This announcement contains inside information for the purposes of Regulation 11 of the Market Abuse (amendment) (EU Exit) Regulations 2019/310.
25 March 2021
Starcom PLC
("Starcom" or the "Company")
Final results for the year ended 31 December 2020
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 audited results for the year ended 31 December 2020.
CHAIRMAN'S STATEMENT
I am pleased to provide the annual report and accounts for 2020. As we previously announced, the Covid-19 pandemic has disrupted Starcom's business in 2020 and this is reflected in the results. The results for the year to 31 December 2020 show that revenues reduced to $5.04m (2019: $6.8m), which has resulted in an operating loss for the year of $1.78m (2019: $0.7m loss) and an adjusted EBITDA* loss of $370,000 (2019: profit $296,000). Gross margin was down to 33% (2019: 41%) reflecting the lower sales revenues and the impact of increases in the cost of raw materials, shipment and logistics as experienced across the industry due to the pandemic.
However, the Company has been able to cope effectively with the crisis. Costs were adjusted quickly and a low-cost long-term bank loan, as well as government grants, were secured to ensure business continuity. This enabled the Company to focus on retaining its key assets, mainly the solid client base and pipeline of future opportunities, as well as to utilize its engineering resources to progress R&D plans to improve competitiveness, to be leveraged when higher customer demand returns.
Even during the long lock-down periods, the Company continued to maintain and further develop Starcom's strategic alliances and pipeline of potential projects. For example, work with Zero Motorcycles ("Zero") progressed during 2020 to integrate Starcom's technology with Zero's new generation of electric motorcycles. Additional projects included working with the National Transport and Safety Authority of Kenya and central authorities in South America for the potential deployment of Starcom's products in container and shipment transportation. More recently, the Company made its modest contribution to the global anti-Covid vaccination effort by providing certain vaccination organizations in Panama with the means to monitor temperature and other conditions of vaccines while in transit.
As many of the Company's customers were impacted by the pandemic, not only were some unable to place orders but some could not make scheduled payments for existing orders as expected, and therefore provisions of approximately $500,000 were made in the 2020 accounts which are included as general and administrative costs. We are hopeful that some of these debts may be recoverable during this year.
BUSINESS REVIEW BY PRODUCT
Although hardware sales were severely depressed by the pandemic at $2.8 million (2019: $4.8m), the newer and higher margin products - Kylos, Tetis and Lokies - still represented 40% of hardware sales.
Lokies
The Company's intelligent keyless padlock, branded as Lokies, was successfully launched in 2019 and well received by customers. It had been anticipated that significant orders would follow based on the positive interest shown, however these orders were not progressed as hoped in 2020. However, we still anticipate that these orders will be resumed later this year.
Kylos
Kylos is a real-time tracking and monitoring solution for the protection and management of any portable asset. One of our major opportunities for 2020 was a project with Cubemonk, a USA company that intended to incorporate Kylos into its shipping containers. However, Covid-19 restrictions resulted in this project being suspended. We remain in contact with this customer and hope that as conditions improve in the USA it may be possible to restart the project.
Kylos development continued to progress in 2020 and Kylos Dodge, a long range cellular based variant of Kylos was launched, allowing cross-device communication for low-cost operations.
Tetis
Tetis is a solution for the tracking, monitoring, and management of cargo shipped by the sea. New developments in the year have seen the Company establish new control centre dashboard software for Tetis, which is now integrated directly into a custom system for a customs authority in South America.
Tetis and Lokies are ideally suited to monitor goods for customs purposes and is a key target market for Starcom.
Helios
Helios Pro was launched in 2020. It is the next generation of our high-end vehicle tracking products and which can connect directly to the computer of over 2,600 vehicle models, to collect and transmit important data for driver security and external sensor integration. In addition, a new project for the monitoring of defibrillators in Israel using Helios was initiated and is expected to lead to more sales in 2021.
SaaS
It is encouraging to see that, even in such a challenging year, the Company could still rely on its strong and loyal customer base to generate $2.2 million of SaaS revenues (2019: $2m), an increase of approximately 9% compared to the previous year. We have also used the time to upgrade the entire structure of Starcom Online - our SaaS platform - and brought it up to date in both the software and underlying backbone. We have also integrated various third-party tracking units to allow easy transitions for customers from other companies to Starcom, developed a full vehicle maintenance module, and added support for Telegram Messaging App. In addition, we launched Olly - a new Android/iOS application for Helios end-users, allowing them to communicate with their vehicle securely using Bluetooth 5.
FINANCIAL REVIEW
Group revenues for the year were $5.04m, compared with $6.8m for the year ended 31 December 2019, a decrease of 26%.
The gross margin for the year was 33%, compared with 41% for 2019. This was due to lower sales revenues and the impact of increases in the cost of raw materials, shipment and logistics as experienced across the industry due to the pandemic.
Total operating expenditure for the year was $3.4m (2019: $3.4m), mainly due to non-cash expenses such as depreciation, share option provisions and exceptional provisions made for doubtful debt. Excluding the exceptional provisions, the operating expenditures were decreased by 12%.
Net loss after taxation for the year increased to $2.0m compared with the 2019 net loss of $1.0m. The operating loss in the period was $1.78m, compared to an operating loss of $0.76m in 2019.
The Group recorded an exchange rate loss of $0.14m resulting from the strengthening of the Israeli Shekel compared with the US dollar.
The Group balance sheet showed stability in trade receivables of $1.1m, compared with $2.0m as at 31 December 2019, due to exceptional provisions made for doubtful debts.
Group inventories at the period end were $2.1m, compared to $2.3m as at the end of 2019. An exceptional provision for obsolete stock was made of $0.08m.
Trade payables at the year-end were $1.6m, compared with $2.1m as at 31 December 2019.
Net cash used in operating activities in the period was approximately $0.4m, compared with zero for the year ended 31 December 2019.
OUTLOOK
At this time of the year, we would normally expect to have a stronger indication of how the current year might end but during this exceptional period many of our clients and prospects are still unable to commit or more safely predict their needs yet. Another factor that makes forecasting very difficult is the increase we have noticed in the cost of raw material and in the lead times for supply, by several weeks in some cases. The currency fluctuations also impact margins. We are working to mitigate this challenge.
However, our discussions with clients and prospects make us cautiously optimistic that the level of activity is starting to rise, and we are hopeful that this is now the beginning of the process of gradually enlarging the sales pipeline and order book and the resumption of projects that had been put on hold. We are therefore quite confident that revenues will increase in the second half of this year. With the solid technology we have kept at the forefront of our business and client relationships that have been maintained throughout the tough period, we will be ready and are well positioned to meet customer demand when it hopefully increases in the second half of 2021 as markets gradually return to some normality.
Michael Rosenberg
Non-Executive Chairman
March 24, 2021
STARCOM PLC
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
| | | December 31, | ||
| | Note | 2020 | | 2019 |
| ASSETS | | | | |
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NON-CURRENT ASSETS | | | | |
| Property, plant and equipment, net | 6 | 318 | | 378 |
| Rights-of-use assets, net | 22 | 330 | | 228 |
| Intangible assets, net | 7 | 1,900 | | 2,119 |
| Income tax authorities | | 56 | | 54 |
| Total Non-Current Assets | | 2,604 | | 2,779 |
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CURRENT ASSETS | | | | |
| Cash and cash equivalents | | 264 | | 158 |
| Short-term bank deposit | 5 | 150 | | 61 |
| Trade receivables, net | 3B | 1,129 | | 1,986 |
| Other accounts receivable | 3A | 81 | | 169 |
| Inventories | 4 | 2,127 | | 2,346 |
| Total Current Assets | | 3,751 | | 4,720 |
| | | | | |
| TOTAL ASSETS | | 6,355 | | 7,499 |
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| EQUITY AND LIABILITIES | | | | |
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EQUITY | 14 | 2,101 | | 3,891 |
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Long-term loans from banks, net of current maturities | 10 | 303 | | 167 |
| Long-term leasehold liabilities | 22 | 236 | | 115 |
| Total Non-Current Liabilities | | 539 | | 282 |
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CURRENT LIABILITIES | | | | |
| Short-term bank credit | | 25 | | 79 |
| Short-term bank loan | 12 | 739 | | - |
| Current maturities of long-term loans from banks | 10 | 12 | | 136 |
| Trade payables | | 1,579 | | 2,081 |
| Other accounts payable | 9 | 303 | | 227 |
| Leasehold liabilities | 22 | 136 | | 135 |
| Warrants at fair value | 11 | 10 | | - |
| Conversion component of a convertible loan at fair value | 11 | 42 | | - |
| Amortized cost of a convertible loan | 11 | 254 | | - |
| Related parties | 20 | 615 | | 668 |
| Total Current Liabilities | | 3,715 | | 3,326 |
| | | | | |
| TOTAL EQUITY AND LIABILITIES | 6,355 | | 7,499 | |
The accompanying notes are an integral part of the consolidated financial statements.
STARCOM PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. Dollars in thousands (except shares data)
Year ended December 31,
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| | Note | | 2020 | | 2019 |
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| Revenues | | | 5,041 | | 6,817 |
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| Cost of sales | 15 | | (3,374) | | (4,019) |
| | | | | | |
| Gross profit | | | 1,667 | | 2,798 |
| | | | | | |
| Operating expenses: | | | | | |
| | | | | | |
| Research and development | | | (206) | | (231) |
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| Selling and marketing | | | (580) | | (776) |
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| General and administrative expenses | 16 | | (2,680) | | (2,423) |
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| Other income (expenses) | 17 | | 24 | | (74) |
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| Total operating expenses | | | (3,442) | | (3,504) |
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| Operating loss | | | (1,775) | | (706) |
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| Finance income | 18A | | 1 | | - |
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| Finance expenses | 18B | | (271) | | (313) |
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| Net finance expenses | | | (270) | | (313) |
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| Total comprehensive loss for the year | | | (2,045) | | (1,019) |
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| Loss per share: | | | | | |
| Basic and diluted loss per share | 19 | | (0.006) | | (0.003) |
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The accompanying notes are an integral part of the consolidated financial statements.
STARCOM PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
U.S. Dollars in thousands
| | | Share Capital | | Premium on Shares | | Capital Reserve | | Capital Reserve in Regard to Share-Based Payment Transactions | |
Accumulated Loss | | Total | ||||||||
| Balance as of January 1, 2019 | | - | | 11,460 | | 89 | | 687 | | (8,375) | | | 3,861 |
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| Proceeds from issued share capital, net of mobilization costs | | - | | 794 | | - | | - | | - | | | 794 |
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| Share based payment (see Note 14c) | | - | | - | | - | | 255 | | - | | | 255 |
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| Comprehensive loss for the year |
| - | | - | | - | | - | | (1,019) | | | (1,019) |
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| Balance as of December 31, 2019 | | - | | 12,254 | | 89 | | 942 | | (9,394) | | | 3,891 |
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| Issued share capital, net of expenses (see Note 14) | | - | | 74 | | - | | - | | - | | | 74 |
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| Share based payment (see Note 14c) | | - | | - | | - | | 181 | | - | | | 181 |
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| Comprehensive loss for the year | | - | | - | | - | | - | | (2,045) | | | (2,045) |
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| Balance as of December 31, 2020 | | - | | 12,328 | | 89 | | 1,123 | | (11,439) | | | 2,101 |
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The accompanying notes are an integral part of the consolidated financial statements.
STARCOM PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
| | | Year Ended December 31, | ||||
| | | 2020 | | 2019 | ||
| CASH FLOWS FOR OPERATING ACTIVITIES: | | | | | ||
| Loss for the year | | (2,045) | | (1,019) | ||
| Adjustments to reconcile loss for the year to net cash used in operating activities: | | | | | ||
| Depreciation and amortization | | 725 | | 673 | ||
| Interest expenses and exchange rate differences | | 50 | | (6) | ||
| Share-based payment expense | | 181 | | 255 | ||
| Capital loss | | - | | 51 | ||
| Changes in assets and liabilities: | | | | | ||
| Decrease (Increase) in inventories | | 219 | | (321) | ||
| Decrease (Increase) in trade receivables, net | | 857 | | (89) | ||
| Decrease (Increase) in other accounts receivable | | 88 | | (82) | ||
| Increase in Income Tax Authorities | | (2) | | (8) | ||
| Increase (Decrease) in trade payables | | (502) | | 669 | ||
| Increase (Decrease) in other accounts payable | | 40 | | (131) | ||
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| Net cash used in operating activities | | (389) | | (8) | ||
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| CASH FLOWS FOR INVESTING ACTIVITIES: | | | | | ||
| Purchases of property, plant and equipment | | (18) | | (220) | ||
| Proceeds from sales of property, plant and equipment | | - | | 53 | ||
| Increase in short-term deposits | | (89) | | (1) | ||
| Cost of intangible assets | | (281) | | (297) | ||
| | | | | | ||
| Net cash used in investing activities | | (388) | | (465) | ||
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| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | ||
| Receipt (Repayment) of short-term bank credit, net | | (54) | | 51 | ||
| Receipt (Repayment) of short-term bank loan, net | | 739 | | (462) | ||
| Receipt of convertible unsecured loans, net | | 290 | | - | ||
| Proceeds from related parties, net | | 57 | | 87 | ||
| Payment for leasehold liabilities | | (162) | | (128) | ||
| Receipt of long-term loans | | 312 | | 290 | ||
| Repayment of long-term loans | | (299) | | (76) | ||
| Consideration from issue of shares, net | | - | | 780 | ||
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| Net cash provided by financing activities | | 883 | | 542 | ||
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| Increase in cash and cash equivalents | | 106 | | 69 | ||
| Cash and cash equivalents at the beginning of the year | | 158 | | 89 | ||
| Cash and cash equivalents at the end of the year | | 264 | | 158 | ||
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| Appendix A - Additional Information | | | | | ||
| Interest paid during the year | | (69) | | (30) | ||
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| Issuance of shares to a related party in payment of debt | | 74 | | 15 | ||
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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.
STARCOM PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
| NOTE 1 - | GENERAL | ||||
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| | a. | The Reporting Entity | |||
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| | 1. Starcom PLC ("the Company") was incorporated in Jersey on November 28, 2012. The Company and its subsidiaries ("the Group") specializes in easy-to-use practical wireless solutions that combine advanced technology, telecommunications and digital data for the protection and management of people, fleets of vehicles, containers and assets. The Group engages in production, marketing, distribution, research and development of G.P.S. systems. | |||
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| | The Company fully owns Starcom G.P.S. Systems Ltd., an Israeli company, and Starcom Systems Limited, a company incorporated in Jersey.
The Company's shares are admitted for trading on the AIM market of the London Stock Exchange ("AIM").
The address of the official Company office in Israel of Starcom G.P.S. Systems Ltd. is: 16A Ha'Taas Street, Kfar Saba, Israel.
The address of the Company's registered office in Jersey of Starcom Systems Limited is: Forum 4, Grenville Street, St. Helier, Jersey, Channel Islands, JE4 8TQ.
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| | b. | Definitions in these financial statements: |
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| 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. | ||||
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| 2. | The Company - Starcom PLC. | ||||
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| 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 in International Accounting Standard No. 24. | ||||
| | c. | Operating Turnover Period
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| | | 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. |
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| | d. | Functional and Presentation Currency
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| | | 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. |
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| | | The dollar is the currency that represents the economic environment in which the Group operates. |
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| | | The Group's transactions and balances denominated in dollars are presented at their original amounts. Non-dollar transactions and balances have been remeasured to dollars. All transaction gains and losses from remeasurement of monetary assets and liabilities denominated in non-dollar currencies are reflected in the statements of comprehensive income as financial income or expenses, as appropriate. |
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| | a. | Declaration in regard to implementation of International Financial Reporting Standards (IFRS)
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| | | 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 Consolidated Financial Statements on March 24, 2021. |
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| | b. | Basis of Measurement
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| | | 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. |
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| NOTE 2B - | USE OF ESTIMATES AND JUDGMENTS |
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| | 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. |
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| | 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. |
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| | 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. |
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| | 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: |
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| | Note 7 - Capitalization of development costs and amortization of these costs. |
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| | Note 14 - Options issued.
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| | Information about assumptions and estimations that have significant risk of resulting in a material adjustment is included in the following Notes: |
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| | Note 3B - Allowance for doubtful accounts. |
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| | Note 7 - Calculation of amortization. |
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| | Note 8 - Utilization of tax losses. |
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| | Note 11 - Financial liabilities of convertible loans and warrants |
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| NOTE 2C - | SIGNIFICANT ACCOUNTING POLICIES |
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| | a. | Basis of consolidation
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| | | All intra-Group transactions, balances, income and expenses of the companies are eliminated on consolidation. |
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| | b. | Foreign currency and linkage basis
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| | | Balances stated in foreign currency or linked to a foreign currency have been included in the consolidated financial statements according to the prevailing representative exchange rates at the balance sheet date. Balances linked to the Consumer Price Index in Israel are included in accordance with the Index published prior to balance sheet date. Linkage and exchange rate differences are included in the statement of comprehensive income when incurred. |
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| | | As of December 31, |
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| | | 2020 | 2019 | | ||||||||
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| CPI (in points) * | | 124.19 | 125.06 | | ||||||||
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| Exchange Rate of NIS in U.S. $ | 0.311 | 0.289 | | |||||||||
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| | | For the Year Ended December 31, |
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| | 2020 | 2019 | | |||||||||
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| Change in CPI | (0.69%) | 0.6% | | |||||||||
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| Change in Exchange Rate of NIS | 7.6% | 8.3% | | |||||||||
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| * Base Index 2002 = 100. |
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| | c. | Financial instruments
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| | | (i) Non-derivative financial assets |
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| | | 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. |
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| | | 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. |
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| | | 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. |
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| | | The Group classified non-derivative financial assets into the following categories: Financial assets at fair value, through profit or loss, held-to-maturity financial assets, loans and receivables, and available-for-sale financial assets. |
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| | | Financial assets at fair value through profit or loss: |
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| | | A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group's documented risk management or investment strategy. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which take into account any dividend income, are recognized in profit or loss. |
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| | | Financial assets designated as at fair value through profit or loss comprise equity securities that otherwise would have been classified as available for sale. |
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| | | Loans and receivables: |
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| | | 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. |
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| | | Loans and receivables are comprised of trade and other receivables, excluding short -term trade and other receivables where the interest amount is immaterial. |
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| | | (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. | |||||||||||||||||||||
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| | | The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. | |||||||||||||||||||||
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| | | 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. | |||||||||||||||||||||
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| | | Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables. | |||||||||||||||||||||
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| | | (iii) Compound financial instruments | |||||||||||||||||||||
| | | Compound financial instruments issued by the Company comprised: an interest-bearing loan with a conversion option issued to the lender. | |||||||||||||||||||||
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| | | The option component was recognized initially at its fair value using a binomial calculation. | |||||||||||||||||||||
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| | | The liability component was recognized initially as the difference between the loan amount and the option component | |||||||||||||||||||||
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| | | Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. | |||||||||||||||||||||
| | | | |||||||||||||||||||||
| | | Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. | |||||||||||||||||||||
| | | | |||||||||||||||||||||
| | | Interest related to the financial liability is recognized in profit or loss. | |||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | d. | Cash and cash equivalents |
| ||||||||||||||||||||
| | | Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | e. | Share capital |
| ||||||||||||||||||||
| | | Ordinary shares: |
| ||||||||||||||||||||
| | | Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | f. | Property, plant and equipment
|
| ||||||||||||||||||||
| | | Property, plant and equipment are measured at cost less accumulated depreciation. |
| ||||||||||||||||||||
| | | Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates: |
| ||||||||||||||||||||
| | | | % |
| |||||||||||||||||||
| | | Computers and software | 33 |
| |||||||||||||||||||
| | | Office furniture and equipment | 7 - 15 |
| |||||||||||||||||||
| | | Vehicles | 15 |
| |||||||||||||||||||
| | | Laboratory equipment | 15 |
| |||||||||||||||||||
| | | Leasehold improvements | 10 |
| |||||||||||||||||||
| | | | |
| |||||||||||||||||||
| | | Leasehold improvements are depreciated by the straight-line method over the term of the lease, ten-year period, (including option terms) or the estimated useful lives of the improvements, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. |
| ||||||||||||||||||||
| | | | |
| |||||||||||||||||||
|
| | At each balance sheet date, the Group examines the residual value, the useful life and the depreciation method it uses. If the Group identifies material changes in the expected residual value, the useful life or the future pattern of consumption of future economic benefits in the asset that may indicate that a change in the depreciation is required, such changes are treated as changes in accounting estimates. In the reported periods, no material changes have taken place with any material effect on the financial statements of the Group. |
| ||||||||||||||||||||
| | | | |
| |||||||||||||||||||
| | g. | Intangible assets: Research and development
| |
| |||||||||||||||||||
| | | Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred. |
| ||||||||||||||||||||
| | | | |
| |||||||||||||||||||
| | | Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends and has sufficient resources to complete development and to use or sell the asset. |
| ||||||||||||||||||||
| | | | |
| |||||||||||||||||||
| | | The expenditure capitalized includes the cost of materials, direct labor, overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognized in profit or loss as incurred. |
| ||||||||||||||||||||
| | | | |
| |||||||||||||||||||
| | | Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.
|
| ||||||||||||||||||||
| | | Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. Amortization is calculated using the straight-line method over the estimated useful lives of the assets: ten years. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | | At each balance sheet date, the Group reviews whether any events have occurred or changes in circumstances have taken place, which might indicate that there has been an impairment of the intangible assets. When such indicators of impairment are present, the Group evaluates whether the carrying value of the intangible asset in the Group's accounts can be recovered from the cash flows anticipated from that asset, and, if necessary, records an impairment provision up to the amount needed to adjust the carrying amount to the recoverable amount. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | h. | Short-term deposit
|
| ||||||||||||||||||||
| | | Deposits with maturities of more than three months but less than one year are included in short-term deposits. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | i. | Leases
|
| ||||||||||||||||||||
| | | The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | | Group as a lessee |
| ||||||||||||||||||||
| | | The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. |
| ||||||||||||||||||||
| | | 1. Right-of-use assets |
| ||||||||||||||||||||
| | | The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: |
| ||||||||||||||||||||
| | | Property - 3 to 4 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). |
| ||||||||||||||||||||
| | | 2. Lease liabilities |
| ||||||||||||||||||||
| | | At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. |
| ||||||||||||||||||||
| | | In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. |
| ||||||||||||||||||||
| | | 3. Short-term leases and leases of low-value assets |
| ||||||||||||||||||||
| | | The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as an expense on a straight-line basis over the lease term. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | j. | Inventories
|
| ||||||||||||||||||||
| | | Inventories are stated at the lower of cost or net market value. |
| ||||||||||||||||||||
| | | Cost is determined using the "first-in, first -out" method. |
| ||||||||||||||||||||
| | | Inventory write-downs are provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories, and discontinued products and for market prices lower than cost, if any. At the point of loss recognition, a new lower cost basis for that inventory is established. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | k. | Impairment in value of assets
|
| ||||||||||||||||||||
| | | During every financial period, the Group examines the book value of its tangible and intangible assets to determine any signs of loss from impairment in value of these assets. In the event that there are signs of impairment, the Group examines the realization value of the designated asset. In the event that the realization cannot be measured for an individual asset, the Group estimates realization value for the unit where the asset belongs. Joint assets are assigned to the units yielding cash on the same basis. Joint assets are designated to the smallest groups of yielding assets for which one can identify a reasonable basis that is consistent with the allocation. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | | The realization value is the higher of net sale price of the asset as compared with its useful life that is determined by the present value of projected cash flows to be realized from this asset and its realization value at the end of its useful life. In the event that the book value of the asset or cash-yielding unit is greater than its realization value, a devaluation of the asset has occurred in the amount of the difference between its book value and its realization value. This amount is recognized immediately in the statements of comprehensive income. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | | In the event that prior devaluation of an asset is nullified, the book value of the asset or of the cash-yielding unit is increased to the estimated current fair value, but not in excess of the asset or cash-yielding unit book value that would have existed had there not been devaluation. Such nullification is recognized immediately in the statements of comprehensive income. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | l. | Revenue recognition
|
| ||||||||||||||||||||
| | | The Group generates revenues from sales of products, which include hardware and software, software licensing, professional services and maintenance. Professional services include mainly installation, project management, customization, consulting and training. The Group sells its products indirectly through a global network of distributors, system integrators and strategic partners, all of whom are considered end-users, and through its direct sales force. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | | Revenue from products and software licensing is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable and collectability is probable. |
| ||||||||||||||||||||
| | | Revenues from maintenance and professional services are recognized ratably over the contractual period or as services are performed, respectively.
|
| ||||||||||||||||||||
| | m. | Allowance for doubtful accounts
|
| ||||||||||||||||||||
| | | 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: |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| |
|
| |||||||||||||||||||||
| | 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. |
| ||||||||||||||||||||
| | | Since there is uncertainty in regard to existence of taxable revenues in the near future, a deferred tax asset was not recognized. |
| ||||||||||||||||||||
| | | A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets and liabilities are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit (taxes on income) will be realized. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | s. | Basic and Diluted Earnings per Share |
| ||||||||||||||||||||
| | | Basic earnings per share are computed based on the weighted average number of common shares outstanding during each year. Diluted earnings per share are computed based on the weighted average number of common shares outstanding during each year, plus dilutive potential common shares considered outstanding during the year. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | t. | Statement of cash flows |
| ||||||||||||||||||||
| | | The statement of cash flows from current operations is presented using the indirect method, whereby interest amounts paid and received by the Group are included in the cash flows in current operations. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | u. | Dividend distribution |
| ||||||||||||||||||||
| | | Dividend distribution to the Company's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are approved by the Group's shareholders. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | v. | Segment reporting |
| ||||||||||||||||||||
| | | Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and tax. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | w. | Government grants |
| ||||||||||||||||||||
| | | A government grant is not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to it, and that the grant will be received. The Group received government grants, the nature of which is compensation for a decrease in revenues, the Group decided to record the grants received by the Government of Israel as revenues. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | x. | New standards, interpretations and amendments adopted by the Group |
| ||||||||||||||||||||
| | 1. | Amendments to IAS 1 and IAS 8 Definition of Material The amendments provide a new definition of material that states, "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to the Group. |
| ||||||||||||||||||||
| | 2. | Conceptual Framework for Financial Reporting issued on 29 March 2018 The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. This will affect those entities which developed their accounting policies based on the Conceptual Framework. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group. |
| ||||||||||||||||||||
| | | |
| ||||||||||||||||||||
| | 3. | Amendments to IFRS 16 Covid-19 Related Rent Concessions On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. The amendment applies to annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted. This amendment had no impact on the consolidated financial statements of the Group. |
| ||||||||||||||||||||
| NOTE 3A - | OTHER ACCOUNTS RECEIVABLE | ||||
|
| | | December 31 | ||
|
| | | 2020 | | 2019 |
|
| Government institutions | | 78 | | 119 |
|
| Prepaid expenses | | 3 | | 50 |
|
| | | 81 | | 169 |
| NOTE 3B - | TRADE RECEIVABLES, NET | ||||
|
| | | December 31 | ||
|
| | | 2020 | | 2019 |
|
| Group receivables | | 1,736 | | 2,045 |
|
| Allowance for doubtful accounts | | (607) | | (59) |
|
| | | 1,129 | | 1,986 |
| NOTE 4 - | INVENTORIES | |||||
|
| | | December 31 |
| ||
|
| | | 2020 | | 2019 |
|
|
| Raw materials | | 1,284 | | 1,470 |
|
|
| Finished goods | | 843 | | 876 |
|
|
| | | 2,127 | | 2,346 |
|
| NOTE 5 - | SHORT-TERM BANK DEPOSIT |
| | |
| | The bank deposit sums of $150 and $61 as of December 31, 2020 and 2019, respectively, serve as a security deposit for repayment of bank loans in accordance with terms of the loans. The deposit bears yearly interest at the rate of 0.02%. |
| NOTE 6 - | PROPERTY, PLANT AND EQUIPMENT, NET |
| |
Computers and Software | | Office Furniture and Equipment | |
Laboratory Equipment | |
Leasehold Improvements | |
Vehicles* | |
Total | |
| | Cost: | | | | | | | | | | | |
| c | Balance as of January 1, 2020 |
194 | |
121 | |
279 | |
60 | |
152 | |
806 |
| | Additions during the year |
6 | |
6 | |
6 | |
- | |
- | |
18 |
| | Balance as of December 31, 2020 |
| |
| |
| |
| |
| |
|
| | | | | | | | | | | | | |
| | Accumulated Depreciation: | | | | | | | | | | | |
| | Balance as of January 1, 2020 |
164 | |
85 | |
93 | |
17 | |
69 | |
428 |
| | Depreciation during the year |
13 | |
8 | |
30 | |
6 | |
21 | |
78 |
| | Balance as of December 31, 2020 |
| |
| |
| |
| |
| |
|
| | | | | | | | | | | | | |
| | Net book value as of December 31, 2020 |
23 | |
| |
| |
| |
| |
|
| | | | | | | | | | | | | |
* See also Note 13.
| NOTE 7 - | INTANGIBLE ASSETS, NET | |||||
| | |
| ||||
| | | | Total | |||
| | Cost: | | | | ||
| | Balance as of January 1, 2020 | | | 4,755 | ||
| | Additions during the year | | | 281 | ||
| | Balance as of December 31, 2020 | | | 5,036 | ||
| | | | | | ||
| | Accumulated Amortization: | | | | ||
| | Balance as of January 1 ,2020 | | | (2,434) | ||
| | Amortization during the year | | | (500) | ||
| | Balance as of December 31, 2020 | | | (2,934) | ||
| | | | | | ||
| | Accumulated Impairment of assets | | | (202) | ||
| | Net book value as of December 31, 2020 | | |
1,900 | ||
|
| | | | |||
| | | | Total | |||
| | Cost: | | | | ||
| | Balance as of January 1, 2019 | | | 4,458 | ||
| | Additions during the year | | | 297 | ||
| | Balance as of December 31, 2019 | | | 4,755 | ||
| | | | | | ||
| | Accumulated Amortization: | | | | ||
| | Balance as of January 1, 2019 | | | (1,977) | ||
| | Amortization during the year | | |
(457) | ||
| | Balance as of December 31, 2019 | | | (2,434) | ||
| | | | | | ||
| | Accumulated Impairment of assets | | | (202) | ||
| | Net book value as of December 31, 2019 | | |
2,119 | ||
| |
| |||||
| | The expenditure capitalized includes the cost of materials and direct labor that are directly attributable to preparing the assets for their intended use. Other development expenditure is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost less accumulated amortization and accumulated impairment losses. Amortization is calculated using the straight-line method over the estimated useful lives of the assets: ten years.
See also Note 2C g and Note 2C k. | |||||
| NOTE 8 - | TAXES ON INCOME | ||
| | | | |
| | a. | Israeli taxation | |
| | | 1. | The Israeli corporate tax rate for 2020 and 2019 is 23%.
|
| | | 2. | Tax Benefits from the Encouragement of Capital Investments Law, 1959 ("The Encouragement Law") |
| | | | Starcom Israel presents its financial statements to the tax authorities as an Approved Enterprise. In the framework of the Law for Change of Priorities, an increase in tax rates was approved, commencing with 2014 and thereafter, on revenues from an approved enterprise, as stated in the Encouragement Law for an Approved Enterprise. An eligible company in Development Area A was entitled to a tax rate of 9% during 2015. During 2016 an amendment to the law was confirmed according to which an eligible company in Development Area A is entitled to a tax rate of 7.5% as of 2017. In an area that is not Development Area A, the tax rate will be 16%. Concurrently, the tax rate on dividend, for distribution from January 1, 2014, the source of which is preferred income as stated in the Encouragement Law, is 20%. Starcom Israel is subject to a tax rate of 16% for the years 2020 and 2019.
|
| | | 3. | Starcom Israel has carryforward operating tax losses of approximately NIS 30 million as of December 31, 2020 (NIS 27 million as of December 31, 2019). As for deferred tax assets see Note 2C(r). Starcom Israel has been assessed by the Income Tax Authorities up to and including the year 2017. |
| | | | |
| | b. | Jersey taxation | |
| |
| Taxable income of the Company and Starcom Jersey is subject to tax at the rate of zero percent for the years 2020 and 2019. | |
| | | | |
|
| 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 2020 or was recorded in 2019. | |
| NOTE 9 - | OTHER ACCOUNTS PAYABLE | ||||
|
| | | December 31 | ||
|
| | | 2020 | | 2019 |
|
| Employees and payroll accruals | | 303 | | 223 |
|
| Accrued expenses and notes payable | | - | | 4 |
|
| | | 303 | | 227 |
| NOTE 10 - | LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES | ||||||||||||||||
|
| | | | ||||||||||||||
| 1. | Composition: | | December 31 | ||||||||||||||
|
| | 2020 | | 2019 | |||||||||||||
|
| Long-term liability | 315 | | 303 | |||||||||||||
|
| Less: current maturities | (12) | | (136) | |||||||||||||
|
| | 303 | | 167 | |||||||||||||
| 2. | Aggregate maturities of long-term loans for years subsequent to December 31, 2020 are as follows: | ||||||||||||||||
| | | | | | Amount | ||||||||||||
| | First year | | | | 12 | ||||||||||||
| | Second year | | | | 74 | ||||||||||||
| | Third year | | | | 74 | ||||||||||||
| | Fourth onwards | | | | 155 | ||||||||||||
| | | | | | 315 | ||||||||||||
| 3. | Additional information regarding long-term loans: |
| |||||||||||||||
|
Loan # |
Date Received | |
Amount Received NIS (U. S. dollars) | |
Annual Interest Rate | |
Loan Terms and Maturity Dates | |
Interest Payment Terms | ||||||||
| 1. | June 3, 2018 | | 150 ($40) | | Prime + 3.85 | | 36 equal monthly installments including principal and interest | | Monthly commencing 20 March 2018 | ||||||||
| 2. | Dec 09, 2020 | | 1,000 ($310) | | Prime + 1.5 | | 48 equal monthly installments including principal and interest (once year grace for principal) * | | Monthly commencing 09 Dec 2020 | ||||||||
| | See also Note 13. | ||||||||||||||||
| | *The loan is a state-guaranteed loan, received as assistance due to the spread of the Covid -19 virus, the state pays the interest for the first year. See also Note 25. | ||||||||||||||||
| | | | | | | | | | | ||||||||
| NOTE 11 -
| FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS
During March 2020, The Company received from Directors Michael Rosenberg (via Montrose Securities Ltd), Avi Engel and Igor Vatenmacher and an employee (hereinafter: "the lenders") loans in the total amount of $290 thousand (£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, as detailed below:
|
| | The convertible loan bears interest at the rate of 8% per annum calculated by reference to the principal amount of the convertible loan. If not converted, the loans will be repayable on September 30, 2021.
In addition, the lenders received fully vested warrants to subscribe a total of 4 million further shares at an exercise price of £0.015 per share. Any unexercised warrants expire at the end of two-years from grant.
The loan was evaluated and divided into different components by independent appraisers as follows: Conversion component at fair value - $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 income regarding these components in the statement of comprehensive loss for the reported period amounted to $19 thousand, net.
See also Note 20.
Composition: | |||||
| | | Loan component | | Option | | Warrant |
| | Balance as of January 1, 2020 | - | | - | | - |
| | Additions during the year | 210 | | 59 | | 12 |
| | Finance (income) expenses | 73 | | (17) | | (2) |
| | Payments | (29) | | - | | - |
| | Balance as of December 31, 2020 | 254 | | 42 | | 10 |
| | | | | | | |
| NOTE 12 - | SHORT-TERM BANK LOAN | ||
| | | | |
| | | During July 2020, Starcom Israel signed a loan agreement with an Israeli bank in order to receive loans and credits in an aggregate principal amount that will not exceed NIS 5 million (hereinafter - "the Loan"). The loan will bear annual interest in the amount of Prime + 3%, calculated and payable on a monthly basis, to be repaid after a year. In the framework of the financial agreement that was signed, the Company is obligated to maintain financials covenants in regard to the Groups' EBITDA, Equity and growth targets.
As of December 31, 2020, the Company is in breach of the financial covenants. | |
| NOTE 13 - | CHARGES |
| |
| | |
In respect of the short-term and long-term bank loans set out in Notes 10 and 12 above-
| |
| | 1. | A charge was placed on the Starcom Israel's vehicle. | |
| | 2. | A floating pledge was placed on the assets of Starcom Israel. | |
| | 3. | A cross Group charge was placed. | |
| | 4. | A Pledge on the bank deposit of Starcom Israel was placed. | |
| NOTE 14 - | EQUITY |
| |
| | a. | Composition - common stock of no-par value, issued and outstanding 351,479,801 shares and 345,329,513 shares as of December 31, 2020 and December 31, 2019, respectively. | |
| | b. | A Company share grants to its holder voting rights, rights to receive dividends and rights to net assets upon dissolution. | |
| | c. | Share-based payment
The following table lists the number of share options and warrants and the exercise prices of such during the current year: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |
* See Note 11.
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | d. | During May 2020 the Company issued 6,150,288 new ordinary shares to Mr. Avi Hartmann, the Company's CEO ("Ordinary Shares") at a price of 1 penny per Ordinary Share in order to convert $74 thousand (£61 thousand) of historic unpaid salary. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | (*) | ||||
| NOTE 15 - | COST OF SALES | ||||
|
| | | Year Ended December 31, | ||
|
| | | 2020 | | 2019 |
|
| Purchases and other | 2,655 | | 3,883 | |
|
| Amortization | 500 | | 457 | |
|
| Decrease (Increase) in inventory | 219 | | (321) | |
|
| | | 3,374 | | 4,019 |
| | | ||||
| NOTE 16 - | GENERAL AND ADMINISTRATIVE EXPENSES | |||||
| | | |||||
|
| | | Year Ended December 31, | |||
|
| | | 2020 | | 2019 | |
|
| a. | | | | ||
|
| Salaries and related expenses (see also Note 20) | 1,167 | | 1,268 | ||
|
| Professional services (1) | | 557 | | 633 | |
|
| Doubtful accounts and bad debts | | 550 | | 49 | |
|
| Depreciation | | 225 | | 216 | |
|
| Office maintenance | | 112 | | 153 | |
|
| Car maintenance | | 69 | | 104 | |
|
| | | 2,680 | | 2,423 | |
|
|
(1) Including share-based payment to directors and senior management in the amounts of $181 and $255 thousand for the years ended December 31, 2020 and 2019, respectively. See also Note 14c | |||||
b. Average Number of Staff Members by Category:
| | | |||
| | Year Ended December 31, | |||
| | 2020 | | 2019 | |
| Sales and marketing | | 5 | | 6 |
| Research and development | | 3 | | 3 |
| General and administrative | | 12 | | 15 |
| | | 20 | | 24 |
| NOTE 17 - | OTHER INCOME (EXPENSES) | |||
|
| | Year Ended December 31, | ||
|
| | 2020 | | 2019 |
|
| Capital loss from sale of property, plant and equipment | - | | (51) |
|
| Other income (expenses) | 24 | | (23) |
|
| | 24 | | (74) |
| NOTE 18A - | FINANCE INCOME | ||||
|
| | | | ||
|
| | | 2020 | | 2019 |
|
| Interest from deposits | | 1 | | - |
|
| | | | | |
| NOTE 18B - FINANCE EXPENSES | |||||
|
| Exchange rate differences | | (140) | | (183) |
|
| Interest to banks and others | | (62) | | (31) |
|
| Bank charges | | (43) | | (77) |
|
| Interest to suppliers | | (16) | | (13) |
|
| Interest to related parties | | (10) | | (9) |
|
| | | (271) | | (313) |
|
| | | | | |
|
| Net finance expenses | | (270) | | (313) |
| NOTE 19 - | LOSS PER SHARE | ||||
| | | ||||
| | Weighted average number of shares used in computing basic and diluted loss per share: | ||||
|
| | | Year Ended December 31, | ||
|
| | | 2020 | | 2019 |
|
| Number of shares | | 349,205,039 | | 323,934,018 |
| NOTE 20 - | RELATED PARTIES | ||||||
| | | |
| ||||
| | a. | The related parties that own shares in the Group are: |
| ||||
| | | Mr. Avraham Hartman (7.0%), Mr. Uri Hartman (6.8%), Mr. Doron Kedem (6.8%). |
| ||||
| | | |
| ||||
| | b. | Short-term balances: | | December 31 |
| ||
|
| | 2020 | | 2019 |
| ||
|
| Credit balances | | | |
| ||
|
| Avi Hartmann | (56) | | (176) |
| ||
|
| Uri Hartmann | (444) | | (373) |
| ||
|
| Doron Kedem | (173) | | (173) |
| ||
|
| Total Credit Balance | (673) | | (722) |
| ||
|
| Loans | | | |
| ||
|
| Avi Hartmann | 87 | | 73 |
| ||
|
| Uri Hartmann | (236) | | (226) |
| ||
|
| Doron Kedem | 207 | | 207 |
| ||
|
| Total Loans | 58 | | 54 |
| ||
|
| | | | |
| ||
|
| | (615) | | (668) |
| ||
| | c.
| Shareholders' credit balances 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, | ||
| | | | 2020 | | 2019 | |
| | | Key management compensation: | | | | |
| | | Total salaries and related expenses for shareholders/related parties |
312 | |
365 | |
| | | Total share-based payment | 80 | | 112 | |
| | | Interest to related parties | 10 | | 9 | |
| | | | ||||
| | 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. | ||||
| | | See also Note 11 and Note 14. | ||||
| 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, 2020 |
| ||||||||||||||||
| | NIS | | U.S. Dollar | | GBP | | Euro | | Total | |||||||||
| |
Unlinked | | Variable Interest | | Unlinked | | |
| ||||||||||
| | |
| ||||||||||||||||
| Financial Assets: | | | | | | | | | | |
| |||||||
| Cash and cash equivalents | 2 | | - | | 251 | | - | 11 | | 264 |
| |||||||
| Short-term deposit | - | | 150 | | - | | - | - | | 150 |
| |||||||
| Trade receivables, net | 233 | | - | | 872 | | 5 | 19 | | 1,129 |
| |||||||
| Other accounts receivable | 132 | | - | | - | | 5 | - | | 137 |
| |||||||
| | | | | | | | | | | |
| |||||||
| Financial Liabilities: | | | | | | | | | | |
| |||||||
| Short-term bank credit | - | | (25) | | - | | - | - | | (25) |
| |||||||
| Short term bank loan | - | | (739) | | - | | - | - | | (739) |
| |||||||
| Trade payables | - | | (1,018) | | (412) | | (146) | (3) | | (1,579) |
| |||||||
| Other accounts payable | (303) | | - | | - | | - | - | | (303) |
| |||||||
| Leasehold liabilities | - | | (372) | | - | | - | - | | (372) |
| |||||||
| Related parties | - | | (615) | | - | | - | - | | (615) |
| |||||||
| Long-term loans from banks | - | | (315) | | - | | - | | - | | (315) |
| ||||||
| Financial liabilities of convertible loans |
- | |
(196) | |
- | |
(110) | |
- | |
(306) |
| ||||||
| | 64 | | (3,130) | | 711 | | (246) | | 27 | | (2,574) |
| ||||||
| | December 31, 2019 | |||||||||||
| | NIS | | U.S. Dollar | | GBP | | Euro | | Total | |||
| |
Unlinked | | Variable Interest | |
Unlinked | | | |||||
| | |
| ||||||||||
| Financial Assets: | | | | | | | | | | | | |
| Cash and cash equivalents | - | | - | | 158 | | - | | - | | 158 | |
| Short-term deposit | - | | 61 | | - | | - | | - | | 61 | |
| Trade receivables, net | 212 | | - | | 1,741 | | 5 | | 28 | | 1,986 | |
| Other accounts receivable | 162 | | - | | - | | 7 | | - | | 169 | |
| | | | | | | | | | | | | |
| Financial Liabilities: | | | | | | | | | | | | |
| Short-term bank credit | - | | (79) | | - | | - | | - | | (79) | |
| Trade payables | - | | (1,490) | | (517) | | (71) | | (3) | | (2,081) | |
| Other accounts payable | (223) | | - | | - | | (4) | | - | | (227) | |
| Leasehold liabilities | - | | (250) | | - | | - | | - | | (250) | |
| Related parties | - | | (668) | | - | | - | | - | | (668) | |
| Long-term loans from banks | - | | (303) | | - | | - | | - | | (303) | |
| | 151 | |
(2,729) | |
1,382 | |
(63) | |
25 | |
(1,234) | |
| Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar Against the NIS: | ||||||||||||||||||||
| | | | | | 5% Increase in Exchange Rate | | 5% Decrease in Exchange Rate | |||||||||||||
| For the Year Ended December 31 | | | | | ||||||||||||||||
| 2020 | | (153) | | 153 | ||||||||||||||||
| 2019 | | (126) | | 126 | ||||||||||||||||
| | | | | | | | | |||||||||||||
| Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar Against the Euro: | ||||||||||||||||||||
| | | | | | 5% Increase in Exchange Rate | | 5% Decrease in Exchange Rate | |||||||||||||
| For the Year Ended December 31 | | | | | ||||||||||||||||
| 2020 | | 1 | | (1) | ||||||||||||||||
| 2019 | | 1 | | (1) | ||||||||||||||||
| | | | | | | | | |||||||||||||
| Analysis of Sensitivity to Changes in the Exchange Rate of the U.S. Dollar Against the GBP: | ||||||||||||||||||||
| | | | | | 5% Increase in Exchange Rate | | 5% Decrease in Exchange Rate | |||||||||||||
| For the Year Ended December 31 | | | | | ||||||||||||||||
| 2020 | | (12) | | 12 | ||||||||||||||||
| 2019 | | (3) | | 3 | ||||||||||||||||
| | c. | Fair value |
| | | As of December 31, 2020, 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. |
| 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 between 3 to 4 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, 2019 | | 79 | | 100 | | 179 |
| Additions | | 185 | | - | | 185 |
| Depreciation expenses | | (84) | | (52) | | (136) |
| Balance at December 31, 2019 | | 180 | | 48 | | 228 |
| Additions | | 111 | | 138 | | 249 |
| Depreciation expenses | | (85) | | (62) | | (147) |
| Balance at December 31, 2020 | | 206 | | 124 | | 330 |
| | | |||||
| | Below are the carrying amounts of lease liabilities (included under Leasehold Liabilities) and the movements during the period: | |||||
| | | |||||
| | | 2020 | | 2019 |
| |
| As at January 1 | | (250) | | (194) |
| |
| Additions | | (249) | | (185) |
| |
| Exchange rate differences and others | | (22) | | 16 |
| |
| Accretion of interest | | (13) | | (15) |
| |
| Payments | | 162 | | 128 |
| |
| Balance at December 31 | | (372) | | (250) |
| |
| Current | | (136) | | (135) |
| |
| Non-Current | | (236) | | (115) |
| |
| | | |||||||||
| | Maturity analysis - contractual undiscounted cash flows | |||||||||
| |
| |||||||||
| | | |||||||||
| | The following are the amounts recognized in profit or loss: |
| | | 2020 | | 2019 |
| Depreciation expenses of right-of-use assets | | (147) | | (136) |
| Interest income (expenses) on lease liabilities | | (13) | | 16 |
| Accretion of interest | | (22) | | (15) |
| Total amount recognized in profit or loss | | (182) | | (135) |
| | | Within 5 years | | More than 5 years | | Total |
| |
| Extension options expected not to be exercised | | | | - | | |
| |
| Termination options expected to be exercised | | - | | - | | - |
| |
| December 31, 2020 | | | | -- | | |
| |
| | | | | | | |
| |
| Extension options expected not to be exercised | | 197 | | - | | 197 |
| |
| Termination options expected to be exercised | | - | | - | | - |
| |
| December 31, 2019 | | 197 | | - | | 197 |
| |
| | The Group had total cash outflows for leases of 162 in 2020 (128 in 2019). The Group also had non-cash additions to right-of-use assets and lease liabilities of 249 in 2020 (185 in 2019) | |||||||
| | | |||||||
| | The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and to align with the Group's business needs. Management performs significant judgment operations in determining whether these extension and termination options are reasonably certain to be exercised. | |||||||
| | Below are the undiscounted potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term: | |||||||
| NOTE 23 - | CUSTOMERS AND GEOGRAPHIC INFORMATION |
| | a. | Major customers' data as a percentage of total consolidated sales to unaffiliated customers: |
| | | |
| | | Year Ended December 31, | ||
| | | 2020 | | 2019 |
| Customer A | | 14% | | 10% |
| Customer B | | 12% | | 6% |
| Customer C | | 5% | | 6% |
| | b. | Breakdown of consolidated sales to unaffiliated customers according to geographic regions: |
| | | Year Ended December 31, | ||
| | | 2020 | | 2019 |
| Latin America | | 15% | | 15% |
| Europe | | 16% | | 16% |
| Africa | | 33% | | 31% |
| Asia | | 9% | | 10% |
| Middle East | | 20% | | 17% |
| North America | | 7% | | 11% |
| Total | | 100% | | 100% |
| 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 31.12.2020: | | | | | |
| Segment revenues | | | 2,833 | | 2,208 |
| Cost of sales | | | (3,070) | | (304) |
| Gross profit (loss) | | | (237) | | 1,904 |
| | | | | | |
| Year Ended 31.12.2019: | | | | | |
| Segment revenues | | | 4,796 | | 2,021 |
| Cost of sales | | | (3,805) | | (214) |
| Gross profit | | | 991 | | 1,807 |
| NOTE 25 - | SIGNIFICANT EVENTS DURING THE REPORTED PERIOD (COVID-19)
Due to the pandemic outbreak since March 2020, most of the countries across the Globe had taken extra measures to prevent and reduce COVID-19 exposure. Among the actions taken were noted: citizens transport limitations, closing its borders, shutting some business activity, limitation of number of employees per square feet, shutting the educations 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 Operational costs were reduced by approximately 20 per cent with effect from March 2020 including unpaid leave for employees. In parallel the company submitted applications and secured both government supported loan for long term amounted $315 thousands (See also note 10) and grants amounted $196 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. |
-ends-
For further information please contact:
| Starcom Plc Michael Rosenberg, Chairman Avi Hartmann, CEO
|
07785 727595 +972 5477 35663 |
| Allenby Capital Limited (Nominated Adviser and Joint Broker) Jeremy Porter/Asha Chotai
| 020 3328 5656 |
| Peterhouse Capital Limited (Joint Broker) Lucy Williams/Charles Goodfellow/Eran Zucker
| 020 7469 0930 |
| Leander PR (Financial PR) Christian Taylor-Wilkinson
| 07795 168 157 |
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