Amortized cost of a convertible loan 11A,D 917 292
Total Non-Current Liabilities 1,850 1,251
CURRENT LIABILITIES
Short-term bank credit 42 42
Short-term bank loan 12 103 719
Current maturities of long-term loans from banks 10 64 70
Trade payables 844 1,144
Other accounts payable 9 433 260
Leasehold liabilities 22 168 112
Warrants at fair value 11B,C 12 84
Amortized cost of a convertible loan 11B,C,D 1,681 1,161
Related parties 20 739 744
Total Current Liabilities 4,086 4,336
TOTAL DEFICIT AND LIABILITIES 4,997 5,049
The accompanying notes are an integral part of the consolidated financial
statements.
25 June 2024
Date of Approval Igor Vatenmacher Avi Hartmann CEO
CFO
of the Financial Statements
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. Dollars in thousands (except shares data)
+
Year ended December 31,
Note 2023 2022
Revenues 4,005 4,041
Cost of sales 15 (1,882) (2,358)
Gross profit 2,123 1,683
Operating expenses:
Research and development (92) (125)
Selling and marketing (485) (652)
General and administrative expenses 16 (1,665) (2,250)
Other expenses, net (3) (29)
Total operating expenses (2,245) (3,056)
Operating loss (122) (1,373)
Finance income 17 604 814
Finance expenses 18 (902) (447)
Net finance income (expenses) (298) 367
Total comprehensive loss for the year (420) (1,006)
Loss per share:
Basic and diluted loss per share 14, 19 (0.008) (0.019)
The accompanying notes are an integral part of the consolidated financial
statements.
T42 IOT TRACKING SOLUTIONS PLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. Dollars in thousands
Share Premium on Shares Capital Reserve Capital Reserve in Regard to Share-Based Payment Transactions Total
Capital
Accumulated
Loss
Balance as of January 1, 2022 - 13,351 89 1,151 (14,398) 193
Issuance of share capital (net of expenses) - 180 - - 180
Share based payment (see Note 14d) - - - 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)
Issuance of share capital (net of expenses) - 12 - - - 12
Share based payment (see Note 14d) - - - 7 - 7
Comprehensive loss for the year - - - - (420) (420)
Balance as of December 31, 2023 - 13,543 89 1,253 (15,824) (939)
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,
2023 2022
CASH FLOWS FOR OPERATING ACTIVITIES:
Loss for the year (420) (1,006)
Adjustments to reconcile loss for the year to net cash used in operating
activities:
Depreciation and amortization 469 437
Interest expenses and exchange rate differences 43 (374)
Share-based payment expense 7 95
Capital gain (10) (24)
Changes in assets and liabilities:
Decrease in inventories 142 209
Decrease (Increase) in trade receivables, net (404) 191
Decrease in other accounts receivable 44 89
Increase in Income Tax Authorities 57 -
Decrease in trade payables (300) (90)
Increase (Decrease) in other accounts payable 173 (478)
Net cash used in operating activities (199) (951)
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property, plant and equipment (16) (318)
Proceeds from sales of property, plant and equipment 52 -
Increase (Decrease) in short-term deposits 94 24
Cost of intangible assets (134) (166)
Net cash used in investing activities (4) (460)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term bank credit, net (616) (152)
Receipt of short-term bank loan, net - -
Receipt of convertible unsecured loans, net - 250
Proceeds from related parties, net (5) 28
Payment for leasehold liabilities (183) (174)
Receipt of short-term loans 250 -
Repayment of long-term loans (546) (81)
Receipt of convertible loans 1,300 -
Consideration from issue of shares, net 14 180
Net cash provided by financing activities 214 51
Increase in cash and cash equivalents 11 (1,360)
Cash and cash equivalents at the beginning of the year 174 1,534
Cash and cash equivalents at the end of the year 186 174
Appendix A - Additional Information
Interest paid during the year 313 251
Appendix B - Non-Cash Financing Activities
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 22
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
t42 IoT Tracking Solutions PLC ("the Company") was incorporated in Jersey on
November 28, 2012. The Company and its subsidiaries ("the Group") is a global
leader in the field of advanced, automated real-time systems, specializing in
the remote tracking and management of vehicles, containers, and assets. Our
commitment to innovation is underpinned using cutting-edge Artificial
Intelligence (AI) and Machine Learning (ML) technologies. We offer a unique
and revolutionary real-time cargo tracking solution that caters to a diverse
clientele.
At the forefront of our product line are the revolutionary Tetis, Lokies, and
Kylos families of products. These products provide a comprehensive 360° view
of containers and goods throughout the entire supply chain. Our commitment to
excellence is evident in the strength, stability, and continuous performance
of all our systems.
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 Company's registered office in Jersey of Starcom Systems
Limited is: Forum 4, Grenville Street, St. Helier, Jersey, Channel Islands,
JE4 8TQ.
b. Definitions in these financial statements:
1. International Financial Reporting Standards ("IFRS") - 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 - Starcom Systems Limited.
5. The Group - t42 IoT Tracking Solutions PLC. and the Subsidiaries.
6. 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.)
c. Operating Turnover Period
The ordinary operating period turnover for the Group is a year. As a result,
the current assets and current liabilities include items that are expected and
intended to be realized at the end of the ordinary operating turnover period
for the Group.
d. Functional and Presentation Currency
The consolidated financial statements are presented in U.S. dollars
(hereinafter: "dollars") that is the functional currency of the Group and is
rounded to the nearest thousands, except when otherwise indicated.
The dollar is the currency that represents the economic environment in which
the Group operates.
The Group's transactions and balances denominated in dollars are presented at
their original amounts. Non-dollar transactions and balances have been
re-measured 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.
e. As of December 31, 2023, the Group has incurred losses from its operations
since its incorporation of approx. USD 16 million that required the Company to
raise funds in the form of convertible loans and secured debt facilities in
the amount of approx. USD 3 million. The Group expects to experience a
significant growth in orders over the next 12 months and has lately been
experiencing ongoing and growing demand across the key markets. In addition,
management plans to continue cut Group expenses as this has been successful
during 2023. This is expected to improve the Group's operational results
during 2024. The further growth may require additional funding to accelerate
the opportunities provided from our technological teams and the necessary
working capital needed for this growth.
As of December 31, 2023, the Group has current loan balances in the amount of
approx. USD 2.5 million to be converted or repaid by January 2025. While
this remains a significant aspect of the Company's balance sheet, the
management team is dedicated to implementing effective strategies to resolve
the loan balances while safeguarding the interests of our shareholders and
maintaining the Group's financial stability.
The Company may raise additional funds or reach an agreement with lenders as
to extension of the loans or their conversion to equity of the Company. The
Company has approached the lenders as to an extension of the loans or
conversion to equity of the Company and has received non-binding indications
from the lenders for their intention to convert their loans to equity and
believes that all of its actions will ensure the Company has the sufficient
cash flow it requires to fund its ongoing operations as well as solve the
requirement to repay the convertible loans.
T42 IOT TRACKING SOLUTIONS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2A - BASIS OF PREPARATION
a. Declaration in regard to implementation of International Financial Reporting
Standards (IFRS)
The consolidated financial statements of the Company have been prepared in
accordance with IFRS and related clarifications published by the IASB.
The Company's board of directors authorized the 2023 Consolidated Financial
Statements on 25 June, 2024.
b. Basis of Measurement
The consolidated financial statements have been prepared on the historical
cost basis, except for financial instruments at fair value through profit or
loss that are stated at fair value.
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 - Capitalization of development costs and amortization of these costs.
Note 11 - Financial liabilities of convertible loans and warrants
Information about assumptions and estimations that have significant risk of
resulting in a material adjustment is included in the following Notes:
Note 3 - Allowance for doubtful accounts.
Note 7 - Calculation of amortization.
Note 8 - Utilization of tax losses.
Note 11 - Financial liabilities of convertible loans and warrants
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES
a. Basis of consolidation
All intra-Group transactions, balances, income and expenses of the companies
are eliminated on consolidation.
b. Foreign currency and linkage basis
Balances stated in foreign currency or linked to a foreign currency have been
included in the consolidated financial statements according to the prevailing
representative exchange rates at the balance sheet date. Exchange rate
differences are included in the statement of comprehensive income when
incurred.
As of December 31,
2023 2022
Exchange Rate of NIS in U.S. $ 0.276 0.284
Exchange Rate of GBP in U.S. $ 1.274 1.204
For the Year Ended December 31,
2023 2022
Change in Exchange Rate of U.S. $ 2.9% (11.6%)
Change in Exchange Rate of GBP (5.8%) (0.1%)
c. Financial instruments
(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 amortized 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.)
c. Financial instruments (cont.)
(ii) Non-derivative financial liabilities
The Group initially recognizes debt securities issued and subordinated
liabilities on the date that they originated. All other financial liabilities
(including liabilities designated as at fair value through profit or loss) are
recognized initially on the trade date, which is the date that the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognizes a financial liability when its contractual obligations
are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other
financial liabilities category. Such financial liabilities are recognized
initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at
amortized cost using the effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts,
and trade and other payables.
(iii) Compound financial instruments and warrants at fair value
Compound financial instruments issued by the Company comprise interest-bearing
loans 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.)
d. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
maturities of three months or less from the acquisition date that are subject
to an insignificant risk of changes in their fair value and are used by the
Group in the management of its short-term commitments.
e. Share capital
Ordinary shares:
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognized as a deduction
from equity, net of any tax effects.
f. Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated
depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets, at the following annual rates:
%
Computers and software 33
Office furniture and equipment 7 - 15
Vehicles 15
Laboratory equipment 15
Leasehold improvements 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 2023, no material changes have taken place with
any material effect on the financial statements of the Group.
g. Intangible assets: Research and development
Expenditure on research activities, undertaken with the prospect of gaining
new scientific or technical knowledge and understanding, is recognized in
profit or loss as incurred.
Development activities involve a plan or design for the production of new or
substantially improved products and processes. Development expenditure is
capitalized only if development costs can be measured reliably, the product or
process is technically and commercially feasible, future economic benefits are
probable, and the Group intends and has sufficient resources to complete
development and to use or sell the asset.
The expenditure capitalized includes the cost of materials, direct labor,
overhead costs that are directly attributable to preparing the asset for its
intended use. Other development expenditure is recognized in profit or loss as
incurred.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
g. Intangible assets: Research and development (cont.)
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:
between five to ten years.
At each balance sheet date, the Group reviews whether any events have occurred
or changes in circumstances have taken place, which might indicate that there
has been an impairment of the intangible assets. When such indicators of
impairment are present, the Group evaluates whether the carrying value of the
intangible asset in the Group's accounts can be recovered from the cash flows
anticipated from that asset, and, if necessary, records an impairment
provision up to the amount needed to adjust the carrying amount to the
recoverable amount.
h. Short-term deposit
Deposits with maturities of more than three months but less than one year are
included in short-term deposits.
i. Leases
The Group assesses at contract inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all
leases, except for short-term leases and leases of low-value assets. The Group
recognizes lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
1. Right-of-use assets
The Group recognizes right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognized,
initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the shorter of the lease term and
the estimated useful lives of the assets, as follows:
Property - 10 years
Vehicles - 3 years
If ownership of the leased asset transfers to the Group at the end of the
lease term or the cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the
accounting policies in Note 2C(k).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
i. Leases (cont.)
2. Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in substance fixed
payments) less than any lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also include the exercise price
of a purchase option reasonably certain to be exercised by the Group and
payments of penalties for terminating the lease, if the lease term reflects
the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are
recognized as expenses (unless they are incurred to produce inventories) in
the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its
incremental borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change
in the lease term, a change in the lease payments (e.g., changes to future
payments resulting from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an option to purchase the
underlying asset.
3. Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term
leases of machinery and equipment (i.e., those leases that have a lease term
of 12 months or less from the commencement date and do not contain a purchase
option). It also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered to be low value. Lease
payments on short-term leases and leases of low value assets are recognized as
an expense on a straight-line basis over the lease term.
j. Inventories
Inventories are stated at the lower of cost or net market value.
Cost is determined using the "first-in, first -out" method.
Inventory write-downs are provided to cover risks arising from slow-moving
items, technological obsolescence, excess inventories, and discontinued
products and for market prices lower than cost, if any. At the point of loss
recognition, a new lower cost basis for that inventory is established.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
k. Impairment in value of assets
During every financial period, the Group examines the book value of its
tangible and intangible assets to determine any signs of loss from impairment
in the value of these assets. In the event that there are signs of impairment,
the Group examines the realization value of the designated asset. In the event
that the realization cannot be measured for an individual asset, the Group
estimates realization value for the unit where the asset belongs. Joint assets
are assigned to the units yielding cash on the same basis. Joint assets are
designated to the smallest groups of yielding assets for which one can
identify a reasonable basis that is consistent with the allocation.
The realization value is the higher of net sale price of the asset as compared
with its useful life that is determined by the present value of projected cash
flows to be realized from this asset and its realization value at the end of
its useful life.
In the event that the book value of the asset or cash-yielding unit is greater
than its realization value, a devaluation of the asset has occurred in the
amount of the difference between its book value and its realization value.
This amount is recognized immediately in the statements of comprehensive
income.
In the event that prior devaluation of an asset is nullified, the book value
of the asset or of the cash-yielding unit is increased to the estimated
current fair value, but not in excess of the asset or cash-yielding unit book
value that would have existed had there not been devaluation. Such
nullification is recognized immediately in the statements of comprehensive
income.
l. Revenue recognition
The Group generates revenues from sales of products, which include hardware
and software, software licensing, professional services and maintenance.
Professional services include mainly installation, project management,
customization, consulting and training. The Group sells its products
indirectly through a global network of distributors, system integrators and
strategic partners, all of whom are considered end-users, and through its
direct sales force.
Revenue from products and software licensing is recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, the fee
is fixed or determinable and collectability is probable.
Revenues from maintenance and professional services are recognized ratably
over the contractual period or as services are performed, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
m. Allowance for expected credit losses
The Group evaluates its allowance for doubtful accounts on a regular basis
through periodic reviews of the collectability of the receivables in light of
historical experience, adverse situations that may affect the repayment
abilities of its customers, and prevailing economic conditions. This
evaluation is inherently subjective, as it requires estimates that are
susceptible to significant revision as more information becomes available.
The Group performs ongoing credit evaluations of its customers and generally
does not require collateral because (1) management believes it has certain
collection measures in-place to limit the potential for significant losses,
and (2) because of the nature of its customers that comprise the Group's
customer base. Receivables are written off when the Group abandons its
collection efforts. An allowance for doubtful accounts is provided with
respect to those amounts that the Group has determined to be doubtful of
collection.
n. Concentrations of credit risk
Financial instruments that potentially subject the Group to concentrations of
credit risk consist principally of cash and cash equivalents, short-term
deposits and trade receivables.
o. Provisions
Provisions are recognized when the Group has a current obligation (legal or
derived) as a result of a past occurrence that can be reliably measured, that
will in all probability result in the Group being required to provide
additional benefits in order to settle this obligation. Provisions are
determined by capitalization of projected cash flows at a rate prior to taxes
that reflects the current market preparation for the money duration and the
specific risks for the liability.
p. Employee benefits
The Group has several benefit plans for its employees:
1. Short-term employee benefits -
Short-term employee benefits include salaries, vacation days, recreation and
deposits to the National Insurance Institute that are recognized as expenses
when rendered.
2. Benefits upon retirement -
Benefits upon retirement, generally funded by deposits to insurance companies
and pension funds, are classified as restricted deposit plans or as restricted
benefits.
All Group employees have restricted deposit plans, in accordance with Section
14 of the Severance Pay Law (Israel), whereby the Group pays fixed amounts
without bearing any legal responsibility to pay additional amounts thereto
even if the fund did not accumulate enough amounts to pay the entire benefit
amount to the employee that relates to the services he rendered during the
current and prior periods. Deposits to the restricted plan are classified as
for benefits or for compensation and are recognized as an expense upon deposit
to the plan concurrent with receiving services from the employee and no
additional provision is required in the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
q. Finance income and expenses
Finance income includes interest in regard to invested amounts, changes in the
fair value of financial assets presented at fair value in the statements of
comprehensive income and gains from changes in the exchange rates and interest
income that are recognized upon accrual using the effective interest method.
Finance expenses include interest on loans received, changes in the time
estimate of provisions, changes in the fair value of financial assets
presented at fair value in the statements of comprehensive loss and losses
from changes in value of financial assets.
Gains and losses from exchange rate differences are reported net. Exchange
rate differences in regard to issuance of shares are charged to equity.
r. Taxes
Tax expense comprises current and deferred tax. Current tax and deferred tax
are recognized in profit or loss except to the extent that they relate to a
business combination, or items recognized directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years. Current tax payable also includes any tax liability arising from the
declaration of dividends.
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is not recognized for:
● Temporary differences on the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss;
● Temporary differences related to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not
reverse in the foreseeable future; and
● Taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and they
relate to taxes levied by the same Tax Authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES (cont.)
r. Taxes (cont.)
Since there is uncertainty in regard to existence of taxable revenues in the
near future, a deferred tax asset was not recognized.
A deferred tax asset is recognized for unused tax losses, tax credits and
deductible temporary differences to the extent that it is probable that future
taxable profits will be available against which they can be utilized. Deferred
tax assets and liabilities are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit
(taxes on income) will be realized.
s. Basic and Diluted Earnings per Share
Basic earnings per share are computed based on the weighted average number of
common shares outstanding during each year.
Diluted earnings per share are computed based on the weighted average number
of common shares outstanding during each year, plus dilutive potential common
shares considered outstanding during the year.
For the years ended December 31, 2023 and 2022, the Company incurred net
losses which cannot be diluted; therefore, basic and diluted loss per common
share is the same.
t. Statement of cash flows
The statement of cash flows from operating activities is presented using the
indirect method, whereby interest amounts paid and received by the Group are
included in the cash flows in current operations.
u. Dividend distribution
Dividend distribution to the Company's shareholders is recognized as a
liability in the Group's financial statements in the period in which the
dividends are approved by the Group's shareholders.
v. Segment reporting
Segment results that are reported to the CEO include items directly
attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise mainly corporate assets, head
office expenses and tax.
w. Government grants
A government grant is not recognized until there is reasonable assurance that
the Group will comply with the conditions attaching to it, and that the grant
will be received. The Group received government grants, the nature of which is
compensation for a decrease in revenues, the Group decided to record the
grants received by the Government of Israel as revenues.
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 2023.
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 3 - TRADE RECEIVABLES, NET
December 31
2023 2022
Group receivables 913 938
Allowance for credit losses (21) (450)
892 488
NOTE 4 - INVENTORIES
December 31
2023 2022
Raw materials 1,076 1,122
Finished goods 363 459
1,439 1,581
NOTE 5 - SHORT-TERM BANK DEPOSIT
The bank deposit sums of $35 and $130 as of December 31, 2023 and 2022,
respectively, serve as a security deposit for repayment of bank loans in
accordance with terms of the loans. The deposits bear yearly interest at the
rate of 0-0.02%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET
Office Furniture and Equipment
Computers and Software
Laboratory Equipment Leasehold Improvements
Vehicles* Total
Cost:
c Balance as of January 1, 2023 156 299 340 156 1,191
240
Additions during the year - 3 7 5 (156) (141)
Balance as of December 31, 2023 240 159 306 345 - 1,050
Accumulated Depreciation:
Balance as of January 1, 2023 203 109 181 31 121 645
Depreciation during the year 18 8 39 39 (121) (17)
Balance as of December 31, 2023 221 117 220 70 - 628
Net book value as of December 31, 2023 19 42 86 275 - 422
Office Furniture and Equipment
Computers and Software
Laboratory Equipment Leasehold Improvements
Vehicles* Total
Cost:
c Balance as of January 1, 2022 218
131 297 71 156 873
Additions during the year 22 25 2 269 - 318
Balance as of December 31, 2022 156 299 340 156 1,191
240
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
* 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, 2023 1,884
Additions during the year 134
Balance as of December 31, 2023 2,018
Accumulated Amortization:
Balance as of January 1 ,2023 (863)
Amortization during the year (203)
Balance as of December 31, 2023 (1,066)
Net book value as of December 31, 2023 952
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 (684)
Amortization during the year (179)
Balance as of December 31, 2022 (863)
Net book value as of December 31, 2022 1,021
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: between five to ten years.
See also Note 2C(g) and Note 2C(k).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 8 - TAXES ON INCOME
a. Israeli taxation
1. The Israeli corporate tax rate for 2023 and 2022 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 49
million as of December 31, 2023 (NIS 42 million as of December 31, 2022). 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 2018.
b. Jersey taxation
Taxable income of the Company and Starcom Jersey is subject to tax at the rate
of zero percent for the years 2023 and 2022.
c. Detail of tax income
Since the recording of a deferred tax asset is limited to the amount of
deferred tax liabilities, no deferred tax income will be recorded in 2023 or
was recorded in 2022.
NOTE 9 - OTHER ACCOUNTS PAYABLE
December 31
2022 2022
Employees and payroll accruals 274 237
Advance payments from trade receivables 159 23
433 260
NOTE 10 - LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES
1. Composition: December 31
2023 2022
Long-term liability 152 212
Less: current maturities (64) (70)
88 142
2. Aggregate maturities of long-term loans for years subsequent to December 31,
2023 are as follows:
Amount
First year 64
Second year 64
Third year 24
152
NOTE 10 -
LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES
1.
Composition:
December 31
2023
2022
Long-term liability
152
212
Less: current maturities
(64)
(70)
88
142
2.
Aggregate maturities of long-term loans for years subsequent to December 31,
2023 are as follows:
Amount
First year
64
Second year
64
Third year
24
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
3. Additional information regarding long-term loans:
Amount Received NIS (U. S. dollars)
In thousands Annual Interest Rate Interest Payment Terms
Loan Terms and
Date Received Maturity Dates
Dec 9, 2020 1,000 ($310) Prime + 1.5 48 equal monthly installments including principal and interest (once year Monthly commencing 09 Dec 2020
grace for principal) *
*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, 2023 the interest prime rate was 6.25%.
** See also Note 13.
NOTE 11 - FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS
a. During July 2023 the Company secured a loan, total amount of $1.3m provided by
Ewave Mobile Ltd.
The loan bears interest of 10% per annum. The Loan, together with accrued
interest at the time of conversion, may be converted, at the discretion of the
Lender, at any time prior to the Loan repayment date of 20 January 2025, into
such number of new t42 ordinary shares as corresponds to 29.5% of the
Company's issued ordinary share capital immediately following such conversion.
The Loan may be converted in part, on a pro rata basis to the above terms.
The loan was evaluated and divided into different components - a conversion
component at fair value, and an amortized cost of the loan component.
The conversion component originally was $464k but due to change in the
Company's share price at year end, the fair value decreased.
The amounts as for December 31, 2023, are as follows:
· Conversion component of the convertible loan at fair value - $31k
· Amortized costs of a convertible loan - $917k
An effective interest rate was calculated for the liability component of the
loan, based on its amortization table. The effective interest rate is 13.4%
per annum, and after the deducting the conversion component it is 55% per
annum.
During December 2021, The Company received from third parties loans in the
total amount of $1,251 thousand (£925 thousand) in the form of convertible
loans enabling the lenders to convert the loans at an exercise price of £0.15
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 bore interest at the rate of 8% per annum calculated by
reference to the principal amount of the convertible loans. If not converted,
b. the loans were supposed to be repayable on December 31, 2023.
In addition, the lenders received warrants to subscribe 1,541,667 shares.
These warrants expired on December 2023.
In addition, the lenders received warrants to subscribe 1,541,667 further
shares at an exercise price of £0.19 per share. Any unexercised warrants
expire at the end of three-years from grant (see note 25).
As of December 31, 2023 the loan was not yet repaid, the Company was in
negotiations to extend the repayment date of the CLN with the Lenders, who
have indicated their willingness to do so, subject to final terms.
After the reporting date the Company successfully negotiated an extension, see
note 25.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 11 - FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS (cont.)
c. During December 2022, the Israeli subsidiary, T42 Limited, 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 Company's 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.
In December 2022, the Company issued a £265,000 convertible loan note to a
supplier, to be applied in lieu of settlement of a supplier debt, assisting
with the Company's 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
d. Company has the right to enforce conversion of £100,000 of the CLN in the
event t42's share price exceeds 12p and the balance if the share price exceeds
15p. As of December 31, 2023 and 2022, the conversion component of the
convertible loan note at fair value was $0 and $27K, respectively.
In October 2023, 530,233 ordinary shares of no par value were issued following
the exercise of options by directors at nil cost.
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 options by directors.
e.
For the Year ended December 31, 2023, the estimated fair values of the various
Warrants and Convertible components were measured by an independent
appraiser as follows:,
f.
The level of the fair value hierarchy is level two.
Common Stock Market Value measured in calculation £0.0275
Year ended
December 31,
2023
Expected
term
1-4 years
Expected average volatility 44%
Expected dividend yield -
Risk-free interest rate
3.9%-4.9%
Fair value at end of year 0.000p-0.004p
Total revaluation expenses regarding these components in the statement of
comprehensive loss for the reported period are as follows:
Loan components Conversion components Warrants
Balance as of January 1, 2023 1,453 34 78
Additions during the year 1,167 464 -
Finance (income) expenses
Payments (22) (467) (66)
Conversion - - -
Balance as of December 31, 2023 2,598 31 12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 12 - SHORT-TERM BANK LOAN
Based on mutual understanding between the bank and the Company the short-term
facility is being gradually amortized, reduced by $616k during 2023 to a
balance of $103k.
NOTE 13 - CHARGES
In respect of the short-term and long-term bank loans set out in Notes 12 and
10 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
a. Share composition - Common stock of no-par value, issued and outstanding:
Year Ended December 31,
2023 2022
54,917,055 54,026,822
b. Company share grants to its holder voting rights, rights to receive dividends During December 2022, the Company raised £90 ($100) thousand before
and rights to net assets upon dissolution. expensesthrough a placing of 1,000,000 Ordinary Shares.
c. See Note 11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 14 - EQUITY (cont.)
d. Share-based payment
The following table lists the number of share options and warrants and the
exercise prices of such during the current and prior years:
2023 2022
Number of options Weighted average Number of options Weighted average
exercise price exercise
price
£ £
Share options & warrants outstanding at beginning of year 12,545,222 0.177 10,122,112 0.206
Warrants granted during the year - - 2,976,185 0.07
Options & Warrants exercised during the year (530,233) - (500,000) 0.12
Options & Warrants expired during the year (1,138,339) 0.37 (53,075) 0.12
Share options & warrants outstanding at end of year 10,876,650 0.166 12,545,222 0.177
Share options & warrants exercisable at end of year 10,713,651 0.159 12,215,555 0.171
See Note 11.
See Note 11.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 15 - COST OF SALES
Year Ended December 31,
2023 2022
Purchases 1,184 1,508
Others 368 462
Amortization 187 180
Decrease in inventory 143 208
1,882 2,358
NOTE 16 - GENERAL AND ADMINISTRATIVE EXPENSES
a. Year Ended December 31,
2023 2022
Salaries and related expenses (see also Note 20) 978 1,205
Professional services (1) 138 555
Doubtful accounts and bad debts 12 (23)
Depreciation 267 257
Office maintenance 187 167
Car maintenance 83 89
1,665 2,250
(1) Including share-based payment to directors and senior management in
the amounts of $6k and $95k for the years ended December 31, 2023 and 2022,
respectively. See also Note 14d.
b. Average Number of Staff Members by Category:
Year Ended December 31,
2023 2022
Sales and marketing 4 7
Research and development 3 3
General and administrative 11 12
18 22
NOTE 17 - FINANCE INCOME
Year Ended December 31,
2023 2022
Exchange rate differences, net 27 455
Revaluation of financial instruments 577 359
604 814
NOTE 18 - FINANCE EXPENSES
Interest to banks and others (818) (382)
Bank charges (73) (50)
Interest to suppliers (1) (5)
Interest to related parties (10) (10)
(902) (447)
Net finance income (expenses) (298) 367
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:
Year Ended December 31,
2023 2022
54,064,060 52,830,858
NOTE 20 - RELATED PARTIES
a. The related parties that own shares in the Group are:
Mr. Avraham Hartman (10.33%), Mr. Uri Hartman (5.46ֻ%),
b. Short-term balances: December 31
2023 2022
Credit balances
Avi Hartmann 52 (20)
Uri Hartmann (570) (545)
Total Credit Balance (518) (565)
Loans
Avi Hartmann 6 69
Uri Hartmann (227) (248)
Total Loans (221) (179)
(739) (744)
c. Shareholders' credit balances are related to deferred salaries and are linked
to the New Israel Shekel ("NIS"). Loans from shareholders accrue 4% annual
interest.
d. Transactions: Year Ended December 31,
2023 2022
Key management compensation:
Total salaries and related expenses for shareholders/related parties 339 381
Non-executive directors' fees 96 95
Total share-based payment 2 3
Interest to related parties 10 10
e. Directors and the shareholders of the Group are each entitled to benefits, in
addition to salaries, that include a vehicle, meals, cellular phones and a
professional enrichment fund. Concurrently, the Group deposits for them
amounts in a restricted benefit plan for implementation upon completion of
their employment.
f. For the purposes of the AIM Rules other transactions with related parties are
disclosed in note 14d.
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, 2023
NIS U.S. Dollar GBP Euro Total
Variable Interest Unlinked
Unlinked
Financial Assets:
Cash and cash equivalents 10 - 172 - 4 186
Short-term deposit - 35 - - - 35
Trade receivables, net 45 - 812 - 35 892
Other accounts receivable 27 - - - - 27
Financial Liabilities:
Short-term bank credit - (42) - - - (42)
Short term bank loan - (103) - - - (103)
Non Bank Loans - - (1,395) - - (1,395)
Trade payables - (489) (200) (153) (2) (844)
Other accounts payable (433) - - - - (433)
Leasehold liabilities - (982) - - - (982)
Related parties - (739) - - - (739)
Long-term loans from banks - (152) - - - (152)
Financial liabilities of convertible loans - - (1,202) - - (1,202)
(351) (2,472) (1,813) (153) 37 (4,752)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 21 - FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS (cont.)
December 31, 2022
NIS U.S. Dollar GBP Euro Total
Variable
Unlinked Interest Unlinked
Financial Assets:
Cash and cash equivalents 2 - 171 - 1 174
Short-term deposit - 130 - - - 130
Trade receivables, net 100 - 371 - 16 487
Other accounts receivable 129 - - - - 129
Financial Liabilities:
Short-term bank credit - (42) - - - (42)
Short-term bank loan - (719) - - - (719)
Non-bank loans - - (583) - - (583)
Trade payables - (569) (478) (93) (5) (1,145)
Other accounts payable (260) - - - - (260)
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) (1,500) (93) 12 (4,598)
Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar
Against the NIS:
5% Increase in 5% Decrease in
Exchange Rate Exchange Rate
For the Year Ended December 31
2023 (134) 134
2022 (149) 149
Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar
Against the Euro:
5% Increase in 5% Decrease in
Exchange Rate Exchange Rate
For the Year Ended December 31
2023 2 (2)
2022 1 (1)
Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar
Against the GBP:
5% Increase in 5% Decrease in
Exchange Rate Exchange Rate
For the Year Ended December 31
2023 (8) 8
2022 (5) 5
c. Fair value
As of December 31, 2023, there was no significant difference between the
carrying amounts and fair values of the Company's financial instruments that
are presented in the financial statements not at fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 22 - Leases
Group as a lessee
The Group has lease contracts for various items of property and vehicles used
in its operations. The leases of property have lease terms of 5 years, while
motor vehicles have lease terms of 3 years. The Group's obligations under its
leases are secured by the lessor's title to the leased assets. Generally, the
Group is restricted from assigning and subleasing.
There are several lease contracts that include extension and termination
options, which are further discussed below.
The Group also has certain leases of machinery with lease terms of 12 months
or less and leases of office equipment with low value. The Group applies the
'short-term lease' and 'lease of low-value assets' recognition exemptions for
these leases.
Below are the carrying amounts of right-of-use assets recognized and the
movements during the period:
Property Vehicles Total
Balance at January 1, 2022 629 61 690
Additions 417 38 455
Disposals - - -
Depreciation expenses (105) (59) (164)
Balance at December 31, 2022 941 40 981
Additions - 231 231
Disposals - - -
Depreciation expenses (104) (64) (168)
Balance at December 31, 2023 837 207 1,044
Below are the carrying amounts of lease liabilities (included under Leasehold
Liabilities) and the activities during the period:
2023 2022
As at January 1 (902) (706)
Additions )231( (455)
Disposals - -
Exchange rate differences and accretion of interest 24 84
Payments 127 175
Balance at December 31 (982) (902)
Current (168) (112)
Non-Current (814) (790)
Maturity analysis - contractual undiscounted cash flows
Less than one year (222)
One to ten years (963)
Total undiscounted lease liabilities at December 31, 2023 (1,185)
The following are the amounts recognized in profit or loss:
The following are the amounts recognized in profit or loss:
2023 2022
Depreciation expenses of right-of-use assets (168) (164)
Interest expenses on lease liabilities 24 84
Total amount recognized in profit or loss (144) (80)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 22 - Leases (cont.)
The Group had total cash outflows for leases of $127 in 2023 ($175 in 2022).
The Group also had non-cash additions to right-of-use assets and lease
liabilities of $231 in 2023 ($457 in 2022)
The Group has several lease contracts that include extension and termination
options. These options are negotiated by management to provide flexibility in
managing the leased-asset portfolio and to align with the Group's business
needs. Management performs significant judgment operations in determining
whether these extension and termination options are reasonably certain to be
exercised.
Below are the undiscounted potential future rental payments relating to
periods following the exercise date of extension and termination options that
are not included in the lease term:
a. Major customers' data as a percentage of total consolidated sales to
unaffiliated customers:
NOTE 23 - CUSTOMERS AND GEOGRAPHIC INFORMATION
Year Ended December 31,
2023 2022
Customer A 8% 14%
Customer B 5% 11%
Customer C 4% 8%
b. Breakdown of consolidated sales to unaffiliated customers according to
geographic regions:
Year Ended December 31,
2023 2022
Latin America 11% 12%
Europe 12% 16%
Africa 29% 38%
Asia 3% 4%
Middle East 27% 22%
North America 18% 8%
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 31.12.2023:
Segment revenues 2,019 1,986
Cost of sales (1,611) (271)
Gross profit (loss) 408 1,715
Year Ended 31.12.2022:
Segment revenues 2,065 1,976
Cost of sales (2,105) (253)
Gross profit (loss) (40) 1,723
.
NOTE 25 - SIGNIFICANT EVENTS AFTER THE REPORTED PERIOD
The Company successfully negotiated extension of the maturity date of the
£925,000 unsecured convertible loan notes ("CLNs") until 20 January 2025.
Under the Agreement the following terms have been agreed with the holders of
the CLNs ("Lenders"):
o Coupon: the interest payable on the CLNs shall be 10% per annum,
commencing from 1 January 2024.
o Conversion: the Lenders will have the right to convert, at their
discretion, the principal amount of the CLNs into such number of T42 shares
("Conversion Shares") corresponding to 28.82% of the Company's issued
ordinary share capital immediately following the date of conversion, if the
aggregate principal amount is converted, and into a pro-rata number of
Conversion Shares in case of a partial conversion. The Lenders shall not issue
a conversion notice if this would result in a breach of Rule 9 of the UK
Takeover Code.
o Anti-Dilution: the Agreement includes anti-dilution provisions to protect
the equity interest percentage of the Lenders, so that in the event of the
exercise or conversion of existing warrants, options or other instruments
convertible into new t42 ordinary shares (subject to certain exceptions), the
Lenders will be issued for no additional consideration such number of t42
shares such that, together with the t42 shares already held, each Lender's
percentage shareholding shall remain the same.
o Security: security is provided by way of parent guarantee and fixed and
floating charges over the assets of t42. The floating charge ranks pari-passu
with the floating charge provided to Ewave under the Ewave loan and the fixed
charge security over the intellectual property rights of t42 is second
ranking, subordinated only to the fixed charge in favor of Ewave under the
Ewave loan.
o Conversion/Repayment Events: in the event of certain major transactions or
financing investments the lender may elect for conversion or repayment of the
CLNs.
o Cancellation of warrants: the 1,541,667 outstanding 3-year warrants
granted to the Lenders in December 2021 have been cancelled.
In conjunction with the Agreement, the Company also entered into an addendum
to the loan agreement with Ewave Mobile Ltd, pursuant to which they consented
to the CLN extension and will also have the same conversion rights as the CLN
holders in the event of a major transaction.
In addition, after the reporting period the Company announced 4 significant
commercial long-term agreements.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR PPURAQUPCGQARecent news on t42 IoT Tracking Solutions
See all newsREG - T42 IOT Tracking Sol - Business Update & Board Change
AnnouncementREG - AIM - AIM Notice - 12/02/2025
AnnouncementREG - T42 IOT Tracking Sol - Placing to raise £262,500
AnnouncementREG - T42 IOT Tracking Sol - Result of AGM
AnnouncementREG - T42 IOT Tracking Sol - Project Agreement Secured Evaluated at over US$5m
Announcement