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Starcom PLC (STAR)

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Friday 27 August, 2021

Starcom PLC

Interim Results

RNS Number : 9503J
Starcom PLC
27 August 2021
 

27 August 2021

 

 

Starcom Plc

("Starcom" or the "Company")

 

 

Interim Results

 

Starcom (AIM: STAR), which specialises in the development of wireless, Internet-Of-Things (IoT) based solutions for the remote tracking, monitoring and protection of a variety of assets, announces its results for the six months ended 30 June 2021.

 

Highlights

 

Revenues decreased by 3% to $2.27m (H1 2020: $2.34m)

Recurring SaaS revenues increased by 3% to $1.1m (H1 2020: $1.0m)

Adjusted EBITDA* loss of $167,000 (H1 2020: loss of $167,000)

Gross margin for the period was 40% (H1 2020:33%)

General expenses reduced by 5% to $1.4m (H1 2020: $1.5m)

Statutory loss for the period of $531,000 (H1 2020: $716,000)

Strong pipeline of potential new orders over next few months

 

Avi Hartmann, CEO of Starcom, commented:

"I am delighted that despite the continuous challenges Starcom faced due to the COVID-19 pandemic we managed to show stable results with increased opportunities in the future. We now have several sales prospects we hope to convert when conditions permit, and I am confident that Starcom technology will continue to create value in this and following years."

 

*Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and share-based payment expense.

 

Contacts:

 

Starcom Plc

Michael Rosenberg, Chairman

Avi Hartmann, CEO

 

 

07785 727595

+972 5477 35663

Allenby Capital Limited (AIM Nominated Adviser and Joint Broker)

Jeremy Porter/Piers Shimwell

 

020 3328 5656

Peterhouse Capital Limited (Joint Broker)

Lucy Williams/Charles Goodfellow/Eran Zucker

 

020 7469 0930

 

 

CHAIRMAN'S STATEMENT

 

The results for the first half of 2021 still bear the impact of COVID-19.  However, there are strong signals that business is starting to revive, and we expect this trend to continue in the next few months.

 

Revenues in the first six months were similar to those in the equivalent period last year at $2.3m. These revenues comprised a more profitable product mix, with the legacy low margin product, the Helios, coming down to 48% of the hardware sales compared with 62% in 2020.

 

During the first half Starcom has managed to retain most of its recurrent customers.  This is reflected in the SaaS revenues which marginally increased (by 3%), to $1.07 million. 

 

The higher quality revenue mix enabled gross margin to increase to 40% compared with 33% in the same period last year.  The improvement in the gross margin was achieved despite the dramatic increase in components and shipping costs imposed on the Company by the unfavourable global conditions. 

 

The electrical components sphere suffered by not only lack of equipment, but extremely long lead times and an increased freight cost. Starcom managed this issue by adjusting its hardware bill of materials ("BOM") several times during the period.

 

Starcom also continues to monitor and reduce the level of general expenses.

 

Starcom took the opportunity during this challenging period to add technological strength and value to its products. We managed to add a new low-cost version for Helios to support its needs in certain geographical areas. This hardware solution is expected to create additional and more significant volumes of SaaS revenues in the next few years. We also released a new version of Kylos (called "Kylos E") with an extended battery life of ten years. 

 

 

Marketing and business development efforts continued, and the pipeline of potential future deals is now at an all time high, although timing of conversions into revenues is still uncertain with some of these prospects. In particular, there has been increased interest and sales of our Lokies product from several sources.

 

Further to the previous announcement regarding the cooperation with DHL, we can now update that DHL's proof of concept ("POC"), intended to ascertain Lokies's fit for DHL's monitoring of its fleets operation, is expected to be completed in the next couple of months. 

 

A major emergency service provider in Israel, United Hatzalah, has chosen our Helios Pro solution for the deployment of smart lifesaving technology. In partnership with Partner Telecommunication, Starcom is providing smart defibrillator cabinets that can be controlled and monitored by United Hatzalah operators and deployed in public areas for emergency response.

 

 

FINANCIAL REVIEW

 

Revenues for the period were $2.27m, compared with $2.34m for six months ended 30 June 2020.

 

Recurring SaaS revenues improved to $1.07m (H1 2020 $1.04m).

 

The gross margin for the period was 40%, compared with 33% for the equivalent period in 2020.

 

Total operating expenditure decreased by 5% to $1.40m (H1 2020: $1.48m), achieved by continuous cost reduction in headcount and office expenses.

 

The Adjusted EBITDA loss was $167,000, as it was in the equivalent period in 2020 as the slight decrease in revenues was compensated for by the higher gross margin and the 12% reduction in G&A costs. Accordingly, the statutory loss for the period improved to $531,000 (H1 2020: $716,000). 

 

The balance sheet showed a decrease in trade receivables to $0.7m, compared with $1.7m as at 30 June 2020.

 

Inventories at the period end were $2.0m, compared with $2.1m as of 31 December 2020.

 

Trade payables were $1.37m, compared with $1.58m as of 31 December 2020.

 

Net cash generated in operating activities in the period was $0.2m compared with $0.4m consumed in the period ended 31 December 2020. Cash and cash equivalents at 30 June 2021 was $0.3m.

 

 

OUTLOOK

 

While uncertainty continues, the strong pipeline of potential new deals we have developed in recent months with both existing and new customers give us confidence that Starcom can deliver considerable improvement in results in the second half of this year and beyond. The pandemic has had a significant impact on the Company, but we have managed to stabilise the situation, secure finance and government support, and are ready to leverage our technological advantages. We believe that as global logistics become even more challenging and freight costs spiral up, the security and control that Starcom's solutions provide in the supply chain become more important and increasingly valuable. 

 

Michael Rosenberg

Chairman

 

 

 

 

 

STARCOM Plc

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

U.S. Dollars in thousands

 

 

 

 

 

 

 

 June 30

 

December 31

 

Note

2021

 

2020

 

2020

 

 

Unaudited

 

Unaudited

 

Audited

ASSETS

 

 

 

 

 

 

 

NON-CURRENT ASSETS :

 

 

 

 

 

 

Property, plant and equipment, net

 

325

 

3 50

 

318

Rights of use assets, net

 

260

 

208

 

330

Intangible assets, net

3

1,811

 

1,976

 

1,900

Income tax authorities

 

56

 

56

 

56

Total Non-Current Assets

 

2,452

 

2,590

 

2,604

 

CURRENT ASSETS :

 

 

 

 

 

 

Inventories

 

2,030

 

2,348

 

2,127

Trade receivables (net of allowance for doubtful accounts of $583, $89 and $607 thousand as of June 30, 2021 and 2020 and December 31,2020)

 

734

 

1,715

 

1,129

Other receivables

 

74

 

68

 

81

Short-term deposit

 

148

 

67

 

150

Cash and cash equivalents

 

328

 

278

 

264

Total Current Assets

 

3,314

 

4,476

 

3,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

5,766

 

7,066

 

6,355

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

                     

 

EQUITY

 

 

 

 

 

 

 

 

 

3,418

 

2,101

 

 

 

 

 

 

 

NON- CURRENT LIABILITIES:

 

 

 

 

 

 

Long-term loans from banks, net of current maturities

 

265

 

123

 

303

Amortized cost of a convertible loan

5

287

 

249

 

254

Conversion component of a convertible loan at fair value

5

16

 

57

 

42

Leasehold liabilities

 

170

 

96

 

236

Total Non-Current Liabilities

 

738

 

525

 

835

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Short-term bank credit

 

1

 

85

 

25

Short-term loans and current maturities of long-term loans

 

958

 

137

 

751

Warrants at fair value

5

6

 

11

 

10

Trade payables

 

1,373

 

1,888

 

1,579

Shareholders and related parties

6

665

 

561

 

615

Other payables

 

254

 

307

 

303

Leasehold liabilities

 

130

 

134

 

136

Total Current Liabilities

 

3,387

 

3,123

 

3,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

5,766

 

  7,066

 

6,355

 

 

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

 

 

26th August 2021

 

Igor Vatenmacher

Date of Approval of the Financial Statements

 

Director

 

 

 

 

 

 

STARCOM Plc

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

U.S. Dollars in thousands

 

 

 

 

Six Months Ended June 30

 

Year Ended December 31

 

Note

 

2021

 

2020

 

2020

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

 

 

 

Revenues

 

 

2,271

 

2,340

 

5,041

 

 

 

 

 

 

 

 

Cost of sales

7

 

(1,356)

 

(1,557)

 

(3,374)

 

 

 

 

 

 

 

 

Gross profit

 

 

915

 

783

 

1,667

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Research and development, net

 

 

(137)

 

(71)

 

(206)

 

 

 

 

 

 

 

 

  Selling and marketing

 

 

(294)

 

(292)

 

(580)

 

 

 

 

 

 

 

 

  General and administrative

 

 

(978)

 

(1,116)

 

(2,680)

 

 

 

 

 

 

 

 

  Other income (expenses)

 

 

21

 

25

 

24

 

 

 

(1,388)

 

(1,454)

 

(3,442)

 

 

 

 

 

 

 

 

Operatingloss

 

 

(473)

 

(671)

 

(1,775)

 

 

 

 

 

 

 

 

Net finance expenses

8

 

(58)

 

(45)

 

(270)

 

 

 

 

 

 

 

 

 

  Total comprehensive loss for the period

 

 

(531)

 

(716)

 

(2,045)

  Loss per share:

 

 

 

 

 

 

 

  Basic and diluted loss per share (in dollars)

4

 

(0.002)

 

(0.002)

 

(0.006)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

STARCOM Plc

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

U.S. Dollars in thousands

 

 

 

Share

Capital *

 

Premium on Shares

 

 

Capital Reserve

 

Capital Reserve for Share-based payment

 

Accumulated Loss

 

 

 

 

Total

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance- January 1, 2021

-

 

12,328

 

 

89

 

1,123

 

(11,439)

 

 

2,101

Issue of share capital, net of expenses - see Note 4

 

-

 

109 

 

 

 

-

 

 

-

 

 

 -

 

 

109

Share based payment - Note 4

  -

 

-

 

 

-

 

(38)

 

-

 

 

(38)

Comprehensive loss for the period

-

 

-

 

 

-

 

-

 

(531)

 

 

(531)

Balance- June 30, 2021

-

 

12,437

 

 

89

 

1,085

 

(11,970)

 

 

1,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance- January 1, 2020

-

 

12,254

 

 

89

 

942

 

(9,394)

 

 

3,891

 

Issue of share capital, net of expenses

-

 

73

 

 

-

 

-

 

 

-

 

 

 

73

Share based payment

  -

 

-

 

 

-

 

170

 

-

 

 

170

Comprehensive loss for the period

-

 

-

 

 

-

 

-

 

(716)

 

 

(716)

Balance- June 30, 2020

-

 

12,327

 

 

89

 

1,112

 

(10,110)

 

 

3,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Audited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance- January 1, 2020

-

 

12,254

 

 

89

 

942

 

(9,394)

 

 

3,891

Proceeds from issued share capital, net of expenses

 

-

 

 

74

 

 

 

-

 

 

-

 

 

-

 

 

 

74

Share based payment

-

 

-

 

 

-

 

181

 

-

 

 

181

Comprehensive loss for the period

-

 

-

 

 

-

 

-

 

(2,045)

 

 

(2,045)

Balance- December 31, 2020

-

 

12,328

 

 

89

 

1,123

 

(11,439)

 

 

2,101

 

  * An amount less than one thousand.

 

 

 

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

 

 

STARCOM Plc

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. Dollars in thousands

 

 

Six Months Ended

June 30

 

Year Ended December 31

 

 

2021

 

2020

 

2020

CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:

 

Unaudited

 

Unaudited

 

Audited

Comprehensive loss

 

(531)

 

(716)

 

(2,045)

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

366

 

360

 

725

Interest expense and exchange rate differences

 

33

 

39

 

50

Share-based payment expense

 

(38)

 

170

 

181

Changes in assets and liabilities:

 

 

 

 

 

 

 Decrease (Increase) in inventories

 

97

 

(2)

 

219

Decrease (Increase) in trade receivables

 

395

 

271

 

857

Decrease (Increase) in other receivables

 

7

 

101

 

88

Increase in Income Tax Authorities

 

-

 

(2)

 

(2)

Increase (Decrease) in trade payables

 

(97)

 

(193)

 

(502)

Increase (Decrease) in other payables

 

(49)

 

45

 

40

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

183

 

73

 

(389)

 

 

 

 

 

 

 

CASH FLOWS FOR INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

(41)

 

(12)

 

(18)

Proceeds from sales of property, plant and equipment 

 

-

 

-

 

-

Decrease (Increase) in short-term deposits

 

2

 

(6)

 

(89)

Purchase of intangible assets

 

(173)

 

(103)

 

(281)

 

 

 

 

 

 

 

Net cash used in investing activities

 

(212)

 

(121)

 

(388)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from short-term bank credit, net

 

(24)

 

6

 

(54)

Receipt (Repayment) of Short-term loans from banks

 

176

 

-

 

739

Receipt of long-term loans

 

-

 

-

 

312

Receipt of convertible loan

 

-

 

290

 

290

Proceeds from (Repayment to) shareholders and related parties, net

 

50

 

(7)

 

57

Repayment of Leasehold liability

 

(67)

 

(78)

 

(162)

Repayment of long-term loans

 

(42)

 

(43)

 

(299)

Consideration from issue of shares

 

 

 

-

 

-

 

 

 

 

 

 

 

Net cash provided by financing activities 

 

93

 

168

 

883

 

 

 

 

 

 

 

Increase (Decrease) in cash and cash equivalents

 

64

 

120

 

106

Cash and cash equivalents at the beginning of the period

 

264

 

158

 

158

Cash and cash equivalents at the end of the period

 

328

 

278

 

264

 

 

 

 

 

 

 

Appendix A -Additional Information

 

 

 

 

 

 

Interest paid during the period

 

(30)

 

(26)

 

(69)

 

Appendix B -Non-cash financing activities

 

 

 

 

 

 

Issuance of shares to a related party in payment of debt

 

109

 

75

 

74

 

 

 

 

 

 

 

 

 

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

 

 

STARCOM Plc

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

U.S. Dollars in thousands

 

 

NOTE 1 -

GENERAL INFORMATION

 

 

 

a.

The Reporting Entity

 

 

 

 

 

 

 

 

 

 

 

 

1.  Starcom Plc ("the Company") was incorporated in Jersey on November 28, 2012.

The Group specializes in easy-to-use practical wireless solutions that combine advanced technology, telecommunications and digital data for the protection and management of people, fleets of vehicles, containers and assets and engages in production, marketing, distribution, research and development of G.P.S. systems.

 

The Company fully owns Starcom G.P.S. Systems Ltd., an Israeli company that engages in the same field, and Starcom Systems Limited, a company in Jersey.
 

The Company's shares are admitted for trading on the London Stock Exchange's AIM market.

 

Address of the official Company office in Israel of Starcom G.P.S. Systems Ltd. is:

16 Hata'as St., Kfar-Saba, Israel.

 

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 (hereinafter: "IFRS") - Standards and interpretations adopted by the International Accounting Standards Board (hereafter: "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 - Starcom Plc.

 

 

 

 

 

3. 

The subsidiaries - Starcom G.P.S. Systems Ltd. And Starcom Systems Limited.

 

 

 

 

 

4.

Starcom Jersey - Starcom Systems Limited.

 

 

 

 

 

5.

Starcom Israel - Starcom G.P.S. Systems Ltd.

 

 

 

 

6.

The Group - Starcom Plc. and the Subsidiaries.

 

 

 

 

7.

Related party - As determined by International Accounting Standard No. 24 in regard to related parties.

 

               

 

 

 

 

  NOTE 2 -

BASIS OF PREPARATION AND CHANGE IN THE GROUP'S ACCOUNTING POLICIES

 

a.

  Basis of preparation

 

 

 

 

 

 

 

 

 

 

 

 

b.

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2020 and for the year ended on that date and with the notes thereto.

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2020 are applied consistently in these interim consolidated financial statements.

 

 

 

Use of estimates and judgments

 

 

 

 

The preparation of financial statements in conformity with IFRS requires management of the Company 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.

 

 

 

The judgment of management, when implementing the Group accounting policies and the basic assumptions utilized in the estimates that are bound up in uncertainties are consistent with those that were utilized to prepare the annual financial statements.

 

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 5 - financial liabilities of convertible loans and warrants.

 

 

 

 

 

 

c.

 

 Exchange rates:

 

 

 

 

Six Months Ended June 30

 

Year Ended December 31

 

 

2021

 

2020

 

2020

 

Exchange rate of U.S. $ in NIS

0.30

 

0.28

 

0.311

 

Exchange rate of U.S. $ in GBP

0.72

 

0.81

 

0.732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change of U.S. $ in NIS

(3.53%)

 

(0.29%)

 

(6.97%)

 

Change of U.S. $ in GBP

(1.64%)

 

6.5%

 

(3.68%)

          

 

 

 

 

NOTE 3 -

INTANGIBLE ASSETS, NET

 

 

 

 

 

 

 

Total

 

 

Unaudited

 

Cost:

 

 

 

 

Balance as of January 1, 2021

 

 

5,036

 

Additions during the period

 

 

173

 

Balance as of June 30, 2021

 

 

5,209

 

 

 

 

 

 

Accumulated Depreciation:

 

 

 

 

Balance as of January 1, 2021

 

 

(2,934)

 

Amortization during the period

 

 

(262)

 

Balance as of June 30, 2021

 

 

(3,196)

 

 

 

 

 

 

Impairment of assets

 

 

(202)

 

 

 

 

 

 

Net book value as of June 30, 2021

 

 

1,811

 

 

 

 

 

Total

 

 

 

Unaudited

 

Cost:

 

 

 

 

Balance as of January 1, 2020

 

 

4,755

 

Additions during the period

 

 

103

 

Balance as of June 30, 2020

 

 

4,858

 

 

 

 

 

 

Accumulated Depreciation:

 

 

 

 

Balance as of January 1, 2020

 

 

(2,434)

 

Amortization during the period

 

 

(246)

 

Balance as of June 30, 2020

 

 

(2,680)

 

 

 

 

 

 

Impairment of assets

 

 

(202)

 

 

 

 

 

 

Net book value as of June 30, 2020

 

 

1,976

 

 

 

 

 

Total

 

 

 

Audited

 

Cost:

 

 

 

 

Balance as of January 1, 2020

 

 

4,755

 

Additions during the year

 

 

281

 

Balance as of December 31, 2020

 

 

5,036

 

 

 

 

 

 

Accumulated Depreciation:

 

 

 

 

Balance as of January 1, 2020

 

 

(2,434)

 

Amortization during the year

 

 

(500)

 

Balance as of December 31, 2020

 

 

(2,934)

 

 

 

 

 

 

Impairment of assets

 

 

(202)

 

 

 

 

 

 

Net book value as of December 31, 2020

 

 

1,900

 

 

 

 

 

NOTE 4 -

 

SHARE CAPITAL

 

 

 

a.

Composition - ordinary shares of no-par value, issued and outstanding - 364,726,576  shares and 351,479,801 shares as of June 30, 2021 and December 31, 2020, respectively.

 

 

 

b.

A Company share grants to its holder voting rights, rights to receive dividends and rights to net assets upon dissolution.

 

c.

Weighted average number of shares used for calculation of basic and diluted loss per share:

 

 

 

 

  June 30   June 30

 

December 31

 

 

 

 

2021

 

2020

 

2020

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

Number

 

352,245,828

 

346,892,750

 

349,205,037

 

 

The following table lists the number of share options and the exercise prices of share options during the reported period:

 

 

June 30, 2021

 

December 31, 2020

 

 

Unaudited

 

Audited

 

 

Number of options

 

Weighted average

exercise price

 

Number of options

 

Weighted average

exercise price

 

 

  £

 

  £

 

 

 

 

 

 

 

 

 

Share options outstanding at beginning of period

 

49,953,947

 

0.028

 

49,293,947

 

0.027

Share options expired during the period

 

-

 

-

 

3,340,000

 

0.018

Shares options exercised during the period

 

3,560,000

 

0

 

 

 

 

Share options granted during the period

 

4,000,000

 

0.018

 

4,000,000

 

0.015

Share options outstanding at end of period

 

50,393,947

 

0.028

 

49,953,947

 

0.027

 

 

 

 

 

 

 

 

 

Share options exercisable at end of period

 

44,560,614

 

0.030

 

45,953,947

 

0.028

          

 

 

 

d.

 

 

During May 2021 the Company

1.  Issued 3,000,000 new share options to executive management and additional 1,000,000 share options to other employees. The executive management options will be exercisable, subject to their continued employment with the Company, over three years as to one third at 1.5p per share from the first anniversary of the date of grant, one third at 2p per share from the second anniversary of date of grant and one third at 2.5p per share from the third anniversary of date of grant

The employees' options will become exercisable, subject to their continued employment with the Company, at 1.25p per share over three years as to one third for each anniversary of the date of grant.

2.  Issued 9,686,775 new ordinary shares in lieu of 60% of director fees for 14-18 months ending May 31 2021 in a total amount of £77 thousands ($109 thousands). The shares were issued at 0.8p per share, being the most recent closing offer price for ordinary shares.

 

e.

During May 2021 the Company's CEO and its Board of directors chairman exercised 3,560,000 options granted to them under the Company's share option scheme in lieu of salary and fees, as announced on 17 June 2019. The options were exercisable at nil cost.

 

 

 

NOTE 5 -

FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS

 

 

a.

During March 2020, The Company received from its Directors, CFO and an employee (hereinafter: "the lenders") loans in the total amount of $290 thousand (£244 thousand) in the form of convertible loans enabling the lenders to convert the loans at an exercise price of £0.0125 per share at any time up to September 30, 2021. The convertible loan bears interest at the rate of 8% per annum calculated by reference to the principal amount of the convertible loan.

In addition, the lenders received fully vested warrants to subscribe a total of 4 million further shares at an exercise price of £0.015 per share. Any unexercised warrants expire at the end of two-years from grant.

 

The loan was evaluated and divided to different components by independent appraisers as follows:

Conversion component at fair value - 59$ thousand

Warrants at fair value - 12$ thousand

Amortized cost of a loan - 210$ thousand

 

Transaction costs were allocated according to the component's fair value ratio.

The part of the expenses that is attributed to the amortized cost of the loan was reduced from its cost.

An effective interest rate was calculated for the liability component of the loan, based on its amortization table. The effective interest rate is 35.2% per annum.

 

 

 

Total revaluation expenses regarding these components in the statement of comprehensive loss for the reported period are as follows:

 

 

   

 

 

 

Loan component

 

Option

 

Warrant

 

Balance as of January 1, 2020

-

 

-

 

-

 

Additions during the period

210

 

59

 

12

 

Finance (income) expenses

73

 

(17)

 

(2)

 

Payments

(29)

 

-

 

-

 

Balance as of December 31, 2020

254

 

42

 

10

 

Additions during the period

-

 

-

 

-

 

Finance (income) expenses

43

 

(26)

 

(4)

 

Payments

(10)

 

-

 

-

 

Balance as of June 30, 2021

287

 

16

 

6

 

 

 

 

 NOTE 6 -

 SHAREHOLDERS AND RELATED PARTIES

 

 

 

  a.

Related parties that own the controlling shares in the Group are:

 

 

Mr. Avraham Hartman (9.13%), Mr. Uri Hartman (6.47%), Mr. Doron Kedem (6.47%).

    

 

 

b.

Short-term balances:

June 30

 

December 31

 

 

2021

 

2020

 

2020

 

 

Unaudited

 

Unaudited

 

Audited

 

Credit balance

Avi Hartmann

Uri Hartmann

Doron Kedem

 

 

(47)

(446)

(173)

 

 

(73)

(367)

(173)

 

 

(56)

(444)

(173)

 

Total Credit balance

(666)

 

(613)

 

(673)

 

 

 

 

 

 

 

 

Loans

Avi Hartmann

Uri Hartmann

Doron Kedem

 

 

31

(237)

207

 

 

73

(228)

207

 

 

87

(236)

207

 

Total Loans

1

 

  52

 

58

 

Total Short-term balances

(665)

 

(561)

 

(615)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c.

 

Transactions:

 

 

Six Months Ended

June 30

 

 

Year Ended

December 31

 

 

2021

 

2020

 

2020

 

 

Unaudited

 

Unaudited

 

Audited

 

Total salaries, services rendered and related expenses for shareholders

 

 

192

 

 

 

151

 

 

 

312

 

Total share-based payment expenses

 

2

 

 

72

 

 

80

 

Interest to related parties

5

 

5

 

10

 

 

 

 

          

 

 

NOTE 7 -

 COST OF SALES

 

 

 

 

 

Six Months Ended

June 30

 

Year Ended December 31

 

 

 

2021

 

2020

 

2020

 

 

 

Unaudited

 

Unaudited

 

Audited

 

Purchases and other

997

 

1,313

 

2,655

 

Amortization

262

 

246

 

500

 

Increase in Inventory

97

 

(2)

 

219

 

 

1,356

 

1,557

 

3,374

         

 

 

 

NOTE 8 -

 NET FINANCE EXPENSES

 

 

 

 

 

Six Months Ended

June 30

 

Year Ended December 31

 

 

 

2021

 

2020

 

2020

 

 

 

Unaudited

 

Unaudited

 

Audited

 

Exchange rate differences

25

 

22

 

(140)

 

Bank charges

(31)

 

(24)

 

(43)

 

Interest to banks and others

(43)

 

(22)

 

(62)

 

Interest to suppliers

(4)

 

(16)

 

(16)

 

Interest to related parties

(5)

 

(5)

 

(10)

 

Interest income from deposits

-

 

-

 

1

 

Net finance expenses

(58)

 

(45)

 

(270)

         

 

 

 NOTE 9 -

SEGMENTATION REPORTING

 

 

 

Differentiation policy for the segments:

The Company's management has defined its segmentation policy based on the financial essence of the different segments. This refers to services versus goods, delivery method and allocated resources per sector.

On this basis, the following segments were defined:

 

 

 

Segment information regarding the reported segments:

 

 

 

 

Hardware

 

SaaS

 

 

Total

Period Ended 30.06.2021: (Unaudited)

 

 

 

 

 

 

 

 

Segment revenues

 

 

1,197

 

1,074

 

 

2,271

Cost of sales

 

 

(1,220)

 

(136)

 

 

(1,356)

Gross profit

 

 

(23)

 

938

 

 

915

 

 

 

 

 

 

 

 

 

Period Ended 30.06.2020: (Unaudited)

 

 

 

 

 

 

 

 

Segment revenues

 

 

1,296

 

1,044

 

 

2,340

Cost of sales

 

 

(1,348)

 

(209)

 

 

(1,557)

Gross profit

 

 

(52)

 

835

 

 

783

 

 

 

 

 

 

 

 

 

Year Ended 31.12.2020: (Audited)

 

 

 

 

 

 

 

 

Segment revenues

 

 

2,833

 

2,208

 

 

5,041

Cost of sales

 

 

(3,070)

 

(304)

 

 

(3,374)

Gross profit (loss)

 

 

(237)

 

1,904

 

 

1,667

 

 

 

 

 

 

 

 

 

 

 

 

 NOTE 10-

SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (COVID-19)

 

 

Due to the pandemic outbreak since March 2020, most of the countries across the globe have taken extra measures to prevent and reduce COVID-19 exposure.

Among the actions taken were noted: citizens transport limitations, closing of borders, shutting some business activity, limitation of number of employees per square feet, shutting the education systems, etc.

The unprecedented conditions resulted in a decrease in revenues for the period. In addition, normal purchasing processes and difficult shipping limitations created additional costs and delays which impacted the fulfilment of some existing orders. Marketing activities were inevitably disrupted

The Group submitted applications and secured both government supported loan for long term amounted $315 thousand and grants amounted $300 thousands.

The continuing cases of COVID-19 and the developments surrounding the pandemic have had a negative impact on the Group's business. Significant events affecting the overall economy have historically had an impact on revenue volumes, with the full extent of the impact generally determined by the length of time the event influences decisions as well as general economic conditions. The COVID-19 outbreak and resulting economic conditions have had, and the Group believes will continue to have, an adverse impact on its operations and on its financial results and liquidity, and such negative impact may continue well beyond the containment of the outbreak.

The Group has taken, and plans to take further actions to manage its liquidity, including reducing operating expenses and strict cashflow monitoring, due to its uncertainty to assure its assumptions used to estimate its liquidity requirements will be correct because it has never previously experienced such a change in demand, and as a consequence, its ability to be predictive is uncertain. In addition, the duration of the pandemic is uncertain. However, based on current operational assumptions, the Group believes it has adequate liquidity beyond the next twelve months.

 

 

 

Note 11 -

SIGNIFICANT EVENTS AFTER THE REPORTED PERIOD 

 

 

 

During July 2021 the Company issued 6,251,162 new share options to certain directors ("Fee Options") at a price of 1.075 pence per share in order to reduce fees by £5,600 per month, for a twelve-month period until 31 May 2022. The Fee Options will vest one year after grant date and can be exercised from that date until 10 years from date of grant.

 

 

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