TIDMSTAR
RNS Number : 4177T
Starcom PLC
25 March 2021
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
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
----- -----------
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
===== ===========
EQUITY AND LIABILITIES
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
-----
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,
Note 2020 2019
------- -------------------
Revenues 5,041 6,817
Cost of sales 15 (3,374) (4,019)
-------
Gross profit 1,667 2,798
------- -------------------
Operating expenses:
Research and development (206) (231)
Selling and marketing (580) (776)
General and administrative expenses 16 (2,680) (2,423)
Other income (expenses) 17 24 (74)
------- -------------------
Total operating expenses (3,442) (3,504)
------- -------------------
Operating loss (1,775) (706)
Finance income 18A 1 -
Finance expenses 18B (271) (313)
-------
Net finance expenses (270) (313)
------- -------------------
Total comprehensive loss for the year (2,045) (1,019)
======= ===================
Loss per share:
Basic and diluted loss per share 19 (0.006) (0.003)
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
Capital Reserve
Premium in Regard
Share on to Share-Based Accumulated
Capital Shares Capital Reserve Payment Transactions Loss Total
-------- ------- -------------------- ------------------------ ------------ ------------
Balance as of January
1, 2019 - 11,460 89 687 (8,375) 3,861
Proceeds from issued
share capital, net of
mobilization costs - 794 - - - 794
Share based payment (see
Note 14c) - - - 255 - 255
Comprehensive loss for
the year - - - - (1,019) (1,019)
-------- ------- -------------------- ------------------------ ------------ ----------
Balance as of December
31, 2019 - 12,254 89 942 (9,394) 3,891
Issued share capital,
net of expenses (see
Note 1 4 ) - 74 - - - 74
Share based payment (see
Note 14c) - - - 181 - 181
Comprehensive loss for
the year - - - - (2,045) (2,045)
-------- ------- -------------------- ------------------------ ------------ ----------
Balance as of December
31, 2020 - 12,328 89 1,123 (11,439) 2,101
======== ======= ==================== ======================== ============ ==========
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)
Net cash used in operating activities (389) (8)
-------- -------------------
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)
-------- -------------------
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, 290 -
net
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
-------- -------------------
Net cash provided by financing activities 883 542
-------- -------------------
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
======== ===================
Appendix A - Additional Information
Interest paid during the year (69) (30)
======== ===================
Appendix B - Non-Cash Financing Activities
Issuance of shares to a related party
in payment of debt 74 15
======== ===================
Significant non-cash transactions (entering into new lease agreements)
are disclosed in Note 2 2
The accompanying notes are an integral part of the consolidated
financial statements.
STARCOM PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL
-
a. The Reporting Entity
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.
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.
b. Definitions in these financial statements:
1. International Financial Reporting Standards ("IFRS")
- Standards and interpretations adopted by the
International Accounting Standards Board ("IASB")
that include international financial reporting
standards (IFRS) and international accounting standards
(IAS), with the addition of interpretations to
these Standards as determined by the International
Financial Reporting Interpretations Committee (IFRIC)
or interpretations determined by the Standards
Interpretation Committee (SIC), respectively.
2. The Company - 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 in International
Accounting Standard No. 24.
c. Operating Turnover Period
The ordinary operating period turnover for the Group
is a year. As a result, the current assets and current
liabilities include items that are expected and intended
to be realized at the end of the ordinary operating
turnover period for the Group.
d. Functional and Presentation Currency
The consolidated financial statements are presented
in U.S. dollars (hereinafter: "dollars") that is the
functional currency of the Group and is rounded to
the nearest thousands, except when otherwise indicated.
The dollar is the currency that represents the economic
environment in which the Group operates.
The Group's transactions and balances denominated
in dollars are presented at their original amounts.
Non-dollar transactions and balances have been remeasured
to dollars. All transaction gains and losses from
remeasurement of monetary assets and liabilities denominated
in non-dollar currencies are reflected in the statements
of comprehensive income as financial income or expenses,
as appropriate.
a. Declaration in regard to implementation of International
Financial Reporting Standards (IFRS)
The consolidated financial statements of the Company
have been prepared in accordance with IFRS and related
clarifications published by the IASB.
The Company's Board of Directors authorized the Consolidated
Financial Statements on March 24, 2021.
b. Basis of Measurement
The consolidated financial statements have been prepared
on the historical cost basis, except for financial
instruments at fair value through profit or loss that
are stated at fair value.
NOTE 2B USE OF ESTIMATES AND JUDGMENTS
-
The preparation of financial statements in conformity
with IFRS requires management to make judgments, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these
estimates.
Upon formulation of accounting estimates used in preparation
of the Group financial statements, management is required
to make assumptions in regard to circumstances and events
that are significantly uncertain. Management arrives
at these decisions based on prior experiences, various
facts, external items and reasonable assumptions in accordance
with the circumstances related to each assumption.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised
and in any future periods affected.
Information about critical judgment in applying accounting
policies that have a significant effect on the amounts
recognized in the consolidated financial statements is
included in the following Notes:
Note 7 - Capitalization of development costs and amortization
of these costs.
Note 14 - Options issued.
Information about assumptions and estimations that have
significant risk of resulting in a material adjustment
is included in the following Notes:
Note 3B - Allowance for doubtful accounts.
Note 7 - Calculation of amortization.
Note 8 - Utilization of tax losses.
Note 11 - Financial liabilities of convertible loans
and warrants
NOTE 2C SIGNIFICANT ACCOUNTING POLICIES
-
a. Basis of consolidation
All intra-Group transactions, balances, income and
expenses of the companies are eliminated on consolidation.
b. Foreign currency and linkage basis
Balances stated in foreign currency or linked to a
foreign currency have been included in the consolidated
financial statements according to the prevailing representative
exchange rates at the balance sheet date. Balances
linked to the Consumer Price Index in Israel are included
in accordance with the Index published prior to balance
sheet date. Linkage and exchange rate differences
are included in the statement of comprehensive income
when incurred.
As of December 31,
2020 2019
CPI (in points) * 124.19 125.06
Exchange Rate of NIS in
U.S. $ 0.311 0.289
For the Year Ended December
31,
2020 2019
Change in CPI (0.69%) 0.6%
Change in Exchange Rate
of NIS 7.6% 8.3%
* Base Index 2002 = 100.
c. Financial instruments
(i) Non-derivative financial assets
The Group initially recognizes loans and receivables
on the date that they are originated. All other financial
assets (including assets designated as at fair value
through profit or loss) are recognized initially on
the trade date, which is the date that the Group becomes
a party to the contractual provisions of the instrument.
The Group derecognizes a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially
all the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred
financial assets that is created or retained by the
Group is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the
net amount presented in the statement of financial
position when, and only when, the Group has a legal
right to offset the amounts and intends either to
settle on a net basis or to realize the asset and
settle the liability simultaneously.
The Group classified non-derivative financial assets
into the following categories: Financial assets at
fair value, through profit or loss, held-to-maturity
financial assets, loans and receivables, and available-for-sale
financial assets.
Financial assets at fair value through profit or loss:
A financial asset is classified as at fair value through
profit or loss if it is classified as held for trading
or is designated as such on initial recognition. Financial
assets are designated as at fair value through profit
or loss if the Group manages such investments and
makes purchase and sale decisions based on their fair
value in accordance with the Group's documented risk
management or investment strategy. Attributable transaction
costs are recognized in profit or loss as incurred.
Financial assets at fair value through profit or loss
are measured at fair value and changes therein, which
take into account any dividend income, are recognized
in profit or loss.
Financial assets designated as at fair value through
profit or loss comprise equity securities that otherwise
would have been classified as available for sale.
Loans and receivables:
Loans and receivables are financial assets with fixed
or determinable payments that are not quoted in an
active market. Such assets are recognized initially
at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and
receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Loans and receivables are comprised of trade and other
receivables, excluding short -term trade and other
receivables where the interest amount is immaterial.
(ii) Non-derivative financial liabilities
The Group initially recognizes debt securities issued
and subordinated liabilities on the date that they
originated. All other financial liabilities (including
liabilities designated as at fair value through profit
or loss) are recognized initially on the trade date,
which is the date that the Group becomes a party to
the contractual provisions of the instrument.
The Group derecognizes a financial liability when
its contractual obligations are discharged, cancelled
or expire.
The Group classifies non-derivative financial liabilities
into the other financial liabilities category. Such
financial liabilities are recognized initially at
fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these financial
liabilities are measured at amortized cost using the
effective interest method.
Other financial liabilities comprise loans and borrowings,
bank overdrafts, and trade and other payables.
(iii) Compound financial instruments
Compound financial instruments issued by the Company
comprised: an interest-bearing loan with a conversion
option issued to the lender.
The option component was recognized initially at its
fair value using a binomial calculation.
The liability component was recognized initially as
the difference between the loan amount and the option
component
Any directly attributable transaction costs are allocated
to the liability and equity components in proportion
to their initial carrying amounts.
Subsequent to initial recognition, the liability component
of a compound financial instrument is measured at
amortized cost using the effective interest method.
The equity component of a compound financial instrument
is not remeasured subsequent to initial recognition.
Interest related to the financial liability is recognized
in profit or loss.
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.
Allowance for doubtful accounts
m
.
The Group evaluates its allowance for doubtful accounts
on a regular basis through periodic reviews of the
collectability of the receivables in light of historical
experience, adverse situations that may affect the
repayment abilities of its customers, and prevailing
economic conditions. This evaluation is inherently
subjective, as it requires estimates that are susceptible
to significant revision as more information becomes
available.
The Group performs ongoing credit evaluations of its
customers and generally does not require collateral
because (1) management believes it has certain collection
measures in-place to limit the potential for significant
losses, and (2) because of the nature of its customers
that comprise the Group's customer base. Receivables
are written off when the Group abandons its collection
efforts. An allowance for doubtful accounts is provided
with respect to those amounts that the Group has determined
to be doubtful of collection.
n. Concentrations of credit risk
Financial instruments that potentially subject the
Group to concentrations of credit risk consist principally
of cash and cash equivalents, short-term deposits
and trade receivables.
o. Provisions
Provisions are recognized when the Group has a current
obligation (legal or derived) as a result of a past
occurrence that can be reliably measured, that will
in all probability result in the Group being required
to provide additional benefits in order to settle
this obligation. Provisions are determined by capitalization
of projected cash flows at a rate prior to taxes that
reflects the current market preparation for the money
duration and the specific risks for the liability.
p. Employee benefits
The Group has several benefit plans for its employees:
1. Short-term employee benefits -
Short-term employee benefits include salaries,
vacation days, recreation and deposits to the National
Insurance Institute that are recognized as expenses
when rendered.
2. Benefits upon retirement -
Benefits upon retirement, generally funded by deposits
to insurance companies and pension funds, are classified
as restricted deposit plans or as restricted benefits.
All Group employees have restricted deposit plans,
in accordance with Section 14 of the Severance
Pay Law (Israel), whereby the Group pays fixed
amounts without bearing any legal responsibility
to pay additional amounts thereto even if the fund
did not accumulate enough amounts to pay the entire
benefit amount to the employee that relates to
the services he rendered during the current and
prior periods. Deposits to the restricted plan
are classified as for benefits or for compensation
and are recognized as an expense upon deposit to
the plan concurrent with receiving services from
the employee and no additional provision is required
in the financial statements.
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
-
Office
Computers Furniture
and Software and Equipment Laboratory Leasehold
Equipment Improvements Vehicles* Total
-------------- -------------- ------------- --------------- ------------ --------
Cost:
Balance as
of January
c 1, 2020 194 121 279 60 152 806
Additions
during the
year 6 6 6 - - 18
Balance as
of December
31, 2020 200 127 285 60 152 824
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1, 2020 164 85 93 17 69 428
Depreciation
during the
year 13 8 30 6 21 78
Balance as
of December
31, 2020 177 93 123 23 90 506
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31, 2020 23 34 162 37 62 318
============== ============== ============= =============== ============ ========
* See also Note 13.
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:
(1, 977
Balance as of January 1, 2019 )
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 31 5 303
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:
Amount Annual Interest
Received Interest Loan Terms Payment
Loan # Date Received NIS (U. Rate and Terms
S. dollars) Maturity Dates
---------------------- ---------------- ---------- ------------------ ----------------
36 equal monthly
installments Monthly
including commencing
Prime principal 20 March
1. June 3, 2018 150 ($40) + 3.85 and interest 2018
48 equal monthly
installments
including
principal
and interest
(once year Monthly
grace for commencing
Prime principal) 09 Dec
2. Dec 09, 2020 1,000 ($310) + 1.5 * 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
(GBP244 thousand) in the form of convertible loans enabling
the lenders to convert the loans at an exercise price
of GBP0.0125 per share at any time up to September 30,
2021, as detailed below:
Lender Value of Loan provided Number of
Warrants
granted
Montrose Securities Limited,
a company controlled by
Michael Rosenberg (Non-Executive
Chairman) GBP100,000 1,600,000
------------------------- ----------
429,330 Israeli
Shekels
Avi Engel (approximately
(Non-Executive Director) GBP100,000) 1,600,000
------------------------- ----------
100,000 Israeli
Igor Vatenmacher Shekels (approximately
(Chief Financial Officer) GBP21,800) 400,000
------------------------- ----------
100,000 Israeli
Shekels (approximately
Starcom Employee GBP21,800) 400,000
------------------------- ----------
The convertible loan bears interest at the rate of 8%
per annum calculated by reference to the principal amount
of the convertible loan. If not converted, the loans
will be repayable on September 30, 2021.
In addition, the lenders received fully vested warrants
to subscribe a total of 4 million further shares at an
exercise price of GBP0.015 per share. Any unexercised
warrants expire at the end of two-years from grant.
The loan was evaluated and divided into different components
by independent appraisers as follows:
Conversion component at fair value - $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:
2020 2019
---------------------- ---------------------
Weighted Weighted
average average
Number exercise Number of exercise
of options price options price
----------- --------- ---------- ---------
GBP GBP
---------------------- ---------------------
Share options outstanding
at beginning of year 49,293,947 0.027 33,496,480 0.037
Warrants granted during
the year* 4,000,000 0.015 16,290,000 0.007
Options & Warrants exercised
during the year - - -
Options & Warrants expired
during the year 3,340,000 0.018 (492,533) 0.04
Share options & warrants
outstanding at end of year 49,953,947 0.027 49,293,947 0.027
=========== ========= ========== =========
Share options & warrants
exercisable at end of year 45,953,947 0.028 27,587,280 0.038
=========== ========= ========== =========
* 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 (GBP61 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 1 4 c
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. GBP Euro Total
Dollar
------------------------ ---------- -------- ------- ----------
Variable
Unlinked Interest Unlinked
----------- ---------- ------------------------------- --------
Financial Assets:
Cash and cash
equivalents 2 - 251 - 11 264
Short-term deposit - 150 - - - 150
Trade receivables,
net 233 - 872 5 19 1,129
Other accounts
receivable 132 - - 5 - 137
Financial Liabilities:
Short-term bank credit - (25) - - - (25)
Short term bank loan - (739) - - - (739)
Trade payables - (1,018) (412) (146) (3) (1,579)
Other accounts payable (303) - - - - (303)
Leasehold liabilities - (372) - - - (372)
Related parties - (615) - - - (615)
Long-term loans from
banks - (315) - - - (315)
Financial liabilities
of convertible loans - (196) - (110) - (306)
64 (3,130) 711 (246) 27 (2,574)
=========== ========== ========== ======== ======= ========
December 31, 2019
----------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
------------------------ -------- ------- ------- ------------
Variable
Unlinked 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 5% Decrease
in in
Exchange Rate 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 5% Decrease
in in
Exchange Rate 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 5% Decrease
in in
Exchange Rate 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
Less than one year 134
One to five years 118
Total undiscounted lease liabilities at December
31, 2020 252
====
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 More than Total
5 years 5 years
--------- ---------- ------
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 2,8 33 2,208
Cost of sales (3,070) (304)
--------- ------
1,90
Gross profit (loss) (237) 4
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 07785 727595
Avi Hartmann, CEO +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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END
FR FFFLVVLISFIL
(END) Dow Jones Newswires
March 25, 2021 03:00 ET (07:00 GMT)
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