UNITED STATES
☐
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Ordinary Shares, NIS 0.25 Par Value
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SPCB
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The NASDAQ Capital Market
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Emerging growth company ☐
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U.S. GAAP ☒
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International Financial Reporting
Standards as issued by the International Accounting Standards Board ☐ |
Other ☐
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Year Ended December 31,
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|||||||||||||||||||
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2021 |
2020 |
2019 |
2018 |
2017 |
|||||||||||||||
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(U.S.
dollars in thousands, except per share data) |
|||||||||||||||||||
Summary of Statement of Operations Data:
|
||||||||||||||||||||
Revenues |
12,267 |
11,770 |
16,475 |
21,882 |
33,264 |
|||||||||||||||
Cost of revenues |
6,063 |
6,189 |
10,127 |
13,743 |
20,351 |
|||||||||||||||
Gross profit |
6,204 |
5,581 |
6,348 |
8,139 |
12,913 |
|||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
2,763 |
2,386 |
3,971 |
4,790 |
7,238 |
|||||||||||||||
Selling and marketing |
1,655 |
1,721 |
3,526 |
5,005 |
8,099 |
|||||||||||||||
General and administrative |
4,149 |
4,074 |
5,389 |
5,748 |
6,113 |
|||||||||||||||
Other (income) expenses |
4,374 |
1,149 |
1,635 |
2,271 |
(2,021 |
) | ||||||||||||||
Total operating expenses |
12,941 |
9,330 |
14,521 |
17,814 |
19,429 |
|||||||||||||||
Operating loss |
(6,737 |
) |
(3,749 |
) |
(8,173 |
) |
(9,675 |
) |
(6,516 |
) | ||||||||||
Financial expenses, net |
(3,396 |
) |
(4,113 |
) |
(3,289 |
) |
(335 |
) |
(538 |
) | ||||||||||
loss before income tax |
(10,133 |
) |
(7,862 |
) |
(11,462 |
) |
(10,010 |
) |
(7,054 |
) | ||||||||||
Income tax (expense) benefit |
(5 |
) |
(5 |
) |
(43 |
) |
5,730 |
393 |
||||||||||||
|
||||||||||||||||||||
Net (loss) |
(10,138 |
) |
(7,867 |
) |
(11,505 |
) |
(15,740 |
) |
(6,661 |
) | ||||||||||
|
||||||||||||||||||||
Per Share Data: |
||||||||||||||||||||
Basic loss per share |
(0.39 |
) |
(0.45 |
) |
(0.71 |
) |
(1.03 |
) |
(0.45 |
) | ||||||||||
Diluted loss per share |
(0.39 |
) |
(0.45 |
) |
(0.71 |
) |
(1.03 |
) |
(0.45 |
) |
|
2021 |
2020 |
2019 |
2018 |
2017 |
|||||||||||||||
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(U.S. dollars in thousands,
except per share data) |
|||||||||||||||||||
Summary of Balance Sheet Data: |
||||||||||||||||||||
Cash and cash equivalents and restricted cash |
4,604 |
3,952 |
1,210 |
1,639 |
1,037 |
|||||||||||||||
Total Current Assets |
26,108 |
24,942 |
23,147 |
25,664 |
27,413 |
|||||||||||||||
TOTAL ASSETS |
42,119 |
40,344 |
40,004 |
44,349 |
54,198 |
|||||||||||||||
Total Current Liabilities |
5,603 |
19,599 |
14,313 |
13,543 |
17,960 |
|||||||||||||||
Total Long-term Liabilities |
32,124 |
15,827 |
17,359 |
11,256 |
3,531 |
|||||||||||||||
SHAREHOLDERS’ EQUITY |
4,392 |
4,919 |
8,332 |
19,550 |
32,707 |
1 | ||
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1 | ||
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1 | ||
1 | ||
1 |
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1 | ||
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16 | ||
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16 | ||
18 | ||
28 | ||
28 | ||
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29 | ||
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29 | ||
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29 | ||
34 | ||
39 | ||
39 | ||
39 | ||
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40 | ||
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40 | ||
41 | ||
43 | ||
51 | ||
52 | ||
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54 | ||
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54 | ||
54 | ||
54 | ||
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55 | ||
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55 | ||
55 | ||
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56 | ||
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56 | ||
57 | ||
57 | ||
57 | ||
57 | ||
57 | ||
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58 | ||
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58 | ||
58 | ||
63 |
63 | ||
63 | ||
68 | ||
68 | ||
68 | ||
68 |
69 | ||
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69 | ||
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69 | ||
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69 | ||
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69 | ||
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70 | ||
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70 | ||
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70 | ||
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70 | ||
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71 | ||
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71 | ||
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71 | ||
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71 | ||
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71 | ||
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72 | ||
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72 | ||
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72 | ||
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77 |
ITEM 1. |
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM
2. |
OFFER
STATISTICS AND EXPECTED TIMETABLE |
ITEM
3. |
KEY
INFORMATION |
A.
|
[reserved]
|
B.
|
Capitalization
and Indebtedness |
|
|
|
Not applicable. |
C.
|
Reasons
for the Offer and Use of Proceeds |
|
|
|
Not applicable. |
D.
|
Risk
Factors |
|
• |
the frequent need to compete against companies
or teams of companies with more financial and marketing resources and more experience than we have in bidding on and performing major
contracts; |
|
• |
the need to compete against companies or
teams of companies that may be long-term, entrenched incumbents for a particular contract we are competing for and which have, as a result,
greater domain expertise and established customer relations; |
|
• |
the substantial cost and managerial time
and effort necessary to prepare bids and proposals for contracts that may not be awarded to us; |
|
• |
the need to accurately estimate the resources
and cost structure that will be required to service any fixed-price contract that we are awarded; and |
|
• |
the expense and delay that may arise if
our competitors protest or challenge new contract awards made to us pursuant to competitive bidding or subsequent contract modifications,
and the risk that any of these protests or challenges could result in the resubmission of bids on modified specifications, or in termination,
reduction or modification of the awarded contract. |
|
• |
issue additional securities that would dilute
our current shareholders’ percentage ownership; |
|
• |
incur debt and assume liabilities; and
|
|
• |
incur large and immediate write-offs of
intangible assets, accounts receivable or other assets. |
|
• |
we may not be successful in developing and
marketing new products or product features that respond to technological change or evolving industry standards; |
|
• |
we may experience difficulties that could
delay or prevent the successful development, introduction and marketing of these new products and features; or |
|
• |
our new products and product features may
not adequately meet the requirements of the marketplace and achieve market acceptance. |
|
• |
national ID and e-Government; |
|
• |
counties and municipals; |
|
• |
public safety; |
|
• |
safe and smart cities |
|
• |
educational campus; |
|
• |
healthcare and homecare; and |
|
• |
large enterprises |
|
• |
the cost, performance and reliability of
our products and services compared to the products and services of our competitors; |
|
• |
customer perception of the benefits of our
products and solutions; |
|
• |
public perception of the intrusiveness of
these solutions and the manner in which organizations use the information collected; |
|
• |
public perception of the privacy protection
for their personal information; |
|
• |
customer satisfaction with our products
and services; and |
|
• |
marketing efforts and publicity for our
products and services. |
• |
Increased price competition
for our products, not only from our competitors but also as a consequence of customers disposing of unutilized products |
• |
Risk of excess and
obsolete inventories |
• |
Risk of supply constraints
|
• |
Risk of excess facilities
and manufacturing capacity |
• |
Higher overhead costs
as a percentage of revenue and higher interest expense |
|
• |
increased collection risks; |
|
• |
trade restrictions; |
|
• |
export duties and tariffs; |
|
• |
uncertain political, regulatory and economic
developments; |
|
• |
inability to protect our intellectual property
rights; |
|
• |
highly aggressive competitors; |
|
• |
currency issues; |
|
• |
difficulties in staffing, managing and supporting
foreign operations; |
|
• |
longer payment cycles; and |
|
• |
difficulties in collecting accounts receivable.
|
|
• |
long customer sales cycles; |
|
• |
reduced demand for our products and services;
|
|
• |
price reductions; |
|
• |
new competitors, or the introduction of
enhanced products or services from new or existing competitors; |
|
• |
changes in the mix of products and services
we or our customers and representatives sell; |
|
• |
contract cancellations, delays or amendments
by customers; |
|
• |
the lack of government demand for our products
and services or the lack of government funds appropriated to purchasing our products and services; |
|
• |
unforeseen legal expenses, including litigation
costs; |
|
• |
expenses related to acquisitions;
|
|
• |
other non-recurring financial charges;
|
|
• |
the lack of availability, or increased cost,
of key components and subassemblies; and |
|
• |
the inability to successfully manufacture
in volume, and reduce the price of, certain of our products; |
|
• |
actual or anticipated variations in our
quarterly operating results or those of our competitors; |
|
• |
announcements by us or our competitors of
technological innovations or new and enhanced products; |
|
• |
developments or disputes concerning proprietary
rights; |
|
• |
introduction and adoption of new industry
standards; |
|
• |
changes in financial estimates by securities
analysts; |
|
• |
market conditions or trends in our industry;
|
|
• |
changes in the market valuations of our
competitors; |
|
• |
announcements by us or our competitors of
significant acquisitions; |
|
• |
entry into strategic partnerships or joint
ventures by us or our competitors; |
|
• |
failing to meet in the financial projection
or guidance; |
• |
Actual and anticipated market volatility
due to the COVID-19; |
|
• |
political and economic conditions, such
as a recession or interest rate or currency rate fluctuations or political events; and |
|
• |
other events or factors in any of the countries
in which we do business, including those resulting from war, incidents of terrorism, natural disasters or responses to such events.
|
|
• |
the rules under the Exchange Act requiring
the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q and current reports on Form 8-K; |
|
• |
the sections of the Exchange Act regulating
the solicitation of proxies in connection with shareholder meetings; |
|
• |
the provisions of Regulation FD aimed at
preventing issuers from making selective disclosures of material information; and |
|
• |
the sections of the Exchange Act requiring
insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized
from any “short-swing” trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s equity
securities within less than six months). |
ITEM 4. |
INFORMATION ON THE COMPANY
|
A.
|
History
and Development of the Company |
B. |
BUSINESS
OVERVIEW |
|
• |
Develop strong strategic relationships with
our business partners, including the systems integrators and representatives that introduce our products and solutions into their respective
markets. |
|
• |
Employ dedicated sales personnel to work
closely with our business partners. Our sales personnel will customize and adapt solutions that can then be installed and supported by
these business partners. |
|
• |
Expand our IoT and Cyber Security activities
globally, particularly in the Americas, Europe, and the Far East. |
|
• |
Leverage our customer base, superior PureSecurity
hybrid suite of IoT solutions, and Cyber Security capabilities to secure additional long-term contracts with governments and communities
in the public safety markets. |
|
• |
Leverage our reputation, talented personnel,
and project management capabilities in the e-Gov market to secure additional projects and solutions in the growing e-Government market.
|
|
• |
Leverage our customer base, Connectivity
solutions, and Cyber Security capabilities to secure additional long-term contracts with governments and communities in the Communication
Infrastructure market. |
|
• |
Develop strong strategic relationships with
business partners that will introduce our solutions into the healthcare, homecare, Safe City and Smart Campus markets. |
|
• |
Develop strong strategic relationships with
business partners in the financial services industry, and un-banked and mobile payments markets. |
|
• |
Identify and acquire synergistic contracts
or businesses in order to reduce time to market, obtain complementary technologies and secure required references for international bids.
|
|
• |
Grow our business in emerging markets with
perceived significant growth opportunities. |
|
• |
Multiple radios provide concurrent 802.11a/n/ac
and 802.11b/g/n connections |
|
• |
Up to 1300 Mbps combined data rate
|
|
• |
Dual concurrent MIMO, Dual-polarized antennas
|
|
• |
Self-configuring, plug-and-play deployment
|
|
• |
Smart MESH supported |
|
• |
Gigabit outdoor Wi-Fi support up to 450
Mbps, (per band) 900 Mbps for both bands, and maximum aggregated capacity of up to one Gigabit per unit |
|
• |
Built in Access Controller, for flexible
service planning |
|
• |
Self-configuring, plug-and-play deployment
|
|
• |
Optimized for high-capacity
applications |
|
• |
Available in the Licensed
Exempt frequencies: 5.1-5.9 GHz |
|
• |
High Performance -
supporting up to 500 Mbps net throughput and distances of up to 50km/32 miles (w/high-gain antenna) |
|
• |
Dynamic up-link /down-link
bandwidth allocation |
|
• |
Optimized performance
of voice, video and data using four priorities of service |
|
• |
Optimized interference
mitigation and NLOS performance |
|
• |
Ease of ordering, installation
and configuration |
|
• |
Cost effective and scalable network architecture
with centralized control plane and distributed |
|
data plane | |
|
• |
Supporting up to 5,000 AP’s and 50,000
users per controller |
|
• |
Control and manage AP and backhaul radio,
including statistic and reporting |
|
• |
Automatic AP units detection, configuration
and firmware distribution |
|
• |
Secured control layer management |
|
• |
Hotspots/Hotzones and cellular offloading
services |
|
• |
Providing a single peer to the AAA
|
|
• |
High capacity, point-to-point, robust outdoor
wireless solution |
|
• |
Flexible rate capacity options: B10, B14,
B28, B100 reaching up to 100 Mbps gross |
|
• |
Long reach: over 60 km |
|
• |
Optimized uplink/downlink configuration
to support different business applications such as public safety and video surveillance |
|
• |
Robust performance in Non-Line-of-Sight
(NLOS) environments |
|
• |
Simple deployment, management and maintenance
|
|
2021 |
2020 |
||||||
Africa |
$ |
1,586 |
1,791 |
|||||
Europe |
2,912 |
3,037 |
||||||
South and center America |
37 |
21 |
||||||
United States |
6,820 |
5,856 |
||||||
Israel |
757 |
746 |
||||||
Asia Pacific |
155 |
319 |
||||||
Total |
$ |
12,267 |
11,770 |
|
Year ended December 31,
|
|||||||
|
2021 |
2020 |
||||||
e-Gov |
$ |
1,729 |
1,911 |
|||||
IoT |
8,904 |
7,656 |
||||||
Cyber Security |
1,634 |
2,203 |
||||||
Total |
$ |
12,267 |
11,770 |
|
Year ended December 31,
|
|||||||
|
2021 |
2020 |
||||||
Revenues |
||||||||
Products |
$ |
4,475 |
4,528 |
|||||
Services |
7,792 |
7,242 |
||||||
|
||||||||
Total revenues |
$ |
12,267 |
11,770 |
C.
|
Organizational
Structure |
D.
|
Property,
Plants and Equipment |
ITEM
4A. |
UNRESOLVED STAFF COMMENTS
|
ITEM
5. |
OPERATING AND FINANCIAL
REVIEW AND PROSPECTS |
A.
|
Operating
Results |
|
2021 |
2020 |
||||||
Revenues |
100 |
% |
100 |
% | ||||
Cost of revenues |
49.4 |
52.6 |
||||||
Gross profit |
50.6 |
47.4 |
||||||
Operating expenses: |
||||||||
Research and development |
22.5 |
20.3 |
||||||
Selling and marketing |
13.5 |
14.6 |
||||||
General and administrative |
33.8 |
34.6 |
||||||
Other expenses |
35.7 |
9.8 |
||||||
Total operating expenses |
105.5 |
79.3 |
||||||
Operating loss |
(54.9 |
) |
(31.8 |
) | ||||
Financial expenses, net |
(27.7 |
) |
(34.9 |
) | ||||
Loss before income tax |
(82.6 |
) |
(66.8 |
) | ||||
Income tax expense |
(0.0 |
) |
(0.0 |
) | ||||
Net Loss |
(82.6 |
) |
(66.8 |
) |
Year ended December 31, |
Israeli
inflation rate % |
NIS
devaluation (appreciation) rate % |
Israeli inflation adjusted for devaluation (appreciation) % |
|||||||||
2020 |
(0.7 |
) |
(7.0 |
) |
6.3 |
|||||||
2021 |
2.8 |
(3.3 |
) |
6.1 |
B.
|
Liquidity
and Capital Resources |
|
Year ended December 31,
|
|||||||
|
2021
|
2020
|
||||||
|
(in thousands) |
|||||||
Net cash used in operating activities |
(9,413 |
) |
(6,514 |
) | ||||
Net cash used in investing activities |
(1,639 |
) |
(1,571 |
) | ||||
Net cash provided by (used in) financing activities |
11,704 |
10,827 |
||||||
Net increase(decrease) in cash and cash equivalents |
652 |
2,742 |
||||||
Cash, cash equivalents and restricted cash at beginning of period
|
3,952 |
1,210 |
||||||
Cash, cash equivalents and restricted cash at end of period
|
4,604 |
3,952 |
|
Year ended December 31,
2021 |
|||||||||||||||
|
Cyber
Security |
IoT |
e-Gov |
Total |
||||||||||||
Major geographic areas
|
||||||||||||||||
Africa |
$ |
- |
$ |
- |
$ |
1,586 |
$ |
1,586 |
||||||||
European countries |
527 |
2,242 |
143 |
2,912 |
||||||||||||
South America |
1 |
36 |
- |
37 |
||||||||||||
United States |
410 |
6,410 |
- |
6,820 |
||||||||||||
Israel |
648 |
109 |
- |
757 |
||||||||||||
APAC |
48 |
107 |
- |
155 |
||||||||||||
Total revenue |
$ |
1,634 |
$ |
8,904 |
$ |
1,729 |
$ |
12,267 |
||||||||
|
||||||||||||||||
Timing of revenue recognition
|
||||||||||||||||
Products and services transferred over time
|
$ |
44 |
$ |
7,176 |
$ |
1,428 |
$ |
8,648 |
||||||||
Products transferred at a point in time
|
1,590 |
1,728 |
301 |
3,619 |
||||||||||||
Total revenue |
$ |
1,634 |
$ |
8,904 |
$ |
1,729 |
$ |
12,267 |
C.
|
Research
and Development |
D.
|
Trend
Information |
E.
|
Critical
Accounting Estimates Disclosure |
ITEM 6. |
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES |
A.
|
Directors
and Senior Management |
Name |
|
Age
|
|
Position
|
Arie Trabelsi |
|
64 |
|
Director |
Menachem Mirski |
65 |
Independent Director (1) (2)(3) | ||
Oren Raoul De Lange |
|
44 |
|
Independent Director (1)(2)(3) |
Shoshana Cohen Shapira |
|
64 |
|
Independent Director (1)(2)(3) |
|
(1) |
“Independent Director" |
|
(2) |
Member of the Audit Committee |
|
(3) |
Member of the Compensation Committee
|
Name |
|
Age
|
|
Position
|
Ordan Trabelsi* |
|
37 |
|
President, Chief Executive Officer
|
Barak Trabelsi* |
|
36 |
|
Chief Operating Officer and CTO |
Gil Alfi |
|
51 |
|
Vice President Sales, Safend Ltd |
Lester Villeneuve | 54 | Managing Director LCA , USA | ||
Meir Vazana | 50 | Vice President Global Sales | ||
Tzvika Mazor* |
39 | Vice President R&D |
B.
|
Compensation
|
|
|
Salaries,
fees, commissions and bonuses |
|
|
Pension, retirement and similar benefits |
| ||
All directors and executive officers as
a group (6 persons) |
|
$ |
543,535 |
|
|
$ |
55,721 |
|
(1) |
Amounts reported in this column include
salary, social benefits, including those mandated by applicable law. |
(2) |
Amounts reported in this column represent
the expense recorded in our audited consolidated financial statements for the year ended December 31, 2021 based on the grant date fair
value in accordance with accounting guidance for stock-based compensation. See Note 12.c to our audited consolidated financial statements
for the year ended December 31, 2021. |
C.
|
Board
Practices |
Name |
Position
|
Date
Service Began |
Date of Expiration of
Current Term | |||
Arie Trabelsi |
Director |
February 24, 2019 |
Annual general meeting | |||
Menachem Mirski |
Independent Director |
July 25, 2011 |
Annual general meeting | |||
Oren Raoul De Lange |
Independent Director |
March 28, 2020 |
March 28, 2023 | |||
Shoshana Cohen Shapira |
Independent Director |
February 24, 2019 |
February 23, 2025 |
|
• |
Monitoring deficiencies in the management
of the company, including in consultation with the independent auditors or the internal auditor, and advising the board of directors on
how to correct such deficiencies. If the audit committee finds a material deficiency, it will hold at least one meeting regarding such
material deficiency, with the presence of the internal auditor or the independent auditors but without the presence of the senior management
of the company. However, a member of the company’s senior management can participate in the meeting in order to present an issue
which is under his or her responsibility. |
|
• |
Determining, on the basis of detailed arguments,
whether to classify certain engagements or transactions as material or extraordinary, as applicable, and therefore as requiring special
approval under the Companies Law. The audit committee must make such determination according to principles and guidelines predetermined
on an annual basis. |
|
• |
Determining if transactions (excluding extraordinary
transactions) with a controlling shareholder, or in which a controlling shareholder has a personal interest, are required to be rendered
pursuant to a competitive procedure. |
|
• |
Deciding whether to approve engagements
or transactions that require the audit committee approval under the Companies Law. |
|
• |
Determining the approval procedure of non-extraordinary
transactions, following classification as such by the audit committee, including whether such specific non-extraordinary transactions
require the approval of the audit committee. |
|
• |
Examining and approving the annual and periodic
working plans of the internal auditor. |
|
• |
Overseeing the company’s internal
auditing and the performance of the internal auditor and confirming that the internal auditor has sufficient tools and resources at his
disposal, taking into account, among other factors, the special requirements of the company and its size; |
|
• |
Examining the scope of work of the independent
auditor and its pay, and bringing such recommendations on these issue before the board. |
|
• |
Determining the procedure for addressing
complaints of employees regarding shortcomings in the management of the company and ensuring the protection of employees who have filed
such complaints. |
|
• |
Determining, with respect to transactions
with the controlling shareholder or in which such controlling shareholder has a personal interest, whether such transactions are extraordinary
or not, whether there is an obligation to conduct a competitive process under the supervision of the audit committee and whether, prior
to entering into such transaction, the company should conduct any other process that the audit committee may deem fit, all taking into
account the type of the company. The audit committee may set such qualifications up to one year in advance. |
|
• |
Determining the manner of approval of transactions
with the controlling shareholder or in which the controlling shareholder has a personal interest which (i) are not negligible transactions
(pursuant to the committee’s determination) and (ii) are not qualified by the committee as extraordinary transactions. |
|
• |
an amendment to the company’s articles
of association; |
|
• |
an increase in the company’s authorized
share capital; |
|
• |
a merger; and |
|
• |
the approval of related party transactions
and acts of office holders that require shareholder approval. |
|
• |
a breach of duty of care towards us or any
other person; |
|
• |
a breach of fiduciary obligations towards
us, provided that the office holder acted in good faith and had reasonable grounds to assume that his or her act would not be to our detriment;
|
|
• |
a financial liability imposed on him or
her in favor of another person; or |
|
• |
any other event for which insurance of an
office holder is or may be permitted. |
|
• |
financial liability imposed upon said office
holder in favor of another person by virtue of a decision by a court of law, including a decision by way of settlement or a decision in
arbitration which has been confirmed by a court of law; |
|
• |
reasonable expenses of the proceedings,
including lawyers’ fees, expended by the office holder or imposed on him by the court for: |
|
(1) |
proceedings issued against him by or on
behalf of our company or by a third party; |
|
(2) |
criminal proceedings in which the office
holder was acquitted; |
|
(3) |
criminal proceedings in which he was convicted
in an offense, which did not require proof of criminal intent; or |
|
(4) |
any other liability or expense for which
the indemnification of an officer holder is not precluded by law. |
|
• |
a breach by the office holder of his or
her duty of loyalty towards the company unless, with respect to insurance coverage, the office holder acted in good faith and had a reasonable
basis to believe that the act would not prejudice the company; |
|
• |
a breach by the office holder of his or
her duty of care if the breach was done intentionally or recklessly; |
|
• |
any act or omission done with the intent
to derive an illegal personal benefit; or |
|
• |
any fine levied against the office holder.
|
D.
|
Employees
|
|
Dec. 31,
2021 |
Dec. 31,
2020 |
||||||
Research, Development & Operations |
93 |
76 |
||||||
Marketing and Sales |
8 |
7 |
||||||
Administration |
13 |
11 |
||||||
Total |
114 |
94 |
|
Dec. 31,
2021 |
Dec. 31,
2020 |
||||||
Israel & Europe |
53 |
44 |
||||||
United States |
61 |
50 |
||||||
Total |
114 |
94 |
E.
|
Share
Ownership |
Name |
Number of Ordinary Shares Beneficially Owned (1) |
Percentage of Outstanding Ordinary Shares (2) |
||||||
Arie Trabelsi(3) |
5,100,212 |
18.09 |
% | |||||
|
||||||||
Menachem Mirski |
— |
— |
||||||
Shoshana Cohen Shapira |
— |
— |
||||||
|
||||||||
Oren Raoul De Lange |
— |
— |
||||||
All executive officers and directors as a group (6 persons)
|
5,154,212 |
18.28 |
% |
(1) |
Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options
currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the
person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by
footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment
power with respect to all shares shown as beneficially owned by them. |
(2) |
The percentages shown are based on 28,239,372 ordinary shares
issued and outstanding. |
(3) |
Sigma Wave Ltd. is controlled by Mrs. Tsviya
Trabelsi, and by her husband, Mr. Arie Trabelsi. As such, Mr. Trabelsi may be deemed to beneficially own the 4,588,212 ordinary shares
beneficially held by Sigma Wave Ltd. Mrs. |
|
Year ended December 31,
|
|||||||||||||||
|
2021 |
2020 |
||||||||||||||
|
Number of
options |
Weighted average exercise price |
Number of
options |
Weighted average exercise price |
||||||||||||
|
$ |
$ |
||||||||||||||
Outstanding at Beginning of year |
334,839 |
2.31 |
564,197 |
2.64 |
||||||||||||
Granted |
- |
- |
- |
- |
||||||||||||
Exercised |
(44,964 |
) |
0.41 |
(123,545 |
) |
0.1 |
||||||||||
Canceled and forfeited |
(76,000 |
) |
2.22 |
(105,813 |
) |
2.94 |
||||||||||
Outstanding at end of year |
213,875 |
1.23 |
334,839 |
2.31 |
||||||||||||
Exercisable at end of year |
159,500 |
1.28 |
193,089 |
1.73 |
|
Year
ended December 31, |
|||||||
|
2021 |
2020
|
||||||
$ |
$ |
|||||||
Cost of revenues |
7 |
84 |
||||||
Research and development expenses
|
12 |
48 |
||||||
Selling and marketing expenses |
7 |
77 |
||||||
General and administrative expenses
|
5 |
2 |
||||||
|
31 |
211 |
Options outstanding
|
Options Exercisable
|
|||||||||||||||||||||||||||||||||
Range of exercise price |
Number outstanding as of December 31, 2021 |
Weighted average remaining contractual life (years) |
Weighted average exercise price |
Aggregate intrinsic value |
Number outstanding as of December 31, 2021 |
Weighted average remaining contractual life (years) |
Weighted average exercise price |
Aggregate intrinsic value |
||||||||||||||||||||||||||
$ |
$ |
$ |
|
$ |
$ |
|||||||||||||||||||||||||||||
0.00-2.00 |
207,875 |
7.09 |
1.11 |
- |
153,500 |
7.10 |
1.13 |
- |
||||||||||||||||||||||||||
3.00-5.00 |
6,000 |
7.00 |
4.96 |
- |
6,000 |
7.00 |
4.96 |
- |
||||||||||||||||||||||||||
213,875 |
7.08 |
1.22 |
- |
159,500 |
7.10 |
1.27 |
- |
|
Options |
Weighted– average grant-date fair value |
||||||
Non-vested at January 1, 2021 |
141,750 |
$ |
1.64 |
|||||
Granted |
- |
$ |
- |
|||||
Vested |
(54,375 |
) |
$ |
1.07 |
||||
Forfeited and canceled |
(33,000 |
) |
$ |
3.52 |
||||
Non-vested at December 31, 2021 |
54,375 |
$ |
1.07 |
ITEM 7. |
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A.
|
Major
Shareholders |
Name of Beneficial Owner
|
|
Number
of Shares Beneficially Owned |
|
|
Percentage
of Shares Outstanding |
| ||
Sigma Wave Ltd |
|
|
4,588,212 |
|
|
|
16.25 |
B.
|
Related
Party Transactions |
C.
|
Interests
of Experts and Counsel |
ITEM 8. |
FINANCIAL
INFORMATION |
A.
|
Consolidated
Statements and Other Financial Information |
B.
|
Significant
Changes |
ITEM
9. |
THE
OFFER AND LISTING |
A.
|
Offer
and Listing Details |
Year |
High
|
Low
|
||||||
2013 |
$ |
5.65 |
$ |
0.30 |
||||
2014 |
$ |
13.78 |
$ |
4.85 |
||||
2015 |
$ |
13.84 |
$ |
4.46 |
||||
2016 |
$ |
5.25 |
$ |
2.62 |
||||
2017 |
$ |
4.36 |
$ |
2.17 |
||||
2018 |
$ |
3.92 |
$ |
1.32 |
||||
2019 |
$ |
1.75 |
$ |
0.59 |
||||
2020 |
$ |
3.09 |
$ |
0.37 |
||||
2021 |
$ |
2.24 |
$ |
0.44 |
|
High |
Low
|
||||||
|
||||||||
2019
|
||||||||
First Quarter |
$ |
1.75 |
$ |
1.38 |
||||
Second Quarter |
$ |
1.49 |
$ |
0.98 |
||||
Third Quarter |
$ |
1.24 |
$ |
0.59 |
||||
Fourth Quarter |
$ |
0.80 |
$ |
0.59 |
||||
|
||||||||
2020
|
||||||||
First Quarter |
$ |
0.92 |
$ |
0.37 |
||||
Second Quarter |
$ |
3.09 |
$ |
0.66 |
||||
Third Quarter |
$ |
1.72 |
$ |
0.72 |
||||
Fourth Quarter |
$ |
1.10 |
$ |
0.78 |
||||
2021
|
||||||||
First Quarter |
$ |
2.24 |
$ |
1.08 |
||||
Second Quarter |
$ |
1.68 |
$ |
1.19 |
||||
Third Quarter |
$ |
1.39 |
$ |
0.98 |
||||
Fourth Quarter |
$ |
1.09 |
$ |
0.44 |
Month |
High |
Low |
||||||
December 2021 |
$ |
0.66 |
$ |
0.44 |
||||
January 2022 |
$ |
0.56 |
$ |
0.48 |
||||
February 2022 |
$ |
0.64 |
$ |
0.52 |
||||
March 2022 |
$ |
0.71 |
$ |
0.50 |
||||
Through April 4, 2022 |
$ |
0.55 |
$ |
0.55 |
B.
|
Plan
of Distribution |
C.
|
Markets
|
D.
|
Selling
Shareholders |
E.
|
Dilution
|
F.
|
Expenses
of the Issue |
ITEM 10. |
ADDITIONAL
INFORMATION |
A.
|
Share
Capital |
B.
|
Memorandum
and Articles of Association |
|
• |
any amendment to the articles of association;
|
|
• |
an increase of the company’s authorized
share capital; |
|
• |
a merger; or |
|
• |
approval of interested party transactions
which require shareholder approval. |
|
• |
a breach of duty of care towards us or any
other person, |
|
• |
a breach of fiduciary obligations towards
us, provided that the office holder acted in good faith and had reasonable grounds to assume that his or her act would not be to our detriment,
|
|
• |
a financial liability imposed on him or
her in favor of another person, or |
|
• |
any other event for which insurance of an
office holder is or may be permitted. |
|
• |
financial liability imposed upon said office
holder in favor of another person by virtue of a decision by a court of law, including a decision by way of settlement or a decision in
arbitration which has been confirmed by a court of law; |
|
• |
reasonable expenses of the proceedings,
including lawyers’ fees, expended by the office holder or imposed on him by the court for: |
|
(1) |
proceedings issued against him by or on
behalf of the Company or by a third party; |
|
(2) |
criminal proceedings in which the office
holder was acquitted; or |
|
(3) |
criminal proceedings in which he was convicted
in an offense, which did not require proof of criminal intent; or |
|
• |
any other liability or expense for which
the indemnification of an officer holder is not precluded by law. |
|
• |
a breach by the office holder of his or
her duty of loyalty towards the company unless, with respect to insurance coverage, the office holder acted in good faith and had a reasonable
basis to believe that the act would not prejudice the company; |
|
• |
a breach by the office holder of his or
her duty of care if the breach was done intentionally or recklessly; |
|
• |
any act or omission done with the intent
to derive an illegal personal benefit; or |
|
• |
any fine levied against the office holder.
|
C.
|
Material
Contracts |
D.
|
Exchange
Controls |
E.
|
Taxation
|
|
• |
banks, financial institutions or insurance
companies; |
|
• |
real estate investment trusts, regulated
investment companies or grantor trusts; |
|
• |
dealers or traders in securities, commodities
or currencies; |
|
• |
tax-exempt
entities or organizations, including an “individual retirement account” or “Roth IRA” as defined in Section 408
or 408A of the Code; |
|
• |
certain
former citizens or long-term residents of the United States;
|
|
• |
persons
that received our shares as compensation for the performance of services;
|
|
• |
persons
that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a
position in a “straddle” for U.S. federal income tax purposes;
|
|
• |
partnerships
or other pass-through, or holders that will hold our shares through such an entity;
|
|
• |
S corporations; |
|
• |
holders whose functional currency is not
the U.S. Dollar; or |
|
• |
holders that actually or constructively
own 10 percent or more of our voting shares. |
|
• |
an individual and either a citizen or, for
U.S. federal income tax purposes, a resident of the United States; |
|
• |
a corporation (or other entity treated as
a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision
thereof; |
|
• |
an estate whose income is subject to U.S.
federal income tax regardless of its source; or |
|
• |
a trust that (a) is subject to the primary
supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under
applicable U.S. Treasury regulations to be treated as a U.S. person. |
F.
|
Dividends
and Paying Agents |
G.
|
Statement
by Experts |
H.
|
Documents
on Display |
I.
|
Subsidiary
Information |
ITEM
11. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
ITEM
12. |
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM
13. |
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM
14. |
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM
15. |
CONTROLS
AND PROCEDURES |
ITEM
16. |
[RESERVED]
|
ITEM
16A. |
AUDIT
COMMITTEE FINANCIAL EXPERT |
ITEM
16B. |
CODE
OF ETHICS |
ITEM
16C. |
PRINCIPAL
ACCOUNTANT FEES AND SERVICES |
|
Year Ended December 31,
|
|||||||
Services Rendered
|
2021 |
2020 |
||||||
Audit fees |
$ |
155,000 |
$ |
155,000 |
||||
Audit-related fees |
$ |
- |
$ |
- |
||||
Tax fees |
$ |
- |
$ |
- |
||||
Total |
$ |
155,000 |
$ |
155,000 |
ITEM
16D. |
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM
16E. |
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM
16F. |
CHANGES
IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM
16G. |
CORPORATE
GOVERNANCE |
ITEM
16H. |
MINE
SAFETY DISCLOSURE |
ITEM 17.
|
FINANCIAL STATEMENTS
|
ITEM 18.
|
FINANCIAL STATEMENTS
|
Index to Financial Statements
|
|
|
|
Report of Independent Registered Public Accounting Firm (PCAOB Name: Halperin Ilanit CPA/PCAOB ID No. 6501)
|
74 |
|
|
F-1
|
|
|
|
F-2
|
|
|
|
F-3
|
|
|
|
F-4
|
|
|
|
F-5 – F-31
|
72
ITEM 19.
|
EXHIBITS
|
Exhibit
|
|
Description
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Label Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith.
|
|
|
**
|
Furnished herewith.
|
†
|
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10). Such omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
|
(1)
|
Filed as Exhibit 1.1 to the Registrant’s Registration Statement on Form F-1, registration number 333-189910, filed with the Securities and Exchange Commission on July 3, 2013, and incorporated herein by reference.
|
(2)
|
Filed as Exhibit 2 to the Registrant’s Report on Form 6-K filed with the Securities and Exchange Commission on August 22, 2013, and incorporated herein by reference.
|
(3)
|
Filed as Exhibit 2.1 to the Registrant’s Registration Statement on Form F-1, registration number 333-189810, filed with the Securities and Exchange Commission on July 3, 2013, and incorporated herein by reference.
|
(4)
|
Filed as Exhibit 4.2(a) to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2011, filed with the Securities and Exchange Commission on May 9, 2012, and incorporated herein by reference.
|
(5)
|
Filed as Exhibit 4.2(b) to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2011, filed with the Securities and Exchange Commission on May 9, 2012, and incorporated herein by reference.
|
(6)
|
Filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form F-1, registration number 333-189810, filed with the Securities and Exchange Commission on July 3, 2013, and incorporated herein by reference.
|
(7)
|
Filed as Exhibit 11.1 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2007, filed with the Securities and Exchange Commission on June 30, 2008, and incorporated herein by reference.
|
73
We have audited the accompanying balance sheet of SuperCom Ltd. (the Company) as of December 31, 2021 and 2020, and the related statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the two years ended December 31, 2021 and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.
◾
|
Assessing the reasonableness of key assumptions underlying management’s forecast operating cash flows, including revenue growth and gross margin assumptions and evaluating the reasonableness of management’s forecast operating cash flows.
|
◾
|
Evaluating the probability that the Company will be able to reduce capital expenditures and other operating expenditures if required.
|
◾
|
Assessing management’s plans in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by management.
|
◾
|
Assessing the effect of events and agreement signed after balance sheet date.
|
/s/ Halperin Ilanit.
SUPERCOM LTD.
|
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data)
|
|
As of December 31,
|
|||||||
|
2021
|
2020
|
||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
3,537 |
$
|
3,137 | ||||
Restricted bank deposit
|
1,067 | 815 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $11,667 and $8,667 as of December
31, 2021 and 2020, respectively (Note 13)
|
11,061 | 12,427 | ||||||
Other current assets (Note 3)
|
1,599 | 876 | ||||||
Inventories, net (Note 4)
|
3,561 | 2,404 | ||||||
Patents held for sale
|
5,283 | 5,283 | ||||||
TOTAL CURRENT ASSETS
|
26,108 | 24,942 | ||||||
|
||||||||
LONG-TERM ASSETS
|
||||||||
Severance pay funds
|
487 | 531 | ||||||
Deferred tax long term
|
202 | 204 | ||||||
Property and equipment, net (Note 5)
|
1,804 | 1,371 | ||||||
Other Intangible assets, net (Note 6)
|
5,610 | 6,270 | ||||||
Goodwill
|
7,026 | 7,026 | ||||||
Operating lease right-of-use asset
|
882 | - | ||||||
TOTAL LONG-TERM ASSETS
|
16,011 | 15,402 | ||||||
|
||||||||
TOTAL ASSETS
|
42,119 | 40,344 | ||||||
|
||||||||
CURRENT LIABILITIES
|
||||||||
Short-term loans and other
|
207 | 7,204 | ||||||
Accounts payable
|
1,395 | 2,860 | ||||||
Employees and payroll accruals
|
2,119 | 2,627 | ||||||
Related parties (Note 11.c)
|
172 | 1,749 | ||||||
Accrued expenses and other liabilities (Note 7)
|
1,559 | 4,393 | ||||||
Deferred revenues
|
151 | 765 | ||||||
TOTAL CURRENT LIABILITIES
|
5,603 | 19,598 | ||||||
|
||||||||
LONG-TERM LIABILITIES
|
||||||||
Long-term loan (Note 1c)
|
30,451 | 14,952 | ||||||
Deferred revenues
|
49 | 49 | ||||||
Deferred tax liability LT
|
170 | 170 | ||||||
Accrued severance pay
|
529 | 656 | ||||||
Operating lease liabilities
|
925 | - | ||||||
TOTAL LONG TERM LIABILITIES
|
32,124 | 15,827 | ||||||
|
||||||||
TOTAL LIABILITIES
|
37,727 | 35,425 | ||||||
|
||||||||
Commitments and contingent liabilities (Note 8)
|
||||||||
|
||||||||
SHAREHOLDERS’ EQUITY (Note 10)
|
||||||||
Ordinary shares, NIS 0.25 par value - authorized 48,000,000 shares, 28,239.372 shares issued and
outstanding at December 31, 2021 and 19,998.745 shares issued and outstanding at
December 31, 2020
|
2,028 | 1,397 | ||||||
Additional paid-in capital
|
97,833 | 88,853 | ||||||
Accumulated deficit
|
(95,469 |
)
|
(85,331 |
)
|
||||
Total shareholders’ equity
|
$
|
4,392 |
$
|
4,919 | ||||
|
||||||||
Total liabilities and shareholders’ equity
|
42,119 | 40,344 |
SUPERCOM LTD.
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(U.S. dollars in thousands, except share and per share data)
|
Year Ended December 31, | ||||||||
2021
|
2020
|
|||||||
Revenues
|
||||||||
Products
|
4,475 | 4,528 | ||||||
Services
|
7,792 | 7,242 | ||||||
Total revenues
|
12,267 | 11,770 | ||||||
|
||||||||
Cost of revenues
|
||||||||
Cost of products
|
1,935 | 2,178 | ||||||
Cost of services
|
4,128 | 4,011 | ||||||
Total cost of revenues
|
6,063 | 6,189 | ||||||
|
||||||||
Gross profit
|
6,204 | 5,581 | ||||||
|
||||||||
Operating expenses:
|
||||||||
Research and development
|
2,763 | 2,386 | ||||||
Sales and marketing
|
1,655 | 1,721 | ||||||
General and administrative
|
4,149 | 4,074 | ||||||
Other expense, net
|
4,374 | 1,149 | ||||||
Total operating expenses
|
12,941 | 9,330 | ||||||
|
||||||||
Operating loss
|
(6,737 |
)
|
(3,749 |
)
|
||||
|
||||||||
Financial expenses, net
|
(3,396 |
)
|
(4,113 |
)
|
||||
|
||||||||
Loss before income taxes
|
(10,133 |
)
|
(7,862 |
)
|
||||
|
||||||||
Income tax expense
|
(5 |
)
|
(5 |
)
|
||||
|
||||||||
Net loss
|
$
|
(10,138 |
)
|
$
|
(7,867 |
)
|
||
|
||||||||
Net loss per share:
|
||||||||
Basic and Diluted
|
$
|
(0.39 |
)
|
$
|
(0.45 |
)
|
||
|
||||||||
Shares used in calculation of net income per share:
|
||||||||
Basic and Diluted
|
26,198,102 | 17,386,369 |
|
Ordinary Shares
|
|||||||||||||||||||
|
Number of
Shares |
Share
Capital |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total
Shareholders’ Equity |
|||||||||||||||
|
||||||||||||||||||||
Balance as of December 31, 2019
|
16,214,228 | 1,116 | 84,680 | (77,464 |
)
|
8,332 | ||||||||||||||
Exercise of options and Convertible loans
|
1,414,517 | 109 | 1,248 | - | 1,357 | |||||||||||||||
Stock based compensation
|
-
|
-
|
211 | - | 211 | |||||||||||||||
Share Issuance
|
2,370,000 | 172 | 2,772 | - | 2,944 | |||||||||||||||
Cancellation of Receivable on share purchase
|
-
|
-
|
(58 |
)
|
- | (58 |
)
|
|||||||||||||
Net loss
|
-
|
-
|
-
|
(7,867 |
)
|
(7,867 |
)
|
|||||||||||||
Balance as of December 31, 2020
|
19,998,745 | 1,397 | 88,853 | (85,331 |
)
|
4,919 | ||||||||||||||
Exercise of options and Convertible loans
|
8,240,627 | 631 | 8,949 |
-
|
9,580 | |||||||||||||||
Stock based compensation
|
-
|
-
|
31 | - | 31 | |||||||||||||||
Net loss
|
-
|
-
|
-
|
(10,138 |
)
|
(10,138 |
)
|
|||||||||||||
|
||||||||||||||||||||
Balance as of December 31, 2021
|
28,239,372 | 2,028 | 97,833 | (95,469 |
)
|
4,392 |
|
Year Ended December 31,
|
|||||||
2021
|
2020
|
|||||||
CASH FLOWS - OPERATING ACTIVITIES
|
||||||||
Net loss
|
(10,138
|
)
|
(7,867
|
)
|
||||
|
||||||||
Adjustments to reconcile net income to net cash from operations:
|
||||||||
Depreciation and amortization
|
2,228
|
2,720
|
||||||
Stock-based compensation
|
31
|
211
|
||||||
Decrease (increase) in deferred tax
|
2
|
384
|
||||||
Decrease (increase) in accounts receivables, net
|
1,366
|
620
|
||||||
Decrease (increase) in other current assets
|
(723
|
)
|
177
|
|||||
Decrease in inventories, net
|
(1,157
|
)
|
242
|
|||||
Increase (decrease) in accounts payables
|
(1,465
|
)
|
(681
|
)
|
||||
Increase(decrease) in employees and payroll accruals
|
(508
|
)
|
(602
|
)
|
||||
Decrease in accrued severance pay
|
(127
|
)
|
76
|
|||||
Increase (decrease) in accrued expenses and other liabilities, related parties & liability for earn out
|
1,078
|
(1,794
|
)
|
|||||
|
||||||||
Net cash used in operating activities
|
(9,413
|
)
|
(6,514
|
)
|
||||
|
||||||||
CASH FLOWS - INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(947
|
)
|
(812
|
)
|
||||
Capitalization of software development costs
|
(736
|
)
|
(590
|
)
|
||||
Increase in severance pay fund
|
44
|
(169
|
)
|
|||||
|
||||||||
Net cash used in investing activities
|
(1,639
|
)
|
(1,571
|
)
|
||||
|
||||||||
CASH FLOWS - FINANCING ACTIVITIES
|
||||||||
Related parties
|
(1,577 |
)
|
(939 |
)
|
||||
Long-term debt, net
|
5,680 | 7,523 | ||||||
Receivable on account of share purchase
|
-
|
(58
|
)
|
|||||
Capital investment
|
-
|
2,945
|
||||||
Proceeds from exercise of options and warrants, net
|
7,601
|
1,356
|
||||||
Net cash provided by (used in) financing activities
|
11,704
|
10,827
|
||||||
|
||||||||
Increase in cash, cash equivalents, and restricted cash
|
652
|
2,742
|
||||||
Cash, cash equivalents, and restricted cash - beginning of year
|
3,952
|
1,210
|
||||||
|
||||||||
Cash, cash equivalents, and restricted cash - end of year
|
4,604
|
3,952
|
SUPERCOM LTD. AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
U.S. dollars in thousands (except per share data)
|
NOTE 1:
|
GENERAL
|
|
a.
|
SuperCom Ltd. (the “Company”) is an Israeli resident company organized in 1988 in Israel. On January 24, 2013 the Company changed its name back to SuperCom Ltd, its original name, from Vuance Ltd. On September 12, 2013, the Company’s ordinary shares were approved for listing on the NASDAQ Capital Market and began trading under the ticker symbol “SPCB” on September 17, 2013. Previously, the Company’s ordinary shares traded on the OTCQB® electronic quotation service.
The Company is a global provider of traditional and digital identity solutions, providing advanced safety, identification, tracking and security products to governments and organizations, both private and public, throughout the world. The Company provides cutting edge real-time positioning, tracking, monitoring and verification solutions enabled by its RFID &Mobile pure security advanced solutions suite of products and technologies, all connected to a web-based, secure, proprietary, interactive and user-friendly interface. The Company offers a wide range of solutions including, national ID registries, e-passports, biometric visas, automated fingerprint identification systems, digitized driver’s licenses, and electronic voter registration and election management using the common platform (“MAGNA”). The Company sells its products through marketing offices in the U.S, and Israel.
|
|
b.
|
In December 2019, a new strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, Hubei Province, China. During February until November of 2020, COVID-19 has spread globally, including in Israel, Asia, Europe, and America. In response to the COVID-19 virus, countries have taken different measures in relation to prevention and containment including lock-down and quarantine. The COVID-19 virus continues to impact worldwide economic activity and pose the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to lockdowns that had been mandated by governmental authorities or otherwise elected by companies as a preventive measure.
During 2021, The company’s business, trading and operations were impacted materially by COVID-19. COVID-19 related imposed government restrictions in California, Israel and other geographies limited our ability to interact with our clients to provide full services as well as adding new clients to our monitoring programs given court systems shutdown. During most of the year 2021, the government imposed lockdowns and travel restrictions also hindered proper project deployment, productions, support, sales and R&D processes: (i) had prevented our sales teams to meet customers and demonstrate our products, (ii) had prevented our support teams to travel and visit customers in order to provide the adequate support and upgrades to our products (iii) had prevented our customers to complete tenders, purchases, (iv) had prevented proper collection of our client debt due to travel limitation or liquidity problems with our customers, (v) had prevented our customers and partners to complete the integrations and deployments of the Company current contacts. As the Company relies on manufacturers of components of our products in Far East, Israel, and USA, some of such components had not produced and/or shipped to the Company or to its customers.
COVID-19 continuous spread and protective measures taken by the authorities may continue to adversely affect our future results of operations, cash flows and financial condition.
|
c.
|
Liquidity Analysis
The Company has experienced net losses and significant cash outflows from cash used in operating activities over the past 3 years. As of and for the year ended December 31, 2021, the Company had an accumulated deficit of $95,469, and net cash used in operating activities of $9,413 compared to $6,514 for the year ended December 31, 2020, also due to an increased investment in inventory and reduction in old account payables.
Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and noted that as of December 31, 2021, the Company had cash, cash equivalent and restricted cash of $4,604 and positive working capital of $20,505.
Further, during 2020, the Company underwent a cost optimization process to have a more efficient structure to operate through the Covid-19 imposed lockdowns, travel limitations and other related effects. During the optimization process, the Company has reduced its expenses through the reduction in its headcount and overhead costs that resulted in a reduction of operating expenses by 36%, between the years 2020 and 2019. During the year 2021 the Company maintained the efficient cost structure achieved during 2020, with similar operation expenses except for an increase of 15% in R&D expense.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 1: |
GENERAL (cont.) |
Additionally, the Company secured financing of $20,000 during 2018, of which, $6,000 remains available to the Company to draw during the 12 months following the balance sheet date, under certain conditions. Throughout 2021, the Company also secured through the issuance of multiple notes, aggregate gross proceeds of $12,000 of subordinated debt (“Subordinated Debt”). The Company raised a gross amount of approximately $3,200 in a private placement in July 2020. To date, the Company has used the proceeds from the secured financing, subordinated debt and private placement (i) to satisfy certain indebtedness; and (ii) for general corporate purposes and (iii) working capital needs for multiple new government customer contracts with significant positive cash flow.
On March 1, 2022, the Company raised $4.65 million in a registered direct offering with a single accredited institutional investor of an aggregate of 3,130,000 of its ordinary shares, and 4,401,585 pre-funded warrants to purchase ordinary shares with an exercise price of $0.00001 per share, and concurrent private placement to the Purchaser of the Company’s private warrants to purchase an aggregate of 5,648,689 or ordinary shares at an exercise price of $0.70 per share.
Furthermore, the available $6 million secured credit facility from Fortress Investment Group may provide the Company additional access to capital if needed.
The Company believes that based on the above-mentioned secured financings, management’s plans, maintaining the cost savings and expected cash streams from the Company’s current contracts with customers worldwide, it will be able to fund its operations for at least the next 12 months.
|
||
d.
|
Senior Secured Credit Facility and Subordinated Debt
On September 6, 2018 and October 26, 2018, through a two-stage closing process, the Company entered into a Senior Secured Credit Facility with affiliates of Fortress Investment Group LLC("Fortress") with an aggregate principal amount of up to $20,000 (the "Credit Facility"). The Initial Term Loan which finalized on October 26, 2018 has an aggregate principal of $10,000, and the Incremental Term Loan provides for up to an additional $10,000 in principal through Incremental Draws of at least $1,000 each. In 2019, a total of $4,000 gross was drawn on the Incremental Term Loan, and some of the terms of the Credit Facility were amended to support the needs of the company. The Credit Facility bears interest on the borrowed balance at a rate per annum equal to LIBOR plus an applicable margin (the "Interest Margin") dependent on the EBITDA Leverage Ratio which is calculated and reset on a quarterly basis (8.0% for an EBITDA Leverage Ratio greater than or equal to 2.50x; 7.0% for an EBITDA Leverage Ratio less than 2.50x). At the Company's election, interest is paid in cash or in-kind in the amount of 4% per annum of the Interest Margin. The balance of interest is payable in cash monthly in arrears. For amounts which remain un-borrowed, the Company incurs interest at a rate of 0.50% per annum ("Unused Fee"). From closing and until today, the Company only paid monthly interest payments. In 2023 the Company expects to start making partial monthly amortization payments towards the principal balance, with the majority of the principal to be paid via a bullet payment at the maturity date, which the company expects to be amended to December 2023.
The Credit Facility is subject to an original issue discount equal to 2.5% of any drawn amounts, and amounts repaid cannot be re-borrowed. At maturity, an end-of-term fee of 2.25% to 4.5% is owed by the Company for any amounts drawn. In connection with securing the Credit Facility, the Company incurred legal and due diligence fees, which are recorded together with the original issue discount and end-of-term fee, and amortized into interest expense over the life of the Credit Facility.
In connection with the Credit Facility, the Investor received 25,000 warrants initially and an additional 75,000 warrants for amendments (the “Credit Facility Warrants”) and purchased 106,705 unregistered common shares at a share price of $1.87 from Company at a total of $200. The Credit Facility Warrants mature 7 years from the date of issuance, were set to be issued at a strike price at a premium to the then current market price.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 1: |
GENERAL (cont.) |
In 2021, the Company secured through the issuance of an additional subordinated notes, gross proceeds of $12,000. For the consideration of $12,000 in gross proceeds, SuperCom issued a two-year unsecured, subordinated promissory note to a certain institutional investor, one in February 2021 and the other in June 2021, both with similar structures and terms. The notes have a 5% annual coupon and a built-in increase to the balance of the notes by 5% every 6 months, for any portion of the notes which has not been paid down prior to maturity. All principal and interest accrued is required to be paid in only one-bullet payment at maturity, and the company has the right to pre-pay any portion of either note at any time without a pre-payment penalty. The company has an option at its discretion only, at any time after 12 months to pay down all or a portion of either note using its ordinary shares, subject to certain conditions being met. The Company converted the remaining balance of the subordinated notes issued in 2020 amounted to $8.240 to the Company’s ordinary shares.
As of December 31, 2021, the outstanding principal, including accrued interest, of the Credit Facility was $16,270 and the aggregate balance for these Subordinated Debt was $13,637.
The Company purchases certain services and products used by it to generate revenues in its projects and sales from several sole suppliers. Although there are only a limited number of manufacturers of those particular services and products, management believe that other suppliers could provide similar services and products on comparable terms without affecting operating results. |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).
|
|
a.
|
Use of estimates:
The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. As applicable to these financial statements, the most significant estimates and assumptions include (i) Revenue Recognition; (ii) Allowance for Doubtful Accounts; (iii) Deferred Income Taxes and (iv) measurement of the fair value of intangible assets and goodwill.
|
|
b.
|
Financial statements in U.S. dollars:
Most of the revenues of the Company are received in U.S. dollars. In addition, a substantial portion of the costs of the Company are incurred in U.S. dollars. Therefore, management believes that the dollar is the currency of the primary economic environment in which the Company operate. Thus, the functional and reporting currency of the Company is the U.S. dollar.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, "Foreign Currency Matters". All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or financial expenses as appropriate.
|
|
c.
|
Principles of consolidation:
The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances were eliminated upon consolidation. Profits from intercompany sales, not yet realized outside the group, were also eliminated.
|
|
d.
|
Cash and cash equivalents:
The Company considers unrestricted short-term highly liquid investments originally purchased with maturities of three months or less to be cash equivalents. The Company has not held any cash equivalents during 2021 and 2020.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
e.
|
Restricted Cash:
Restricted cash held in interest bearing saving accounts which are used as a security for the Company's Israeli facility leasehold bank guarantee, and as a security for ongoing terms of the contracts with existing customers and commercial tenders guarantees.
|
|
f.
|
Allowance for doubtful accounts:
The allowance for doubtful accounts is determined with respect to specific amounts the Company has determined to be doubtful of collection. In determining the allowance for doubtful accounts, the Company considers, among other things, its past experience with such customers and the information available regarding such customers.
|
|
g.
|
Inventories:
Inventories are stated at the lower of cost or net realizable value. Inventory write-offs are mainly provided to cover risks arising from slow-moving items or technological obsolescence. Cost is determined for all types of inventory using the moving average cost method.
|
|
h.
|
Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is computed using the straight-line method, over the estimated useful lives, at the following annual rates:
|
|
years
|
|
Computers and peripheral equipment
|
3 | |
Leased Products to Customers
|
5 | |
Office furniture and equipment
|
5 - 17
|
|
Leasehold improvements
|
Over the shorter of the term of the lease or the life of the asset
|
|
i.
|
Intangible assets:
Intangible assets that are not considered to have an indefinite useful life are amortized using units of production and the straight-line basis over their estimated useful lives, as noted below. Recoverability of these assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the assets. If the assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.
Intangible assets and their useful lives are as follows:
|
|
Useful Life (in Years)
|
|
|
|
|
Customers relationships & Other
|
Between 4.5-13 (mainly 13)
|
|
IP & Technology
|
Between 4-15 (mainly 15)
|
|
Capitalized software development costs
|
Between 4-5
|
As of December 31, 2021, and 2020 no impairment losses were identified.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
Acquisition-related intangible assets:
The Company accounts for its business combinations in accordance with ASC 805 “Business Combinations” and with ASC 350-20 “Goodwill and Other Intangible Assets” (“ASC 350-20”). ASC 805-10 specifies the accounting for business combinations and the criteria for recognizing and reporting intangible assets apart from goodwill.
Acquisition-related intangible assets result from the Company’s acquisitions of businesses accounted for under the purchase method and consist of the value of identifiable intangible assets including developed software products, brand and patents, as well as goodwill. Goodwill is the amount by which the acquisition cost exceeds the fair values of identifiable acquired net assets on the date of purchase. Acquisition-related definite lived intangible assets are reported at cost, net of accumulated amortization.
|
|
j.
|
Goodwill:
The Company’s goodwill reflects the excess of the consideration paid or transferred including the fair value of contingent consideration over the fair values of the identifiable net assets acquired. The goodwill impairment test is performed by evaluating an initial qualitative assessment of the likelihood of impairment. If this step indicates that the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the impairment test is performed.
In step one of the impairment test, the Company compares the fair value of the reporting unit to the carrying value of the reporting unit. If the fair value of the reporting unit exceeds the carrying value of the net assets allocated to that unit, goodwill is not impaired, and no further testing is required. If the fair value is less than the carrying value of the reporting unit, then the second step of the impairment test is performed to measure the amount of the impairment.
In the second step, the reporting unit’s fair value is allocated to all the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that simulates the business combination principles to derive an implied goodwill value. If the implied fair value of the reporting unit’s goodwill is less than its carrying value, the difference is recorded as impairment.
For the years ended December 31, 2021 and 2020 the Company performed an annual impairment analysis and no impairment losses have been identified.
|
|
k.
|
Impairment of long-lived assets and intangible assets:
The Company’s long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.
|
|
l.
|
Long lived assets held for sale:
The company accounted for its long lived assets held for sale under ASC 360-10 ("Impairment or disposal of Long-lived Assets").
Under management decision, the patents acquired under Alvarion Ltd. and Safend Ltd. acquisitions during 2016, were not intended for internal use by the Company, and thus accounted for as Long lived assets held for sale. During 2020 and 2021, following management decision, the Company elected to enter into engagements with several brokers for the purpose of marketing and sale of those patents. Realization costs of the patents are immaterial.
For the years ended December 31, 2021 and 2020 the Company did not identify any triggers for impairment.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
m.
|
Accrued severance pay and severance pay fund:
The liabilities of the Company for severance pay of its Israeli employees are calculated pursuant to Israel’s Severance Pay Law. Employees are entitled to one month’s salary for each year of employment, or portion thereof. The Company’s liability for all its employees is presented under “accrued severance pay”. The Company deposits on a monthly basis to severance pay funds and insurance policies. The value of these policies is presented as an asset on the Company’s balance sheet.
The deposited funds include accrued income up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the Company’s obligation pursuant to Israel’s Severance Pay Law or labor agreements.
Severance expenses for the years ended December 31, 2021 and 2020 amounted to $385 and $304, respectively.
|
|
n.
|
Revenue recognition:
The Company and its subsidiaries generate their revenues from the sale of products, licensing, maintenance, royalties and long term contracts (including training and installation).
Effective January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 was applied using the modified retrospective method, therefore the cumulative effect of initially applying the revenue standard is recognized as an adjustment to opening retained earnings at January 1, 2018.
Upon adoption of ASC 606, the Company identified a change in the Company’s revenue recognition policies related to combined license and maintenance sales, as noted within the Company’s Safend contracts. Under ASC 605, revenue for these contracts was recognized over the life of the contract. In accordance with ASC 606, license revenue is recognized upon delivery while maintenance is recognized over the life of the contract. As a result of applying the new standard, the Company had recognized a cumulative effect adjustment to Retained Earnings as of January 1, 2018 in the amount of $257.
Aside from its combined license and maintenance sales, no other changes were identified to the characteristics of the Company’s other revenue recognition policies, other than the enhanced disclosure regarding revenue recognition, including disclosures of revenue streams, performance obligations, variable consideration and the related judgments and estimates necessary to apply the new standard.
The Company measures revenue based upon the consideration specified in the client arrangement, and revenue is recognized when the performance obligations in the client arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the Company expect to receive in exchange for those services. To achieve this core principal, the Company applies the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer.
The Company evaluates whether a significant financing component exists when the Company recognizes revenue in advance of customer payments that occur over time. For example, some of the Company contracts include payment terms greater than one year from when we transfer control of goods and services to the Company customers and the receipt of the final payment for those goods and services. If a significant financing component exists, the Company classifies a portion of the transaction price as interest income, instead of recognizing all of the transaction price as revenue. The Company does not adjust the transaction price for the effects of financing if, at contract inception, the period between the transfer of control to a customer and final payment is expected to be one year or less.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price based on management’s judgement.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.
Nature of goods and services
The following is a description of the Company’s goods and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each, as applicable:
Software Maintenance and Support Services Revenue
Software maintenance and support services contracts are sold in conjunction with the Company’s software products for its e-Gov, IoT and Connectivity, and Cyber Security revenue streams. The contract terms for software maintenance and support span to five years in length and provide customers with the rights to unspecified software product updates if and wh en available, online and telephone access to technical support personnel.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
The Company recognizes revenue from fixed-price service and maintenance contracts using the input method of accounting. Under the input method, revenue is recognized on the basis of an entity’s efforts toward satisfying a performance obligation. The Company recognizes revenue from maintenance and support services provided pursuant to the time elapsed under such contracts, as that is when the performance obligation to the Company customers under such arrangements is fulfilled.
Perpetual Software License Revenue
The Company generates revenue from the sales of perpetual software licenses for its Cyber Security and e-Gov segments, including sales for its Magna_DL, Magna_VL, Magna_Passport, and Magna_ID software products. The intellectual property rights for usage of these products are transferred to the customer at the time of purchase and the software does not require implementation services, ongoing maintenance and support, or other adaptions in order to maintain utility.
In arrangements where ongoing services are not essential to the functionality of the delivered software, the Company recognizes perpetual software license revenue when the license agreement has been approved and the software has been delivered. The Company can identify each party’s rights, payment terms, and commercial substance of the content. Where applicable, the Company identifies multiple performance obligations and record as revenue as the performance obligations are fulfilled based on the adjusted market assessment approach.
Annual Software License Revenue
The Company generates revenue from the sales of time-based software licenses for certain of its software products. The intellectual property rights for access to these products are transferred to the customer for contract terms of one year and the software requires ongoing maintenance, support, or other adaptions in order to maintain utility.
The Company recognizes revenue over time using the input method for its annual software licenses when ongoing services are determined to be essential to the functionality of the delivered software. The license along with the any customization services are transferred to the Company customers pursuant to the time elapsed under such contracts, as that is when the Company performance obligation to its customers under such arrangements is fulfilled.
System Design Revenue
System design revenue relate to services provided to governments and national agencies in the early stages of a new project including incumbent system data information extraction, customer interviewing and specification mapping, architecture and software design, secure credential design, project management and planning, data migration design, project operation planning, training, assimilation, and operational processes optimization for the Company’s e-Gov and IoT solutions.
The Company recognizes revenue from its system design services using the input method of accounting. Under the input method, revenue is recognized on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. The Company recognizes revenue from system design services provided pursuant to time-and-materials based contracts as the services are performed, as that is when the Company performance obligation to its customers under such arrangements is fulfilled. Where applicable, the Company identifies multiple performance obligations and record as revenue as the performance obligations are fulfilled based on the using the expected cost plus a margin approach.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
Implementation and System Deployment Revenue
Implementation and system deployment revenue relate to services provided to governments and national agencies typically after the design stage is concluded including infrastructure setup and deployment, software and chip design development, software customizations, purchase, and deployment of hardware and necessary system components, system integration and implementation, process engineering, customer training, system quality assurance testing, load balancing and local environment optimizations, and operational system launch for the Company’s e-Gov and IoT solutions.
The Company recognizes revenue from its implementation and system deployment revenue using the input method of accounting. Under the input method, revenue is recognized on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. The Company recognizes revenue from implementation and system deployment services provided pursuant to time-and-materials based contracts as the services are performed, as that is when the Company performance obligation to its customers under such arrangements is fulfilled. Where applicable, the Company identifies multiple performance obligations and record as revenue as the performance obligations are fulfilled based on the using the residual approach.
Procurement of Secure Document Consumables Revenue
The Company procures secure document consumables for its e-Gov government customers which are needed to issue secure documents after a project deployment is complete and a system in actively running and operational. These consumables are manufactured generally at secure printing facilities utilizing proprietary and customized designs, which the Company has developed during the project design stage, to provide multiple layers of security preventing falsification of documents. These consumables include base card stock, security laminates, holograms, passive RFID chip inlays, passport booklets, secure chip cards, and various other secure credentialing necessities.
The Company recognizes revenue on procurement of secure document consumables products when the customer has control of the product, which is determined to be at the point in time when the products are delivered. Where applicable, the Company identifies multiple performance obligations and record as revenue as the performance obligations are fulfilled based on their stated prices within the contract.
Wireless & RFID Products Revenue
The Company’s wireless products include solutions for carrier wi-fi, enterprise connectivity, smart city, smart hospitality, connected campuses and connected events which enhance productivity and performance. The Company’s RFID products include asset tags which provide real-time asset loss prevention, inventory management, and personnel/asset tracking and vehicle tags which provide long-range vehicle ID for parking and fleet management, access control, asset loss prevention at airports, gated communities, truck and bus terminals, employee parking lots, hospitals, industrial facilities, railroads, mines and military installations.
The Company recognizes revenue on wireless and RFID products when the customer has control of the equipment, which is determined to be at the point in time when the products are shipped. Where applicable, the Company identifies multiple performance obligations and record as revenue as the performance obligations are fulfilled based on their stated prices within the contract.
|
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
Electronic Monitoring Services Revenue
Electronic monitoring services represent fees the Company collects through the sale or rental of its PureSecurity Suite of products, which include the PureMonitor, PureTrack, PureTag, PureCom, PureBeacon, and SCRAM devices. These devices identify, track, and monitor people or objects in real time through the Company’s GPS monitoring, home monitoring, and alcohol tracking solutions.
The Company recognizes revenue on the sale of electronic monitoring products when the customer has control of the equipment, which is determined to be at the point in time when the products are shipped. For devices which are rented and for electronic monitoring services provided, the Company recognizes revenue pursuant to the time elapsed for such contracts, as that is when the Company performance obligation to its customers under such arrangements is fulfilled. The Company customers typically pay for these services based on a net rate per day per individual or on a fixed monthly rate.
Treatment Services Revenue
Treatment services revenue is an extension of the Company’s electronic monitoring services. The Company provides individuals who have completed or are near the end of their sentence with the resources necessary to productively transition back into society. Through the Company daily reporting centers, we provide criminal justice programs and reentry services to help reduce recidivism which include case management, substance abuse education, vocational training, parental support, employment readiness and job placement. These activities are considered to be a bundle of services which are a part of a series of distinct services recognized over time.
The Company recognizes revenue from its treatment services using the input method of accounting. Under the input method, revenue is recognized revenue on the basis of an entity’s efforts or inputs toward satisfying a performance obligation. The Company recognizes revenue from implementation and system deployment services provided pursuant to time-and-materials based contracts as the services are performed, as that is when the Company performance obligation to its customers under such arrangements is fulfilled. Where applicable, the Company identify multiple performance obligations and record as revenue as the performance obligations are fulfilled based on the using the expected cost plus a margin approach.
Professional Services Revenue
The Company offers professional services for the Company’s Cyber Security software products, which includes an on-site / remote visit by a specialist technician to assist with installation, deployment and configuration.
The Company recognizes revenue from professional services upon completion of the service performed for the customer. As these services are completed during a single onsite visit, revenue is recognized at a point in time of such onsite visit.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
Disaggregation of revenue
In the following table, revenue is disaggregated by major geographic region and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:
|
|
Year ended December 31, 2021
|
||||||||||||||||
|
Cyber
Security |
IoT
|
e-Gov
|
Total
|
|||||||||||||
Major geographic areas
|
|||||||||||||||||
Africa
|
$
|
- |
$
|
- |
$
|
1,586 |
$
|
1,586 | |||||||||
European countries
|
527 | 2,242 | 143 | 2,912 | |||||||||||||
South America
|
1 | 36 | - | 37 | |||||||||||||
United States
|
410 | 6,410 | - | 6,820 | |||||||||||||
Israel
|
648 | 109 | - | 757 | |||||||||||||
APAC
|
48 | 107 | - | 155 | |||||||||||||
Total revenue
|
$
|
1,634 |
$
|
8,904 |
$
|
1,729 |
$
|
12,267 | |||||||||
|
|||||||||||||||||
Timing of revenue recognition
|
|||||||||||||||||
Products and services transferred over time
|
$
|
44 |
$
|
7,176 |
$
|
1,428 |
$
|
8,648 | |||||||||
Products transferred at a point in time
|
1,590 | 1,728 | 301 | 3,619 | |||||||||||||
Total revenue
|
$
|
1,634 |
$
|
8,904 |
$
|
1,729 |
$
|
12,267 |
|
Year ended December 31, 2020
|
||||||||||||||||
|
Cyber
Security |
IoT
|
e-Gov
|
Total
|
|||||||||||||
Major geographic areas
|
|||||||||||||||||
Africa
|
$
|
- |
$
|
- |
$
|
1,791 |
$
|
1,791 | |||||||||
European countries
|
762 | 2,155 | 120 | 3,037 | |||||||||||||
South America
|
- | 21 | - | 21 | |||||||||||||
United States
|
544 | 5,312 | - | 5,856 | |||||||||||||
Israel
|
677 | 69 | - | 746 | |||||||||||||
APAC
|
220 | 99 | - | 319 | |||||||||||||
Total revenue
|
$
|
2,203 |
$
|
7,656 |
$
|
1,911 |
$
|
11,770 | |||||||||
|
|||||||||||||||||
Timing of revenue recognition
|
|||||||||||||||||
Products and services transferred over time
|
$
|
92 |
$
|
6,020 |
$
|
1,466 |
$
|
7,578 | |||||||||
Products transferred at a point in time
|
2,111 | 1,636 | 445 | 4,192 | |||||||||||||
Total revenue
|
$
|
2,203 |
$
|
7,656 |
$
|
1,911 |
$
|
11,770 |
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
Transaction price allocated to the remaining performance obligations
Remaining performance obligations represent the transaction price of system deployment, service and maintenance contracts for which work has not been performed as of the period end date. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance totals $8.27 million. The Company expects approximately 39% of remaining performance obligations to be recognized into revenue within the next 12 months, with the remaining 61% recognized thereafter.
The Company applies the practical expedient in paragraph ASC 606-10-50-14 and do not disclose information about remaining performance obligations that have original expected durations of one-year or less. We apply the transition practical expedient in paragraph ASC 606-10-65-1(f)(3) and do not disclose the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the Company expects to recognize that amount as revenue. Additionally, applying the practical expedient in paragraph ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts (i.e., commissions) as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one-year or less.
|
|
o.
|
Research and development costs and software development costs:
Research and development costs are expensed as incurred. Software development costs eligible for capitalization are accounted for in accordance with 985-20 Software - Costs of Software to be Sold, Leased or Marketed. Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. Amortization is calculated and provided over the estimated economic life of the software, using the greater of (i) straight-line method or if applicable (ii) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product. Amortization commences when developed software is available for general release to clients.
The estimated useful life of capitalized software development costs is 5 years.
|
|
p.
|
Income taxes:
The Company and its subsidiaries account for income taxes in accordance with ASC Topic 740, “Income Taxes”. This Statement prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws, that will be in effect when the differences are expected to reverse. The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
The Company accounts for uncertain tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements. According to ASC Topic 740-10, tax positions must meet a more-likely-than-not recognition and measurement threshold. The Company’s accounting policy is to classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such items in its fiscal 2021 and 2020 financial statements.
ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, requires a reporting entity to classify all deferred tax assets and liabilities as noncurrent in a classified balance sheet. As of December 31, 2018, the Company adopted in a retrospective method the new Income Tax guidelines, stating all deferred tax assets and liabilities need be presented as non-current in the balance sheet.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
q.
|
Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, restricted cash deposits and trade receivables. The Company’s trade receivables are derived from sales to customers located primarily in Eastern Europe, Africa, the United States and South America. The Company performs ongoing credit evaluations of its customers’ financial condition. The allowance for doubtful accounts is determined with respect to specific debts that the Company has determined to be doubtful of collection.
Cash and cash equivalents and restricted cash deposits are deposited with major banks in Israel and the United States. Management believes that such financial institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments. The Company has no significant off-balance-sheet concentration of credit risk.
|
|
r.
|
Basic and diluted earnings per share:
Basic earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year. Diluted earnings per share are computed based on the weighted average number of ordinary shares outstanding during each year, plus the dilutive potential of stock options and warrants outstanding during the year using the treasury stock method. The numbers of potential shares from the conversion of options and warrants that have been excluded from the calculation were 2.877 million and 334,839 for the years ended December 31, 2021 and 2020, respectively
|
|
s.
|
Fair value of financial instruments:
The Company applies ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The hierarchy is broken down into three levels based on the inputs as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, other accounts receivable, trade payable, and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.
The Company measures its earn-out liability at fair value (see also Note 10).
|
|
t.
|
Accounting for stock-based compensation:
Stock-based compensation, including grants of stock options, is recognized in the consolidated statement of operations over the requisite service period as an operating expense, based on the fair value of the award on the date of grant. The fair value of stock-based compensation is estimated using an option-pricing model.
The Company elected to recognize compensation costs for awards conditioned only on continued service that have a graded vesting schedule using the straight-line method and to value the awards based on the single-option award approach.
The Company accounts for forfeitures as they occur.
|
|
u.
|
Treasury Shares:
Treasury shares are recorded at cost and presented as a reduction of shareholders' equity.
|
|
v.
|
Leases:
The Company adopted ASU 2016-02, Leases (“Topic 842” or “ASC 842”) on January 1, 2021, using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. The standard requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. Leases with a term of 12 months or less can be accounted for in a manner similar to the accounting for operating leases under ASC 840. The ASC 842 requires lessors to account for leases using an approach that is substantially equivalent to ASC 840 for sales-type leases, direct financing leases and operating leases.
The Company leases real estate and storage areas, which are all classified as operating leases. In addition to rent payments, the leases may require the Company to pay for insurance, maintenance, and other operating expenses.
The Company determines if an arrangement is a lease at inception. Lease classification is governed by five criteria in ASC 842-10-25-2. If any of these five criteria is met, the Company classifies the lease as a finance lease. Otherwise, the Company classifies the lease as an operating lease.
Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments.
Operating lease expenses are recognized on a straight-line basis over the lease term. Exchange rate differences related to lease liabilities are recognized as finance income or expense. Several of the Company’s leases include options to extend the lease. For purposes of calculating lease liabilities, lease terms include options to extend the lease when it is reasonably certain that the Company will exercise such options.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 2:
|
SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
The Company's ROU assets are reviewed for impairment in accordance with ASC 360, "Property, Plant and Equipment" ("ASC 360"), whenever events in circumstances indicate that the carrying amount of an asset may not be recoverable.
The ASC 842 provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases with a term shorter than 12 months. This means that for those leases, the Company does not recognize ROU assets or lease liabilities but recognizes lease expenses over the lease term on a straight-line basis. The Company also elected to not separate lease and non-lease components for all of the Company’s leases.
Upon adoption as of January 1, 2021, the Company recorded right-of-use leased assets and corresponding liabilities of $1200. See Note 8 for further information on leases.
|
|
w.
|
Recent accounting pronouncements
ASU 2019-12, Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective is effective for annual periods beginning after January 1, 2022 and interim periods within annual periods beginning after January 1, 2023, and early adoption was permitted. The Company is currently evaluating the effect the adoption of ASU 2019-12 will have on its consolidated financial statements.
ASU 2020-06, Debt - Debt with Conversion and Other Options,
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and(2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for interim and annual periods beginning after January 1, 2024, and early adoption was permitted. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures.
Other new pronouncements issued but not effective as of December 31, 2021 are not expected to have a material impact on the Company’s consolidated financial statements.
|
NOTE 3:
|
OTHER CURRENT ASSETS
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Prepaid expenses
|
209 | 157 | |||||||
Advances to suppliers
|
323 | 308 | |||||||
Government institutions
|
208 | 124 | |||||||
Other
|
859 | 287 | |||||||
|
1,599
|
876
|
NOTE 5:
|
PROPERTY AND EQUIPMENT, NET
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Cost:
|
|||||||||
|
|||||||||
Computers and peripheral equipment
|
3,040 | 2,770 | |||||||
Office furniture and equipment
|
850 | 824 | |||||||
Trade Equipment
|
42 | 42 | |||||||
Leasehold improvements
|
210 | 196 | |||||||
Equipment in lease
|
2,534 | 1,898 | |||||||
|
6,676 | 5,730 | |||||||
Accumulated depreciation:
|
|||||||||
Computers and peripheral equipment
|
2,729 | 2,650 | |||||||
Office furniture and equipment
|
735 | 735 | |||||||
Trade Equipment
|
39 | 33 | |||||||
Leasehold improvements
|
197 | 196 | |||||||
Equipment in lease
|
1,172 | 745 | |||||||
|
4,872 | 4,359 | |||||||
Depreciated cost
|
1,804 | 1,371 |
Purchasing of Equipment for the years ended December 31, 2021 and 2020, were $946 and $812, respectively.
Depreciation expenses for the years ended December 31, 2021 and 2020, were $513 and $335, respectively.
|
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 6:
|
OTHER INTANGIBLE ASSETS, NET
|
Other intangible assets consisted of the following:
|
|
December 31, 2021
|
December 31, 2020
|
|||||||||||||||||||||||
|
Carrying
Amount |
Accumulated
Amortization |
Net Book
Value |
Carrying
Amount |
Accumulated
Amortization |
Net Book
Value |
|||||||||||||||||||
Customers relationships & Other
|
8,734 | 7,798 | 936 | 8,734 | 7,484 | 1,250 | |||||||||||||||||||
IP & Technology
|
7,019 | 4,524 | 2,495 | 7,019 | 3,959 | 3,060 | |||||||||||||||||||
Right of use
|
1,200 | 318 | 882 | - | - | - | |||||||||||||||||||
Capitalized software development costs
|
8,001 | 5,822 | 2,179 | 7,265 | 5,305 | 1,960 | |||||||||||||||||||
|
24,954 | 18,462 | 6,492 | 23,018 | 16,748 | 6,270 |
Amortization expenses amounted to $1,396 and $2,385 for the years ended December 31, 2021 and 2020, respectively.
|
NOTE 7:
|
ACCRUED EXPENSES AND OTHER LIABILITIES
|
|
December 31
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Liabilities related with the Smart ID acquisition (see note 8 c1)
|
- | 805 | |||||||
Accrued management services
|
86 | 125 | |||||||
Professional services
|
206 | 155 | |||||||
Facilities
|
136 | 39 | |||||||
Legal contingent liability
|
67 | 60 | |||||||
Legal service providers
|
28 | 39 | |||||||
Authorities
|
393 | 382 | |||||||
Other accrued expenses
|
643 | 2,788 | |||||||
|
1,559 | 4,393 |
NOTE 8:
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
a.
|
Lease commitments:
We do not own any real estate. We lease approximately 1,139 square meters of office and warehousing premise in Tel Aviv and Herzliya, Israel, under a new lease which started on April l 1, 2021 and expires on March 30, 2023 with an option for 24-month extension. According to the lease agreements, the monthly fee (including management fees) is approximately $35,430.
We lease approximately 1,278 square meters of office premises in California for our U.S. subsidiary, LCA Inc., which under the current lease contracts expire in 2022, with a monthly fee of approximately $24,068.
Future minimum lease commitments under non-cancelable operating leases for the years ended December 31, 2021, are as follows: |
2022
|
$
|
502
|
||||
2023
|
432
|
|||||
2024
|
103
|
|||||
Total operating lease payments
|
$
|
1,037
|
||||
Less: imputed interest
|
(112 | ) | ||||
Present value of lease Liabilities
|
$ | 925 |
Rent expenses amounted to $714 and $753 for the years ended December 31, 2021 and 2020, respectively.
|
|
b.
|
Guarantees, indemnity and liens:
|
|
1.
|
The Company and its subsidiaries issued bank guaranties in the total amount of approximately $1,067 as a part of the ongoing terms of lease contracts, contracts with existing customers and for tenders.
|
|
2.
|
Under the Fortress Agreement, the Company recorded a fix floating charge on all of the Company’s assets in favor of the Fortress, limited in amount, in order to secure long-term loan granted by them in favor of the Company.
|
NOTE 8:
|
COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
|
|
|
The Company is party to legal proceedings in the normal course of our business. There are no material pending legal proceedings to which the Company is a party or of which our property is subject. Although the outcome of claims and lawsuits against the Company cannot be accurately predicted, we do not believe that any of the claims and lawsuits, will have a material adverse effect on the Company business, financial condition, results of operations or cash flows for any quarterly or annual period. |
NOTE 9:
|
INCOME TAX
|
|
a.
|
Changes in Israeli corporate tax rates:
The regular corporate tax rate in Israel in 2021and 2020 is 23%.
|
|
b.
|
Our USA subsidiaries were subject to federal tax rate of 21% in 2020 and 2021, state tax of 8.84% in CA and 6.5% in NY, and city tax of 6.5% in NYC. |
|
c.
|
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets of the Company and its subsidiaries are as follows:
|
|
December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Operating loss carry forwards
|
20,150 | 18,658 | |||||||
Reserves and allowances
|
4,206 | 2,589 | |||||||
|
|||||||||
Net deferred tax assets before valuation allowance
|
24,356 | 21,247 | |||||||
Valuation allowance
|
(23,797 |
)
|
(21,121 |
)
|
|||||
|
|||||||||
Net deferred tax assets
|
559 | 126 | |||||||
|
|||||||||
Deferred income taxes consist of the following:
|
|||||||||
Domestic
|
19,521 | 16,285 | |||||||
Valuation allowance
|
(18,963 |
)
|
(16,159 |
)
|
|||||
Net deferred tax assets
|
558 | 126 | |||||||
|
|||||||||
Foreign
|
4,835 | 4,962 | |||||||
Valuation allowance
|
(4,835 |
)
|
(4,962 |
)
|
|||||
|
-
|
-
|
As of December 31, 2021, the Company and its subsidiaries, have provided a valuation allowance of $23,797 in respect of deferred tax assets resulting from tax loss carryforwards and other temporary differences. Other tax loss carryforwards and temporary differences in the amount of $565 were not provided with valuation allowance as the Company’s management currently believes that these tax assets are more likely than not to be recovered.
|
NOTE 9:
|
INCOME TAX (cont.)
|
|
d.
|
Carryforward tax losses:
As of December 31, 2021, SuperCom Ltd and its subsidiaries in Israel have accumulated losses for tax purposes of approximately $49,833, which may be carried forward and offset against taxable income in the future for an indefinite period. SuperCom Ltd. also has a capital loss of approximately $16,450, which may be carried forward and offset against capital gains for an indefinite period. Loss carryforwards in Israel are measured in NIS.
As of December 31, 2021, SuperCom’ s subsidiaries in the United States have estimated total available carryforward tax losses of approximately $18,558 which expires in the years 2028 to 2037. Utilization of the U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
SuperCom Ltd has assessments which are considered as final until the tax year ended December 31, 2015.
SuperCom’s subsidiaries in the United States and Israel have not received final assessments since their incorporation.
|
|
e.
|
loss before income tax consists of the following:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Domestic
|
(10,616
|
)
|
(6,301
|
)
|
|||||
Foreign
|
483
|
(1,561
|
)
|
||||||
|
(10,133
|
)
|
(7,862
|
)
|
Substantially, all tax expenses are as a result of changes in deferred taxes.
|
||
|
f.
|
Reconciliation of the theoretical tax benefit to the actual tax benefit:
A reconciliation of theoretical tax expense, assuming all income is taxed at the statutory rate applicable to the income of companies in Israel, and the actual tax expense (benefit), is as follows:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Loss before income tax, as reported in the consolidated statements of operations
|
(10,133 |
)
|
(7,862 |
)
|
|||||
Statutory tax rate in Israel
|
23 |
%
|
23 |
%
|
|||||
|
|||||||||
Theoretical tax benefit
|
(2,331 |
)
|
(1,808 |
)
|
|||||
Current year carryforward losses and other differences for which a valuation allowance was recorded
|
1,438 | 1,278 | |||||||
Changes in valuation allowance
|
- | 48 | |||||||
Offset of Other non-current assets (accounted for as DTA element)
|
(56 |
)
|
(56 |
)
|
|||||
Changes in foreign currency exchange rate and other differences
|
788 | 5 | |||||||
Non-deductible expenses and other differences
|
166 | 538 | |||||||
|
|||||||||
Actual income tax expense (benefit)
|
5 | 5 |
NOTE 10:
|
SHARE CAPITAL
|
|
a.
|
The Company’s ordinary shares are quoted under the symbol “SPCB” on the NASDAQ Capital Market in the United States.
|
b.
|
Shareholders’ rights:
|
||
|
|
|
|
|
The ordinary shares confer upon the holders the right to receive notice to participate and vote in the general meetings of the Company, and the right to receive dividends, if declared. |
|
|
c.
|
Stock options:
|
|
1.
|
In 2003, the Company adopted a stock option plan under which the Company issues stock options (the “Option Plan”). The Option Plan is intended to provide incentives to the Company’s employees, officers, directors and/or consultants by providing them with the opportunity to purchase ordinary shares of the Company. Subject to the provisions of the Israeli Companies Law, the Option Plan is administered by the Compensation Committee, and is designed: (i) to comply with Section 102 of the Israeli Tax Ordinance or any provision which may amend or replace it and the rules promulgated thereunder and to enable the Company and grantees thereunder to benefit from Section 102 of the Israeli Tax Ordinance and the Commissioner’s Rules; and (ii) to enable the Company to grant options and issue shares outside the context of Section 102 of the Israeli Tax Ordinance. Options granted under the Option Plan will become exercisable ratably over a period of three to five years or immediately in certain circumstances, commencing with the date of grant. The options generally expire no later than 10 years from the date of grant. Any options which are forfeited or canceled before expiration become available for future grants.
|
NOTE 10:
|
SHARE CAPITAL (Cont.)
|
As a result of an amendment to Section 102 of the Israeli Tax Ordinance as part of the 2003 Israeli tax reform, and pursuant to an election made by the Company thereunder, capital gains derived by grantees arising from the sale of shares issued pursuant to the exercise of options granted to them under Section 102 after January 1, 2003, will generally be subject to a flat capital gains tax rate of 25%. However, as a result of this election, the Company will no longer be allowed to claim as an expense for tax purposes the amounts credited to such employees as a benefit when the related capital gains tax is payable by them, as the Company had previously been entitled to do under Section 102.
On June 27, 2007, the Compensation Committee and board of directors of the Company approved a new option plan under which the Company may grant stock options to the U.S. employees of the Company and its subsidiaries. Under this new option plan, the Company may grant both qualified (for preferential tax treatment) and non-qualified stock options. On August 15, 2007, the new option plan was approved by the shareholders of the Company at the general shareholders meeting.
In June 2013, the Option plan was extended for another period of ten years, until December 31, 2023.
During the years 2019, 2020 and 2021, the Company did not grant any option to purchase shares.
|
|
2.
|
A summary of the Company’s stock option activity and related information is as follows:
|
|
Year ended December 31
|
||||||||||||||||
|
2021
|
2020
|
|||||||||||||||
|
Number of
options |
Weighted
average exercise price |
Number of
options |
Weighted
average exercise price |
|||||||||||||
|
$
|
$
|
|||||||||||||||
Outstanding at Beginning of year
|
334,839 | 2.31 | 564,197 | 2.64 | |||||||||||||
Granted
|
- | - | - | - | |||||||||||||
Exercised
|
(44,964 |
)
|
0.41 | (123,545 |
)
|
0.1 | |||||||||||
Canceled and forfeited
|
(76,000 |
)
|
2.22 | (105,813 |
)
|
2.94 | |||||||||||
Outstanding at end of year
|
213,875 | 1.23 | 334,839 | 2.31 | |||||||||||||
Exercisable at end of year
|
159,500 | 1.28 | 193,089 | 1.73 |
|
SUPERCOM LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.) |
U.S. dollars in thousands (except per share data) |
NOTE 10:
|
SHARE CAPITAL (Cont.)
|
The weighted average fair value of options granted during the year ended December 31, 2018 was $1.87 per option.
The fair value of these options was estimated on the date of grant using the Black & Scholes option pricing model. The following weighted average assumptions were used for the 2018 grants: risk-free rate of 2.89% and 3.04%, dividend yield of 0%, expected volatility factor of 238% and 240% and expected term of 6.25 years.
The expected volatility was based on the historical volatility of the Company’s stock. The expected term was based on the historical experience and based on Management estimate.
Compensation expenses recognized by the Company related to its stock-based employee compensation awards were $31 and $211 for the years ended December 31, 2021 and 2020, respectively.
The following table summarizes the allocation of the stock-based compensation and warrants charge
|
|
Year e Ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Cost of revenues
|
7 | 84 | |||||||
Research and development expenses
|
12 | 48 | |||||||
Selling and marketing expenses
|
7 | 77 | |||||||
General and administrative expenses
|
5 | 2 | |||||||
|
|||||||||
|
31 | 211 |
The options outstanding and exercisable as of December 31, 2021, have been separated into ranges of exercise prices as follows:
|
Options outstanding
|
Options Exercisable
|
|||||||||||||||||||||||||||||||||
Range of
exercise price |
Number
outstanding as of December 31, 2021 |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
Aggregate
intrinsic value |
Number
outstanding as of December 31, 2021 |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
Aggregate
intrinsic value |
||||||||||||||||||||||||||
$
|
$
|
$
|
$
|
$
|
||||||||||||||||||||||||||||||
0.00-2.00
|
207,875 | 7.09 | 1.11 | - | 153,500 | 7.10 | 1.13 | - | ||||||||||||||||||||||||||
3.00-5.00
|
6,000 | 7.00 | 4.96 | - | 6,000 | 7.00 | 4.96 | - | ||||||||||||||||||||||||||
213,875 | 7.08 | 1.22 | - | 159,500 | 7.10 | 1.27 | - |
The total intrinsic value of options exercised for the years ended December 31, 2021 and 2020 was $0 and $0, respectively, based on the Company’s average stock price of $1.16 and $1.04, during the years ended on those dates, respectively.
|
A summary of the status of the Company’s non-vested options granted to employees as of December 31, 2021 and changes during the year ended December 31, 2021 is presented below: |
|
Options
|
Weighted–
average grant-date fair value |
|||||||
Non-vested as of December 31, 2020
|
141,750 | 1.64 | |||||||
Granted
|
- | - | |||||||
Vested
|
(54,375 |
)
|
1.07 | ||||||
Forfeited and canceled
|
(33,000 |
)
|
3.52 | ||||||
Non-vested as of December 31, 2021
|
54,375 | 1.07 |
As of December 31, 2021, there was $66 of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the stock option plans, to be recognized over a weighted average period of approximately 0.61 years.
|
||
|
d.
|
Private placements and warrants:
During 2019, the Company issued 348,132 warrants to purchase the Company ordinary shares at an exercise price of $0.76 per share.
During 2020 and 2021, the Company issued 2.38 million warrants to purchase the Company ordinary shares at an exercise price of $1.7 per share. The warrants are exercisable until July 2025.
|
|
e.
|
Dividends:
No dividends were declared in the reported periods. In the event that cash dividends are declared in the future, such dividends will be paid in NIS. The Company does not intend to distribute cash dividends in the foreseeable future.
|
NOTE 11:
|
RELATED PARTY TRANSACTIONS
|
|
a.
|
On July 25, 2010, the board of directors of the Company elected Mrs. Tsviya Trabelsi to serve as Chairman. Mrs. Trabelsi is an officer at Sigma Wave Ltd., which is the controlling shareholder of the Company and is also the wife of the Company’s chief executive officer. On May 12, 2011, the special general meeting approved a service agreement with Mrs. Trabelsi whereby she will receive a monthly fee equal to 60% of the Company’s chief executive officer’s monthly cost. In addition to the above consideration, the Company will bear all reasonable costs and expenses incurred by the Chairman in connection with her services and provide her with an automobile. On December 12, 2011, Mrs. Tsviya Trabelsi resigned effective immediately and the board of directors of the Company approved the appointment of Mr. Arie Trabelsi as its new Chairman, effective December 12, 2011. On December 27, 2012, the company’s shareholders at a general meeting of shareholders approved the reappointment of Mrs. Trabelsi as Chairman. On May 9, 2013, the general meeting of shareholders of the Company approved the same management services compensation for Mrs. Trabelsi as those approved in May 2011.
|
|
b.
|
Mr. Trabelsi has served as the chief executive officer of the Company since June 1, 2012 until February 21, 2021. Mr. Trabelsi is the sole director of Sigma Wave, which is the controlling shareholder of the Company. On May 9, 2013, the general meeting of shareholders of the Company approved the payment of management fees to Mr. Trabelsi of $10.6 per month plus social benefits and an annual bonus of the greater of 2% of the Company’s annual net profit or 0.5% of annual revenues, but in no event greater than Mr. Trabelsi’s annual salary.
|
|
c.
|
As of December 31, 2021 and 2020, the Company accrued $103 and $391, respectively as expenses arising from related party management services.
|
|
d.
|
On April 29, 2012, the board of directors approved the recording of a floating charge on all of the Company’s assets in favor of the Mr. and Mrs. Trabelsi, unlimited in amount, in order to secure personal guarantees granted by them in favor of the Company to a bank and in order to secure loans that are given by them from time to time to the Company. As of December 31,2021, total loans were $172. These loans bear no interest and are not attached to any price index.
|
NOTE 12:
|
SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
|
|
a.
|
Summary information about segments:
ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer.
As part of the Company decision to switch from one technology segment, the e-government, into 3 separate technologies segments or Strategic business units; e-Gov, IoT, and Cyber Security, the Company acquired during 2016, 4 different companies with various technologies and customers base which enrich and strengthen the capacities and offering of each of the 3 segments:
e-Gov: Through the Company proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, the Company has helped governments and national agencies design and issue secured multi-identification, or Multi-ID, documents and robust digital identity solutions to their citizens, visitors and Lands.
IoT: The Company’s IoT products and solutions reliably identify, track and monitor people or objects in real time, enabling the customers to detect unauthorized movement of people, vehicles and other monitored objects.
|
The Company provides all-in-one field proven IoT suite, accompanied with services specifically tailored to meet the requirements of an IoT solutions. The Company’s proprietary IoT suite of hybrid hardware, connectivity and software components are the foundation of these solutions and services.
|
NOTE 12:
|
SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)
|
Cyber Security: The Company operates in the fields of cutting edge endpoint data protection guarding against corporate data loss and theft through content discovery and inspection, encryption methodologies, and comprehensive device and port control and cyber security services.
As a result, all prior period information has been recast to reflect the new segment composition.
|
|
Year ended December 31, 2021
|
||||||||||||||||
|
Cyber
Security |
IoT
|
e-Gov
|
Total
|
|||||||||||||
Revenues
|
1,634 | 8,904 | 1,729 | 12,267 | |||||||||||||
|
|||||||||||||||||
Operating loss
|
400 | (3,004 |
)
|
(4,133 |
)
|
(6,737 |
)
|
||||||||||
|
|||||||||||||||||
Goodwill
|
1,075 | 2,229 | 3,722 | 7,026 | |||||||||||||
|
|||||||||||||||||
Total Property and Equipment, net
|
47 | 1,543 | 214 | 1,804 |
|
Year ended December 31, 2020
|
||||||||||||||||
|
Cyber
Security |
IoT
|
e-Gov
|
Total
|
|||||||||||||
Revenues
|
2,203 | 7,656 | 1,911 | 11,770 | |||||||||||||
|
|||||||||||||||||
Operating loss
|
581 | (1,373 |
)
|
(2,957 |
)
|
(3,749 |
)
|
||||||||||
|
|||||||||||||||||
Goodwill
|
1,075 | 2,229 | 3,722 | 7,026 | |||||||||||||
|
|||||||||||||||||
Total Property and Equipment, net
|
109 | 1,016 | 246 | 1,371 |
Following is a reconciliation of the operating income (loss) of the reportable segments to the data included in the statements of operations:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
Operating loss
|
|||||||||
Total operating loss of reportable segments
|
(6,737 |
)
|
(3,749 |
)
|
|||||
Financial expenses, net
|
(3,396 |
)
|
(4,113 |
)
|
|||||
Loss before income taxes
|
(10,133 |
)
|
(7,862 |
)
|
NOTE 12:
|
SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)
|
|
b.
|
Summary information about geographic areas:
The following is a summary of revenues from external customers of the continued operations within geographic areas and data regarding property and equipment, net:
|
|
Year ended December 31,
|
||||||||||||||||
|
2021
|
2020
|
|||||||||||||||
|
Total
|
Property and
|
Total
|
Property and
|
|||||||||||||
|
Revenues
|
Equipment, net
|
revenues
|
Equipment, net
|
|||||||||||||
|
$
|
$
|
$
|
$
|
|||||||||||||
Africa
|
1,586 | - | 1,791 | - | |||||||||||||
European countries
|
2,912 | - | 3,037 | - | |||||||||||||
South America
|
37 | - | 21 | - | |||||||||||||
United States
|
6,820 | 47 | 5,856 | 89 | |||||||||||||
Israel
|
757 | 1,757 | 746 | 1,282 | |||||||||||||
APAC
|
155 | - | 319 | - | |||||||||||||
|
12,267 | 1,804 | 11,770 | 1,371 |
|
-
|
Revenues were attributed to countries based on the customer’s location.
|
|
-
|
Property and equipment were classified based on geographic areas in which such property and equipment items are held.
|
|
c.
|
Summary of revenues from external customers based on products and services:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Raw materials and equipment
|
1,119 | 2,926 | |||||||
Electronic monitoring
|
6,393 | 6,019 | |||||||
Treatment programs
|
3,292 | 1,640 | |||||||
Maintenance, royalties and project management
|
1,463 | 1,185 | |||||||
|
|||||||||
|
12,267 | 11,770 |
|
d.
|
Major customer data as a percentage of total sales:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
Customer A
|
- | 11 |
%
|
||||||
Customer B
|
10 |
%
|
13 |
%
|
NOTE 13:
|
OTHER EXPENSE, NET
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Doubtful debt provision
|
3,000 | 2000 | |||||||
Change in liability for future earn-out
|
689 |
|
(59 |
)
|
|||||
Other
|
683 |
|
(792 |
)
|
|||||
Total other expense, net
|
4,372 | 1,149 |
Bad debt
The following is a summary of the accounts receivables allowance for doubtful accounts for the years ended December 31:
|
|
Year ended December 31,
|
||||||||
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Balance at beginning of period
|
8,667 | 6,667 | |||||||
Provision during the period
|
3,000 | 2,000 | |||||||
Balance at end of period
|
11,667 | 8,667 |
NOTE 14:
|
FINANCIAL EXPENSES, NET
|
|
2021
|
2020
|
|||||||
|
$
|
$
|
|||||||
Financial expenses:
|
|||||||||
|
|||||||||
Interest, bank charges and fees
|
(3,642 |
)
|
(3,812 |
)
|
|||||
Exchange differences, net
|
246 | (316 |
)
|
||||||
|
|||||||||
Total financial expenses
|
(3,396 |
)
|
(4,128 |
)
|
|||||
Financial income:
|
|||||||||
Interest income
|
- | 15 | |||||||
|
|||||||||
Total financial income
|
- | 15 | |||||||
|
|||||||||
Total financial expenses, net
|
(3,396 |
)
|
(4,113 |
)
|
NOTE 15:
|
Subsequent Events
|
a.
|
On March 1, 2022, (the “Closing Date”) the Company raised $4.65 million in a registered direct offering with a single accredited institutional investor (the “Purchaser”) of an aggregate of 3,130,000 of its ordinary shares, par value NIS 0.25 per share (the “ordinary shares”), and 4,401,585 pre-funded warrants to purchase ordinary shares with an exercise price of $0.00001 per share, and concurrent private placement to the Purchaser of the Company’s private warrants to purchase an aggregate of 5,648,689 or ordinary shares at an exercise price of $0.70 per share. The private warrants will be exercisable beginning on the six-month anniversary of the Closing Date and will expire five years and six months following the Closing Date. These offerings were effected pursuant to the Securities Purchase Agreement, dated as of February 25, 2022 (the “Purchase Agreement”), with a single accredited institutional investor.
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b.
|
In February 2022, Russia launched a military invasion into Ukraine. While as of the date of issuance of this annual report there have not been material impacts associated with the military invasion, management is continuously monitoring the developments to assess potential future impacts
|
SUPERCOM LTD. | ||
By: | /s/ Ordan Trabelsi | |
Name: | Ordan Trabelsi | |
Title: | Chief Executive Officer |
77
1. |
In these Articles of Association the following terms will have the meanings described below, unless the context requires otherwise:
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"Articles"
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These Articles of Association, as may be amended from time to time.
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"Audit Committee"
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The audit committee of the Board of Directors, established according to these Artic1es and the Law.
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"Board of Directors"
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The Company's board of directors.
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"Company"
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SUPERCOM LTD.
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"Director"
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A member of the Company's Board of Directors.
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"General Meeting"
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A meeting of the company's Shareholders convened according to these Articles and the Law.
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"lndependent Director"
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A Director that qualifies as independent in accordance with the rules of the U.S. Securities and Exchange Commission and of any securities
exchange in which the Company has registered its shares on and in accordance with any applicable law or regulation.
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"Law"
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The Companies Law - 1999, including any regulations and regulatory orders relating thereto and to the Compa11y, as will be in effect from time
to time.
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"Officer"
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A Director, General Manager, President, Chief Executive Officer ("CEO"), Deputy General Manager, Assistant General Manager, and any person holding
such office in the Company, even if bearing a different title, and any other manager being directly subordinated to the CEO.
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"Ordinary Majority"
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An ordinary majority of all votes properly cast at a General Meeting, without taking into account abstentions.
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"Register"
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The register of Shareholders, including branch registers the Company may maintain, kept according to the Law.
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"Secretary"
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The Company's corporate secretary, as may be appointed by the Board from time to time.
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"Share Capital"
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The Company' s registered share capital, as authorized in these Articles.
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"Shareholder"
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Any person or entity that is a holder of shares of the Company according to these Articles and the Law
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"Special Majority"
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A majority of at least sixty-six percent (66%) of all votes properly cast at a General Meeting, without taking into account abstentions.
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"Voting Instrument"
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A written form for Shareholders to use, according to these Articles and the Law, in voting at General Meetings.
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"Writing"
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A handwritten, typewritten, facsimile, print, e-mail or any other legally recognized form of communication that can be read.
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2. |
In these Articles, unless the context otherwise requires, terms used herein shall have the meanings ascribed to them in the Law. In addition, words importing the singular will include the plural, and vice versa. Words importing the
masculine gender will include the feminine, and words importing persons will include companies, partnerships, associations and all other legal entities. Days, months and years refer to the Gregorian calendar.
|
3. |
In the event that an Article is revised or a 11ew Article is added to these Articles, which contradicts an original Article, the revised or added Article(s) will prevail.
|
4. |
Unless the context requires otherwise, wherever it is specified in these Articles that the provisions thereof are according to or subject to the provisions of the Law and/or any other applicable law, rules or regulations, the intention
is to mandatory legislation provisions only.
|
5. |
(a) The Company is a public company as defined in the Law.
|
(b) |
Subject to any limitation or restriction under any law, the transfer of shares in the Company is not restricted.
|
(c) |
The number of Shareholders is unlimited.
|
(d) |
The Company may issue any form of its shares or other securities to the public.
|
6. |
The liability of each of the Shareholders of the Company is limited to the greater amount of the two - the Share's nominal value, or the amount,
which the Shareholder is called to pay to the Company for the shares, which have been allocated to him but have not yet been paid for by him.
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7. |
The Objects of the Company may include any activity permitted by law.
|
8. |
The Company may contribute, from time to time, reasonable amounts to worthwhile causes, even if the contributio11 is 11ot based on profit-orie11ted business considerations.
|
9. |
The name of the Company is: SuperCom Ltd. and in Hebrew: סופרקום מ"בע.
|
10. |
The Registered Office of the Company will be at such place as the Board of Directors shall determine from time to time.
|
11. |
The authorized Share Capital of the Company is 48,000,000 Ordinary Shares of NIS 0.25 each.
|
12. |
The Company may from time to time, by a Resolution of Shareholders at a General Meeting, whether or not all the shares then authorized have been issued, and whether or not all the shares then issued have been called up for payment,
increase its authorized Share Capital by the creation of new shares. Such increase shall be in such amount, divided into shares of such nominal amounts, subject to such restrictions and terms and with such rights and preferences, as the
Resolution creating the same shall provide.
|
13. |
Unless otherwise provided in the Resolution authorizing the increase of Share Capital, the new shares shall be subject to the same provisions applicable to the shares included in the existing Share Capital with regard to the payment of
calls, lien, forfeiture, transfer, transmission and otherwise.
|
14. |
The Company may, by a resolution of the Shareholders at a General Meeting:
|
(a) |
consolidate and re-divide its Share Capital, fully or partly, into shares of larger nominal (par) value than its existing shares;
|
(b) |
divide, by sub-division of its existing shares or any of them, into shares of smaller nominal (par) value than is fixed by the Memorandum of Association and these Articles; provided, however, that the proportion between the amount paid
and the amount unpaid on each share which is not fully paid up shall be retained at such sub-division;
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(c) |
cancel any shares of its issued or unissued share capital, and decrease the amount of its authorized share capital by the amount of the shares so canceled, subject to any commitment (including a conditional commitment) given by the
Company in respect of such shares and provided that the cancellation of any issued shares shall be equally made on a pro-rata basis with respect to all issued shares of the Company;
|
(d) |
reduce its Share Capital in any manner, subject to any approval required by law.
|
15. |
If, as a result of a consolidation or split of shares authorized under these Articles, fractions of a share will stand to the credit of any Shareholder, the Board is authorized, at its discretion, to act as follows:
|
(a) |
determine that fractions of shares that do not entitle their owners to a whole share, will be sold by the Company, and that the consideration for such sale be paid to the beneficiaries, on terms the Board may determine;
|
(b) |
allot to every Shareholder who holds a fraction of a share resulting from a consolidation and/or a split, shares of the class that existed prior to the consolidation and/or split, in a quantity that, when consolidated with the fraction,
will constitute a whole share, and such allotment will be considered valid immediately prior to the consolidation or split;
|
(c) |
determine the manner for paying the amounts to be paid for shares allotted in accordance with Sub-Section (b) above, including on account of bonus shares; and/or
|
(d) |
determine that the owners of fractions of shares will not be entitled to receive a whole share in respect of a share fraction or that they may receive a whole share with a different par value than that of the fraction of a share.
|
16. |
Subject to these Articles and to the terms of any General Meeting resolution creating new shares, the allotment and issue of shares will be as determined by the Board of Directors, who may in its sole discretion allot and issue such
shares to persons on te1ms and conditions and at such times as determined by the Board of Directors, including the allotment of bonus shares.
|
17. |
(a) Each ordinary share will entitle its owner to receive notices of, to attend, and to cast one vote at a General Meeting.
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(b) All shares of the Company of the same class shall rank pari passu in respect of dividends, allotment of bonus shares, distribution of assets or otherwise.
|
18. |
(a) The rights granted to Shareholders of any class of shares issued with preferred or other special rights will not, unless specifically provided by the terms
of issue of the shares of that class, be deemed to be modified by the creation or issue of shares of a different class.
(b) Unless otherwise provided for by the terms of issuance of particular class of shares, the Company may create or change rights, preferences, restrictions and
provisions related to one or more of the classes of shares, after receipt of consent in writing of all Shareholders of the affected class, or a Resolution passed at a General Meeting of such class. These Articles will apply, as
applicable, to every such separate General Meeting of a class.
|
19. |
The rights applicable to any shares, whether in the original Share Capital or any increased Share Capital, may be changed according to the provisions of these Articles, provided however, that the Company will not disparately reduce or
restrict the existing Shareholders' voting rights through any corporate action or issuance.
|
20. |
The Company may, at any time and from time to time, subject to the Law, purchase back or finance the purchase of any shares or other securities issued by the Company, in such manner and under such terms as the Board of Directors shall
determine, whether from any one or more Shareholders. Such purchase shall not be deemed a payment of dividends; and no Shareholder will have the right to require the Company to purchase his shares or to offer to purchase shares from any
other Shareholder.
|
21. |
The Company will maintain a Register of Shareholders according to the Law. The Company may maintain the Register of Shareholders or one or two branch Registers of Shareholders, in Israel or another jurisdiction, which will be considered
as part of the Register.
|
22. |
The Company will not be bound by or required to recognize any right or interest in any share other than rights or interests of the Shareholder duly registered in the Register or otherwise proven in accordance with these Articles and the
Law.
|
23. |
Every person whose name duly appears as a shareholder in the Register or who otherwise establishes proof of ownership in accordance with these Articles and the Law, will have the right without payment to receive, within two (2) months
after allotment or registration of transfer (unless the conditions of allotment or transfer provide for a longer period), a stamped certificate for all the shares registered in his name. The certificate will specify the number of shares for
which it is issued. In case of joint Shareholders the Company will not be required to issue more than one certificate to all the joint Shareholders. Delivery of a certificate to any of the joint Shareholders will be sufficient delivery to
all. Every certificate will be signed by two Directors and countersigned by the Secretary or by other persons nominated by the Board of Directors for that purpose. The Company may withhold the issue of share certificates for shares not
fully paid up.
|
24. |
If any share certificate will be defaced, worn out, destroyed or lost, it may be replaced following production of any evidence, provision of any indemnity and payment of any of the Company's out of pocket expenses as the Board of
Directors will require. In case of defacement or wearing out, replacement will require delivery of the old certificate.
|
25. |
The Company may issue from time to time share warrants, options on shares, debentures and similar forms of securities. The price, terms and conditions of any such securities will be determined by the Board of Directors.
|
26. |
Subject to the applicable provisions of the Law, the Company may issue and redeem redeemable preference shares and redeemable warrants. The terms of redemption of, and the rights and obligations attached to such securities, shall be
determined by the Board of Directors, either in general or with respect to a particular issue.
|
27. |
The Company will have a lien on every share for all amounts payable by a shareholder in respect of such share, whether or not such payables have matured. However, the Board of Directors may at any time declare any share to be wholly or
partly exempt from the provisions of this Article. The Company's lien, if any, on a share will extend to all dividends payable on that share.
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28. |
The Company may sell any shares on which it has a lien at such time and in such manner as will be determined by the Board of Directors. However, no sale will be made prior to the lapse of fourteen (14) days from the date of sending a
notice in writing to the registered Shareholders, demanding payment of such sum and giving notice of the Company's intention to sell in default. To give effect to any such sale, the Board of Directors may authorize transfer of the shares
sold to the purchaser who will be registered as the holder of the Shares. The Company will receive the net proceeds of the sale which will be applied in payment of the sum then payable on the lien. The balance of the sale proceeds, if any,
will be paid to the person holding the shares immediately prior to the sale, subject to any lien for sums that were not currently payable for the shares prior to the sale.
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29. |
The Board of Directors may, at its discretion, from time to time authorize the amount and manner of the consideration to be given to the Company for shares. The Board may also make calls on Shareholders for any moneys unpaid on their
shares. Each Shareholder will be liable to pay the amount of every call so made on him to the persons and at the times, places and installments specified by the Board. A call may be revoked or postponed as the Board may determine.
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30. |
A call will be considered to have been made, at the time the Board of Directors approves the resolution authorizing such call.
|
31. |
The joint shareholders of a share will be jointly and severally liable for the payment of all calls and related installments .
|
32. |
The Board of Directors may, at its discretion, authorize receipt of advances from any shareholder relating to future calls on shares. The Board may authorize interest to be paid as may be agreed with the advancing shareholder.
|
33. |
Any sum that, by the terms of a share, is payable upon the share's allotment or at any fixed date, will be considered to be a call duly made and payable on the date fixed for such payment. In case of non-payment of such sum, the relevant
provisions of these Articles will apply as if such sum were a call duly made and notified according to these Articles.
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34. |
The Board of Directors may, upon the issue of shares, differentiate between the Shareholders as to the amount of calls to be paid and the times of payment.
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35. |
If any shareholder fails to pay all or part of any call or installment of a call on or before the day set for such payment, the Board of Directors may serve a notice on such Shareholder. The notice will require payment of the amount
remaining unpaid together with interest, at such rate as the Board will determine, and any expenses that may have accrued by reason of such non-payment. The notice will state a date, not less than fourteen (14) days from the date of the
notice, on or before which such call or installment, and all interest and expenses that have accrued by reason of such non-payment are to be paid. It will also state the place where payment is to be made, and will state that in the event of
non-payment on or before the time and at the place set, the shares for which such call was made will be liable to be forfeited. If the requirements of any such notice are not met, any share for which such notice has been given may, as long
as the payment required by the notice has not been made, be forfeited by a resolution of the Board to that effect. A forfeiture of shares will include all dividends applicable to the shares not actually paid before the forfeiture, even if
the dividend has already been declared.
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36. |
When any shares have been forfeited in accordance with these Articles, notice of forfeiture will be promptly given to the Shareholder or to the person entitled to the shares by transmission, as the case may be. An entry of such notice
having been given and of the date of the forfeiture of the applicable shares will be made in the Register. However, a forfeiture will not be invalid solely due to the failure to give such notice or to make such entry in the Register.
|
37. |
(a) Following a forfeiture, the Board of Directors may, at any time before the forfeited share has been otherwise disposed of, revoke the forfeiture and return the
share to the Shareholder on terms determined by the Board.
(b) Every forfeited share may be sold or re-allotted or otherwise disposed of, to any other person, on such terms as the Board of Directors may determine.
|
38. |
A person whose shares have been forfeited will remain liable to pay to the Company all calls made and not paid on such shares at the time of forfeiture, and interest thereon to date of payment, in the same manner as if the shares had not
been forfeited. Such person will also remain liable to satisfy any claims and demands which the Company might have enforced regarding the shares at the time of forfeiture, without any deduction or allowance for the value of the shares at
the time of forfeiture. However, if the Company chooses to sell the forfeited shares, then the net consideration received by the Company for such shares will be deducted from the amount the person whose shares have been forfeited is
liable to pay the Company.
|
39. |
The forfeiture of a share will cause the extinction at the time of forfeiture of all claims and demands against the Company regarding the share, and all other rights and liabilities relating to the share as between the forfeiting
Shareholder and the Company, except as provided by law.
|
40. |
A written declaration by a Director that a share has been duly forfeited according to these Articles and stating the date of forfeiture, will be conclusive evidence of the facts stated in the declaration against any persons claiming to
be entitled to the forfeited shares. Such declaration, together with the Company's receipt for the consideration, if any, given for the forfeited shares on their sale or disposition, and a duly signed share certificate delivered to the
purchaser, will confer good title to the shares. Such purchaser will be registered as the holder of the shares.
|
41. |
(a) The Company may, by a Resolution of the Shareholders at a General Meeting, convert any paid-up shares into stock, and may reconvert any stock into paid-up
shares of any denomination.
|
(b) The holders of stock may transfer the same, or any part thereof, in the same manner, and subject to the same regulations, as the shares from which the stock
arose might, prior to conversion, have been transferred, or as near thereto as circumstances admit; but the Board of Directors may from time to time fix the minimum amount of stock transferable, and restrict or forbid the transfer of
fractions of that minimum.
|
(c ) The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges, and advantages as regards dividends, voting at
General Meetings, and other matters as if they held the shares from which the stock arose, but no such privileges or advantage, except participation in the dividends and profits of the Company, shall be conferred by any such aliquot part of
stock as would not, if existing in shares, have conferred that privilege or advantage.
|
(d) Such of the Articles of the Company, as are applicable to paid-up shares shall apply to stock, and the words "share" and "Shareholder" therein shall include
"stock" and "Stockholder".
|
42. |
Transfer of fully paid up shares in the Company shall not require the approval of the Board of Directors.
|
43. |
No transfer of shares shall be registered unless a proper instrument of transfer has been submitted to the Company, coupled, to the extent applicable, with the certificate for the shares to be transferred, and any other evidence as the
Board of Directors may reasonably require of the title of the transferor. The transferor will be considered to remain the Shareholder until the name of the transferee is entered in the Register for the applicable shares.
|
44. |
The instrument of transfer of any share shall be in the usual or customary form or as near thereto as possible, and shall be signed by the transferor and transferee.
|
45. |
The Board of Directors may decline to register any transfer of shares, which have not been fully paid up.
|
46. |
The transfer books, the Register and registers of debenture-holders may be closed during such time as the Board of Directors deems fit, not exceeding a total of thirty (30) days in each year.
|
47. |
The Board of Directors may determine a fee to be charged for registration of a transfer.
|
48. |
The executors and administrators of the deceased sole holder of a share or, if there are no executors or administrators, such persons, heirs (as evidenced by a probate or such other evidence as the Board of Directors may reasonably deem
sufficient) shall be the only persons recognized by the Company as having any title to the share. In case of a share registered in the name of two or more holders, the Company shall recognize the survivor or survivors as the only persons
having any title to or benefit in the share.
|
49. |
The receiver or liquidator of a Shareholder in winding-up or dissolution, or the trustee in bankruptcy, or any official receiver of any bankrupt Shareholder, upon producing such evidence as the Board of Directors may deem sufficient as
to his authority to act in such capacity under this Article, may be registered as a Shareholder in respect of such shares, or may, subject to the regulations as to transfer herein contained, transfer such shares.
|
50. |
The Company may from time to time, at its discretion, bon-ow or secure the payment of any sum or sums of money for the purposes of the Company.
|
51. |
The Company may raise the funds for or secure the repayment of such sum or sums in such manner, at such times and upon such terms and conditions as it deems fit and, in particular, by the issue of bonds, perpetual or redeemable
debentures, debenture stock, or any mortgages or charges, on the whole or any part of the property of the Company, both present and future, including its uncalled capital at that time and its called but unpaid capital.
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52. |
General Meetings will be held at least once in every calendar year at the time and place, and with an agenda, as may be determined by the Board of Directors. Shareholders representing at least ten percent (10%) of the Company's
outstanding share capital and one percent (1%) of the Company's voting power may request the Chairman of the Board to add appropriate items to a General Meeting agenda.
|
53. |
Unless otherwise determined by the Board of Directors and subject to the Law and applicable rules and regulations, the business of a General Meeting shall be to receive the financial statements and the Board of Directors report, to elect
Directors, to appoint independent certified accountants, and to transact any other business which according to these Articles, the Law or any applicable rules or regulations, is to be addressed at a General Meeting. Each annual General
Meeting will be called an "Annual Meeting", and any other General Meeting will be called a "Special Meeting".
|
54. |
Each Annual Meeting will take place no later than fifteen (15) months after the previous Annual Meeting, and no later than the end of the applicable calendar year. The Board may convene a Special Meeting at any time it deems necessary.
|
55. |
The Board of Directors will convene a Special Meeting on receipt of a written request from any of:
|
(a) |
two (2) Directors or twenty-five percent (25%) of the total number of Directors;
|
(b) |
one (l) or more Shareholders, holding at least five percent (5%) of the issued Share Capital and at least one percent (1%) of the Shareholders' voting power; or
|
(c) |
one (1) or more Shareholders holding no less that five percent (5%) of the Company's issued voting shares.
|
56. |
A Special Meeting requested under Article 55 above will be convened within the period specified in the relevant provisions of the Law. If the Board of Directors fails to convene such meeting within such time, then the required Special
Meeting may be convened, in the same manner as for other Special Meetings, by any of the Directors and/or by Shareholders who requested the convening (representing at least one-half of such Shareholders' voting rights), provided it is
convened no later than three (3) months after submission of the written request to the Board.
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57. |
The Board of Directors will set a record date in accordance with the requirements of the Law, for Shareholders entitled to receive notice of and vote at a General Meeting. Subject to the terms of the Law, the date to be determined by the
Board, shall not precede the date for which a General Meeting was called by more than forty (40) nor by less than four (4) days (or any longer or shorter period permitted by Law). The determination of a record date shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may set a new record date for the adjourned meeting.
|
58. |
A written notice of the convening of a General Meeting will be given, at least twenty-one (21) days in advance, or a longer period as may be required under the Law or any other applicable rules and regulations. The notice will specify
the place, date and time of the Meeting, the record date, and other items as specified in the Law. The place of the meeting will be in Israel unless otherwise specified by the Board.
|
59. |
(a) The accidental omission to give notice of a General Meeting to, or the non receipt of notice by, any Shareholder entitled thereto, shall not invalidate the
proceedings at such meetings.
(b) No shareholder present, in person or by proxy, at the commencement of a General Meeting shall be entitled to seek the revocation of any proceedings or
resolutions adopted at such General Meeting on account of any defect in the notice of such meeting relating to the time or the place thereof.
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60. |
No business will be transacted at any General Meeting or at any adjourned meeting unless a quorum is present. The quorum at any General Meeting or at any adjourned meeting, will be at least two (2) Shareholders present in person, by
Proxy or by a Voting Instrument and holding or representing at least thirty three and one third percent (33 1/3%) of the issued voting ordinary shares.
|
61. |
If within one-half (1/2) hour from the time set for the holding of a General Meeting a quorum is not present, the meeting will be adjourned to the same day, time and place in the next week or as will be determined in the notice to the
Shareholders, or another date and place as shall be determined by the Board of Directors.
|
62. |
Except as provided in these Articles, the Law and any other applicable rules and regulations, all business transacted at a General Meeting will be decided by a resolution adopted by a simple majority of the votes cast at the General
Meeting, not taking into account abstentions.
|
63. |
The Chairman of the Board of Directors will preside at any General Meeting as the chairman of the General Meeting, but if there will be no such Chairman, or if at any General Meeting he will not be present or is unwilling to act as
Chairman of the General Meeting, the Shareholders present will choose any Director to act as Chairman of the meeting. If no Director is present, or if all the Directors present decline to take the chair, the Shareholders present will choose
a Shareholder present to be chairman of the meeting. The chairman of any General Meeting shall not be entitled to a second or tie-breaking vote.
|
64. |
The chairman of a General Meeting may, with the consent of any General Meeting at which a quorum is present (and will if so directed by the meeting) adjourn the meeting from time to time and from place to place. No Shareholder will have
the right to any other notice of adjournment. However, whenever a General Meeting is adjourned for twenty one (21) days or more, notice of the adjourned General Meeting will be given in the same manner as for the original General Meeting.
No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting as originally called.
|
65. |
Shareholders in the Company who are registered in the Register on the date determined by the Board of Directors in its resolution to convene a General Meeting and who are present at the meeting, in person or by proxy, or deemed to be
present by a Voting Instrument, shall be entitled to participate in and vote at the General Meeting.
|
66. |
The vote may be by show of hands, by secret ballot, by Voting Instrument or by any other manner authorized by the Board of Directors consistent with the Law. A Shareholder will have one (1) vote for each share held by him. However,
unless otherwise determined by the Board, no Shareholder will be permitted to vote at a General Meeting or to appoint a Proxy to so vote unless he has paid all calls for payment and all moneys due to the Company from him with respect to his
shares.
|
67. |
A Proxy present at a General Meeting will have the same rights as a Shareholder with respect to voting at a General Meeting. A Proxy may be granted to any person, whether or not such person is a Shareholder.
|
68. |
The vote of the senior of any joint Shareholders, whether in person, by Voting Instrument or by Proxy, will be accepted to the exclusion of the votes of other joint Shareholders. For the purpose of these Articles, seniority will be
determined by the order in which the names appear in the Register.
|
69. |
An objection to a Shareholder's or a Proxy's right to vote in a General Meeting must be raised at the applicable meeting or adjourned meeting in which that person was supposed to vote. The chairman of the meeting will decide whether to
accept or reject any objection raised at the proper time regarding the vote of a Shareholder or Proxy, and the chairman of the General Meeting's decision will be final. Every vote not disqualified as provided above will be valid for all
matters at the General Meeting.
|
70. |
A Shareholder that is a corporation or other form of legal entity will have the right to appoint a person to be its representative at any General Meeting. The representative so appointed will have the right to exercise on behalf of the
entity he represents all the powers that the entity itself might exercise in connection with the General Meeting.
|
71. |
A Shareholder who has been declared legally incompetent or has otherwise been appointed a legal guardian, may, following proof of appointment of a legal guardian or similar representative, vote at a General Meeting through such guardian
or similar representative, whether in person, by Voting Instrument or by Proxy.
|
72. |
A vote by Proxy or by Voting Instrument will be considered valid even in the event of the death or declaration of incompetence of the appointee/signatory or the cancellation of the Proxy appointment or Voting Instrument or expiration of
a Proxy appointment or Voting Instrument in accordance with the Law and any other applicable rules and regulations, or the transfer of the shares for which the Proxy appointment or Voting Instrument was given, unless the Company receives at
the Registered Office, prior to a General Meeting, a written notice as specified below. For a Voting Instrument or Proxy appointment that has been provided to the Company for a specific General Meeting to be considered invalid, a written
notice of cancellation of a Voting Instrument or a Proxy appointment must be duly signed by the applicable Shareholder specifying the applicable shares, the name of the Shareholder, legal representative or successor in interest and nature
of the event invalidating the Proxy appointment or Voting Instrument. In the event of voting by a secret ballot or by Voting Instrument, a notice canceling the appointment of a Proxy will be valid if it is signed by the appointee/signatory
or its legal representative or successor in interest and received at the Registered Office no later than one (1) hour before the beginning of the vote.
|
73. |
A Shareholder will have the right, to vote by a Voting Instrument as an alternative to voting in person or by Proxy. In all applicable cases, the Company will send the Voting Instrument to the Shareholders before the applicable General
Meeting, no later than the time set for that purpose in the Law.
|
74. |
A Shareholder has the right to vote by a separate Proxy with respect to each share held by him, provided that each Proxy will have a separate letter of appointment containing the serial number of the shares for which the Proxy is
entitled to vote. If a specific share is included in more than one (1) letter of appointment, then no Proxy will have the right to vote such share.
|
75. |
An instrument appointing a Proxy, which is not limited in time, will expire twelve (12) months after the date of its execution. If the appointment is for a limited time period, even exceeding twelve (12) months, the instrument will be
valid for such period as specified in the instrument.
|
76. |
(a) A Voting Instrument, instrument of appointment of a Proxy, power of attorney or other instrument relating to voting at a General Meeting, must be in writing.
(b) Any instrument of appointment a of proxy, whether for any specified meeting or otherwise shall, as far as circumstances permit, be in the following form or in
any other acceptable form approved by the Board of Directors:
"I, , of , being the holder of shares of NIS each, hereby appoint Mr. of to vote for me and on my behalf at the General Meeting of the Company to be held on the day of in the year and at any adjourned meeting of such meeting."
IN WITNESS WHEREOF I have set my hand this day of the month of in the year ."
(c) The original or a copy of such confirmed instrument will be delivered to the Registered Office, or to such other place in Israel or abroad as the Board
may from time to time designate, at least twenty-four (24) hours before the time set for the applicable original or adjourned General Meeting. Otherwise, that person will not be entitled to vote that share through the instrument. At
the request of the chairman of a General Meeting, written evidence of such authorization, in a reasonably acceptable form and content, satisfactory to the chairman of the General Meeting, shall be furnished to the chairman of the
General Meeting.
|
77. |
The Board of Directors will set the policies of the Company and oversee the execution by the General Manager of his tasks and acts. The Board will have all residual powers not granted under these Articles or by law to any other Company
body.
|
78. |
The General Meeting may assume powers granted under these Articles or by Law to the Board of Directors. However, any decision to assume such powers must be adopted by a Special Majority and must specify the matters and time period for
which such powers are assumed .
|
79. |
The number of Directors may be determined from time to time by the Board. Unless otherwise determined by the Board, the number of Directors comprising the Board will be at least four (4) and not more than ten (10). The majority of the
Directors will be Independent Directors, and at least two (2) of the Directors shall be External Directors in accordance with the requirements of the Law. A Director is not required to be a Shareholder.
|
80. |
The Directors will be entitled to be reimbursed for reasonable expenses incurred by them in performing their services as Directors. The External Directors shall be paid for their services, as prescribed under the Law and as resolved by
the General Meeting.
|
81. |
Subject to the provisions of the Law, a Director (or any other Officer) shall not be disqualified by his holding of such office with the Company from holding any other office or function with the Company (other than the office of an
Internal Auditor or Independent Certified Accountant) or from giving services for consideration to the Company, save that the additional employment of a Director and the terms thereof must be approved, as required by the Law; nor will a
Director (or any other Officer) be disqualified by the holding of such office with the Company from holding any other office or function or from giving services for consideration to a company in which the Company holds any shares or in
which it is interested in any other way.
|
82. |
Directors will be elected annually by the Shareholders at the Annual Meeting. Directors may be nominated in accordance with rules and regulations that may apply to the Company. Directors will hold office until the conclusion of the next
Annual Meeting or until their earlier removal or resignation. However, if no Directors are elected at an Annual Meeting, then the persons who served as Directors immediately prior to the Annual Meeting shall be deemed reelected at the same
meeting, and will continue to serve as Directors unless otherwise determined by the Annual Meeting. Directors will be eligible for re-election.
|
83. |
Notwithstanding Article 82 above:
|
(a) |
the General Meeting may resolve that a director be elected for a period longer than by the next Annual Meeting but not longer than the third next Annual Meeting.
|
(b) |
Shareholders holding a majority of the outstanding share capital of the Company may remove or elect directors by a written notice to the Company.
|
(c) |
A General Meeting may, remove any Director from his office before the end of his term and can, by a resolution adopted by a simple majority, elect another person in his place.
|
84. |
The Chairman of the Board of Directors will be appointed by the Board from the Directors elected to their office. Such Director will serve as Chairman of the Board of Directors until he ceases to hold the office of Director or until the
General Meeting replaces him.
|
85. |
The Board of Directors will have the power, from time to time, to appoint additional Directors if the current number of Directors is less than ten (10) or such other maximum number approved by the Board of Directors. Any Director so
appointed will hold office until the conclusion of the next Annual Meeting, unless he is removed or resigns earlier.
|
86. |
Where the office of a Director has been vacated, the remaining Directors may continue to act, but if their number is reduced below the minimum number specified in these Articles, or if the number of the Directors elected by a General
Meeting is lower than the minimum number specified in these Articles, then the Director or Directors continuing to hold office shall not act except in case of an emergency, or for the purpose of increasing the number of Directors, by way of
appointment of additional Directors, or for the purpose of convening a General Meeting of the Company, but not for any other purpose.
|
87. |
Subject to the terms of the Law, a Director will be removed if he:
|
(a) |
becomes bankrupt or enters into similar status (and if the Director 1s a company, upon its winding-up);
|
(b) |
dies or is declared legally incompetent;
|
(c) |
resigns his office by notice in writing given to the Company;
|
(d) |
is removed by a resolution of a General Meeting; or
|
(e) |
upon the occurrence of any of the applicable events set forth in the Law.
|
88. |
(a) A Director may, by notice in writing to the Company and subject to Sub-Section (b), appoint for a specific meeting a substitute (hereinafter referred to as "Substitute Director"), revoke the appointment of such Substitute Director and appoint another in his place. Any appointment, or revocation of appointment of a Substitute Director shall become effective
on the date set in the respective notice of appointment or revocation, as the case may be, but not before delivery thereof to the Company.
|
(b) |
A person may not act as a Substitute Director if he is not qualified to be appointed a Director or if he currently serves as a Director or Substitute Director.
|
(c) |
A Substitute Director shall be entitled to receive notices of the meeting of the Board of Directors for which he has been appointed and to attend and vote at such meeting as if he were a Director, and he shall have all the rights and be
subject to all obligations of the Director for whom he acts as Substitute Director.
|
(d) |
The office of a Substitute Director shall ipso facto be vacated at the end of the meeting of the Board of Directors for which he has been so appointed; if he is removed from office in accordance with Sub-Section (a) hereof; if the office
of the Director by whom he has been appointed Substitute Director is vacated for any reason whatsoever or upon the death of the Substitute Director or upon the occurrence of any of the events referred to in Article 88.
|
89. |
The Board of Directors will include at least two (2) External Directors or such other number, all as required in order to comply with the qualifications described in the Law.
|
90. |
An External Director will be nominated by a majority vote at a General Meeting, provided that:
|
(a) |
The majority vote at the General Meeting will include at least one- third (1/3) of the total number of the votes of the non-controlling Shareholders voting at the meeting. For the purposes of this Article, abstentions will not be
counted towards the total number of the non-controlling Shareholders; and
|
(b) |
The total number of non-controlling Shareholders voting against the resolution appointing the External Director, is not more than one percent (1%) of the total voting rights in the Company.
|
91. |
The compensation and indemnification of expenses of External Directors will be determined in accordance with the applicable provisions of the Law.
|
92. |
An External Director will be appointed for a period of three (3) years. The term of his office may be extended by a resolution of the General Meeting for an additional three (3) years. An External Director may be removed from his office
only in accordance with the applicable provisions of the Law.
|
93. |
The Board of Directors may convene, adjourn and otherwise regulate its meetings, as it deems fit; provided, however, that the Board will meet at least once in every three (3) months period. Unless otherwise determined by the Board, the
quorum for a Board meeting will be not less than thirty percent (30%) of the then number of Directors but in any event not less then two directors.
|
94. |
No business shall be transacted at a meeting of the Board of Directors unless the requisite quorum is present at the commencement of the meeting, and no resolution shall be adopted unless the requisite quorum is present when the
resolution is voted upon.
|
95. |
Issues arising at any Board of Directors' meeting will be decided by a majority of votes cast at the meeting. In case of a tie, the Chairman will not have a second or casting vote.
|
96. |
Each Director will receive at least 3 (three) days prior notice of a Board meeting. Such notice may be given by any means of communication as determined by the Chairmen or the Secretary, including, among others, telephone, facsimile or
e-mail. Such notice will include the time and location of the meeting and a reasonable description of the meeting's agenda. Notwithstanding anything to the contrary herein, failure to deliver notice to a Director of any such meeting in the
manner required hereby may be waived (in advance or retroactively) by such Director, and a meeting shall be deemed to have been duly convened notwithstanding such defective notice of such failure or defect. Without derogating from the
foregoing, no Director present at the commencement of a meeting of the Board of Directors shall be entitled to seek the revocation of any proceedings or resolutions adopted at such meeting on account of any defect in the notice of such
meeting relating to the time or the place thereof.
|
97. |
At the request of any Director, the Secretary will summon a meeting of the Board of Directors.
|
98. |
The Chairman of the Board of Directors shall take the chair at all meetings of the Board of Directors, but if there is no Chairman, or if at any meeting he is not present within fifteen (15) minutes of the time appointed for the meeting,
or if he is unwilling to take the chair at the meeting, the Directors present shall choose on Director to serve as the Chairman of such meeting.
|
99. |
A meeting of the Board of Directors at which a quorum is present shall be competent to exercise all the authorities, powers and discretions by or under the Law and the Articles of the Company at that time vested in or exercisable by the
Board of Directors.
|
100. |
Directors may participate in a Board meeting or Board committee meeting by means of a telephone conference or other communications media, provided that all participating Directors can hear each other simultaneously. Participation
by such means will be considered as presence in person at a meeting.
|
101. |
All acts done at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any person acting as a Director shall, notwithstanding that it may afterwards be discovered that there was some defect in the
appointment of such Directors or members of a Committee of the Board of Directors or persons acting as aforesaid or any of them, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and
was qualified to be Director or a member of such Committee of the Board of Directors.
|
102. |
A resolution in writing signed by all of the Directors or to which all of the Directors have agreed in writing or by telephone or facsimile, shall be as valid and effective for all purposes as if passed at a meeting of the Board of
Directors duly convened and held, and for the purpose of this Article "Director" shall include, if duly appointed therefore, a Substitute Director.
|
103. |
Minutes in writing signed by the Chairman will serve as evidence of a resolution passed at a duly convened meeting of the Board of Directors.
|
104. |
Subject to the applicable provisions of the Law regarding matters that the Board may not delegate to a committee, the Board of Directors may delegate any of its powers to committees consisting of at least three (3) Directors, provided
that each such committee shall include at least one (1) External Director. The Board of Directors may from time to time revoke such delegation or alter the composition of any such committee. Any committee so formed will exercise its powers
in accordance with any directions given to it by the Board.
|
105. |
A Board committee may elect a chairman. If no such chairman is elected, or if at any meeting the chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, the committee members present may
choose a committee member to be chairman of the meeting. Unless otherwise specifically directed by the Board of Directors, the meetings and proceedings of any committee will be governed by the applicable provisions in these Articles
regulating the meetings and proceedings of the Board.
|
106. |
A committee may meet and adjourn as its members may determine. Issues arising at any meeting will be determined by a majority of votes of the members present. In case of a tie the chairman of the committee will not have a second or tie
breaking vote.
|
107. |
The Board of Directors will appoint an Audit Committee. The composition, responsibilities and authorities of the Audit committee shall be in accordance with the Law and with the applicable rules and regulations the Company is subject to.
|
108. |
The Board of Directors may from time to time, provide for the management and transaction of the affairs of the Company in any specified locality, whether in Israel or abroad, in such manner as it deems fit, and the provisions contained
in the next following Article shall be without prejudice to the general powers vested by these Articles on the Board of Directors.
|
109. |
The Board of Directors may from time to time, and at any time, establish any local board or agency for managing any of the affairs of the Company in any such specified locality, and may appoint any person to be a member of such local
board, or any manager or agent, and may fix their remuneration. Subject to the provisions of the Law, the Board of Directors may from time to time, and at any time, delegate to any person so appointed any of the powers, authorities and
discretions at that time vested in the Board of Directors, on such terms and subject to such conditions as the Board of Directors deems fit, and the Board of Directors may at any time remove any person so appointed and may revoke or vary
any such delegation.
|
110. |
The Board of Directors shall from time to time appoint one or more persons, whether or not Directors as Chief Executive Officer or Officers, General Manager or Managers, or President of the Company, either for a fixed or an unlimited
term, and from time to time (subject to any provisions of the Law and of any contract between any such person and the Company) remove or dismiss him or them from office and appoint another or others in his or their stead.
|
111. |
The remuneration of a General Manager, Chief Executive Officer and President, shall from time to time (subject to the provisions of the Law and any contract between him and the Company) be determined by the Board of Directors, and may be
subject to a recommendation of the majority of the Independent Directors, or of a compensation committee comprised solely of Independent Directors.
|
112. |
The General Manager shall be responsible for the day-to-day management of the Company's affairs within the framework of the Company's policy set by the Board of Directors and subject to its directions; he shall have all management and
execution powers not vested by the Law or these Articles in any other Organ, and he will be subject to the supervision of the Board of Directors. Subject to the provisions of the Law, the Board of Directors may from time to time, and at any
time, entrust to and confer upon the General Manager such powers exercisable under the Articles by the Board of Directors as it may deem fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and
upon such terms and conditions, and with such restrictions, as it deems expedient; and it may confer such powers, either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the Board of Directors
in that behalf; and may from time to time revoke, withdraw, alter, or vary all or any of such powers.
|
113. |
The Board of Directors may from time to time declare and cause the Company to pay to the Shareholders such interim or final dividend as the Board of Directors deems appropriate considering the profits of the Company and in compliance
with the provisions of the Law. The Board may set the dividend record date (which date may be on or after the date of declaration) and the time for payment.
|
114. |
No dividend shall be paid otherwise than out of the profits of the Company.
|
115. |
No dividend shall be paid other than in compliance with the provisions of the Law; and no dividend shall carry interest as against the Company.
|
116. |
The Board of Directors may, before declaring any dividend, set aside, out of the profits of the Company, such sums as it deems appropriate, as a reserve fund to meet contingencies, or for equalization of dividends, or for special
dividends, or for repairing, improving and maintaining any of the property of the Company, or for such other purposes as the Board of Directors shall in its absolute discretion deem conducive to the interests of the Company; and may invest
such sum(s) so set aside in such investments as it may deem fit, and from time to time vary such investments, and dispose of all or any part thereof for the benefit of the Company, and may divide the reserve fund into such special funds as
it deems fit, and use the reserve fund or any part thereof in the business of the Company, and that without being bound to keep the same separate from the other asset of the Company.
|
117. |
Subject to special rights of Shareholders and subject to the provisions of these Articles, dividends, whether in cash or in bonus shares, shall be paid or distributed, as the case may be, to Shareholders pro rata to the amount paid up or
credited as paid up on account of the of their shares, without taking into consideration any premium paid thereon; but the amount paid up on account of a share prior to call being made thereon or prior to the due date for payment thereof,
and on which the Company is paying interest, shall not, for purposes of this Article, be deemed to be an amount paid up on account of a share. Notwithstanding the above, and to the extent that the rights attached to the shares or the terms
of issue thereof otherwise provide, the Board of Directors may determine that any amount paid on a share during the period in respect of which the dividend has been declared shall entitle the holder of such share only to a proportionate
amount of the dividend having regard to the date of the payment of the said amount of capital.
|
118. |
Unless otherwise directed by the Board of Directors or by a General Meeting, any dividend may be paid by check or bank transfer to the registered address of the Shareholder; or in case of joint Shareholders, to the one of them first
named in the Register regarding the joint holding. The receipt of the person whose name on the record date appears on the Register as the owner of any share, or in the case of joint Shareholders, of any one of such joint Shareholders, will
be sufficient evidence of all payments made for such share. All dividends unclaimed after having been declared may be invested or otherwise used as directed by the Board for the benefit of the Company until claimed. Upon the lapse of seven
(7) years from the declaration of such dividends, the Company will have no obligation to pay the unclaimed dividend. No unclaimed dividend or interest will bear interest from the Company.
|
119. |
Without derogation from the provisions of Section 113, upon the recommendation of the Board of Directors approved by a resolution at a General Meeting, any General Meeting may resolve that any moneys, investments, or other assets forming
part of the undivided profits of the Company standing to the credit of the reserve fund, or to the credit of the reserve fund for the redemption of capital or in the hands of the Company and available for distribution of dividends, or
representing premiums received on the issue of shares and standing to the credit of the share premium account, be capitalized and distributed among such of the Shareholders as would be entitled to receive the same if distributed by way of
dividend and in the same proportion and on the same basis ; and that all or any part of such capitalized fund be applied on behalf of such Shareholders in paying up in full, either at par or at such premiums as the resolution may provide,
any unissued shares or debentures of the Company, which shall be distributed accordingly and shall be accepted by such Shareholders in full satisfaction of their rights in the said capitalized sum.
|
120. |
Without derogation from the provisions of Section 113, a General Meeting may resolve that a dividend be paid, in whole or in part, in cash and/or by the distribution of specific assets and, in particular, by distribution of paid-up
shares, paid-up debentures, or debenture stock of any other company, or in any one or more combinations of such ways.
|
121. |
In order to give effect to any resolution regarding the distribution of shares or debentures by way of capitalization of profits as aforesaid, the Board of Directors may:
|
(a) |
settle, in such manner as it deems fit, any difficulty arising with regard to the distribution and take any steps it deems fit to overcome such difficulty;
|
(b) |
issue certificates for fractions of shares or resolve that fractions of lesser amount than that decided upon by the Board of Directors will not be taken into account for the purpose of adjusting the rights of the shareholders, or sell
fractions of shares and pay the net consideration to the persons entitled thereto;
|
(c) |
sign on the shareholders' behalf any contract or other document that may be required in order to give effect to the distribution, and in particular it may sign and submit for registration a contract as mentioned in section 291 of the
Law;
|
(d) |
make any arrangement or other settlement required, in the board of directors' opinion, to facilitate the distribution.
|
122. |
The Board of Directors may deduct from any dividend or other amount to be paid in respect of shares held by any Shareholder, whether alone or together with another Shareholder, any sum or sums due from him and payable by him, alone or
together with any other person, to the Company on account of calls or the like.
|
123. |
If several persons are registered as joint holders of any share, any one of them may give valid receipts for any dividends payable on the share.
|
124. |
The Board of Directors shall cause minutes to be duly entered in books provided for that purpose:
|
(a) |
of the names of the Directors present at each meeting of the Board of Directors and of any Committee of the Board of Directors;
|
(b) |
of the names of the Shareholders present at each General Meeting;
|
(c) |
of all directions given by the Board of Directors to any Committee of the Board of Directors;
|
(d) |
of the proceedings and resolutions of General Meetings and of meetings of the Board of Directors and Committees of the Board of Directors.
|
125. |
Any minutes, as aforesaid, of a meeting of the Board of Directors, which is confirmed and signed by the chairman of the meeting or by the Chairman of the Board of Directors, and any minutes of a meeting of a Committee of the Board of
Directors or of a General Meeting, if signed by the chairman of such meeting, shall be accepted as prima facie evidence of the matters therein recorded.
|
126. |
The Company shall have a stamp, and the Board of Directors shall provide for the safe custody of such stamp.
|
127. |
The Board of Directors shall be entitled to authorize any person(s) (even if such person(s) is/are not Director(s) of the Company) to act and sign on behalf of the Company, and the acts and signatures of such person or persons on behalf
of the Company shall bind the Company insofar as such person or persons acted and signed within the scope of his or their authority.
|
128. |
Unless otherwise determined by the Board of Directors, the Chairman of the Board of Directors, the President or any committee or officer authorized by the Board of Directors may from time to time appoint a Secretary for the Company, as
well as other officers, personnel, agents and employees, to permanent, temporary or special positions, and the General Manager may determine and/or modify their titles, powers, duties, remuneration, salaries and bonuses. The Chairman of the
Board of Directors, the President, or any committee or officer authorized by the Board of Directors may from time to time, in its discretion, revoke such appointments, modify their scope, or suspend the service of any one or more of such
persons.
|
129. |
The Board of Directors may from time to time, and at any time, by power of attorney, appoint any company, firm or person or body of persons, whether nominated directly or indirectly by the Board of Directors, to be the Company's Attorney
or Attorneys for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the General Manager under the Law or these Articles), and for such period and subject to such conditions as it
deems fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such Attorney as the General Manager may deem fit, and may also authorize any such Attorney to delegate all
or any of the powers, authorities and discretions vested in him.
|
130. |
The Board of Directors will cause the Company's books of accounts to be kept in accordance with legal requirements. A Shareholder who is not a Director shall not have any right of inspecting any account or book or document of the Company
except as conferred upon him by Law or authorized by the Board of Directors or by the General Meeting.
|
131. |
The Company will issue financial statements as required by the Law and other applicable rules and regulations. The issued financial statements will be available for inspection by the Board of Directors and Shareholders at the Registered
Office during regular office hours.
|
132. |
The Company will appoint Independent Certified Accountants at a General Meeting. The Independent Certified Accountants will hold office until the end of the next Annual Meeting. However, the Shareholders at a General Meeting may remove
the Independent Certified Accountants or extend the term of appointment for up to three (3) years. The independency, certification and registration of the Independent Certified Accountant shall be in accordance with the Law and applicable
rules and regulations.
|
133. |
The fee of the Independent Certified Accountants will be set and approved by the Board of Directors.
|
134. |
(a) The Board of Directors, subject to the recommendation of the Audit Committee, will appoint an Internal Auditor for the Company. The Internal Auditor will report
to the General Manager.
(b) The Internal Auditor may only be removed or replaced in accordance with the applicable provisions of the Law.
|
135. |
Notwithstanding Section 327 of the Law, the Company may approve any Merger as defined in the Law, by a resolution adopted by a simple vote cast at a General Meeting, not taking into account abstentions.
|
136. |
(a) Notices by the Company to a Shareholder shall be given by registered mail to the address, if any, supplied by such Shareholder for the purpose of giving
notices, as listed in the Register. In the absence of such address, notice shall be deemed to have been given by posting thereof at the Registered Office of the Company. Notice may also be given by way of transmission of facsimile and/or
e-mail, based on details of such Shareholder as listed in the Register.
(b) Notice by registered mail or notice sent to any address outside of the State of Israel shall be deemed received three (3) days from the date on which a properly addressed, prepaid enclosure containing
the notice was mailed. Notice by facsimile and/or e-mail, shall be deemed to be received one (1) day from their transmission.
|
137. |
Notice to joint Shareholders may be given by sending it only to the Shareholder first named in the Register for the applicable shares.
|
138. |
(a) The Board of Directors may authorize other methods of notice to Shareholders that are consistent with the Law and applicable rules and regulations.
(b) Notices of General Meetings will contain the information required by the Law and applicable rules and regulations.
|
139. |
The Company may exempt any Officer from his liability to the Company for breach of duty of care, to the maximum extent permitted by law, before or after the occurrence giving rise to such liability.
|
140. |
Subject to the provisions of the Law, the Company may exempt and release in advance or retroactively, any Officer from liability resulting from his breach of his duty of care to the Company.
|
141. |
Subject to the provisions of the Law, the Company may procure, as the Board may from time to time determine, Directors' and Officers' liability insurance covering the liabilities of an Officer for any act done by him by virtue of being
an Officer, in respect of any of the following:
|
(a) |
breach of duty of care towards the Company or towards any other person;
|
(b) |
breach of fiduciary duty towards the Company, provided that such Officer acted in good faith and had a reasonable basis to assume that his action would not harm the interests of the Company;
|
(c) |
financial liabilities imposed on him in favor of a third party; or
|
(d) |
any other event for which insurance of an Officer is or may be permitted.
|
142. |
Subject to the provisions of the Law, the Company may undertake in advance or retroactively to indemnify any past or present Officer in respect of a liability or expense as detailed in Article 143 below, imposed on him as a result of an
act carried out in his capacity as an Officer. However, if made in advance, such undertaking will be limited to the kinds of events that, in the Board's opinion, are foreseeable at the time of the approval of the indemnification undertaking
and will be limited to the amount fixed by the Board as reasonable under the circumstances which shall not exceed 25% of the Company's Shareholders Equity for the time being.
|
143. |
An indemnity, as provided in Article 142 above, may be issued in respect of a liability or expense as follows:
|
(a) |
financial liability imposed upon said Officer in favor of another person by virtue of a decision by a court of law, including a decision by way of settlement or a decision in arbitration which has been confirmed by a court of law;
|
(b) |
reasonable expenses of the proceedings, including lawyers' fees, expended by the Officer or imposed on him by the court for:
|
(1) |
proceedings issued against him by or on behalf of the Company or by a third party;
|
(2) |
criminal proceedings in which the Officer was acquitted; or
|
(3) |
criminal proceedings in which he was convicted in an offense, which did not require proof of criminal intent; or
|
(c) |
any other liability or expense for which the indemnification of an Officer is not precluded by Law.
|
144. |
Subject to the provisions of the Law, the Company may issue an undertaking in advance or retroactively to indemnity any person, including an Officer, who acts or acted on behalf or at the request of the Company as a director or officer
of another company in which the Company, directly or indirectly, is a shareholder, or in which the Company has any other interest. Such indemnity will be in respect of a liability or expense referred to in Article 143 above, imposed on him
as a result of an act carried out by him in his capacity as a director or officer of the other company.
However, such undertaking, if made in advance, will be limited to the kinds of events that, in the Board's opinion, are foreseeable at the time of the approval of the indemnification undertaking and will be
limited to the amount set by the Board as reasonable under the circumstances which shall not exceed 25% of the Company's Shareholders Equity for the time being.
|
145. |
Subject to the provisions of the Law, nothing in these Articles will limit the Company, in any manner, from entering into an agreement of liability insurance, or in granting an exemption or indemnification in respect of:
|
(a) |
an Officer, or a director or officer of another company as provided in Article 144 above, to the extent that the insurance, exemption or indemnity is not prohibited by law; or
|
(b) |
any person who is not an officer, or a director of another company as provided in Article 144 above, including but not limited to employees and representatives of the Company.
|
146. |
If the Company will be wound up voluntarily the liquidators may, with the approval of a Special Majority of the Shareholders voting at a General Meeting, divide among the Shareholders any part of the Company's assets remaining after
payment of all of the Company's outstanding obligations. Such approval may also vest any part of the Company's assets to trustees under trusts for the benefit of the Shareholders as the liquidators may determine.
|
147. |
On any sale of the Company or its assets through a liquidation or winding-up, a Special Majority of the Shareholders voting at a General Meeting may authorize the Board of Directors or liquidators to: (a)
accept fully or partly paid up Shares, debentures, or other Company securities, whether registered in Israel or in other jurisdictions, whether existing or contingent, for the purchase in whole or in part of Company property and, if the
profits of the Company permit, distribute such shares, securities or any other Company property among the Shareholders without requiring their realization, or vest the same in trustees for their benefit; and/or
(b) distribute or appropriate the Company's cash, Shares, other securities, benefits or property as so approved at the General Meeting. In such case, all
Shareholders will be bound to accept any valuation on distribution so authorized, and will waive all rights in relation to such valuation, except where otherwise required by law.
|
148. |
These Articles may be amended, in whole or in part, by an Ordinary Majority of the Shareholders voting at a General Meeting.
|
Name of active Subsidiary
|
|
Jurisdiction of
Organization |
|
Percent Owned
|
|
||
|
|
|
|
|
|
||
S.B.C. Aviation Ltd.
|
|
Israel
|
|
|
100
|
%
|
|
SuperCom Inc.
|
|
United States
|
|
|
100
|
%
|
|
SuperCom IP LLC.
|
|
United States
|
|
|
99.98
|
%
|
|
SuperCom Slovakia A.S.
|
|
Slovakia
|
|
|
66
|
%
|
|
Prevision Ltd.
|
|
Israel
|
|
|
100
|
%
|
|
Safend Ltd.
|
|
Israel
|
|
|
100
|
%
|
|
Leaders in Community Alternatives, Inc.
|
|
United States
|
|
|
100
|
%
|
|
Alvarion Technologies Ltd
|
|
Israel
|
|
|
100
|
%
|
|
/s/ Ordan Trabelsi
|
|
Ordan Trabelsi*
|
|
Chief Executive Officer
|
|
/s/ Arie Trabelsi
|
|
Arie Trabelsi*
|
|
Acting Chief Financial Officer
|
|
/s/ Ordan Trabelsi
|
|
Ordan Trabelsi*
|
|
Chief Executive Officer
|
|
/s/ Arie Trabelsi
|
|
Arie Trabelsi*
|
|
Acting Chief Financial Officer
|
Tel Aviv, Israel
|
/s/ Halperin Ilanit
|
April 4, 2022
|
Certified Public Accountants
|