UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 001-41544
SatixFy Communications Ltd.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Israel
(Jurisdiction of incorporation or organization)
12 Hamada St., Rehovot 670315, Israel
(Address of principal executive offices)
Oren Harari, Interim Chief Financial Officer
12 Hamada St., Rehovot 670315, Israel
Tel: +(972) 8-939-3200
(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
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Oded Har-Even, Esq.
Sullivan & Worcester LLP 1633 Broadway New York, 10019 Tel: 212.660.3000 |
Reut Alfiah, Adv.
Sullivan & Worcester Tel-Aviv
(Har-Even & Co.)
28 HaArba’a St. HaArba’a Towers,
North Tower, 35th Floor
Tel-Aviv, 6473925
T +972.74.758.0480
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Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of 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, no par value
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SATX
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NYSE American LLC
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
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Warrants to purchase ordinary shares
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(Title of Class)
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Securities registered or to be registered pursuant to Section 15(d) of the Act.
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None
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(Title of Class)
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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 83,114,193 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.
Yes ☐ No ☒
Note-Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
Emerging growth company ☒
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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International Financial Reporting Standards as issued by the
International Accounting Standards Board ☒
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Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
TABLE OF CONTENTS
| PART I |
6 | |
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6 | ||
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6 | ||
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6 | ||
| 49 | ||
| 70 | ||
| 71 | ||
| 89 | ||
| 110 | ||
| 113 | ||
| 114 | ||
| 115 | ||
| 130 | ||
| 130 | ||
| PART II |
131 | |
| 131 | ||
| 131 | ||
| 131 | ||
| 131 | ||
| 131 | ||
| 132 | ||
| 132 | ||
| 132 | ||
| 132 | ||
| 133 | ||
| 133 | ||
| 133 | ||
| 133 | ||
| 134 | ||
| 134 | ||
| PART III |
135 | |
| 135 | ||
| 135 | ||
| 136 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report may constitute “forward-looking
statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements
regarding us or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition,
any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. The words “anticipate,” “appear,” “approximate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “foresee,” “intends,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”
“seek,” “should,” “would” and similar expressions (or the negative version of such words or expressions)
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward- looking. Forward-
looking statements in this Annual Report may include, for example, statements about:
Forward-looking statements involve a number of risks, uncertainties
and assumptions, and actual results or events may differ materially from those projected or implied in those statements.
Important factors that could cause such differences include, but
are not limited to:
| • |
Our performance following the Business Combination; |
| • |
Unpredictability in the satellite communications industry; |
| • |
The regulatory environment and changes in laws, regulations or policies in the jurisdictions in which we operate; |
| • |
Competition in the satellite communications industry, and the failure to introduce new technologies and products in a timely manner
to compete successfully against competitors; |
| • |
Failure by us to adjust our supply chain volume due to changing market conditions or failure to estimate its customers’
demand; |
| • |
Disruptions in relationships with any one of our key customers; |
| • |
Disruptions in relationships with any one of our third-party manufacturers or suppliers; |
| • |
Any difficulty selling our products if customers do not design its products into their product offerings; |
| • |
Our dependence on winning selection processes and gaining market acceptance of its technologies and products; |
| • |
Even if we succeed in winning selection processes for its technologies and products, we may not generate timely or sufficient net
sales or margins from those wins; |
| • |
Our ability to execute its strategies, manage growth and maintain its corporate culture as it grows; |
| • |
Sustained yield problems or other delays in the manufacturing process of products; |
| • |
Changes in the need for capital and the availability of financing and capital to fund these needs; |
| • |
Our estimates of our total addressable market and the demand for and pricing of its products and services; |
| • |
Our ability to maintain effective internal control over financial reporting; |
| • |
Our ability to retain key personnel and to replace such personnel on a timely basis or on acceptable terms; |
| • |
Exchange rate fluctuations; |
| • |
Changes in interest rates or rates of inflation; |
| • |
Legal, regulatory and other proceedings; |
| • |
Changes in applicable laws or regulations, or the application thereof on us; |
| • |
The results of future financing efforts; |
| • |
Our ability to maintain continued listing standards with the NYSE American LLC: |
| • |
General market, political and economic conditions in the countries in which we operate including those related to recent unrest and
actual or potential armed conflict in Israel and other parts of the Middle East, such as the Israel-Hamas war; |
| • |
Some or all of the expected benefits of the transaction between the Company and MDA will not be achieved; and |
| • |
The other matters described in the section titled “Risk Factors”. |
SatixFy cautions you against placing undue reliance on forward-looking
statements, which reflect current beliefs and are based on information currently available as of the date a forward- looking statement
is made. Forward-looking statements set forth herein speak only as of the date of this Annual Report. SatixFy has no obligation to revise
forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that any forward-looking
statement is updated, no inference should be made that SatixFy will make additional updates with respect to that statement, related matters,
or any other forward-looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual
results to differ materially from forward-looking statements, including discussions of significant risk factors, may appear in SatixFy’s
public filings with the SEC, which are or will be (as appropriate) accessible at www.sec.gov, and which you are advised to consult.
Market, ranking and industry data used throughout this Annual Report,
including statements regarding market size and technology adoption rates, is based on the good faith estimates of SatixFy’s management,
which in turn are based upon SatixFy’s management’s review of internal surveys, independent industry surveys and publications,
and other third-party research and publicly available information. These data involve a number of assumptions and limitations, and you
are cautioned not to give undue weight to such estimates. While SatixFy is not aware of any misstatements regarding the industry data
presented herein, its estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed
under the heading “Item 3. Key Information — D. Risk Factors” in this Annual
Report.
SELECTED DEFINITIONS
“A&R Articles of Association” means
the second amended and restated articles of association of SatixFy.
“A&R Registration Rights Agreement”
means the amended and restated registration rights agreement, dated as of March 8, 2022 by and among Endurance, the Sponsor and
Cantor Fitzgerald & Co., as amended on October 27, 2022 by amendment no.1 to the Amended and Restated Registration Rights Agreement,
by and among Endurance, the Sponsor and Cantor Fitzgerald & Co.
“A&R Shareholders’ Agreement”
means the amended and restated shareholders’ agreement, dated as of March 8, 2022, by and among SatixFy, the Sponsor and
certain shareholders of SatixFy.
“Business Combination” means the
merger contemplated by the Business Combination Agreement, whereby Merger Sub merged with and into Endurance, with Endurance surviving
the merger as a wholly owned subsidiary of SatixFy, and the other transactions contemplated by the Business Combination Agreement.
“Business Combination Agreement” means
the Business Combination Agreement, dated as of March 8, 2022, by and among SatixFy, Endurance and SatixFy MS, as amended on June 13,
2022 and August 23, 2022.
“CF Principal Investments” means CF Principal Investments
LLC (“Cantor”), an affiliate of Cantor Fitzgerald & Co.
“CF Purchase Agreement” means that
certain equity line of credit purchase agreement, dated as of March 8, 2022, by and between SatixFy and CF Principal Investments LLC.
“CF Registration Rights Agreement” means
that certain registration rights agreement, dated as of March 8, 2022, by and between SatixFy and CF Principal Investments LLC. “Closing”
means the closing of the Business Combination.
“Closing Date” means the date of
the Closing.
“Companies Law” means the Israeli
Companies Law, 5759-1999, as amended.
“Continental” means Continental
Stock Transfer & Trust Company, the transfer agent for Endurance, the warrant agent for the Endurance warrants and the warrant agent
for the SatixFy Warrants.
“Debt Financing” means a credit
facility, by and among SatixFy and an institutional lender and its affiliates, pursuant to the 2022 Credit Agreement, under which SatixFy
borrowed an aggregate principal amount of $55,000,000 in February 2022, as amended.
“Effective Time” means the effective
time of the Business Combination.
“Endurance” means Endurance Acquisition
Corp., a Cayman Islands exempted company.
“Endurance Class A ordinary shares” means
Class A ordinary shares, par value $0.0001 per share, of Endurance.
“Endurance IPO” means the initial
public offering of Endurance, which was consummated on September 17, 2021.
“Endurance Public Warrants” means
each one (1) warrant of Endurance entitling the holder thereof to purchase one Endurance Class A ordinary share at a price of $11.50 per
share, subject to adjustment, in accordance with the terms with respect to the public warrants of Endurance issued as part of the Endurance
Units in the Endurance IPO.
“Endurance warrants” means the
Endurance Public Warrants and 7,630,000 private warrants of Endurance, each entitling the holder thereof to purchase one (1) Endurance
Class A ordinary share at a price of $11.50 per share, subject to adjustment, in accordance with terms with respect to the private warrants
of Endurance, sold to the Sponsor and Cantor Fitzgerald & Co. in a private placement in connection with the Endurance IPO, collectively.
“Equity Line of Credit” means the
CF Purchase Agreement and the CF Registration Rights Agreement, pursuant to which SatixFy may receive up to $75,000,000 in aggregate gross
proceeds from CF Principal Investments LLC in connection with sales of SatixFy Ordinary Shares.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
“Exchange Ratio” means (a) (i)
$365,000,000.00, plus (ii) the Aggregate Vested Company Option Exercise Price, plus (iii) the Aggregate Warrant Exercise Price, divided
by (b) $10.00, which number shall be calculated and determined by the Company in accordance with the terms of the Business Combination
Agreement.
“Forward Purchase Agreement” means
the agreement for an OTC Equity Prepaid Forward Transaction by and among Endurance, SatixFy, Merger Sub and Vellar Opportunity Fund SPV
LLC— Series 7 (“Vellar”), dated October 24, 2022, as subsequently amended on October 25, 2022. This agreement was terminated
in October 2023.
“Founder Shares” means the Endurance
Class B ordinary shares which were originally acquired by the Sponsor for an aggregate purchase price of $25,000 prior to the Endurance
IPO.
“IFRS” means International Financial
Reporting Standards as issued by the International Accounting Standards Board and Interpretations.
“Israeli Companies Law” means the
Israeli Companies Law, 5759-1999, as amended.
“Merger Sub” means SatixFy MS,
a Cayman Islands exempted company and a direct, wholly owned subsidiary of the Company, which merged with and into Endurance in connection
with the consummation of the Business Combination.
“MDA” means MDA Space and Robotics
Limited, an affiliate of MDA Ltd.
“MDA Agreement” means the sale
of all of the outstanding ordinary shares in the capital of SatixFy Space Systems UK Ltd., a previously wholly-owned subsidiary of the
Company, to MDA Space and Robotics Limited, an affiliate of MDA Ltd., pursuant to a Share Purchase Agreement, dated August 30, 2023.
“NYSE” means NYSE American LLC.
“PCAOB” means the Public Company
Accounting Oversight Board.
“PIPE Financing” means the issuance
and sale of the number of PIPE Units set forth in the applicable Subscription Agreements to the PIPE Investors in private placements.
“PIPE Investors” means certain
accredited investors that entered into the Subscription Agreements providing for the purchase of PIPE Units at a price per unit of $10.00.
“PIPE Units” means each unit, consisting
of one (1) PIPE Share and one-half of one PIPE Warrant, to be purchased by the PIPE Investors pursuant to the Subscription Agreements
for a purchase price of $10.00 per unit.
“PIPE Warrant” means each warrant
of SatixFy entitling the holder thereof to purchase one SatixFy Ordinary Share at a price of $11.50 per share, subject to adjustment and
on the terms and subject to the limitations described in the PIPE Warrant Agreement, to be purchased by the PIPE Investors as part of
the PIPE Units issued pursuant to the Subscription Agreements. The PIPE Warrants were subsequently exchanged for public warrants under
the terms of the A&R SatixFy Warrant Agreement as described elsewhere in this Annual Report and references to “PIPE Warrants”
herein are to the originally issued warrants or the newly issued warrants, as the context requires.
“Pre-Closing Recapitalization” means
the conversion, by stock split, stock issuance or share consolidation, of each SatixFy Ordinary Share issued and outstanding immediately
following the Preferred Shared Conversion, but prior to the Effective Time, into a number of SatixFy Ordinary Shares determined by multiplying
each such SatixFy Ordinary Share by the Exchange Ratio as described in the Business Combination Agreement.
“Registration Statement” means
the Registration Statement on Form F-1 (File No. 333-268510), as amended, filed by the Company and declared effective by the SEC on January
23, 2023.
“SatixFy Private Warrants” means
each warrant of SatixFy assumed as part of the Business Combination entitling the holder thereof to purchase one SatixFy Ordinary Share
on substantially the same terms and conditions with respect to the Endurance Private Warrants.
“SatixFy Public Warrants” means
each warrant of SatixFy assumed as part of the Business Combination entitling the holder thereof to purchase one SatixFy Ordinary Share
on substantially the same terms and conditions with respect to the Endurance Public Warrants.
“SatixFy Warrants” means the SatixFy
Public Warrants, the SatixFy Private Warrants and the PIPE Warrants, collectively.
“SatixFy Warrant Assumption Agreement”
means that certain warrant assignment, assumption and amendment agreement, dated as of the Closing Date by and among SatixFy, Endurance
and Continental.
“SatixFy A&R Warrant Agreement” means
that certain Amended and Restated Warrant Agreement, dated as of January 12, 2023, by and between SatixFy and Continental, which amended
and restated the SatixFy Warrant Assumption Agreement.
“SEC” means the U.S. Securities
and Exchange Commission.
“Securities Act” means the Securities
Act of 1933, as amended.
“Sponsor” means Endurance Antarctica
Partners, LLC, a Cayman Islands limited liability company.
“Sponsor Letter Agreement” means
that certain sponsor letter agreement, dated March 8, 2022, by and among the Sponsor, Endurance and SatixFy, as amended on June 13, 2022
and August 23, 2022.
“units” means the 20,000,000 units
sold as part of the Endurance IPO, each consisting of one share of Endurance Class A Shares and one-half of one redeemable Endurance warrant.
“Transactions” means the transactions
contemplated by the Business Combination Agreement and the other agreements contemplated thereby or entered into in connection therewith.
“Warrant Letter Agreement” means
that certain warrant letter agreement, dated as of January 12, 2023, by and among SatixFy, the Sponsor and Cantor.
“2020 Share Award Plan” means SatixFy’s
2020 Share Award Plan, as amended from time to time, that provides for the award to any current or former director, manager, officer,
employee, or individual independent contractor or service provider of SatixFy or its subsidiaries of rights of any kind to receive Equity
Securities of SatixFy or its subsidiaries or benefits measured in whole or in part by reference to equity securities of SatixFy or its
subsidiaries.
"2022 Credit Agreement" means that certain
credit agreement, dated as of February 1, 2022, by and among the Company, on the one hand, and Wilmington Savings Fund Society, FSB, as
administrative agent (the "Agent"), and the lenders thereunder (each of which is an affiliate of Francisco Partners L.P.) (together with
the Agent, “FP”), on the other hand, as amended by that First Amendment to Credit Agreement, dated as of September 13, 2022,
by and among SatixFy and FP, and as further amended by that Waiver and Second Amendment to the Credit Agreement, dated as of April 23,
2023, by and among SatixFy and FP, and as further amended by the Consent, Waiver and Third Amendment to Credit Agreement, dated June 2,
2023, by and among SatixFy and FP, and as further amended by the. Consent, Waiver and Fourth Amendment to Credit Agreement, dated October
31, 2023, by and among SatixFy and FP , and as amended by the Consent and Fifth Amendment to Credit Agreement, dated as of October 31,
2023, by and among SatixFy and FP.
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
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 |
An investment in our securities involves a
high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects,
financial condition, or operating results could be harmed by any of these risks, as well as other risks not known to us or that we consider
immaterial as of the date of this Annual Report. The trading price of our securities could decline due to any of these risks, and, as
a result, you may lose all or part of your investment. You should carefully consider the following risk factors in addition to the other
information included in this Annual Report, including matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking
Statements.”
Summary of Risk Factors
Our ability to implement our business strategy is subject to numerous
risks, as more fully described in this section. These risks include, among others:
| • |
SatixFy has limited capital currently
available and will need to raise additional capital in the future to fund its operations and develop its technology and chips and satellite
communications systems. If SatixFy fails to raise sufficient capital or is unable to do so on favorable or acceptable terms, it might
not be able to make the necessary investments in technology development, its operating results may be harmed, it may have to seek protection
under insolvency laws and may be unable to continue its operations. |
| • |
SatixFy is an early stage company with a history of losses, has generated less revenues than its prior projections, and has not demonstrated
a sustained ability to generate predictable revenues or cash flows. If SatixFy does not generate revenue as expected, its financial condition
will be materially and adversely affected. |
| • |
SatixFy may face increased risks and costs associated with volatility in labor or component prices or as a result of supply chain
or procurement disruptions, which may adversely affect its operations. |
| • |
Obtaining customer contracts may require SatixFy to participate in lengthy competitive selection processes that require it to incur
significant costs. |
| • |
Some of SatixFy’s customers may require its chips and satellite communications systems to undergo a demonstration process that
does not assure future sales or customer contracts. |
| • |
SatixFy generates a significant percentage of its revenue from certain key customers and anticipates this concentration will continue
for the foreseeable future, and the loss of one or more of its key customers could negatively affect its business and operating results.
|
| • |
SatixFy may not be able to continue to develop its technology or develop new technologies for its existing and new satellite communications
systems. |
| • |
Deterioration of the financial conditions of SatixFy’s customers could adversely affect its operating results. |
| • |
SatixFy operates in a highly competitive industry and may be unsuccessful in effectively competing in the future. |
| • |
SatixFy has incurred net losses in each year since inception and may not be able to continue to raise sufficient capital or achieve
or sustain profitability. |
| • |
SatixFy may not be able to generate sufficient cash to service its indebtedness. |
| • |
SatixFy’s estimates, including market opportunity estimates and growth forecasts, are subject to inherent challenges in measurement
and significant uncertainty, and real or perceived inaccuracies in those metrics and estimates may harm its reputation and negatively
affect its business. |
| • |
SatixFy’s results of operations may vary significantly from its expectations or guidance. |
| • |
SatixFy may not be able to comply with its contracts with customers, and non-compliance may harm its operations and expose it to
potential third-party claims for damages. |
| • |
Loss of key employees and the inability to continuously recruit and retain qualified employees could hurt SatixFy’s competitive
position. |
| • |
SatixFy relies on third parties for manufacturing of its products. SatixFy does not have long-term supply contracts with its foundry
or most of its third-party manufacturing vendors, and they may not allocate sufficient capacity to SatixFy at reasonable prices to meet
future demands for its solutions. |
| • |
SatixFy’s business is subject to a wide range of laws and regulations, many of which are continuously evolving, and failure
to comply with such laws and regulations could harm its business, financial condition and operating results. |
| • |
SatixFy is subject to risks from its international operations. |
| • |
SatixFy relies on its intellectual property and proprietary rights and may be unable to adequately obtain, maintain, enforce, defend
or protect its intellectual property and proprietary rights, including against unauthorized use by third parties. |
| • |
SatixFy relies on the availability of third-party licenses of intellectual property, and if it fails to comply with its obligations
under such agreements or is unable to extend its existing third- party licenses or enter into new third-party licenses on reasonable terms
or at all, it could have a material adverse effect on its business, operating results and financial condition. |
| • |
Defects, errors or other performance problems in SatixFy’s software or hardware, or the third-party software or hardware on
which it relies, could harm SatixFy’s reputation, result in significant costs to SatixFy, impair its ability to sell its systems
and subject it to substantial liability. |
| • |
SatixFy is subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy
and cybersecurity, which can increase the cost of doing business, compliance risks and potential liability. |
| • |
Changes in SatixFy’s effective tax rate may adversely impact its results of operations. |
| • |
Exchange rate fluctuations between the U.S. dollar, the British pound, the Euro and other foreign currencies may negatively affect
SatixFy’s future revenues. |
| • |
Managing a public company and compliance with regulatory requirements may divert the attention of SatixFy’s senior management
from the day-to-day management of its business. |
| • |
An active trading market for SatixFy’s equity securities may not develop or may not be sustained to provide adequate liquidity.
|
| • |
The selling shareholders listed in the Registration Statement may be incentivized to sell them under the Registration Statement depending
on the market price of our securities, and sales of a significant number of our securities by such selling shareholders could materially
adversely affect the trading prices of our securities. |
| • |
Investors’ rights and responsibilities as SatixFy’s shareholders will be governed by Israeli law, which differs in some
respects from the rights and responsibilities of shareholders of non- Israeli companies. |
| • |
The market price of SatixFy’s equity securities may be volatile, and your investment could suffer or decline in value.
|
| • |
SatixFy is an “emerging growth company” and avails itself of the reduced disclosure requirements applicable to emerging
growth companies, which could make its equity securities less attractive to investors. |
| • |
SatixFy may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
|
| • |
Future sales or other issuances of our securities could depress the market price for our securities. |
| • |
Failure to meet NYSE’s continued listing requirements could result in the delisting of our Ordinary Shares, negatively impact
the price of our Ordinary Shares and negatively impact our ability to raise additional capital. |
Risks Related to Our Business and Industry
We have limited capital currently
available and will need to raise additional capital in the future to fund our operations and develop our technology and chips and satellite
communications systems. If we fail to raise sufficient capital or are unable to do so on favorable or acceptable terms, we might not be
able to make the necessary investments in technology development, our operating results may be harmed, we may have to seek protection
under insolvency laws and may be unable to continue our operations.
The satellite communications industry is subject
to rapid technological changes, new and enhanced product introductions, product obsolescence and changes in user requirements, and we
plan to continue to make significant investments in next-generation satellite communications technologies in order meet industry developed
requirements. In addition, major new companies entering this market might reshape the competitive landscape. In order to fund our operations
in the near term and continue our development of these next-generation technologies, we require and are exploring options to obtain equity
financing, which, if obtained, may be subject to unfavorable terms and could impair the value of our ordinary shares, dilute existing
shareholders’ ownership interests and impose restrictions on us.
In order to preserve liquidity and allow us more time to evaluate
our financing and strategic alternatives, we entered into the 2022 Credit Agreement, dated as of February 1, 2022, as amended, which place
certain obligations on us in connection with future agreements we enter into. See “Item 5. Operating
and Financial Review and Prospects—B. Liquidity and Capital Resources—Debt Financing” for more information. Our
inability to raise sufficient capital on reasonable terms may adversely affect our ability to develop new technologies and chips and satellite
communications systems, and may result in our breach of certain covenants under the 2022 Credit Agreement (see “— We
may not be able to generate sufficient cash to service our indebtedness”), which could result in our inability to fund our
working capital requirements and otherwise adversely affect our business, financial condition and results of operations. If the amount
of capital we are able to raise from financing activities, together with our revenues and cash flows from operations, is not sufficient
to satisfy our capital needs (even to the extent that we reduce our operations), third parties may be reluctant to provide the services
we need in order to operate and we may be required to obtain financing on unattractive terms, divest our assets at unattractive prices,
seek protection under insolvency laws or cease our operations.
Additionally, until its termination in October 2023, the Forward
Purchase Agreement limited our ability to issue equity securities to raise additional capital due to a clause restricting us from issuing
additional equity securities (except pursuant to the Equity Line of Credit and our 2020 Share Award Plan) until such time as the sellers
thereunder recoup the Prepayment Shortfall (as defined therein, see “Item 5. Operating and Financial
Review and Prospects – B. Liquidity and Capital Resources — Forward Purchase Agreement”). Although the
Forward Purchase Agreement was terminated in October 2023, it may have precluded us from raising additional capital while it was in effect,
including during times when it would be advantageous to do so. Further, recent declines in our stock price mean that our ability to raise
new capital under the Equity Line of Credit Facility, which limits the number of shares we can sell based on their daily average trading
volume, could be substantially less than we initially expected.
We are an early stage company with a history
of losses, have generated less revenues than our prior projections, and have not demonstrated a sustained ability to generate predictable
revenues or cash flows. If we do not generate revenue as expected, our financial condition will be materially and adversely affected.
Since inception, we have devoted substantially all of our resources
to designing, developing and manufacturing our chips and satellite communications systems and technology, enhancing our engineering capabilities,
building our business and establishing relations with our customers, raising capital and providing general and administrative support
for these operations. We have a history of losses and have generated substantially less revenues than we previously predicted and have
not demonstrated a sustained ability to generate predictable or sustained revenue or cash flows from our satellite communications systems
and chips or convert sufficient leads into commercial engagements. For example, we have experienced extended delays in the manufacturing
cycle of our third-party manufacturer and related delays in our ability to deliver chips, payloads and terminals and/or delays in our
development work, a strategic decision by management to reduce sales in China due to concerns about the changes in the regulatory environment
and the termination of discussions with a number of prospective customers and deferrals of orders under existing contracts and postponement
of new contract negotiations with certain existing customers. Our ability to generate predictable revenue and operating cash flows sufficient
to fund our working capital requirements continues to be negatively impacted by these factors and we expect these factors to continue
to negatively impact our operations for the foreseeable future. Consequently, any assessment you make about our current business or future
success or viability may not be as accurate as it could be if we had a longer operating history or an established track record in generating
predictable revenues or operating cash flows sufficient to fund our working capital requirements. Further, our limited financial track
record, without meaningful revenue from our expected future principal business, is of limited reference value for your assessment of our
business and future prospects.
We incurred losses of approximately $29.7 million and $397.8 million
for the years ended December 31, 2023 and 2022, respectively. We expect to continue to incur losses until we are able to onboard a sufficient
number of new customers and contracts, and launch and scale a sufficient number of our satellite communications systems and related products
to become profitable. As we work to transition from technology and product development activities to commercial production and sales,
it is difficult to forecast our future results. Although we have several customer contracts, we have limited insight into trends that
may emerge and affect our business, including our ability to attract and retain customers, the amount of revenue we will generate from
our customers and the competition we will face. If our revenue grows slower than we anticipate or we otherwise fall materially short of
our forecasts and expectations, we may not be able to achieve profitability and our financial condition will be materially and adversely
affected which could cause our share price to decline and investors to lose confidence in us.
Amounts included in backlog may not result
in actual revenue and are an uncertain indicator of our future earnings.
As of December 31, 2023, our backlog was approximately
$59 million. Our backlog, which includes the pre-payment related to the MDA Agreement also consists of estimated revenue pursuant to customer
orders and signed contracts. See Note 3 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Our customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach
our contracts, and most of our customer contracts are terminable upon prior notice to us, without penalty. The disclosure of backlog
aids in the analysis of the demand for the Company’s products, as well as the Company’s ability to meet that demand. However,
because revenue will not be recognized until we have fulfilled our obligations to a customer, there may be a significant amount of time
between executing a contract with a customer and delivery of the product to the customer and revenue recognition. In addition, backlog
is not necessarily indicative of our revenues to be recognized in a specified future period and we cannot assure that we will recognize
revenue with respect to each order included in backlog. Our customers may order products from multiple sources to ensure timely delivery
and may cancel or defer orders without significant penalty. Our customers also may cancel orders when business is weaker, and inventories
are excessive. While as of the date of this Annual Report on Form 20-F, no orders were cancelled, should a cancellation occur, our backlog
and anticipated revenue would be reduced unless we were able to replace the cancelled order. As a result, we cannot provide assurances
as to the portion of backlog to be filled in a given year, and our backlog as of any particular date may not be representative of actual
revenues for any subsequent period.
We are currently experiencing, and may continue
to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement
disruptions, which may adversely affect our operations.
Our chips and satellite communications systems, including the manufactured
assemblies used in our satellite communications systems, are manufactured by third parties in several countries in Europe and in the Far
East using inputs, such as silicon wafers, laminate substrates, gold, copper, lead frames, mold compound, ceramic packages and various
chemicals and gases as well as other production supplies used in our manufacturing processes. Additionally, worldwide manufacturing capacity
for chips is relatively inelastic. The present demand for chips is exceeding market supply, which has resulted in increases in the prices
we pay for our supply of chips, as well as extended delivery delays beyond what we have experienced in the past. If such supply and demand
pressure continues, the prices we pay for our chips and, potentially, other components and assemblies could become substantially more
expensive and the delivery time for such products could be materially prolonged, which would have an adverse effect on our ability to
meet our customers’ demand. The current global shortage in semiconductor and electronic components, resulting mainly from macro
trends such as strong demand for 5G devices and high performance computing, as well as the wars between Russia-Ukraine and Israel-Hamas
war, has resulted in disruptions in our supply chain and delays in the delivery of our chips by our third-party manufacturers, increases
in the prices of our chip components and manufacturing and disruptions in the operations of our suppliers and customers. Additionally,
because the quantity of chips and assemblies we order comprises a small percentage of the overall output of our third-party manufacturers,
our third-party manufacturers have, and may continue to, prioritize their near-term capacity for the production of products for larger
companies while extending delivery times for our products. If this chip manufacturing capacity shortage continues for a prolonged period
of time, or if we are unable to secure manufacturing capacity on acceptable price and delivery terms, it could negatively impact our ability
to meet our customer’s demand for our chips and satellite communications systems and have an adverse impact on our revenue, results
of operations and customer relationships. See “— We rely on third parties for the manufacturing
of our chips and other satellite communications system components. We do not have long-term supply contracts with our foundry or most
of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands
for our solutions..”
Many of the manufacturers of our chips and satellite
communications systems components are located outside of the jurisdictions in which we have facilities and sites, necessitating international
shipping. Supply chain disruptions have occurred and may continue to occur from time to time due to a range of factors beyond our control,
including, but not limited to, international conflicts, such as the current war between Israel and Hamas, Russia’s invasion of Ukraine,
climate change, increased costs of labor, freight cost and raw material price fluctuations or a shortage of qualified workers. Such supply
chain disruptions could materially impact our operating performance and financial position, including if deliveries to us are delayed
or if such disruptions negatively impact the business and operations of our key customers. See “— Our
headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political,
economic and military instability in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip
and Israel’s war against them.”
The Russia-Ukraine war poses indirect but unpredictable risks of
disruption to our business. Several of our current and prospective customers are operators of communication satellite constellations and
have historically used Russian-based launch facilities and vehicles to place their satellites into orbit. If these customers are unable
to find alternative launch venues on a timely basis or at all, they may experience delays in deploying their satellites, which in turn
could cause them to defer orders for our satellite communications chips and satellite payloads. For example, Eutelsat OneWeb (“OneWeb”)
announced that it was suspending all satellite launches from Russia’s Baikonur Cosmodrome. As a result, it partnered with companies
in other countries to launch its satellites, which includes test launches of satellites equipped with our payload systems, and we have
no control over its ability to transition its expected satellite launches on a timely basis. OneWeb also announced its merger of equals
with Eutelsat, a major Geostationary (“GEO”) satellite provider, expected in 2023, which may result in further delays or changes
in OneWeb’s satellite projects. Additionally, recent reports indicated that the Russia-Ukraine war may have an adverse impact on
the supply of certain commodities, of which Ukraine and Russia were significant producers (for example, neon gas), used in the fabrication
of silicon chips. Our ability to mitigate the potential adverse impacts of the Russia-Ukraine war on our supply chain or the supply chains
of our customers and suppliers is limited, as the impacts are largely indirect and it is difficult for us to predict at this time how
our suppliers and customers will adjust to the new challenges or how these challenges will impact our costs or demand for our products
and services. The effects of the sanctions implemented in response to the conflict may also adversely affect our industry, including chip
supply chains, to the extent that they lead to higher energy and manufacturing costs, lower economic growth or deferrals of investment
in satellite communications technology.
Additionally, the third-party manufacturers, suppliers
and distributors that we contract with are susceptible to losses and interruptions caused by factors outside of their control, such as,
floods, hurricanes, earthquakes, typhoons, volcanic eruptions, and similar natural disasters, as well as power outages, telecommunications
failures, industrial accidents, geopolitical instability (including instability caused by international conflict, such as the Russia-Ukraine
war or the increasing potential of conflicts in Asia implicating the global semiconductor supply-chain, such as conflicts between Taiwan
and China), health and safety epidemics and similar events. The occurrence of natural or conflict-related disasters in any of the regions
in which these third-party service providers operate could severely disrupt the operation of our business by negatively impacting our
supply chain, our ability to deliver products, and the cost of our products. Such events can negatively impact revenue and earnings and
can significantly impact cash flow, both from decreased revenue and from increased costs associated with the event. In addition, these
events could cause consumer confidence and spending to decrease or result in increased volatility to the U.S. and worldwide economies.
The magnitude and nature of the effects of these challenges and
uncertainties on our business are difficult to predict and such effects may not be fully realized, or reflected in our financial results,
until future periods.
We rely on third parties for
the manufacturing of our chips and other satellite communications system components. We do not have long-term supply contracts with our
foundry or most of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to
meet future demands for our solutions.
The semiconductor industry is subject to intense competitive market
pressure. Accordingly, any increase in the cost of our chips or satellite communications systems, whether by adverse purchase price variances
or adverse manufacturing cost variances, will reduce our gross margins and operating profit. We currently rely on third parties for a
substantial amount of our manufacturing operations. If one or more of these vendors terminates its relationship with us, or if they fail
to produce and deliver our products according to our requested demands in specification, quantity, cost and time, our ability to ship
our chips or satellite communications systems to our customers on time and in the quantity required could be adversely affected, which
in turn could cause an unanticipated decline in our sales and damage our customer relationships.
Currently, the majority of our chips are supplied
by a single foundry, GlobalFoundries, Inc. (“GlobalFoundries”). We obtain manufacturing services from our foundry vendor and
negotiate pricing on a purchase order-by-purchase order basis. We do not have contractual assurances from our foundry vendor that adequate
capacity will be available to us when we need it or to meet our anticipated future demand for chips. We have continued to experience delays
and price increases in in 2023, although to a lesser extent than in 2022, with respect to the production of chips at our foundry vendor
and expect that we will continue to experience delays and/or increased prices in the near term due to unprecedented levels of demand and
the resulting tightening of capacity at our foundry vendor. If this trend continues, it could limit the volume of chips and satellite
communications systems we can produce and/or delay production of new chips or satellite communications systems, both of which would negatively
impact our business. If these conditions continue for a substantial period or worsen, our ability to meet our anticipated demand for our
solutions could be impacted which, in turn, could negatively impact our operations and financial results.
Our foundry vendor may allocate capacity to the production of other
companies’ products while extending delivery times for our products and may also reduce deliveries to us on short notice. In particular,
other companies that are larger and better financed than we are or that have long-term agreements with our foundry vendor may cause our
foundry vendor or assembly and test vendors to reallocate capacity to them, decreasing the capacity available to us. The unavailability
of our foundry could significantly impact our ability to produce our chips or satellite communications systems or delay production, which
would negatively impact our business. Additionally, the majority of our chips are designed to be compatible with the manufacturing processes
and equipment employed by GlobalFoundries, and switching to a new foundry vendor for these chips may require significant cost and time.
We do not presently own or operate any in-house manufacturing or
assembly facilities and do not anticipate making any investments in new manufacturing facilities in the near term and, accordingly, expect
to continue to rely on third-party vendors or sub-contractors for these services. We currently do not have long-term supply contracts
with most of our other third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis.
Therefore, they are not obligated to provide services or supply products to us for any specific period, in any specific quantities, or
at any specific price, except as may be provided in a particular purchase order. The ability of our vendors to provide us with products
or services is limited by their available capacity, existing obligations and technological capabilities.
If we need to contract additional third-party vendors or sub-contractors,
we may not be able to do so cost-effectively or on a timely basis, if at all.
Obtaining customer contracts may require us
to participate in lengthy competitive selection processes that require us to incur significant costs.
We expect to sell our satellite communications
systems and chips for integration into our customers’ systems primarily at the design stage. These efforts to achieve design wins
may be lengthy, and may require us to incur both design and development costs or dedicate scarce engineering resources in pursuit of a
single customer opportunity. We may not prevail in the competitive selection process, and even when we do achieve a design win, we may
never generate any product development or product sale revenue despite incurring development expenditures. Due to factors outside of our
control, our customers have in the past, and may in the future, delay or cancel their projects, resulting in a loss of projected revenue.
In addition, even if a customer designs one of our chips or satellite communications systems into one of its systems, we cannot be assured
that we will secure new design wins from that customer for future systems. Further, even after securing a design win, we have experienced
and may again experience delays in generating revenue, if any, from our chips and satellite communications systems as a result of the
lengthy product development cycle typically required.
Our customers may take a considerable amount of time to evaluate
our chips and satellite communications systems. The delays inherent in these lengthy sales cycles increase the risk that a customer will
decide to cancel, curtail or delay its product plans, causing us to lose anticipated sales. In addition, any delay or cancellation of
a customer’s plans could harm our financial results. If we are unable to generate revenue after incurring substantial expenses to
develop any of our solutions, our business would suffer.
Some of our customers may require our chips and satellite communications
systems to undergo a demonstration process that does not assure future sales or customer contracts.
Prior to purchasing our chips or satellite communications
systems, some of our customers may require that our chips or satellite communications systems undergo extensive demonstration processes,
which may involve the testing of our chips or satellite communications systems in the customers’ systems or via a prototype demonstration.
We may also undertake to commit resources to prepare a demonstration for a prospective customer, in which case we would bear the expenses
of the demonstration. The demonstration process varies by the customer and the product and may take several months. The demonstration
of a chip or satellite communications system to a customer does not assure any sales of the chip or the satellite communications system
to that customer. After demonstration of our chip or satellite communications system and entry into an agreement for the development of
a satellite communications system or sale of a chip, it can take several months or more before the customer commences volume production
of components or systems that incorporate our satellite communications systems or chips. Despite these uncertainties, we may devote substantial
resources, including design, engineering, sales, marketing and management efforts, to demonstrate our chips or satellite communications
systems to customers in anticipation of sales and without an expectation of reimbursement of these costs or generating future revenues
and gross profits from the projected sale of the chips or satellite communications systems.
We generate a significant percentage of our revenue from certain
key customers, and anticipate this concentration will continue for the foreseeable future, and the loss of one or more of our key customers
could negatively affect our business and operating results.
We derive a significant portion of our revenue from a limited number
of customers and, because the satellite communications industry is characterized by a relatively small number of large players, we anticipate
that this customer concentration will continue for the foreseeable future. For the years ended December 31, 2023 and December 31, 2022,
our three largest customers accounted for, in the aggregate, approximately 77% and 78% of our revenue, respectively. If we fail to deliver
upon contracts with these three customers, or upon the contracts of other large customers, or if demand by these customers for our chips
and satellite communications systems decreases substantially, our revenues and operating results could be materially adversely affected.
Our customers’ continued success will depend in large part
on growth within their respective markets. Demand in these markets fluctuates significantly, driven by the development of new technologies
and prevailing economic conditions. Factors affecting these markets could seriously harm our customers and, as a result, harm us, including:
| • |
the effects of catastrophic and other disruptive events at our customers’ operational sites or targeted markets including,
but not limited to, natural disasters, telecommunications failures, geopolitical instability caused by international conflict, including
the Russia-Ukraine and Israel-Hamas wars, cyber-attacks, terrorist attacks, pandemics, epidemics or other outbreaks of infectious disease,
and breaches of security or loss of critical data; |
| • |
increased costs associated with potential disruptions to our or our customers’ supply chain and other manufacturing and production
operations; |
| • |
the deterioration of our customers’ financial condition; |
| • |
delays and project cancellations as a result of design flaws in the chips and communications systems developed by us or our customers;
|
| • |
the inability of our customers to dedicate the resources necessary to promote and commercialize their products; |
| • |
the inability of our customers to adapt to changing technological demands resulting in their products becoming obsolete; and
|
| • |
the failure of our satellite communications systems or our customers’ products to achieve market success and gain market acceptance.
|
Any slowdown or a disruption in the growth of these markets could
adversely affect our financial condition and results of operations.
The success of our business is highly dependent on our ability to
effectively market and sell our technologies and to convert contracted revenues and our pipeline of potential contracts into actual revenues,
which can be a costly process.
To date, we have relied heavily on equity
and debt financing to fund our business and operations, and we are currently generating revenue from a limited number of customer contracts.
See “— We generate a significant percentage of our revenue from certain key customers, and
anticipate this concentration will continue for the foreseeable future, and the loss of one or more of our key customers could negatively
affect our business and operating results..” Our success will be highly dependent on our ability to retain and expand our
business with existing customers and convert our pipeline of potential contracts into revenues. If we fail to sign contracts with at least
some of the customers envisaged in our pipeline, particularly with large customers over the next years when any large contract would significantly
impact our revenues and financial results, and grow sufficient business volume with such customers, our business, financial condition
and results of operations will be materially and adversely affected. For example, potential additional future contracts with Telesat,
one of our largest customers, related to delivery of SX 3099 chip-enabled ground terminal modems for their Low Earth Orbit (“LEO”)
network, are dependent on Telesat obtaining the necessary funding for completion of this project.
Our ability to establish and expand our customer
relationships is subject to several factors, including, among other things, our ability to overcome customer concerns relating to our
lack of experience or track record in providing chips and satellite communications systems to customers in the same industry, competition
from more experienced service providers, and our customers’ level of satisfaction with our technology, chips, satellite communications
systems and services. For example, one potential with whom we were discussing prospective new contracts recently informed us that they
selected our larger competitors with longer track records of providing aircraft-based satellite communications solutions as principal
contractors for their satellite communications needs.
If our satellite communications systems or chips fail to perform
as expected or their commercial availability or production is significantly delayed as compared to the timelines we establish with our
customers, our business, financial condition and results of operations may be harmed.
We may not be able to continue to develop our technology or develop
new technologies for our existing and new satellite communications systems.
The satellite communications industry is subject to rapid technological
changes, new and enhanced product introductions, product obsolescence and changes in user requirements. Our ability to compete successfully
in the satellite communications market depends on our ability to successfully enhance our existing technology and develop new chips and
satellite communications systems that are responsive to the latest technological advances. Our ability to continue to enhance our existing
technology, or develop new technology that is responsive to changing technological requirements and suitable for the needs of market participants,
depends on a number of factors, including the following:
| • |
our ability to anticipate the needs of the market for new generations of satellite communications digital chip technology;
|
| • |
our ability to continue funding and to maintain our current research and development activities, particularly the development of
enhancements to our chips and systems; |
| • |
our ability to successfully integrate our advanced technologies and system design architectures into satellite communications systems
that are compatible with our customers’ infrastructure; |
| • |
our ability to develop and introduce timely, qualified
and on-budget new satellite communications systems or chips that meet the market’s technological requirements; |
| • |
our ability to establish close working relationships with our customers and to have them integrate our satellite communications systems
in their design of new communications systems; |
| • |
our ability to maintain intellectual properties rights, whether proprietary or third-party, that are necessary to our research and
development activities, such as chip development software; |
| • |
our ability to gain access to the proprietary waveforms that potential customers utilize; and |
| • |
our ability to obtain funding for continuing our technology and product development. |
Some of our chips and satellite communications systems are in the
development or engineering (involving the customization of a developed product to the customer’s specifications) stage with limited
or no sales to date, and we cannot assure that our chips and satellite communications systems will be successful. If we are unable to
design and develop new chips and satellite communications systems that are compatible with current technological needs, it could materially
harm our business, financial condition and results of operations.
Additionally, as part of our current strategy, we have decided
to pause development and marketing related to our satellite-enabled Internet-of-Things Diamond product and the Terminal-On-Mobile product
in order to continue to focus on our other satellite communications chips and products described herein.
We will be reliant on our joint venture partner, ST Electronics
(Satcom & Sensor Systems) Pte Ltd. (“STE”), for the success of the Jet Talk joint venture and, therefore, our Aero/IFC
terminals business.
We hold 51% of the equity in Jet Talk and our joint
venture partner, STE, participates in significant financial and operational decisions, including participating in the appointment of Jet
Talk’s chief executive officer and direct Jet Talk’s research and development (“R&D”) (which is performed
by us as a paid service), marketing activities, and funding. We are developing our large Aero/IFC satellite communications terminal for
commercial aircraft under agreements with Jet Talk and, under our joint venture agreement with STE, Jet Talk will have the exclusive right
to commercialize and sell our Aero-IFC terminals to the commercial aviation market. We believe that the large Aero/IFC sector is likely
to represent a substantial portion of our future business and revenues, most of which are likely to be driven by the commercial aviation
market. Accordingly, we expect to rely primarily on STE for managing Jet Talk and directing the marketing and sale of our large Aero/IFC
terminals. While we believe our interests are aligned with STE’s, these interests may diverge in the future, including as a result
of STE pursuing a different strategy, developing its own competing product, selling or exiting its aerospace business, or other reasons
outside of our control. If any of these things were to occur, we would have to replace STE as a partner or expand our own sales and marketing
resources, which could increase our costs and materially adversely affect our results of operations.
Additionally, once we complete the development of and are able
to commercialize our large Aero/IFC satellite communications terminals, the revenues and margins attributable to such sales will not be
fully reflected in our consolidated financial statements, which will instead reflect our sales of products and services to Jet Talk and
our equity in Jet Talk’s net income or loss for each reporting period. This may make it more difficult for investors and analysts
to analyze our business and performance trends relative to companies that consolidate their material operations. See Note 7 to SatixFy’s
consolidated financial statements included elsewhere in this Annual Report.
Deterioration of the financial condition of our customers could
adversely affect our operating results.
Deterioration of the financial condition of our
customers could adversely impact our collection of accounts receivable and may result in delays in product orders or contract negotiations.
For the years ended December 31, 2023 and December 31, 2022, our three largest customers accounted for, in the aggregate, approximately
77% and 78% of our revenue, respectively. As of December 31, 2023 and December 31, 2022, accounts receivable with these customers were
approximately $0.2 million and $0.8 million, respectively. We regularly review the collectability and creditworthiness of our customers
to determine an appropriate allowance for credit losses. Based on our review of our customers, we currently have only immaterial reserves
for uncollectible accounts. If our uncollectible accounts, however, were to exceed our current or future allowance for credit losses,
our operating results would be negatively impacted. Further, recent global inflationary trends and financial markets volatility have resulted
in funding constraints that may affect the timing and scale of investments in new communications satellite constellations and related
infrastructure by some of our existing and prospective customers. The effects of recent macroeconomic uncertainties on our customers have
also resulted in delays to contract negotiations or customer orders and may result in further delays. For example, one of our customers
announced last year that it is reconsidering the scale and timing of its plans to launch a new LEO communications satellite constellation.
These and any new or further delays in new contracts or customer orders could materially adversely affect our financial condition and
operating results.
Inflation could adversely affect our business and results of operations.
While inflation in the United States and global markets was relatively
low before 2020, during 2021 and 2022, the economy in the United States and global markets encountered a material increase in the level
of inflation. The impact of COVID-19, geopolitical developments such as the Russia-Ukraine and Israel-Hamas conflicts and global supply
chain disruptions continue to increase uncertainty in the outlook of near-term and long-term economic activity, including whether inflation
will continue and how long, and at what rate. Increases in inflation raise our costs for commodities, labor, materials and services and
other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial
condition. Additionally, increases in inflation, along with the uncertainties surrounding geopolitical developments and global supply
chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment,
which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks
could have a material adverse impact on our financial condition, results of operations or cash flows.
We operate in a highly competitive industry and may be unsuccessful
in effectively competing in the future.
We operate in the highly competitive and rapidly developing industry
of satellite communications, and we face intense worldwide competition in the introduction of new chips and satellite communications systems.
Our customers’ selection processes are typically highly competitive, and our chips and satellite communications systems may not
be included in the next generation of their products and systems.
We compete with various companies across the various satellite
communications industry’s segments we serve. In addition to our direct competitors, some of our customers and suppliers also compete
with us to some extent by designing and manufacturing their own satellite communications systems. We face intense competition to introduce
new technologies and satellite communications systems and to competitively price our chips and satellite communications systems. Some
of our competitors have recently introduced products with more advanced technologies than in the past which increases competition with
our products. Many of our current and potential competitors have existing customer relationships, established patents and other intellectual
property, greater access to capital, advanced manufacturing capabilities, more experience in the satellite communications industry and
substantial technological resources. We may not be able to compete successfully against current or future competitors, which would adversely
affect our business, financial condition and results of operations.
Pricing at too high a level could adversely affect our ability
to gain new customers and retain current customers, while increased competition could force us to lower our prices or lose market position
and could adversely affect growth prospects and profitability. Relatedly, if we are unable to deliver on our contracts with our existing
customers for any reason or if we fail to meet customer needs and expectations, we may lose our existing contracts or our reputation could
be harmed, either of which would have a material adverse effect on our business, operations and financial condition.
The magnitude and nature of the effects of these challenges and
uncertainties, in addition to the challenges and uncertainties discussed above under “— We
are an early stage company with a history of losses, have generated less revenues than our prior projections, and have not demonstrated
a sustained ability to generate predictable revenues or cash flows. If we do not generate revenue as expected, our financial condition
will be materially and adversely affected.” on our business are difficult to predict and such effects may not be fully realized,
or reflected in our financial results, until future periods.
If the available satellite
communications markets fail to grow, our business could be materially harmed.
We develop and market satellite communications
systems and digital chips across the value chain for the satellite communications industry. The industry is undergoing a dramatic transformation
due to lower cost solutions and miniaturization as well as introduction of new technologies and manufacturing practices. Demand for large
GEO communication satellites has fallen as new satellite operators prepare to launch constellations of hundreds or thousands of smaller,
lower cost LEO and Medium Earth Orbit (“MEO”) broadband satellite constellations, increasing the need for chips and products
that are small in size, low in weight, with low power consumption and low cost. New constellation of Direct To Device are being discussed.
Because the industry is constantly changing, it is difficult to predict the rate at which these markets will grow or decline.
If the markets for commercial satellite communications systems fail to grow, or if we
fail to penetrate the market for LEO satellites, or if LEO satellite operators to whom we are targeting for the sale of our satellite
communications systems do not successfully deploy their satellites, or fail to build their clientele in a reasonable period, our business
could be materially harmed. Additionally, if we fail to penetrate the market for IFC systems, to which we are late comers, or if airline
operators or service providers to whom we are targeting for the sale of our IFC systems do not select our IFC system, or decide not to
pursue IFC upgrade, our business could be materially harmed. A significant decline or a delay in the growth in these two markets could
materially harm our business and impair the value of our shares.
We have incurred net losses in each year since inception and may
not be able to continue to raise sufficient capital or achieve or sustain profitability.
We have incurred net losses and had net cash outflows from operating
activities in each year since 2012, when we commenced operations. We have invested and continue to invest significantly in our business,
including in technology research and development and the recruitment of quality industry talent. As of December 31, 2023, we have invested
over $243 million in research and development, a substantial portion of which has been defrayed by government and public entity grants.
We have based some of our plans, budgets and financial projections on assumptions that
may prove to be wrong, and we may be required to utilize our available capital resources sooner than we expect. Changing circumstances
could also cause us to consume capital faster than we currently anticipate, and we may need to spend more than currently expected. The
timing of the completion of the development and engineering of our satellite communications systems and chips that are expected to drive
our future results is uncertain. The commercialization of these products may also entail unpredictable costs and is subject to significant
risks, uncertainties and contingencies, many of which are beyond our control. Certain of these risks and uncertainties include, but are
not limited to, changing business conditions, continued supply chain challenges, other disruptions due to governmental and regulatory
changes, competitive pressures, regulatory developments or the cessation of public sector research and development funding, among other
potential developments. As discussed above, we need to seek additional equity financing in order to fund our operations for the near term
and continue the development of products and technologies. Debt financing could contain restrictive covenants relating to financial and
operational matters including restrictions on the ability to incur additional secured or unsecured indebtedness that may make it more
difficult to obtain additional capital with which to pursue business opportunities. If financing is not available, or if the terms of
financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back
our operations, which could have a material adverse impact on our business and financial prospects.
In addition, as of December 31, 2023, we had long term debt from
financial institutions of $59.8 million and our liabilities exceeded our assets by $58.8 million. Any failure to increase our revenue,
manage the increase in our operating expenses, continue to raise capital, manage our liquidity or otherwise manage the effects of net
liabilities, net losses and net cash outflows, could prevent us from continuing as a going concern or achieving or maintaining profitability.
Additionally, recent media and regulatory scrutiny of SPAC business combinations, and high redemption trends, may lead customers to view
SatixFy as a riskier or undercapitalized partner, which could negatively affect our customer relationships, business and operations.
We may not be able to generate sufficient cash to service our indebtedness.
We have a high amount of debt relative to our earnings. Our ability
to make payments on our indebtedness depends on our ability to generate cash in the future. Accordingly, we will need to generate significant
cash flows from operations, or obtain new capital, in the future to meet our debt service requirements. Additionally, the 2022 Credit
Agreement contains customary covenants that limit our ability to incur additional indebtedness or liens or dispose of our assets, which
may impair our ability to meet our debt service requirements. See “Item 5. Operating and Financial
Review and Prospects – B. Liquidity and Capital Resources— Debt Financing” for more information. If we are unable
to generate sufficient cash flows it may make it more difficult for us to obtain future financing on terms that are acceptable to us,
or at all, which may require us to seek protection under insolvency laws or cease our operations altogether.
Our estimates, including market opportunity estimates and market
growth forecasts, are subject to inherent challenges in measurement and significant uncertainty, and real or perceived inaccuracies in
those metrics and estimates may harm our reputation and negatively affect our business.
We track certain key metrics and market data, including, among
others, our estimated demand for communication satellites, particularly LEO satellites, which may differ from estimates or similar metrics
published by third parties due to differences in sources, methodologies or the assumptions on which we rely. We previously reported estimates
of our potential future revenue pipeline, however, due to the postponement or narrowing of negotiations of new contracts with existing
and prospective customers and the early stage of our negotiations with additional new customers, our management has decided to no longer
publicly report our potential revenue pipeline unless and until these uncertainties are resolved, as any such pipeline information would
be of limited utility to investors. Our methodologies for tracking these data may change over time, which could result in changes to our
metrics, including the metrics we publicly disclose. While our key metrics and market data are based on what we believe to be reasonable
estimates for the applicable period of measurement, there are inherent challenges in measuring our performance. For example, the accuracy
of our projected potential contract revenue pipeline could be impacted by developments outside of our control, such as changes in customers’
plans, supply chain difficulties and the availability of alternative products. In addition, limitations with respect to how we measure
data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our
long-term strategies. If our estimates of operating metrics and market data are not accurate representations of our business, if investors
do not perceive our operating metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our business,
financial condition, results of operations and prospects could be materially and adversely affected.
Additionally, industry data, forecasts, estimates and projections
included elsewhere in this Annual Report are subject to inherent uncertainty as they necessarily require certain assumptions and judgments.
Certain facts, forecasts and other statistics relating to the industries in which we compete have been derived from various public data
sources, including third- party industry reports and analyses. Accordingly, our use of the terms referring to our markets and industries
such as, satellite communications systems, chips, IFC, and Communications-On-The-Move (“COTM”) may be subject to interpretation,
and the resulting industry data, projections and estimates are inherently uncertain. You should not place undue reliance on such information.
In addition, our industry data and market share data should be interpreted in light of the defined markets in which we operate. Any discrepancy
in the interpretation thereof could lead to varying industry data, measurements, forecasts and estimates. Further, the sources on which
such industry and market data and estimates are based were prepared as of a certain point in time, and any changes in global macroeconomic
conditions, including recent global inflationary trends and financial markets volatility, could also lead to changes in these data, measurements,
forecasts and estimates. For these reasons and due to the nature of market research methodologies, you should not place undue reliance
on such information as a basis for making, or refraining from making, your investment decision.
Furthermore, we do not, as a matter of general practice, publicly
disclose long-term forecasts or internal projections of our future performance, revenue, financial condition or other results.
Our results of operations may vary significantly from our expectations.
Our revenue, margins and other operating results depend on demand
for our chips and satellite communications systems. A decline in demand for such products as a result of economic conditions or for other
reasons could materially adversely impact our revenue and profitability. Given recent developments described elsewhere herein, our prior
projections should not be viewed as current. Our future operating results will depend on many factors, including the following:
| • |
our ability to timely introduce to the market our current chips and satellite communications systems; |
| • |
our ability to develop new chips and satellite communications systems that respond to customer requirements; |
| • |
changes in cost estimates and cost overruns associated with our development projects; |
| • |
changes in demand for, and market conditions of, our chips and satellite communications systems; |
| • |
the ability of third-party foundries and other third-party suppliers to manufacture, assemble and test our chips and satellite communications
systems in a timely and cost-effective manner; |
| • |
the discovery of defects or errors in our hardware or software after delivery to customers; |
| • |
our ability to achieve cost savings and improve yields and margins on our new and existing products; |
| • |
our ability to utilize our capacity efficiently or to adjust such capacity in response to customer demand; |
| • |
our ability to realize the expected benefits of any acquisitions or strategic investments; |
| • |
business, political, geopolitical and macroeconomic changes, including the Russia-Ukraine and Israel-Hamas wars. trade disputes,
the imposition of tariffs or sanctions, inflation trends and downturns in the semiconductor and the satellite communications industries
and the overall global economy; and |
| • |
changes in consumer confidence caused by many factors, including changes in interest rates, credit markets, expectations for inflation,
unemployment levels, and energy or other commodity prices. |
Our future operating results could be adversely affected by one
or more factors, including any of the above factors, which may also damage our reputation, reduce customer satisfaction, cause the loss
of existing customers, result in a failure to attract new customers, result in a failure to achieve market acceptance for our chips and
satellite communications systems, result in cancellation of orders and loss of revenues, reduce our backlog and our market share, increase
our service and warranty costs, divert development resources, lead to legal actions by our customers, result in product returns or recalls
and increase our insurance premiums. In addition, any prolonged adverse effect on our revenue could alter our anticipated working capital
needs and interfere with our short-term and long-term business strategies.
If we are unable to manage our growth effectively, our business
and financial results may be adversely affected.
To continue to grow, we must continue to expand our operational,
engineering, sales and marketing efforts, accounting and financial systems, procedures, controls and other internal management systems.
This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems,
procedures and controls may not be adequate to support our future operations. Unless our growth results in an increase in our revenues
that is proportionate to the increase in our costs associated with this growth, our operating margins and profitability will be adversely
affected. If we fail to adequately manage our growth effectively, improve our operational, financial and management information systems,
or effectively train, motivate and manage our new and future employees, it could adversely affect our business, financial condition and
results of operations.
We may not benefit from our investment in the development of new
technologies and satellite communications systems.
The time from conception to launch of a new chip or a satellite
communications systems may be several years, thereby delaying our ability to realize the benefits of our investments in new technologies.
In addition, we may lose our investment in new chips or satellite communications systems that we develop if by the time we launch the
new chips or satellite communications systems they are no longer responsive to market needs or have become obsolete due to technological
changes, the introduction of new and superior technology or product or changes in customer needs. For example, the satellite communications
industry and the IFC customers we serve, or may serve in the future, will likely experience increased market pressure from telecommunication-based
connectivity providers as 5G broadband coverage increases. A decrease in demand for satellite communications connectivity solutions would
likely have an adverse effect on such IFC customers’ businesses, which may in turn have an adverse effect on our business and operations.
We may also experience design, procurement and manufacturing difficulties that could delay or prevent us from successfully launching new
chips and satellite communications systems. Any delays could result in increased costs of development, reducing the benefits from the
launch of new chips or satellite communications systems. If we are not able to benefit from our investments in new technologies and satellite
communications systems, or if we experience delays or other difficulties, our business, financial condition and results of operations
could be adversely affected.
We developed our chip set with the help of substantial grants from
the European Space Agency (“ESA”), sponsored by the U.K. Space Agency (“UKSA”), through ESA’s Advanced Research
in Telecommunication Systems ("ARTES") program, which have amounted to over $77.5 million through December 31, 2023. In connection with
the ESA grants, which are intended to fund 50%-75% of the cost of development and manufacturing of the integrated chip sets and the communications
systems, our agreement stipulates that the resulting intellectual property will be available to ESA on a free, worldwide license for its
own programs. In addition, ESA can require us to license the intellectual property to certain bodies that are part of specified ESA programs,
for ESA’s own requirements on acceptable commercial terms, and can also require us to license the intellectual property to any other
third party for purposes other than ESA’s requirements, subject to our approval that such other purposes do not contradict our commercial
interests. Although ESA has not yet indicated an intention to exercise its right to require us to license our intellectual property to
other parties, it may do so in the future, which may require us to agree to contractual terms that are less favorable than what we may
otherwise agree to in other customer contracts.
We may not be able to comply with our contracts with customers,
and non-compliance may harm our operations and expose us to potential third-party claims for damages.
A significant portion of our revenue is derived from commercial
contracts with customers for the development and delivery of satellite communications systems. These contracts typically contain strict
performance requirements and project milestones. Some of our customers expressed initial concerns with our performance due to delays in
deliveries and completion of work, which has primarily been the result of the ongoing supply-chain and macro-economic events discussed
elsewhere herein. We may not be able to comply with these performance requirements or meet these project milestones in the future. If
we are unable to comply with these performance requirements or meet these milestones, our customers may terminate these contracts and,
under some circumstances, recover damages or other penalties from us. Any termination of these contracts could materially reduce our revenues
and adversely affect our business, financial condition and results of operations.
Loss of key employees and the inability to continuously recruit
and retain qualified employees could hurt our competitive position.
We depend on a limited number of key technical, marketing and management
personnel to manage and operate our business. In particular, we believe our success depends to a significant degree on our ability to
attract and retain highly skilled engineers to facilitate the enhancement of our existing technologies and the development of new chips
and satellite communications systems.
In order to compete effectively, we must:
| • |
hire and retain qualified professionals; |
| • |
continue to develop leaders for key business units and functions; and |
| • |
train and motivate our employee base. |
The competition for qualified personnel is intense, and the number
of candidates with relevant experience, particularly in radio-frequency device and satellite communications systems development and engineering,
integrated circuit and technical pre- and post-sale support, is limited. Changes in employment-related laws and regulations may also result
in increased operating costs and less flexibility in how we meet our changing workforce needs. Additionally, we have dismissed, and may
in the future decide to dismiss, certain personnel in order to save on costs and focus on our core competencies, which may have an adverse
effect on our reputation and our ability to retain additional qualified personnel in the future. We cannot assure that we will be able
to attract and retain skilled personnel in the future, which could harm our business and our results of operations.
Due to intense competition for highly skilled personnel in Israel
and the U.K., we may fail to attract, recruit, retain and develop qualified employees, which could materially and adversely impact our
business, financial condition and results of operations.
Our principal research and development activities are conducted
from our offices in Israel and the U.K. and we face significant competition for suitably skilled software engineers, electrical engineers
working in digital signal processing and developers in these regions. For example, the labor market has slowed since the war with Hamas
began. The accelerated economic growth of Israeli tech companies led to a sudden surplus of job opportunities and intense competition
between Israeli-based employers to attract locally qualified employees. As a result, the high-tech industry in Israel experienced significant
levels of employee attrition and is currently facing a severe shortage of skilled personnel. Many of the companies with whom we compete
for experienced personnel have greater resources than we do and we may not succeed in recruiting additional experienced or professional
personnel, retaining current personnel or effectively replacing current personnel who may depart with qualified or effective successors.
Our effort to retain and develop personnel may also result in significant
additional expenses, which could adversely affect our profitability. There can be no assurance that qualified employees will continue
to be employed or that we will be able to attract and retain qualified personnel in the future. Failure to retain or attract qualified
personnel could have a material adverse effect on our business, financial condition and results of operations.
We are dependent on our senior management and other key personnel
for the success of our business.
Our future growth and success depend to a large extent on the continued
services of members of our current management including, in particular, Mr. Itzik Ben Bassat, who serves as our Chief Operating Officer
and Mr. Stephan Zohar, who serves as our Executive Vice President of VLSI. Any of our employees and consultants may leave the Company
at any time, subject to certain notice periods. The loss of the services of any of our executive officers or any key employees or consultants
may adversely affect our ability to execute our business plan and harm our operating results. Our operational success will substantially
depend on the continued employment of senior executives, technical staff, and other key personnel. The loss of key personnel may have
an adverse effect on our operations and financial performance.
Damage to our reputation could negatively impact our business, financial
condition and results of operations.
Our reputation is a critical factor in our relationships with customers,
employees, governments, suppliers and other stakeholders. Incidents involving product quality, security, or safety issues, allegations
of unethical behavior or misconduct or legal noncompliance, internal control failures, data or privacy or cybersecurity breaches, workplace
safety incidents, environmental incidents, the use of our chips or satellite communications systems for illegal or objectionable applications,
negative media reports, the conduct of our suppliers or representatives, and other issues or incidents that, whether actual or perceived,
may result in adverse publicity and harm to our reputation. In addition, if we fail to respond quickly and effectively to address such
incidents, the ensuing negative public reaction could harm our reputation and lead to litigation or subject us to regulatory actions or
restrictions. Damage to our reputation could harm customer relations, reduce demand for our chips or satellite communications systems,
reduce investor confidence in us, and may also damage our ability to compete for highly skilled employees. Repairing our reputation may
be difficult, time-consuming and expensive.
Our customers’ satellite communications projects incorporate
components or rely on launch services supplied by multiple third parties, and a supply shortage or delay in delivery of these components
or lack of access to launch capabilities could delay orders for our systems by our customers.
Our customers purchase components or services used in the manufacture
of their satellite communications projects from various sources of supply, often involving several specialized components or service providers.
Any supply shortage or delay in delivery by third-party component suppliers, or a third-party supplier or service provider’s cessation
or shut down of its business, may prevent or delay production of our customers’ systems or products. As a result of delays in delivery
or supply shortages of third-party components or services, orders for our chips or satellite communications systems may be delayed or
canceled and our business may be harmed. In addition, the semiconductor industry is currently experiencing a shortage on manufacturing
capacity due to unprecedented levels of demand, which has impacted, and may continue to impact, our customers’ ability to build
their products and negatively impact our customers’ demand for our solutions. Additionally, certain of our customers are satellite
operators that rely on third parties to launch their satellites into space, with some of them having relied on Russian launch capabilities
that are currently no longer available due to sanctions resulting from the Russia-Ukraine war. The unavailability of the Russian launch
capabilities caused delays in the deployment by certain of our customers of their satellites, which in turn caused them to defer orders
for our satellite communications chips and satellite payloads. This could materially adversely affect our business, financial condition,
results of operations and prospects.
We rely on a third-party vendor to supply chip development software
to us for the development of our new chips and satellite communications systems, and we may be unable to obtain the tools necessary to
develop or enhance new or existing chips or satellite communications products.
We rely on third-party chip development software (i.e., electronic
design automation tools) to assist us in the design, simulation and verification of new chips or chip enhancements. To bring new chips
or chip enhancements to market in a timely manner, or at all, we need development software that is sophisticated enough or technologically
advanced enough to complete our design, simulations and verifications. We have experienced in the past, and may experience in the future,
delays in our development of chips that utilize third-party software as a result of bugs, defects or other issues in, or caused by, such
third-party software. Such delays could cause us to fail to meet our contractual obligations to customers, or otherwise delay the development,
testing and release of new products, and could negatively impact our reputation, business and operating results.
Because of the importance of chip development software to the development
and enhancement of our chips and satellite communications systems, our relationships with leaders in the computer-aided design industry,
such as Cadence Design Systems, Inc. and Siemens, are critical to us. If these relationships are not successful, we may be unable to develop
new chips or satellite communications systems, or enhancements to these products, in a timely manner, which could result in a loss of
market share, a decrease in revenue or negatively impact our operating results.
Any disruption to the operations of our third-party contractors
and their suppliers could cause significant delays in the production or delivery of our chips and satellite communications systems.
Our operations could be harmed if manufacturing, logistics or other
operations of our third-party contractors or their suppliers are disrupted for any reason, including natural disasters, severe storms,
other negative impacts from climate change, information technology system failures or other cybersecurity event, geopolitical instability,
military actions or environmental, public health or regulatory issues. The majority of our chips and satellite communications systems
are manufactured by or use components from third-party contractors located in Europe and the Far East. Any disruption resulting from such
events in the regions in which our suppliers operate could cause significant delays in the production or shipment of our chips or satellite
communications systems until we are able to shift our manufacturing, from the affected contractor to another third-party vendor. We may
not be able to obtain alternate capacity on favorable terms, or at all which could adversely affect our financial condition and results
of operations.
We may in the future invest significant resources in developing
new products or service offerings and exploring the application of our proprietary technologies for other uses and those opportunities
may never materialize.
While our primary focus for the foreseeable future will be on acquiring
customers, commercializing our satellite communications systems and developing our proprietary chip technologies for application in satellite
communications systems, we may also invest significant resources in the future in developing new technologies, products and offerings.
However, we may not realize the expected benefits of these investments. Such technologies, services, products and offerings are unproven
and may never materialize or be commercialized in a way that would allow us to generate material revenues from them. If such technologies,
products and offerings become viable in the future, we may be subject to competition from our competitors, some of which may have substantially
greater monetary and knowledge resources than we have and expect to have in the future to devote to the development of these technologies.
New research and development initiatives may also have a high degree
of risk and involve unproven business strategies and technologies with which we have limited experience. They may involve claims and liabilities,
expenses, regulatory challenges and other risks that we may not be able to anticipate. There can be no assurance that such initiatives
will yield technologies or products for which there is customer demand or that any such demand will be sustained at the levels that we
anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset
any new expenses or liabilities associated with these new investments. Further, any such research and development efforts could distract
management from our operations, and would divert capital and other resources from our more established technologies and products. Even
if we were to be successful in developing new technologies, products or offerings, regulatory authorities may subject us to new rules
or restrictions in response to our innovations that may increase our expenses or prevent us from successfully commercializing such new
technologies, products or offerings.
We are subject to warranty claims, product recalls and product liability
claims and may be adversely affected by unfavorable court decisions or legal settlements.
From time to time, we may be subject to warranty or product liability
claims as a result of defects in our chips or satellite communications systems that could lead to significant expense. If we or one of
our customers recalls any of our chips or satellite communications systems or a customer recalls any of its products containing one of
our chips, we may incur significant costs and expenses, including replacement costs, direct and indirect product recall-related costs,
diversion of technical and other resources and reputational harm. Our customer contracts typically contain warranty and indemnification
provisions, and in certain cases may also contain liquidated damages provisions related to product delivery obligations. The potential
liabilities associated with such provisions are significant, and in some cases, including in agreements with some of our largest customers,
are potentially unlimited. Any such liabilities may greatly exceed any revenue we receive from the sale of the relevant products. Costs,
payments or damages incurred or paid by us in connection with warranty and product liability claims and product recalls could materially
and adversely affect our financial condition and results of operations.
Risks Related to Litigation, Laws and Regulation and Governmental Matters
Our business is subject to a wide range of laws and regulations,
many of which are continuously evolving, and failure to comply with such laws and regulations could harm our business, financial condition
and operating results.
We operate globally with several operational centers in Israel,
the United Kingdom, the U.S. and Bulgaria, and have customers, potential customers and suppliers across different regions of the world.
We are also developing our business across several international markets, where each country in which our customers plan to launch their
projects has different infrastructure, regulations, systems and customer expectations, all of which require more investment by us than
if we only operated in one country. Therefore, we are subject to environmental, labor, health, safety and other laws and regulations in
in all of the jurisdictions in which we operate or sell our chips and satellite communications systems and we are subject to regulatory,
geopolitical and other risks associated with doing business internationally. We are also required to obtain authorizations or licenses
from governmental authorities for certain of our operations, including with respect to regulatory approval of our Aero products for installation
on commercial aircraft, and have to maintain and protect our intellectual property worldwide. In the jurisdictions where we operate, we
need to comply with differing standards and varying practices of regulatory, tax, judicial and administrative bodies.
Our business environment is also subject to many business uncertainties,
resulting from the following international risks:
| • |
negative economic developments in economies around the world and the instability of governments; |
| • |
social and political instability in Israel, including the Israel-Hamas war, and in the other countries in which we operate;
|
| • |
pandemics or national and international environmental, nuclear or other disasters, which may adversely affect our workforce, as well
as our local suppliers and customers; |
| • |
adverse changes in governmental policies, especially those affecting trade and investment; |
| • |
foreign currency exchange, in particular with respect to the U.S. dollar, the Euro, the British pound sterling, the Israeli Shekel,
and transfer restrictions, in particular in Russia and China; |
| • |
global and local economic, social and political conditions and uncertainty; |
| • |
formal or informal imposition of export, import or doing-business regulations, including trade sanctions, tariffs and other related
restrictions; |
| • |
compliance with laws and regulations that differ among jurisdictions, including those covering taxes, intellectual property ownership
and infringement, export control regulations, anti- corruption and anti-bribery, antitrust and competition, data privacy, cybersecurity
and environment, health and safety; |
| • |
labor market conditions and workers’ rights affecting our operations; and |
| • |
occurrences of geopolitical crises such as terrorist activity, armed conflict, civil or military unrest or political instability,
which may disrupt our operations — for example, conflicts in Asia implicating the global semi-conductor supply-chain, such as conflicts
between Taiwan and China, the war between Russia and Ukraine, the war between Israel and Hamas, the tense relations between the U.S. and
China, could lead to regional and/or global instability, as well as adversely affect supply chains as well as commodity and other financial
markets or economic conditions. The U.S., European Union (the “EU”), the United Kingdom, Switzerland and other countries have
imposed, and may further impose, financial and economic sanctions and export controls targeting certain Russian entities and/or individuals,
and we, or our customers, may face restrictions on engaging with certain businesses due to any current or impending sanctions and laws,
which could adversely affect our business; and |
| • |
threats that our operations or property could be subject to nationalization and expropriation. |
No assurance can be given that we have been or will be at all times
in complete compliance with the laws and regulations to which we are subject or that we have obtained or will obtain the permits and other
authorizations or licenses that we need. If we violate or fail to comply with laws, regulations, permits and other authorizations or licenses,
we could be fined or otherwise sanctioned by regulators. In addition, if any of the international business risks materialize or become
worse, they could also have a material adverse effect on our business, financial condition and results of operations.
Changes in government trade policies, including the imposition of
export restrictions, could limit our ability to sell our chips and satellite communications systems to certain customers, which may materially
and adversely affect our sales and results of operations.
We are subject to United Kingdom, Israeli and, to a certain extent,
the U.S. export control and economic sanctions laws, which prohibit the shipment of certain products to embargoed or sanctioned countries
and regions, governments and persons. In addition, we incorporate encryption capabilities into certain of our products, and these products
are subject to Israel export control requirements that control the use, import and export of encryption technology.
Any change in export or import regulations, the scope of economic
sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments,
persons or technologies targeted by such sanctions, legislation or regulations, could result in decreased use of our products by, or in
our decreased ability to export or sell our products to, existing or potential customers with international operations. Additionally,
any new, expanded or modified sanctions, legislation or regulations, such as the sanctions imposed on Russia following its invasion of
the Ukraine, could adversely affect the operations of certain of our customers, which could in turn adversely affect their demand for
our products and services.
In addition, on March 12, 2024, the UK Export Control
Joint Unit (“ECJU”) announced updates to the UK export control regime which include new controls on semiconductor technologies,
as well as other ‘emerging’ technologies. From April 1, 2024, export of these newly controlled technologies from the UK will
now require an export license for all destinations. These updates are reflective of wider global trends towards protectionism around emerging
technologies, in particular semiconductors. As no general licenses have been published yet, we will need to seek specific licenses for
all exports made by us to any destination which will increase cost and might delay shipping schedules.
The loss of customers, the imposition of restrictions on our ability
to sell products to customers or the reduction in customer demand for our products as a result of export restrictions or other regulatory
actions could materially adversely affect our sales, business and results of operations.
We have received grants from the Israeli Innovation Authority that
require us to meet several specified conditions and may restrict our ability to manufacture some product candidates and transfer relevant
know-how outside of Israel.
We have received grants from the government of Israel through the National Authority
for Technological Innovation (formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry) (the “Israel
Innovation Authority” or “IIA”) under several research and development programs funded by the IIA (the “Approved
Programs”), in an aggregate amount of $6.3 million for the financing of our research and development expenditures in Israel. These
IIA grants are comprised of $3.3 million royalty-bearing grants which are related to certain elements of the SX-3000 chip, which currently
forms a nominal part of our activities, and $3.0 million of non-royalty-bearing grants which are related to several consortium programs
(with participation of academic institutions and the industry) for the development of related Application Specific Integrated Circuit
(“ASIC”) manufacturing technologies. We are required to pay the IIA royalties from the revenues generated from the sale
of products (and related services) or services using the IIA royalty-bearing grants we received under certain Approved Programs at rates
which are determined under the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984, and
related rules, guidelines and regulations (the “Innovation Law”), up to the aggregate amount of the total grants received
by the IIA, plus annual interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to
US Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration
of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter,
as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank
of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12
months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. In this regard, the United Kingdom’s Financial Conduct
Authority, which regulates the London Interbank Offered Rate (LIBOR), announced that it will no longer persuade or require banks to submit
rates for LIBOR after January 1, 2022.
As we received grants from the IIA, we are subject to certain restrictions
under the Innovation Law. These restrictions may impair our ability to perform or outsource manufacturing activities outside of Israel,
grant licenses for R&D purposes or otherwise transfer outside of Israel, in each case, without the approval of the IIA, the intellectual
property and other know-how resulting, directly or indirectly, in whole or in part, in accordance with or as a result of, research and
development activities made according to the Approved Programs, as well as any rights associated with such know-how (including later developments
which derive from, are based on, or constitute improvements or modifications of, such know-how) (the “IIA Funded Know-How”).
We cannot be certain that any approval of the IIA will be obtained on terms that are acceptable to us, or at all. Furthermore, in the
event that we undertake a transaction involving the transfer to a non-Israeli entity of IIA Funded Know-How pursuant to a merger or similar
transaction, or in the event we undertake a transaction involving the licensing of IIA Funded Know-How for R&D purposes to a non-Israeli
entity, the consideration available to our shareholders may be reduced by the amounts we are required to pay to the IIA. Any approval
with respect to such transactions, if given, will generally be subject to additional financial obligations, calculated according to formulas
provided under the IIA’s rules and guidelines. Failure to comply with the requirements under the Innovation Law may subject us to
financial sanctions, to mandatory repayment of grants received by us (together with interest and penalties), as well as expose us to criminal
proceedings.
The restrictions under the Innovation Law generally continue to
apply even after payment of the full amount of royalties payable pursuant to the grants. In addition, the government of the State of Israel
may from time to time audit sales of products which it claims incorporate IIA Funded Know-How and this may lead to additional royalties
being payable on additional product candidates, and may subject such products to the restrictions and obligations specified hereunder.
See “Item 4 Information on the Company — B. Business
Overview — Grants from the Israel Innovation Authority” for additional information.
The United Kingdom’s decision to exit from the EU has had,
and may continue to have, uncertain effects on our business
On December 31, 2020 the transition period following the United
Kingdom’s departure from the EU (“Brexit”) ended. On December 24, 2020, the United Kingdom and the EU agreed to a trade
and cooperation agreement (the “Trade and Cooperation Agreement”), in relation to the United Kingdom’s withdrawal from
the EU which will enter into force on the first day of the month following that in which the United Kingdom and the EU have notified each
other that they have completed their respective internal requirements and procedures for establishing their consent to be bound. The Trade
and Cooperation Agreement took full effect on February 28, 2021 and provided for, among other things, zero-rate tariffs and zero quotas
on the movement of goods between the United Kingdom and the EU.
We have significant operations in the United Kingdom and Bulgaria
and cannot predict whether or not the United Kingdom will significantly alter its current laws and regulations in respect of the satellite
communications and semiconductor industry and, if so, what impact any such alteration would have on us or our business. Moreover, we cannot
predict the impact that Brexit will have on (i) the marketing of our chips or satellite communications systems or (ii) the process to
obtain regulatory approval in the United Kingdom for our business, chips or satellite communications systems. As a result of Brexit, we
may experience adverse impacts on customer demand and profitability in the United Kingdom and other markets. Depending on the terms of
Brexit and any subsequent trade agreement, the United Kingdom could also lose access to the single EU market, or specific countries in
the EU, resulting in a negative impact on the general and economic conditions in the United Kingdom and the EU. Changes may occur in regulations
that we are required to comply with as well as amendments to treaties governing tax, duties, tariffs, etc. which could adversely impact
our operations and require us to modify our financial and supply arrangements. For example, the imposition of any import restrictions
and duties levied on our chips and satellite communications systems may make our chips and satellite communications systems more expensive
and less competitive from a pricing perspective. To avoid such impacts, we may have to restructure or relocate some of our operations
which would be costly and negatively impact our profitability and cash flow.
Additionally, political instability in the EU may result in a material
negative effect on credit markets, currency exchange rates and foreign direct investments and any subsequent trade agreement in the EU
and UK. This deterioration in economic conditions could result in increased unemployment rates, increased short- and long-term interest
rates, adverse movements in exchange rates, consumer and commercial bankruptcy filings, a decline in the strength of national and local
economies, and other results that negatively impact household incomes.
Due to, among other things, the absence of comparable precedent,
it is unclear what financial, regulatory and legal implications the withdrawal of the United Kingdom from the EU would have and how such
withdrawal would affect us, and the full extent to which our business could be adversely affected.
Risks Related to Intellectual Property, Information Technology, Data Privacy and Cybersecurity
We rely on our intellectual property and proprietary rights and
may be unable to adequately obtain, maintain, enforce, defend or protect our intellectual property and proprietary rights, including against
unauthorized use by third parties.
We rely on a combination of patent, trademark, copyright and trade
secret laws, as well as contractual rights and confidentiality procedures to protect our intellectual property and proprietary rights.
We seek to maintain the confidentiality of our trade secrets and confidential information through nondisclosure policies, the use of appropriate
confidentiality agreements and other security measures.
We have registered a number of patents worldwide and have a number
of patent applications pending determination, including provisional patent applications for which we are considering whether to file a
non-provisional patent application. We cannot be certain that patents will be issued from any of our pending patent applications or that
patents will be issued in all countries where our systems may be sold. Further, we cannot be certain that any claims allowed from pending
applications will be of sufficient scope or strength to provide meaningful protection against our competitors in any particular jurisdiction.
Our competitors may also be able to design around our patents. Additionally, we have not applied for patents with respect to certain of
our products, and cannot ensure that any patent applications for such products will be made by us or that, if they are made, they will
be granted. There can be no assurance our intellectual property rights will be sufficient to protect against others offering products
or services that are substantially similar to our systems and compete with our business or that unauthorized parties may attempt to copy
aspects of our systems and use information that we consider proprietary. In addition, our patents and other intellectual property rights
can be challenged, narrowed or rendered invalid or unenforceable, including through interference proceedings, reexamination proceedings,
post-grant review, inter partes review and derivation proceedings before the United States Patent
and Trademark Office and similar proceedings in foreign jurisdictions, such as oppositions before the European Patent Office. Any of the
foregoing could potentially result in the loss of some of our competitive advantage and a decrease in revenue which would adversely affect
our business, prospects, financial condition and operating results.
Additionally, we have not registered the right to use the SatixFy
trademark, and cannot ensure that any such trademark registrations for the SatixFy name will be made by us or that, if they are made,
they will be granted. Unregistered, or common law, trademarks may be more difficult to enforce than registered trademarks in the United
States because they are not entitled to, among other things, a presumption of ownership and exclusive rights on a nationwide basis, and
certain statutory remedies (including the right to record the trademarks with the U.S. Customs and Border Patrol to block importation
of infringing goods from overseas). Moreover, there are jurisdictions that do not recognize unregistered trademark rights, and third parties
in these jurisdictions may register trademarks similar or identical to our own and sue us to preclude our use of the SatixFy name. The
rights of a common law trademark are also limited to the geographic area in which the trademark is actually used. Even where we have effectively
secured statutory protection for our use of the SatixFy name, our competitors and other third parties may infringe, misappropriate or
otherwise violate our intellectual property, and in the course of litigation, such competitors and other third parties may attempt to
challenge the breadth of our ability to prevent others from using similar trademarks. If such challenges were to be successful, less ability
to prevent others from using similar trademarks may ultimately result in a reduced distinctiveness of our brand.
We may, over time, strategically increase our intellectual property
investment through additional patent, trademark, copyright and other intellectual property filings, which could be expensive and time-
consuming and are not guaranteed to result in the issuance of registrations. Even if we are successful in obtaining a particular patent,
trademark or copyright registration, it is expensive to enforce our rights, including through maintenance costs, monitoring, sending demand
letters, initiating administrative proceedings and filing lawsuits. In addition to registering material and eligible intellectual property,
we rely to a degree on contractual restrictions to prevent others from exploiting our intellectual property rights. However, the enforceability
of these provisions is subject to various state and federal laws, and is therefore uncertain.
Our reliance on unpatented proprietary information, such as trade
secrets and confidential information, depends in part on agreements we have in place with employees, independent contractors and other
third parties that allocate ownership of intellectual property and place restrictions on the use and disclosure of this intellectual property
and confidential information. These agreements may be insufficient or may be breached, in either case potentially resulting in the unauthorized
use or disclosure of our trade secrets and other intellectual property and confidential information, including to our competitors, which
could cause us to lose any competitive advantage resulting from this intellectual property, and we cannot be certain that we will have
adequate remedies for any breach. We cannot guarantee that we have entered into such agreements with each party that may have or have
had access to our trade secrets or other intellectual property or confidential information or otherwise developed intellectual property
for us. Individuals and entities not subject to invention assignment agreements may make adverse ownership claims to our current and future
intellectual property. Additionally, to the extent that our employees, independent contractors, or other third parties with whom we do
business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how
and inventions.
In addition, the laws of some countries in which our systems are
developed, manufactured or sold may not adequately protect our systems or intellectual property or proprietary rights. Furthermore, recent
changes to U.S. intellectual property laws may jeopardize the enforceability and validity of our intellectual property portfolio. This
increases the possibility of infringement, misappropriation or other violations of our intellectual property and proprietary rights in
our technology and systems. Although we intend to vigorously defend our intellectual property and proprietary rights, we may not be able
to prevent the infringement, misappropriation or other violation of our intellectual property and proprietary rights in our technology
and systems. We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect
unauthorized use of our intellectual property rights. Any of our intellectual property rights may be challenged, which could result in
them being narrowed in scope or declared invalid or unenforceable. Additionally, our competitors may be able to independently develop
non-infringing technologies that are substantially equivalent or superior to ours.
We have in the past, and may in the future, engage in legal action
to enforce, defend or protect our intellectual property and proprietary rights. Our efforts to enforce our intellectual property rights
in this manner may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual
property rights. Generally, intellectual property litigation is both expensive, time- consuming and unpredictable. Our involvement in
intellectual property litigation could divert the attention of our management and technical personnel, expose us to significant liability
and have a material, adverse effect on our business.
We may be subject to claims of infringement, misappropriation or
other violations of third-party intellectual property or proprietary rights.
The industries in which we compete are characterized by rapidly
changing technologies, a large number of patents, and claims and related litigation regarding patent and other intellectual property rights.
Third parties have in the past, and may in the future, assert claims that our systems infringed, misappropriated or otherwise violated
their patent or other intellectual property or proprietary rights. This risk has been amplified by the increase in “non-practicing
entities” or patent holding companies that seek to monetize patents they have purchased or otherwise obtained and whose sole or
primary business is to assert such claims. Such assertions could lead to expensive, time-consuming and unpredictable litigation, diverting
the attention of management and technical personnel. Even if we believe that intellectual property related-claims are without merit, litigation
may be necessary to determine the scope and validity of intellectual property or proprietary rights of others or to protect or enforce
our intellectual property rights. An unsuccessful result in any such litigation could have adverse effects on our business, which may
include substantial damages, exclusion orders, royalty payments to third parties, injunctions requiring us to, among other things, stop
using our intellectual property or rebrand or redesign our systems, stop providing our systems, and indemnification obligations that we
have with certain parties with whom we have commercial relationships. Moreover, we could be found liable for significant monetary damages,
including treble damages and attorneys’ fees, if we are found to have willfully infringed a third party’s patent. In addition,
if one of our customers or another supplier to one of our customers are alleged or found to be infringing, misappropriating or otherwise
violating any third-party intellectual property or proprietary rights, such finding could expose us to legal claims and otherwise adversely
affect the demand for our systems.
We rely on the availability of third-party licenses of intellectual
property, and if we fail to comply with our obligations under such agreements or are unable to extend our existing third- party licenses
or enter into new third-party licenses on reasonable terms or at all, it could have a material adverse effect on our business, operating
results and financial condition.
Many of our systems are designed to include software or other intellectual
property licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various elements of the
technology used to develop these systems or our future systems. While we believe, based upon past experience and standard industry practice,
that such licenses generally could be obtained on commercially reasonable terms, we cannot assure that our existing or future third-party
licenses will be available to us on commercially reasonable terms, if at all. The licensing or acquisition of third-party intellectual
property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party
intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage
over us due to their size, capital resources and greater development or commercialization capabilities. In addition, companies that perceive
us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, in return for the use of
a third party’s intellectual property, we may agree to pay the licensor royalties based on sales of our systems. Royalties are a
component of cost of systems and affect the margins on our systems.
Further, if we fail to comply with any of our obligations under
such agreements, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor
would cause us to lose valuable rights, and could prevent us from selling our systems or inhibit our ability to commercialize future systems.
Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if
the licensors fail to enforce licensed intellectual property rights against infringing third parties, if the licensed software or other
intellectual property rights are found to be infringing third-party rights, or if we are unable to enter into necessary licenses on acceptable
terms. In addition, our rights to certain technologies are licensed to us on a non-exclusive basis. The owners of these non-exclusively
licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to
those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property
that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise
violating the licensor’s rights. In addition, the agreements under which we license intellectual property from third parties are
generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract
interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property,
or increase what we believe to be our financial or other obligations under the relevant agreement. Additionally, third parties from whom
we currently license intellectual property rights and technology could refuse to renew our agreements upon their expiration or could impose
additional terms and fees that we otherwise would not deem acceptable requiring us to obtain the intellectual property from another third-party,
if any is available, or to pay increased licensing fees or be subject to additional restrictions on our use of such third-party intellectual
property. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing our
systems. Our inability to maintain or obtain any third party license required to sell or develop our systems and product enhancements,
or the need to engage in litigation regarding our third-party licenses, could have a material adverse effect on our business, operating
results and financial condition.
We use open source software in our systems, which could negatively
affect our ability to offer our systems and subject us to litigation and other actions.
We rely on some open source in the development of our chips for
the purpose of activating and operating the chips, and may continue to rely on similar licenses. Third parties may assert a copyright
claim against us regarding our use of such software or libraries, including asserting its ownership of, or demanding release of, the open
source software or derivative works that we have developed using such software, which could include our proprietary source code, or otherwise
seeking to enforce the terms of the applicable open source license. We may also be forced to purchase a costly license or cease offering
the implicated systems unless and until we can re-engineer them to avoid infringement, which may be a costly and time-consuming process,
and we may not be able to complete the re-engineering process successfully. Like any other intellectual property claim or litigation,
such claims could lead to the adverse results listed above. However, the terms of many open source licenses have not been interpreted
by the courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions
on our ability to commercialize our systems. In addition, some open source software licenses require those who distribute open source
software as part of their own software product to publicly disclose all or part of the source code to such software product or to make
available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. As a result,
use of such software or libraries by us may also force us to provide third parties, at no cost, the source code to our systems. Additionally,
the use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors
generally do not provide warranties or controls on the origin of software. There is typically no support available for open source software,
and we cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not
abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties
or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. While
we monitor our use of open source software and do not believe that our use of such software would require us to disclose our proprietary
source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed
to have occurred, in part because open source license terms are often ambiguous. Any of these risks could be difficult to eliminate or
manage and may decrease revenue and lessen any competitive advantage we have due to the secrecy of its source code.
We may be obligated to disclose our proprietary source code to certain
of our customers, which may limit our ability to protect our intellectual property and proprietary rights.
In limited circumstances, our customer agreements may contain provisions
permitting the customer to become a party to, or a beneficiary of, a source code escrow agreement under which we place the proprietary
source code for certain of our systems in escrow with a third party. Under these source code escrow agreements, our source code may be
released to the customer upon the occurrence of specified events, such as in situations of our bankruptcy or insolvency. Disclosing the
content of our source code may limit the intellectual property protection we can obtain or maintain for our source code or our systems
containing that source code and may facilitate intellectual property infringement, misappropriation or other violation claims against
us. Following any such release, we cannot be certain that customers will comply with the restrictions on their use of the source code
and we may be unable to monitor and prevent unauthorized disclosure of such source code by customers. Any increase in the number of people
familiar with our source code as a result of any such release also may increase the risk of a successful hacking attempt. Any of these
circumstances could result in a material adverse effect on our business, financial condition and results of operations.
Defects, errors or other performance problems in our software or
hardware, or the third-party software or hardware on which we rely, could harm our reputation, result in significant costs to us, impair
our ability to sell our systems and subject us to substantial liability.
Our software and hardware, and those of third parties on which
we rely, is complex and may contain defects or errors when implemented or when new functionality is released, as we may modify, enhance,
upgrade and implement new systems, procedures and controls to reflect changes in our business, technological advancements and changing
industry trends. Despite our testing, from time to time we have discovered and may in the future discover defects or errors in our software
and hardware. Any performance problems or defects in our software or hardware, or those of third parties on which we rely, could materially
and adversely affect our business, financial condition and results of operations. Defects, errors or other similar performance problems
or disruptions, whether in connection with day-to-day operations or otherwise, could be costly for us, damage our customers’ businesses,
harm our reputation and result in reduced sales or a loss of, or delay in, the market acceptance of our systems. In addition, if we have
any such errors, defects or other performance problems, our clients could seek to terminate their contracts, delay or withhold payment
or make claims against us. Any of these actions could result in liability, lost business, increased insurance costs, difficulty in collecting
accounts receivable, costly litigation or adverse publicity, which could materially and adversely affect our business, financial condition
and results of operations.
Cybersecurity breaches, attacks and other similar incidents, as
well as other disruptions, could compromise our confidential and proprietary information, including personal information, and expose us
to liability and regulatory fines, increase our expenses, or result in legal or regulatory proceedings, which would cause our business
and reputation to suffer.
We rely on trade secrets, technical know-how and other unpatented
confidential and proprietary information relating to our product development and production activities to provide us with competitive
advantages. We also collect, maintain and otherwise process certain sensitive and other personal information regarding our employees,
as well as contact information of our customers and service providers, in the ordinary course of business. One of the ways we protect
this information is by entering into confidentiality agreements with our employees, consultants, customers, suppliers, strategic partners
and other third parties with which we do business. We also design our computer networks and implement various procedures to restrict unauthorized
access to dissemination of our confidential and proprietary information.
We, and our service providers which may have access to any such
information, face various internal and external cybersecurity threats and risks. For example, current, departing or former employees or
other individuals or third parties with which we do business could attempt to improperly use or access our computer systems and networks,
or those of our service providers, to copy, obtain or misappropriate our confidential or proprietary information, including personal information,
or otherwise interrupt our business. Additionally, like others, we and our service providers are subject to significant system or network
or computer system disruptions from numerous causes, including cybersecurity breaches, attacks or other similar incidents, facility access
issues, new system implementations, human error, fraud, energy blackouts, theft, fire, power loss, telecommunications failure or a similar
catastrophic event. Moreover, computer viruses, worms, malware, ransomware, phishing, spoofing, malicious or destructive code, social
engineering, denial- of-service attacks, and other cyber-attacks have become more prevalent and sophisticated in recent years. Attacks
of this nature may be conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise, including
organized criminal groups, “hacktivists,” terrorists, nation states, nation state-supported actors, and others. We have been
subject to attempted cyberattacks in the past, including attempted phishing attacks, and may continue to be subject to such attacks in
the future. While we defend against these threats and risks on a daily basis, we do not believe that any such incidents to date have caused
us any material damage. Because the techniques used by computer hackers and others to access or sabotage networks and computer systems
constantly evolve and generally are not recognized until launched against a target, we and our service providers may be unable to anticipate,
detect, react to, counter or ameliorate all of these techniques or remediate any incident as a result therefrom. Further, the COVID-19
pandemic increased cybersecurity risk due to increased online and remote activity. As a result, our and our customers’ and employees’
confidential and proprietary information, including personal information, may be subject to unauthorized release, accessing, gathering,
monitoring, loss, destruction, modification, acquisition, transfer, use or other processing, and the impact of any future incident cannot
be predicted. While we generally perform cybersecurity diligence on our key service providers, because we do not control our service providers
and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to
protect any information we share with them. Due to applicable laws and regulations or contractual obligations, we may be held responsible
for cybersecurity breaches, attacks or other similar incidents attributed to our service providers as they relate to the information we
share with them.
We routinely implement improvements to our network security safeguards
and we are devoting increasing resources designed to protect the security of our information technology systems. We cannot, however, assure
that such safeguards or system improvements will be sufficient to prevent or limit a cybersecurity breach, attack or other similar incident
or network or computer system disruption, or the damage resulting therefrom. We may be required to expend significant additional resources
to continue to modify or enhance our protective measures or to investigate or remediate any cybersecurity vulnerabilities, breaches, attacks
or other similar incidents. Any cybersecurity incident, attack or other similar incident, or our failure to make adequate or timely disclosures
to the public, regulators, or law enforcement agencies following any such event, could harm our competitive position, result in violations
of applicable data privacy or cybersecurity laws or regulations, result in a loss of customer confidence in the adequacy of our threat
mitigation and detection processes and procedures, cause us to incur significant costs to remedy the damages caused by the incident or
defend legal claims, subject us to additional regulatory scrutiny, expose us to civil litigation, fines, damages or injunctions, cause
disruption to our business activities, divert management attention and other resources or otherwise adversely affect our internal operations
and reputation or degrade our financial results.
The costs related to cybersecurity breaches, attacks or other similar
incidents or network or computer system disruptions typically would not be fully insured or indemnified by others. We cannot ensure that
any limitations of liability provisions in our agreements with customers, service providers and other third parties with which we do business
would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim in
connection with a cybersecurity breach, attack or other similar incident. We do not currently maintain cybersecurity insurance, and therefore
the successful assertion of one or more large claims against us in connection with a cybersecurity breach, attack or other similar incident
could adversely affect our business and financial condition.
We are subject to complex and evolving laws, regulations, rules,
standards and contractual obligations regarding data privacy and cybersecurity, which can increase the cost of doing business, compliance
risks and potential liability.
In the ordinary course of our business, we collect, use, transfer,
store, maintain and otherwise process certain sensitive and other personal information regarding our employees, and contact information
of our customers and service providers, that is subject to complex and evolving laws, regulations, rules, standards and contractual obligations
regarding data privacy and cybersecurity. Ensuring that our collection, use, transfer, storage, maintenance and other processing of personal
information complies with applicable laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity
in relevant jurisdictions can increase operating costs, impact the development of new systems, and reduce operational efficiency. Global
legislation, enforcement, and policy activity in this area is rapidly expanding and creating a complex regulatory compliance environment.
Any actual or perceived mishandling or misuse of the personal information by us or a third party with which we are affiliated, including
payrolls providers and other service providers that have access to sensitive and other personal information, could result in litigation,
regulatory fines, penalties or other sanctions, damage to our reputation, disruption of our business activities, and significantly increased
business and cybersecurity costs or costs related to defending legal claims.
Internationally, many jurisdictions have established data privacy
and cybersecurity legal frameworks with which we may need to comply. For example, the EU has adopted the General Data Protection Regulation
(“GDPR”), which requires covered businesses to comply with rules regarding the processing of personal data, including its
use, protection and the ability of persons whose personal data is processed to access, to correct or delete personal data about themselves.
Failure to meet GDPR requirements could result in penalties of up to 4% of annual worldwide turnover or EUR 20 million (UK£17.5 million)
(whichever is the greater). Additionally, the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the
GDPR as implemented into U.K. law) went into effect following Brexit. While the GDPR and the U.K. GDPR are substantially the same, going
forward there is increasing risk for divergence in application, interpretation and enforcement of the data privacy and cybersecurity laws
and regulations as between the EU and the United Kingdom, which may result in greater operational burdens, costs and compliance risks.
Additionally, the GDPR and the U.K. GDPR include certain limitations and stringent obligations with respect to the transfer of personal
data from the EU and the United Kingdom to third countries (including the United States), and the mechanisms to comply with such obligations
are also in considerable flux and may lead to greater operational burdens, costs and compliance risks.
At the federal level, we are subject to the rules and regulations
promulgated under the authority of the Federal Trade Commission, which regulates unfair or deceptive acts or practices, including with
respect to data privacy and cybersecurity. Moreover, the United States Congress has recently considered, and is currently considering,
various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed. Data privacy
and cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to various state
laws and regulations regarding data privacy and cybersecurity. For example, the California Consumer Protection Act of 2018, as amended
by the California Privacy Rights Act (collectively, the “CCPA”), applies to for-profit businesses that conduct business in
California and meet certain revenue or data collection thresholds. The CCPA gives California residents certain rights with respect to
personal information collected about them. Other states where we do business, or may in the future do business, or from which we otherwise
collect, or may in the future otherwise collect, personal information of residents have enacted or are considering enacting similar laws,
with at least four such laws (in Virginia, Colorado, Connecticut and Utah) having taken effect or scheduled to take effect in 2024. In
addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to consumers whose personal
information has been disclosed as a result of a data breach. Certain state laws and regulations may be more stringent, broader in scope,
or offer greater individual rights, with respect to personal information than international, federal or other state laws and regulations,
and such laws and regulations may differ from each other, which may complicate compliance efforts and increase compliance costs. The interpretation
and application of international, federal and state laws and regulations relating to data privacy and cybersecurity are often uncertain
and fluid, and may be interpreted and applied in a manner that is inconsistent with our data practices.
Further, while we strive to publish and prominently display privacy
policies that are accurate, comprehensive, and compliant with applicable laws, regulations, rules and industry standards, we cannot ensure
that our privacy policies and other statements regarding our practices will be sufficient to protect us from claims, proceedings, liability
or adverse publicity relating to data privacy or cybersecurity. Although we endeavor to comply with our privacy policies, we may at times
fail to do so or be alleged to have failed to do so. The publication of our privacy policies and other documentation that provide promises
and assurances about privacy and cybersecurity can subject us to potential federal or state action if they are found to be deceptive,
unfair, or misrepresentative of our actual practices.
Any failure or perceived or inadvertent failure by us to comply
with our privacy policies, or existing or new laws, regulations, rules, standards or contractual obligations, or any compromise of security
that results in unauthorized access to, or unauthorized loss, destruction, use, modification, acquisition, disclosure, release or transfer
of personal information, may result in substantial costs, time and other resources, orders to stop or modify the alleged non-compliant
activity, proceedings or actions against us by governmental entities or others, legal liability, audits, regulatory inquiries, governmental
investigations, enforcement actions, claims, fines, judgments, awards, penalties, sanctions and costly litigation (including class actions).
Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business,
adversely affect the demand for our systems, and ultimately result in the imposition of liability, any of which could have a material
adverse effect on our business, financial condition and results of operations.
Risks Related to Tax and Accounting
Changes in our effective tax rate may adversely impact our results
of operations.
We are subject to taxation in Israel, the United Kingdom, the U.S.
and Bulgaria. Our effective tax rate is subject to fluctuations, as it is impacted by a number of factors, including the following:
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changes in our overall profitability and the amount of profit determined to be earned and taxed in jurisdictions with differing statutory
tax rates; |
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the resolution of issues arising from tax audits with various tax authorities; |
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the impact of transfer pricing policies; |
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changes in the valuation of either our gross deferred tax assets or gross deferred tax liabilities; |
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changes in expenses not deductible for tax purposes; |
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changes in available tax credits; and |
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changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles. |
Any significant increase in our future effective tax rates could
reduce net income for future periods.
Exchange rate fluctuations between the U.S. dollar, the British
pound, the Euro and other foreign currencies may negatively affect our future revenues.
Our results of operations are affected by movements in currency
exchange rates. The functional currency for our operations is the U.S. dollar. Our revenue has in recent periods been primarily denominated
in Euro and British pound. Our operating expenses and certain working capital items are denominated in local currencies (in addition to
the U.S. dollar) and therefore are affected by changes in the U.S. dollar exchange rate. Due to the constantly changing currency exposures
to which we are subject and the volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon
future operating results. See “— The United Kingdom’s decision to exit from the European
Union (the “EU”) has had, and may continue to have, uncertain effects on our business.” In addition, our exposure
to various currencies may increase or decrease over time as the volume of our business fluctuates in the countries where we have operations,
and these changes could have a material impact on our financial results.
Changes to tax laws or regulations in Israel, the United Kingdom,
the EU and other jurisdictions expose us to tax uncertainties and could adversely affect our results of operations or financial condition.
As a multinational business, operating in multiple jurisdiction
such as Israel, the United Kingdom and the EU, we may be subject to taxation in several jurisdictions around the world with increasingly
complex tax laws, the application of which can be uncertain. Changes to tax laws or regulations in the jurisdictions in which we operate,
or in the interpretation of such laws or regulations, could, significantly increase our effective tax rate and reduce our cash flow from
operating activities, and otherwise have a material adverse effect on our financial condition. Since a significant portion of our operations
are located in Israel and the United Kingdom, changes in tax laws or regulations in Israel or the United Kingdom could significantly affect
our operating results. Further changes in the tax laws of foreign jurisdictions could arise, in particular, as a result of different initiatives
undertaken by the Organization for Economic Co-operation and Development (the “OECD”). Any changes in the OECD policy or recommendations,
if adopted, could increase tax uncertainty and may adversely affect our provision for income taxes and increase our tax liabilities. In
addition, other factors or events, including business combinations and investment transactions, changes in the valuation of our deferred
tax assets and liabilities, adjustments to taxes upon finalization of various tax returns or as a result of deficiencies asserted by taxing
authorities, increases in expenses not deductible for tax purposes, changes in available tax credits, changes in transfer pricing methodologies,
other changes in the apportionment of our income and other activities among tax jurisdictions, and changes in tax rates, could also increase
our effective tax rate.
We are subject to regular review and audit by Israeli, the United
Kingdom and other foreign tax authorities. Although we believe our tax estimates are reasonable, the authorities in these jurisdictions
could review our tax returns and impose additional taxes, interest, linkage and penalties, and the authorities could claim that various
withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries,
any of which could materially affect our income tax provision, net income, or cash flows in the period or periods for which such determination
and settlement is made. We may also be liable for taxes in connection with businesses we acquire. Our determinations are not binding on
any taxing authorities, and accordingly the final determination in an audit or other proceeding may be materially different than the treatment
reflected in our tax provisions, accruals and returns. An assessment of additional taxes because of an audit could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
Transfer pricing rules may adversely affect our corporate income
tax expense.
Many of the jurisdictions in which we conduct business have detailed
transfer pricing rules, which require contemporaneous documentation establishing that all transactions with non- resident related parties
be priced using arm’s length pricing principles. The tax authorities in these jurisdictions could challenge our related party transfer
pricing policies and as a consequence the tax treatment of corresponding expenses and income. International transfer pricing is an area
of taxation that depends heavily on the underlying facts and circumstances and generally involves a significant degree of judgment. If
any of these tax authorities are successful in challenging our transfer pricing policies, we may be liable for additional corporate income
tax, and penalties and interest related thereto, which may have a significant impact on our results of operations and financial condition.
If we or any of our subsidiaries are characterized as a PFIC for
U.S. federal income tax purposes, U.S. investors may suffer adverse tax consequences.
A non-U.S. corporation generally will be treated as a PFIC for
U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or
(2) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is
attributable to assets that produce or are held for the production of passive income (including cash). For purposes of the above calculations,
a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it
held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the
other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains. Goodwill is an active asset
under the PFIC rules to the extent attributable to activities that produce active income.
Based on the current and anticipated composition of our and our
subsidiaries’ income, assets and operations, including goodwill, which is based on the trading prices of our Satixfy Ordinary Shares
during 2023, we believe that we were not a PFIC for the taxable year of 2023. However, whether we or any of our subsidiaries are a PFIC
for any taxable year is a factual determination that depends on, among other things, the composition of our and our subsidiaries’
income and assets. Changes in the composition of our and our subsidiaries’ income or assets may cause us to be or become a PFIC
for the current or subsequent taxable years. In addition, because the value of our goodwill may be determined based on our market capitalization,
the decline in our market capitalization (or a further such decline) could cause us to be treated as a PFIC for 2023, the current taxable
year or a future taxable year. Even if the value of our goodwill is respected for 2023, we may be a PFIC for the current taxable year
or future taxable years if our market capitalization does not increase significantly and we continue to hold substantial amounts of cash
and financial investments. Therefore, there is a risk that we may be a PFIC due to our declined market capitalization. The application
of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that the Internal Revenue Services (the “IRS”)
will not take a contrary position or that a court will not sustain such a challenge by the IRS.
If we are a PFIC for any taxable year, a U.S. investor who owns
our ordinary shares may be subject to adverse tax consequences and may incur certain information reporting obligations. For a further
discussion, see “Item 10 Additional information — E. Taxation — U.S. Federal Income
Tax Considerations — Ownership and Disposition of SatixFy Ordinary Shares and SatixFy Warrants by U.S. Holders — Passive Foreign
Investment Company Rules.” U.S. investors who own our ordinary shares and/or warrants are strongly encouraged to consult
their own advisors regarding the potential application of these rules to us and the ownership of our ordinary shares and/or warrants.
If a U.S. investor is treated for U.S. federal income tax purposes
as owning at least 10% of the SatixFy Ordinary Shares, such U.S. investor may be subject to adverse U.S. federal income tax consequences.
For U.S. federal income tax purposes, if a U.S. investor who is
a U.S. person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary
shares, such U.S. investor may be treated as a “United States shareholder” with respect to us, or any of our non-U.S. subsidiaries.
A non-U.S. corporation is considered a controlled foreign corporation if more than 50% of (1) the total combined voting power of all classes
of stock of such corporation entitled to vote, or (2) the total value of the stock of such corporation is owned, or is considered as owned
by applying certain constructive ownership rules, by United States shareholders on any day during the taxable year of such non-U.S. corporation.
If we have one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as a controlled foreign corporation regardless
of whether we are treated as a controlled foreign corporation (although there are recently promulgated final and currently proposed Treasury
regulations that may limit the application of these rules in certain circumstances).
Certain United States shareholders of a controlled foreign corporation
may be required to report annually and include in their U.S. federal taxable income their pro rata share of the controlled foreign corporation’s
“Subpart F income” and, in computing their “global intangible low-taxed income,” “tested income” and
a pro rata share of the amount of certain U.S. property (including certain stock in U.S. corporations and certain tangible assets located
in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions.
The amount includable by a United States shareholder under these rules is based on a number of factors, including potentially, but not
limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis in the controlled foreign corporation’s
assets, and foreign taxes paid by the controlled foreign corporation on its underlying income. Failure to comply with these reporting
obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may
extend the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for
which reporting (or payment of tax) was due. We cannot provide any assurances that we will assist U.S. investors in determining whether
we or any of our non-U.S. subsidiaries are treated as a controlled foreign corporation for U.S. federal income tax purposes or whether
any U.S. investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to
any holder information that may be necessary to comply with reporting and tax paying obligations if we, or any of our non-U.S. subsidiaries,
is treated as a controlled foreign corporation for U.S. federal income tax purposes. U.S. investors who hold 10% or more of the combined
voting power or value of our ordinary shares are strongly encouraged to consult their own advisors regarding the U.S. tax consequences
of owning or disposing of our ordinary shares.
Risks Related to Being a Public Company
The listing of our securities on the NYSE did not benefit from the
process customarily undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand,
inefficiencies in pricing and a more volatile public price for our securities.
Unlike an underwritten initial public offering of our securities,
the initial listing of our securities as a result of the Business Combination did not benefit from the following:
| • |
the book-building process undertaken by underwriters that helps to inform efficient price discovery with respect to opening trades
of newly listed securities; |
| • |
underwriter support to help stabilize, maintain or affect the public price of the new issue immediately after listing; and
|
| • |
underwriter due diligence review of the offering and potential liability for material misstatements or omissions of fact in a prospectus
used in connection with the securities being offered or for statements made by its securities analysts or other personnel. |
The lack of such a process in connection with the listing of our
securities could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for our securities during
the period immediately following the listing than in connection with an underwritten initial public offering.
Failure to comply with requirements to design, implement
and maintain effective internal control over financial reporting could have a material adverse effect on our business and share price.
As a public company, we have significant requirements for enhanced
financial reporting and internal controls. The process of designing, implementing, testing and maintaining effective internal controls
is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments.
In this regard, we dedicate internal resources, engage outside consultants, document the adequacy of internal control over financial reporting,
continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented,
and implement a continuous reporting and improvement process for internal control over financial reporting.
If we are unable to maintain appropriate internal financial reporting
controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements
in our consolidated financial statements and adversely affect our operating results. In addition, we are required, pursuant to Section
404, to furnish a report by our management on, among other things, the effectiveness of our internal controls. This assessment includes
disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing
the standards to assess our internal control over financial reporting are complex and require significant documentation and testing. Testing
and maintaining internal controls may divert our management’s attention from other matters that are important to our business. In
addition, once we are no longer an emerging growth company, we will be required to include in the annual reports that we file with the
SEC an attestation report on our internal control over financial reporting issued by our independent registered public accounting firm,
pursuant to Section 404 of the Sarbanes-Oxley Act.
Furthermore, we may, during the course of our testing of our internal
controls over financial reporting, or during the subsequent testing by our independent registered public accounting firm, identify deficiencies
which would have to be remediated to satisfy the SEC rules for certification of our internal controls over financial reporting. As a consequence,
we may have to disclose in periodic reports we file with the SEC significant deficiencies or material weaknesses in our system of internal
controls. The existence of a material weakness would preclude management from concluding that our internal controls over financial reporting
are effective, and would preclude our independent auditors from issuing an unqualified opinion that our internal controls over financial
reporting are effective. In addition, disclosures of this type in our SEC reports could cause investors to lose confidence in the accuracy
and completeness of our financial reporting and may negatively affect the trading price of our ordinary shares and our warrants, and we
could be subject to sanctions or investigations by regulatory authorities. Moreover, effective internal controls are necessary to produce
reliable financial reports and to prevent fraud. If we have deficiencies in our disclosure controls and procedures or internal controls
over financial reporting, it could negatively impact our business, results of operations and reputation.
An active trading market for our equity securities may not develop
or may not be sustained to provide adequate liquidity.
An active trading market may not be sustained for our ordinary
shares. Further, in November 2023, we announced that the NYSE determined to commence proceedings to delist our warrants due to their low
trading price levels pursuant to Section 1001 of the NYSE American Company Guide. The warrants that previously traded on the NYSE American
under the symbol “SATX.WSA” may be quoted and traded in the over-the-counter market. However, holders of warrants could face
significant material adverse consequences, including:
| • |
a limited availability of market quotations for the warrants; |
| • |
reduced liquidity for the warrants; |
| • |
a determination that our warrants are a “penny stock” which will require brokers trading in our warrants to adhere to
more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Warrants; and
|
| • |
the risk that market makers that initially make a market in our unexchanged warrants eventually cease to do so. |
The lack of an active market may impair your ability to sell your
shares or warrants at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our
ability to raise capital by selling ordinary shares and may impair our ability to acquire other companies by using our shares as consideration.
Our quarterly results of operations may fluctuate. As a result,
we may fail to meet or exceed the expectations of investors or securities analysts, which could cause our share price to decline.
We operate in a highly dynamic industry and our future operating
results could be subject to significant fluctuations, particularly on a quarterly basis. Our quarterly revenues and operating results
have fluctuated significantly in the past and may continue to vary from quarter to quarter due to a number of factors, many of which are
not within our control. As a result, accurately forecasting our operating results in any fiscal quarter is difficult. If our operating
results do not meet the expectations of securities analysts and investors, our share price may decline.
Additional factors that can contribute to fluctuations in our operating
results include:
| • |
the rescheduling, increase, reduction or cancellation of significant customer orders; |
| • |
the timing of customer qualification of our products and commencement of volume sales by our customers of systems that include our
products; |
| • |
the timing and amount of research and development and sales and marketing expenditures; |
| • |
the rate at which our present and future customers and end users adopt our technologies in our target end markets; |
| • |
the timing and success of the introduction of new products and technologies by us and our competitors, and the acceptance of our
new products by our customers; |
| • |
our ability to anticipate changing customer product requirements; |
| • |
our gain or loss of one or more key customers; |
| • |
the availability, cost and quality of materials and components that we purchase from third-party vendors and any problems or delays
in the manufacturing, testing or delivery of our products; |
| • |
the availability of production capacity at our third-party facilities or other third-party subcontractors and other interruptions
in the supply chain, including as a result of materials shortages, bankruptcies or other causes; |
| • |
supply constraints for and changes in the cost of the other components incorporated into our customers’ products; |
| • |
our ability to reduce the manufacturing costs of our products; |
| • |
fluctuations in manufacturing yields; |
| • |
the changes in our product mix or customer mix; |
| • |
the timing of expenses related to the acquisition of technologies or businesses; |
| • |
product rates of return or price concessions in excess of those expected or forecasted; |
| • |
the emergence of new industry standards; |
| • |
product obsolescence; |
| • |
unexpected inventory write-downs or write-offs; |
| • |
costs associated with litigation over intellectual property rights and other litigation; |
| • |
the length and unpredictability of the purchasing and budgeting cycles of our customers; |
| • |
loss of key personnel or the inability to attract qualified engineers; |
| • |
the quality of our products and any remediation costs; |
| • |
adverse changes in economic conditions in the various markets where we or our customers have operations; |
| • |
the general industry conditions and seasonal patterns in our target end markets, particularly the satellite communications market;
|
| • |
other conditions affecting the timing of customer orders or our ability to fill orders of customers subject to export control or
economic sanctions; and |
| • |
geopolitical events, such as war, threat of war or terrorist actions, including the current wars between Russia-Ukraine and Israel-Hamas,
or the occurrence of pandemics, epidemics or other outbreaks of disease, including the COVID-19 pandemic, or natural disasters, and the
impact of these events on the factors set forth above. |
We may experience a delay in generating or recognizing revenues
for a number of reasons. For example, our customer agreements typically provide that the customer may delay scheduled delivery dates and
cancel orders within specified timeframes without significant penalty. In addition, we maintain an infrastructure of facilities and human
resources in several locations around the world and have a limited ability to reduce the expenses required to maintain such infrastructure.
Accordingly, we believe that period-to-period comparisons of our results of operations should not solely be relied upon as indications
of future performance. Any shortfall in revenues or net income from a previous quarter or from levels expected by the investment community
could cause a decline in the trading price of our shares.
Risks Related to SatixFy’s Incorporation and Location in Israel
Our headquarters and other significant operations are located in
Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel, including the
recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them.
We are incorporated under the laws of the State of Israel, and
our principal offices are located in Israel. Accordingly, political, economic and geo-political instability in Israel may affect our business.
Any armed conflicts, political instability, terrorism, cyberattacks or any other hostilities involving Israel or the interruption or curtailment
of trade between Israel and its present trading partners could affect adversely our operations. Ongoing and revived hostilities in the
Middle East or other Israeli political or economic factors, could harm our operations and solution development and cause any future sales
to decrease.
Accordingly, political, economic and military and security conditions
in Israel and the surrounding region may directly affect our business. Any conflicts, political instability, terrorism, cyberattacks or
any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could
adversely affect our operations. Ongoing and revived hostilities in the Middle East or other Israeli political or economic factors, could
harm our operations.
On October 7, 2023, Hamas terrorists infiltrated Israel’s
southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive
rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas
within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the
attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced
in parallel to their continued rocket and terror attacks.
The intensity and duration of Israel’s current war is difficult
to predict, as are such war’s implications on our business and operations. While none/some of our supply chains have been impacted
since the war broke out on October 7, 2023, the ongoing war may create supply and demand irregularities in Israel’s economy in general
or lead to macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect
on us and our ability to effectively conduct our operations. Moreover, we cannot predict how this war will ultimately affect Israel’s
economy in general, which may involve a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by
Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to
“negative”).
In connection with the Israeli security cabinet’s
declaration of war against Hamas and possible or currently occurring hostilities with other organizations, several hundred thousand Israeli
military reservists were drafted to perform immediate military service. Five of our employees, none of whom are members of management,
have been called to active military duty since October 7, 2023. Some of these employees have since returned, but there can be no assurance
that they will not be called to military service again. In addition, we rely on service providers located in Israel and our employees
or employees of such service providers may be called for service in the current or future wars or other armed conflicts with Hamas and
such persons may be absent from their positions for a period of time. As of March 28, 2024, any impact as a result of the number of absences
of our personnel and personnel at our service providers or counterparties located in Israel has been manageable. However, military service
call ups that result in absences of personnel from our service providers or contractual counterparties in Israel may disrupt our operations
and absences for an extended period of time may materially and adversely affect our business, prospects, financial condition and results
of operations.
Following the attack by Hamas on Israel’s southern border,
Hezbollah in Lebanon has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns
in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to
Hezbollah in southern Lebanon. It is possible that other terrorist organizations, including Palestinian military organizations in the
West Bank or the Houthis in Yemen, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include
terror and missile attacks. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading
partners could adversely affect our operations and results of operations. Our commercial insurance does not cover losses that may occur
as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct
damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or
that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our
business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm
our results of operations.
Further, in the past, the State of Israel and Israeli companies
have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies.
These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.
A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.
Prior to the Hamas attack in October 2023, the Israeli government
pursued extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals, organizations and
institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment
in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic
conditions. The risk of such negative developments has increased in light of the recent Hamas attacks and the war against Hamas declared
by Israel, regardless of the proposed changes to the judicial system and the related debate. To the extent that any of these negative
developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional
funds, if deemed necessary by our management and board of directors.
Investors’ rights and responsibilities as our shareholders
are governed by Israeli law, which differs in some respects from the rights and responsibilities of shareholders of non-Israeli companies.
We were incorporated under Israeli law and the rights and responsibilities
of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects
from the rights and responsibilities of shareholders of U.S. and other non-Israeli corporations. In particular, a shareholder of an Israeli
company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the
company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general
meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s
authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder
also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder of an Israeli
company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to
appoint or prevent the appointment of a director or officer in the company or has other powers toward the company has a duty of fairness
toward the company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to
assist in understanding the implications of these provisions that govern shareholder behavior. These provisions may be interpreted to
impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.
Provisions of Israeli law and our amended and restated articles
of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
Provisions of Israeli law and our amended and restated articles
of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to
acquire us or our shareholders to elect different individuals to our board of directors, even if doing so would be considered to be beneficial
by some of our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among
other things:
| • |
the Israeli Companies Law regulates mergers and requires that a tender offer be effected when one or more shareholders propose to
purchase shares that would result in it or them owning more than a specified percentage of shares in a company; |
| • |
the Israeli Companies Law requires special approvals for certain transactions involving directors, officers or significant shareholders
and regulates other matters that may be relevant to these types of transactions; |
| • |
the Israeli Companies Law does not provide for shareholder action by written consent for public companies, thereby requiring all
shareholder actions to be taken at a general meeting of shareholders; |
| • |
our amended and restated articles of association divide our directors into three classes, each of which is elected once every three
years; |
| • |
an amendment to our amended and restated articles of association generally requires, in addition to the approval of our board of
directors, a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at
a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision
empowering our board of directors to determine the size of the board, the provision dividing our directors into three classes, the provision
that sets forth the procedures and the requirements that must be met in order for a shareholder to require the Company to include a matter
on the agenda for a general meeting of the shareholders, the provisions relating to the election and removal of members of our board of
directors and empowering our board of directors to fill vacancies on the board, requires, in addition to the approval of our board of
directors, a vote of the holders of 66-2⁄3% of our outstanding ordinary shares entitled to vote at a general meeting; |
| • |
our amended and restated articles of association do not permit a director to be removed except by a vote of the holders of at least
66-2⁄3% of our outstanding shares entitled to vote at a general meeting of shareholders; and |
| • |
our amended and restated articles of association provide that director vacancies may be filled by our board of directors. |
Further, Israeli tax considerations may make potential transactions
undesirable to us or some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to
such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S.
tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on
the fulfillment of numerous conditions, including, a holding period of two years from the date of the transaction during which certain
sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions,
the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.
Our amended and restated articles of association provide that unless
SatixFy consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes
between SatixFy and its shareholders under the Israeli Companies Law and the Israeli Securities Law, which could limit shareholders’
ability to bring claims and proceedings against, as well as obtain favorable judicial forum for disputes with SatixFy, its directors,
officers and other employees.
Unless we agree otherwise in writing, the competent courts in Tel
Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of SatixFy, (ii) any action asserting
a claim of breach of fiduciary duty owed by any director, officer or other employee of SatixFy to SatixFy or SatixFy’s shareholders,
or (iii) any action asserting a claim arising pursuant to any provision of the Israeli Companies Law or the Israeli Securities Law. Such
exclusive forum provision in our amended and restated articles of association will not relieve SatixFy of its duties to comply with federal
securities laws and the rules and regulations thereunder, and shareholders of SatixFy will not be deemed to have waived SatixFy’s
compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim
in a judicial forum of its choosing for disputes with SatixFy or its directors or other employees which may discourage lawsuits against
SatixFy, its directors, officers and employees. The foregoing exclusive forum provision is intended to apply to claims arising under Israeli
law and would not apply to claims for which the federal courts would have exclusive jurisdiction, whether by law (as is the case under
the Exchange Act) or pursuant to our amended and restated articles of association, including claims under the Securities Act for which
there is a separate exclusive forum provision in our amended and restated articles of association. However, the enforceability of similar
forum provisions (including exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under
the Securities Act) in other companies’ organizational documents has been challenged in legal proceedings and there is uncertainty
as to whether courts would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were
to find the choice of forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely
affect our business, financial condition and results of operations.
Our amended and restated articles of association provide that unless
we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims
arising under the Securities Act which could limit shareholders’ ability to obtain a favorable judicial forum for disputes with
SatixFy or SatixFy’s directors, officers or employees and may impose additional litigation costs on our shareholders.
Our amended and restated articles of association provides that
the federal district courts of the United States shall be the exclusive forum for the resolution of any claims arising under the Securities
Act or the federal forum provision in our amended and restated articles of association (the “Federal Forum Provision”). While
the Federal Forum Provision does not restrict the ability of our shareholders to bring claims under the Securities Act, nor does it affect
the remedies available thereunder if such claims are successful, we recognize that it may limit shareholders’ ability to bring a
claim in the judicial forum that they find favorable and may increase certain litigation costs which may discourage the filing of claims
under the Securities Act against SatixFy, its directors and officers. However, the enforceability of similar forum provisions (including
exclusive federal forum provisions for actions, suits or proceedings asserting a cause of action arising under the Securities Act) in
other companies’ organizational documents has been challenged in legal proceedings and there is uncertainty as to whether courts
would enforce the exclusive forum provisions in our amended and restated articles of association. If a court were to find the choice of
forum provision contained in our amended and restated articles of association to be inapplicable or unenforceable in an action, we may
incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business,
financial condition and results of operations.
Any person or entity purchasing or otherwise acquiring or holding
any interest in any of SatixFy’s securities shall be deemed to have notice of and consented to SatixFy’s Federal Forum Provision.
Notwithstanding the foregoing, the shareholders of SatixFy will not be deemed to have waived compliance with the federal securities laws
and the rules and regulations thereunder.
Certain tax benefits that may be available to SatixFy, if obtained
by SatixFy, would require it to continue to meet various conditions and may be terminated or reduced in the future, which could increase
SatixFy’s costs and taxes.
We may be eligible for certain tax benefits provided to “Preferred
Technological Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the Investment
Law. If we obtain tax benefits under the “Preferred Technological Enterprises” regime then, in order to remain eligible for
such tax benefits, we will need to continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended.
If these tax benefits are reduced, cancelled or discontinued, our Israeli taxable income may be subject to the Israeli corporate tax (at
a rate of 23% in 2023). Additionally, if we increase our activities outside of Israel through acquisitions, for example, our activities
might not be eligible for inclusion in future Israeli tax benefit programs. See “Item 10. Additional
Information – E. Taxation - Israeli Tax Considerations.”
It may be difficult to enforce a U.S. judgment
against SatixFy, its officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve
process on SatixFy’s officers and directors.
Most of SatixFy’s directors or officers are not residents
of the United States and most of their and SatixFy’s assets are located outside the United States. Service of process upon SatixFy
or its non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against SatixFy or its non-U.S.
directors and executive officers may be difficult to obtain within the United States, although our amended and restated articles of association
provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of
resolution of any claims arising under the Securities Act. Israeli courts may refuse to hear a claim based on a violation of U.S. securities
laws against SatixFy or its non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim.
In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the
claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming
and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing
the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect
on judgments rendered against SatixFy or its non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment
if, among other things, it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject
to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained
by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between
the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time
the foreign action was brought.
Risks Related to Ownership of our Securities
SatixFy’s amended and restated articles of association and
Israeli law could prevent a takeover that shareholders consider favorable and could also reduce the market price of the SatixFy Ordinary
Shares.
Certain provisions of Israeli law and our amended and restated
articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party
to acquire SatixFy or for SatixFy’s shareholders to elect different individuals to its board of directors, even if doing so would
be beneficial to its shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares.
For example, Israeli corporate law regulates mergers and requires that a tender offer be effected when certain thresholds of percentage
ownership of voting power in a company are exceeded (subject to certain conditions). Further, Israeli tax considerations may make potential
transactions undesirable to SatixFy or to some of its shareholders whose country of residence does not have a tax treaty with Israel granting
tax relief to such shareholders from Israeli tax. See “Item 10. Additional Information —
E. Taxation — Israeli Tax Considerations.”
We have never paid cash dividends on our share
capital, and we do not anticipate paying any cash dividends in the foreseeable future.
We have never paid and do not intend to pay dividends for the foreseeable
future. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not
anticipate paying any dividends on our ordinary shares in the foreseeable future. Consequently, you may be unable to realize a gain on
your investment except by selling sell such shares after price appreciation, which may never occur. SatixFy’s board of directors
has sole discretion whether to pay dividends. If SatixFy’s board of directors decides to pay dividends, the form, frequency, and
amount will depend upon its future, operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that its directors may deem relevant. The Israeli Companies Law imposes restrictions on SatixFy’s
ability to declare and pay dividends. See the section titled “Item 10. Additional Information –
B. Memorandum and Articles of Association — Dividend and Liquidation Rights” for additional information. Payment of
dividends may also be subject to Israeli withholding taxes. See “Item 10. Additional Information
— E. Taxation — Israeli Tax Considerations” for additional information.
The market price of our equity securities may be volatile, and your
investment could suffer or decline in value.
The stock markets, including the NYSE, on which certain of our
securities are listed, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly
trading market develops and is sustained for the SatixFy Ordinary Shares, the market price of the SatixFy Ordinary Shares may be volatile
and could decline significantly. During 2023, our share price has fluctuated from a high of $1.45 to a low of $0.30. Given the recent
price volatility of our ordinary shares and relative lack of liquidity in our stock, there is no certainty that warrant holders will exercise
their warrants and, accordingly, we may not receive any proceeds in relation to our outstanding warrants. If our securities become delisted
from the NYSE, the liquidity and price of our securities may be more limited than if our securities were quoted or listed on the NYSE
or another national securities exchange. In addition, the trading volume in the SatixFy Ordinary Shares may fluctuate and cause significant
price variations to occur. SatixFy cannot assure you that the market price of the SatixFy Ordinary Shares will not fluctuate widely or
decline significantly in the future in response to a number of factors, including, among others, the following:
| • |
sales of a significant number of our securities, including those which we plan to register in connection with the Equity Line of
Credit and by the selling securityholders under our resale registration statement on Form F-1 (Registration No. 333-268510), or that we
may in the future register for sale or for resale on behalf of our securityholders, could materially adversely affect the trading prices
of our securities; |
| • |
the realization of any of the risk factors presented in this Annual Report; |
| • |
actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, earnings, results of operations,
level of indebtedness, liquidity or financial condition; |
| • |
failure to comply with the requirements of the NYSE; |
| • |
failure to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| • |
variance in our financial performance from the expectations of market analysts; |
| • |
announcements by us or our competitors of significant business developments, changes in service provider relationships, acquisitions
or expansion plans; |
| • |
changes in the prices of our products and services; |
| • |
commencement of, or involvement in, litigation involving us; |
| • |
future issuances, sales, repurchases or anticipated issuances, sales, resales or repurchases, of our securities including due to
the expiration of contractual lock-up agreements; |
| • |
publication of research reports about us; |
| • |
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts
who follow us or our failure to meet these estimates or the expectations of investors; |
| • |
new laws, regulations, subsidies, or credits or new interpretations of existing laws applicable to us; |
| • |
market conditions in our industry; |
| • |
changes in key personnel; |
| • |
speculation in the press or investment community; |
| • |
changes in the estimation of the future size and growth rate of our markets; |
| • |
broad disruptions in the financial markets, including sudden disruptions in the credit markets; |
| • |
actual, potential or perceived control, accounting or reporting problems; |
| • |
changes in accounting principles, policies and guidelines; and |
| • |
other events or factors, including those resulting from infectious diseases, health epidemics and pandemics, natural disasters, war,
including the current wars between Russia-Ukraine and Israel-Hamas, acts of terrorism or responses to these events. |
In the past, following periods of volatility in the trading price
of a company’s securities, securities class action litigation has often been instituted against that company. If we were to be involved
in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted, which
would have a material adverse effect on us.
If securities or industry analysts do not publish or cease publishing
research or reports about SatixFy, its business, or its market, or if they change their recommendations regarding our securities adversely,
then the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the
research and reports that industry or financial analysts publish about our business. We do not control these analysts, or the content
and opinions included in their reports. As a new public company, we may be slow to attract research coverage and the analysts who publish
information about our securities will have relatively little experience with our business, which could affect their ability to accurately
forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst
coverage, if any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our business, our share price would
likely decline. In addition, the share prices of many companies in the technology industry have declined significantly after those companies
have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts.
If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors,
analysts could downgrade our securities or publish unfavorable research about it. If one or more of these analysts cease coverage of us
or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our share
price or trading volume to decline.
Our failure to meet the continued listing requirements of the NYSE
could result in a delisting of our securities.
On November 30, 2023, we received written notice from the NYSE
stating that we were not in compliance with its continued listing standards, as set forth in Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii)
of the NYSE American Company Guide. Generally, Section 1003(a) of the NYSE American Company Guide requires companies to have a minimum
stockholders’ equity of $2,000,000 in two of its three most recent fiscal years, or requires companies to satisfy either of the
following criteria: (1) a total value of market capitalization of at least $50,000,000; or total assets and revenue of $50,000,000 each
in its last fiscal year, or in two of its last three fiscal years; and (2) the issuer has at least 1,100,000 shares publicly held, a market
value of publicly held shares of at least $15,000,000 and 400 round lot shareholders (the “Alternative Listing Criteria”).
We do not currently satisfy the Alternative Listing Criteria due to a recent decline in our market capitalization to below $50,000,000.
In order to maintain our listing, we submitted a plan of compliance
on January 5, 2024 (the “Plan”) addressing how we intend to regain compliance with the applicable listing standards by May
30, 2025. The Plan is based in part on expected upcoming business progress and technological development, including potential positive
announcements it expects to report of new customers and new orders that it believes should evidence that its valuation should be higher.
On February 6, 2024, we received written notice from the NYSE stating that it reviewed the Plan and determined to accept the Plan and
grant a plan period for targeted completion of the Plan through May 30, 2025. The NYSE will review the Company periodically for compliance
with the initiatives outlined in the Plan.
In the interim, our ordinary shares will continue to be listed
on the NYSE exchange while we attempt to regain compliance with the continued listing standards. If we fail to satisfy the NYSE’s
continued listing requirements, the NYSE may take steps to delist our ordinary shares, as it has done with our warrants. Such a delisting
would likely have a negative effect on the price of our securities and would impair your ability to sell or purchase the securities when
you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing
requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities,
prevent our securities from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with the NYSE’s
listing requirements. Additionally, if our securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted
on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange,
the liquidity and price of our securities may be more limited than if our securities were quoted or listed on the NYSE or another national
securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
We are an “emerging growth company” and avail ourselves
of the reduced disclosure requirements applicable to emerging growth companies, which could make our equity securities less attractive
to investors.
We are an “emerging growth company” as defined in the
JOBS Act and remain an “emerging growth company” until the earliest to occur of:
| • |
the last day of the fiscal year during which our total annual revenue equals or exceeds $1.235 billion (subject to adjustment for
inflation); |
| • |
the last day of the fiscal year following the fifth anniversary of our initial registered offering; |
| • |
the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or |
| • |
the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. |
The JOBS Act exempts emerging growth companies from certain SEC
disclosure requirements and standard and we intend to take advantage of some of the reduced regulatory and reporting requirements of emerging
growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company, including, but not limited to, (1) not
being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) presenting only two
years of audited consolidated financial statements until we file our first annual report with the SEC, and (3) not being required to comply
with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or current or future PCAOB rules requiring
supplements to the auditor’s report providing additional information about the audit and the consolidated financial statements (critical
audit matters or auditor discussion and analysis). Although under the JOBS Act emerging growth companies can delay adopting new or revised
accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies,
this exemption does not apply to companies, such as us, reporting under IFRS since IFRS does not provide for different transition periods
for public and private companies.
Investors may find our ordinary shares less attractive because
we rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market
for our securities and the trading prices of our securities may be materially adversely affected and more volatile.
We are a foreign private issuer and, as a result, are not subject
to U.S. proxy rules but are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than
those of a U.S. issuer.
Because we qualify as a foreign private issuer under the federal
securities laws and although we follow Israeli laws and regulations with regard to such matters, we are exempt from certain provisions
of the Exchange Act that are applicable to U.S. public companies, including: (i) the sections of the Exchange Act regulating the solicitation
of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act
requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades
made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified
significant events. In addition, foreign private issuers will be required to file their annual report on Form 20-F by 120 days after the
end of each fiscal year, while U.S. domestic issuers that are non-accelerated filers are required to file their annual report on Form
10-K within 90 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed
at preventing issuers from making selective disclosures of material information. As a result of the above, even though we are contractually
obligated and intend to make interim reports available to our shareholders, copies of which we are required to furnish to the SEC on a
Form 6-K, and even though we are required to file reports on Form 6-K disclosing whatever information we have made or are required to
make public pursuant to Israeli law or distribute to our shareholders and that is material to our company, you may not have the same protections
afforded to shareholders of companies that are U.S. domestic issuers.
As we are a “foreign private issuer” and follow certain
home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies
that are subject to all the NYSE corporate governance requirements.
As a foreign private issuer, we have the option to follow certain
home country corporate governance practices rather than those of the NYSE, provided that we disclose the requirements we are not following
and describe the home country practices we are following. We have relied on, and in the future intend to rely on, this “foreign
private issuer exemption” with respect to certain NYSE rules, as further described in the section entitled “Item
6. Directors, Senior Management and Employees — C. Board Practices — Corporate Governance Practices.” We may
in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same
protections afforded to shareholders of companies that are subject to all the NYSE corporate governance requirements.
We may lose our foreign private issuer status in the future, which
could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore,
we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination
of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal
quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2024. In the future, we would lose our foreign
private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our
directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of
foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports
and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign
private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal
shareholders will become subject to the short- swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition,
we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the NYSE. As
a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses
that we will not incur as a foreign private issuer.
Future sales or other issuances of our securities
could depress the market price for our securities.
Substantial sales of our securities
may cause the market price of our securities to decline. Sales by our security
holders of substantial amounts of our securities, or the perception that these
sales may occur in the future, could cause a reduction in the market price of our ordinary shares or could make it more difficult for
us to raise funds through the sale of equity in the future.
Future issuances of ordinary shares or any securities that are
exercisable for or convertible into ordinary shares could further depress the market for our ordinary shares, may have an adverse effect
on the market price of our ordinary shares and will have a dilutive effect on our existing shareholders and holders of securities.
We expect to continue to incur research and development and general and administrative expenses and, to satisfy our funding requirements,
we will need to sell additional equity securities, which may include sales of significant amounts of ordinary shares. The sale or the
proposed sale of substantial amounts of our ordinary shares or other equity securities in the public markets or in private transactions
may adversely affect the market price of our ordinary shares and our share price may decline substantially.
If any of SatixFy’s large shareholders or members of its
management were to sell substantial amounts of SatixFy Ordinary Shares in the public markets, or the market perceives that such sales
may occur, this could have the effect of increasing the volatility in, and put significant downward pressure on, the trading price of
SatixFy Ordinary Shares. Any such volatility or decrease in the trading price of SatixFy Ordinary Shares could also adversely affect SatixFy’s
ability to raise capital through an issue of equity securities in the future.
As of March 28, 2024, there are 14,329,792
warrants outstanding with an exercise price of $11.50 per share. To the extent the warrants are exercised, additional shares will be issued,
which will result in dilution to our shareholders and increase the number of our ordinary shares eligible for resale in the public market,
which could have an adverse effect on the market price of our ordinary shares. Pursuant to the Fifth Amendment to the 2022 Credit Agreement,
whereby the lenders provided their consent to the MDA Agreement, we agreed to issue 500,556 new ordinary shares to the lenders. In addition,
we agreed to issue the lenders 1,000,000 Price Adjustment Shares in a private placement. Further, pursuant to the Business Combination
Agreement, we issued 27,500,000 Price Adjustment Shares to our founders and the Sponsor which are subject to vesting and forfeiture based
on the trading price of our ordinary shares. To the extent the Price Adjustment Shares vest upon the achievement of certain price thresholds
as described in the Business Combination Agreement (see “Item 6.B. Liquidity and Capital Resources”
and “Item 7. Major Shareholders and Related Party Transactions — B. Related Party
Transactions – Issuance of Price Adjustment Shares”), such Price Adjustment Shares will result in dilution to our shareholders
and increase the number of our ordinary shares eligible for resale in the public market, which could have an adverse effect on the market
price of our ordinary shares.
Upon the expiration or waiver of certain lock-ups and as further
described in “Item 7. – Major Shareholders and Related Party Transactions – B. Related
Party Transactions,” shares held by certain of our shareholders will be eligible for resale, subject to, in the case of certain
stockholders, volume, manner of sale and other limitations under Rule 144, if then available.
As restrictions on resale end or if these shareholders exercise
their registration rights, the market price of shares of our ordinary shares could drop significantly if the holders of these shares sell
them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional
funds through future offerings of our ordinary shares or other securities.
As of the date of this Annual Report, we have up
to $77.25 million aggregate principal amount of ordinary shares available for future issuance under the Equity Line of Credit to the investor
thereunder. Pursuant to the Exchange Cap (as defined in the CF Purchase Agreement) in the CF Purchase Agreement, we have reserved an initial
amount of up to 15,295,125 ordinary shares for issuance under the Facility, which represents approximately 18.3% of our total outstanding
shares as of March 28, 2024. To the extent shares are issued and sold to the investor pursuant to the Equity Line of Credit, such issuance
will result in dilution to our shareholders and increase the number of our ordinary shares eligible for resale in the public market, which
could have an adverse effect on the market price of our ordinary shares. See “Item 5. Operating
and Financial Review and Prospects— B. Liquidity and Capital Resources— Equity Line of Credit.”
As of March 28, 2024, we had 3,790,473 ordinary shares underlying
options that would have been vested and exercisable and an additional 1,670,904 unvested options outstanding, as well as 4,014,790 ordinary
shares underlying unvested restricted share units (“RSUs”). These grants, and any additional grants that we make in the future,
will result in dilution to our shareholders, which may be material and could cause the market price for our equity securities to decline.
Risks Related to our Warrants
SatixFy may redeem your unexpired warrants
prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
The public warrants and PIPE Warrants became exercisable upon the
effectiveness of the Registration Statement. When our warrants become redeemable, SatixFy may exercise the redemption right even if it
is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of our outstanding
warrants could force holders: (i) to exercise our warrants and pay the exercise price therefor at a time when it may be disadvantageous
to do so, (ii) to sell our warrants at the then-current market price when the holder might otherwise wish to hold our warrants or (iii)
to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially
less than the market value of our warrants. The warrants of SatixFy exchanged for Endurance warrants that were issued in a private placement
are not expected to be redeemable by SatixFy so long as they are held by the Sponsor or its permitted transferees.
There can be no assurance that warrants received
by holders of Endurance warrants or PIPE Warrant holders in the Business Combination will be in the money at the time they become exercisable
or otherwise, and they may expire worthless.
The exercise price of our warrants is $11.50 per SatixFy Ordinary
Share. There can be no assurance that our warrants will be in the money following the time they become exercisable and prior to their
expiration, and as such, our warrants may expire worthless.
The SatixFy A&R Warrant Agreement designates
the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of
warrant holders to obtain a favorable judicial forum for disputes with our company.
The SatixFy A&R Warrant Agreement provides that, subject to
applicable law, (i) any action, proceeding or claim against SatixFy arising out of or relating in any way to the each such agreement will
be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York,
and (ii) that the parties thereto irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such
action, proceeding or claim. The parties also agreed to waive any objection to such exclusive jurisdiction or that such courts represent
an inconvenient forum.
Notwithstanding the foregoing, these provisions of the SatixFy
A&R Warrant Agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim
for which the federal district courts of the United States are the sole and exclusive forum. Any person or entity purchasing or otherwise
acquiring any interest in our warrants will be deemed to have notice of and to have consented to the forum provisions in the applicable
agreement. If any action, the subject matter of which is within the scope the forum provisions of the SatixFy A&R Warrant Agreement,
is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York
(a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the
personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such
court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant
holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant
holder.
This choice-of-forum provision may limit a warrant holder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with SatixFy, which may discourage such lawsuits. Alternatively,
if a court were to find this provision of the SatixFy A&R Warrant Agreement inapplicable or unenforceable with respect to one or more
actions or proceedings, SatixFy may incur additional costs associated with resolving such matters in other jurisdictions, which could
materially and adversely affect SatixFy’s business, financial condition and results of operations.
ITEM
4. INFORMATION ON THE COMPANY
| A. |
History and Development of the Company |
Our legal and commercial name is SatixFy Communications Ltd. Our
company was incorporated in June 2012 as a Hong Kong company. In January 2020, we were incorporated as a private company limited by shares
under the laws of the State of Israel with all company business transferring to the Israeli entity. Our principal executive offices are
located at 12 Hamada St., Rehovot 670315, Israel, and our telephone number is 972-8-939-3200. The SEC, maintains an internet site that
contains reports and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Our website address is http://www.satixfy.com. Information contained
on, or that can be accessed through, our website does not constitute a part of this Annual Report.
Capital Expenditures and Divestitures
For a description of our principal capital expenditures and divestitures
for the three years ended December 31, 2023, and for those currently in progress, see “Item 5.
Operating and Financial Review and Prospects.”
| B. |
Business Overview |
Our Mission
Our mission is to be the leading global provider of digital satellite
communications systems that enable satellite-based broadband delivery to markets across the globe.
Our Company
We are a vertically integrated satellite communications
systems provider using our own semiconductors, focused on designing chips and systems that serve the entire satellite communications value
chain — from the satellite’s antenna payload to user terminals. We design chip technologies capable of enabling satellite-based
broadband delivery to markets around the world. Since we commenced operations in June 2012, through December 31, 2023 we have invested
over $243 million in research and development (“R&D”) to create what we believe are the most advanced provider of satellite
communications and ground terminal chips in the world.
We develop advanced Application-Specific and Radio
Frequency Integrated Circuit chips (“ASICs” and “RFICs”) based on technology designed to meet the requirements
of a variety of satellite communications applications, mainly for LEO, MEO and GEO satellite communications systems, Aero/IFC systems
and certain COTM and on the pause applications. Our chip technology supports Electronically Steered Multibeam Antennas (“ESMA”),
digital beamforming and beam-hopping, on- board processing for payloads and Software Defined Radio (“SDR”) modems —
each of which will be critical for providing optimized access to LEO satellite constellations.
We believe we are the only vertically integrated maker of satellite
communications systems selling products across the entire satellite communications value chain (depicted in the graphic below). All of
our systems integrate our proprietary semiconductor chips, of which we are a fabless manufacturer. We design our chips, code our software
and design end-to-end communications systems for use in various satellite communications applications.
Our end-to-end solutions for the satellite communications industry
include satellite payloads, user terminals (ground and Aero/IFC) and hubs, each built around our advanced ASICs and RFICs. We have a diverse
customer base, including satellite operators, airlines, manufacturers of satellite communications systems, and other connectivity service
providers that integrate our chips and systems in their satellite communications infrastructure. We believe that our modular, scalable
and software controllable technology, our focus on producing products for the entire satellite communications value chain and our ability
and experience in designing our systems to meet our customers’ specifications, differentiate us from our competitors.
We expect that our growth in the coming years will be driven by
continued rapid increases in demand for high-speed broadband services across the globe, which will be propelled by an increasing number
of internet users, broadband connected devices, amount of global data usage and the need for ubiquitous connectivity. We believe that
our technologies are well positioned to meet the need for compatible chips and systems to connect new satellite technologies with existing
systems and maximize their innovative potential.
Our revenues for the years ended December 31, 2023 and December
31, 2022 were $10.7 million and $10.6 million, respectively.
Satellite Communications Chips
There is a current trend in the satellite communications industry
to transition from traditional analog devices and components to modern digital devices, integrating multiple functions into miniaturized
and low- cost integrated circuit modules (chips), which is having a material impact on the satellite communications value-chain. The chips
themselves are the critical technology needed to implement this transition — enabling application-specific functionality and defining
the capabilities of the communications systems in which they are integrated.
We believe we are a leader in developing advanced, digital silicon
ASICs and RFICs for modems and antennas that can be deployed across the entire satellite communications value chain. We have developed
advanced lines of modem and antenna chips that enable critical functions for satellite communications systems, such as our PRIME and BEAT
antenna chips, which enable multi-beamforming and beam-hopping for satellite payloads and user terminals, and our recent software-defined
SX-4000 satellite payload chip, which enables digital on-board processing, beam- hopping and enhanced connectivity needs, including positioning,
navigation and timing. We design each of our chips to provide a desirable ratio of size, weight, power and cost (“SWaP-C”),
while also aiming to maximize data transmission rates for the communication applications that our chips serve.
We developed our chip set with the help of substantial grants from
the European Space Agency (“ESA”), sponsored by the U.K. Space Agency (“UKSA”), through ESA’s Advanced Research
in Telecommunication Systems (“ARTES”) program, which have amounted to over $77.5 million through December 31, 2023.
The functionality of our chips has been designed to meet key anticipated
market trends in satellite communications, leveraging our know-how and additional insight and expertise from ESA industry specialists
and other leading market participants in these programs throughout the development process. We believe the significant time and cost associated
with the development of a new ASIC creates a significant barrier to entry and endows us with a market advantage over competitors that
would need to invest large sums and spend years to attempt to catch up with our current capabilities. We intend to continue investing
in new chip development to meet the future needs of our customers and ensure that we maintain our technological market advantage.
Our chips are compatible with the emerging communication LEO, MEO
and GEO satellite constellations and are also designed to be utilized for satellite communications applications such as IFC. We believe
our chips are some of the most advanced on the market in terms of their ability to provide wide bandwidths, beamforming and beam-hopping
functions in satellite payloads and user terminals, while also being among the most attractive chips in terms of SWaP-C characteristics,
as we believe our chips have higher capacity, lower power usage, lower weight and are lower cost than competing products. See the below
graphic for an overview of our chipsets.
Satellite Communications Systems
A satellite communications system is comprised of the three following
constituent subsystems (depicted in the graphic below):
| • |
The satellite payload, which is the system
integrated to the satellite platform that provides in-space data receiving, processing and transmitting capabilities. |
| • |
The user terminal, which is the system on
the ground (or aircraft, in the case of IFC), comprised of an antenna and modem, that digitally links to the satellite payload and provides
data receiving, processing and transmitting capabilities. |
| • |
The hub, which is the system that enables
the network operator to control and manage its communication network and the interaction between the satellite payload and the ground
terminal. |
We design systems in each of these three categories powered by
our own proprietary chips, providing satellite communications network operators and manufacturers of satellites with advanced solutions
for their satellite communications needs.
Satellite
Payloads’ chipset
Our advanced SDR SX-4000 payload chip, and our satellite ESMA powered
by our PRIME2 digital beamforming chip. Our satellite payload chips are designed for LEO, MEO and GEO satellite applications and are fundamentally
flexible, enabling the transmission of large amounts of data that can support in-flight and other remote and mobile communication services,
among other applications. These satellite payloads have a digital regenerative onboard processing capability (involving demodulation,
processing and remodulation of the signals) that enables handling of communications coming from the ground and communications transmitted
from the satellite to the ground, thereby supporting satellite interconnectivity, while ensuring more effective use of the communication
bandwidth, and improving system performance. These payload chips also support transparent modes used in more traditional satellite systems.
In August 2023, we announced a $60 million transaction with MDA Ltd. (“MDA”) (TSX: MDA), a leading provider of advanced technology
and services to the rapidly expanding global space industry (the “MDA Agreement”). The MDA Agreement establishes cooperation
between the companies to utilize our digital payload chip-based technology to advanced digital satellite payloads, which the parties believe
to be unparalleled in today’s market, and is expected to open up our solutions to broader markets as well as new customers. We have
decided strategically to focus our space business on being a technology provider to satellite payload design companies offering its unique
digital multi beam forming and beam-hopping on-board-processing radiation hardening chipsets.
The MDA Agreement is a combination of a $40 million share purchase
agreement selling our holdings in SatixFy Space Systems UK Ltd, one of our UK based subsidiaries, to MDA as well as an additional $20
million in advanced payments under new commercial agreements which includes the previous $10 million advanced payment made in June 2023
to be applied to future orders of space grade chips. SatixFy Space Systems is our satellite payload subsidiary expert in the development
of digital satellite payloads systems and subsystems, including digital beam forming antennas and on-board processing. digital payloads.
In October 2023, we announced the completion of the MDA Agreement. We continue to retain all our related ASIC intellectual property and
new chips’ development to support the growing market. Thus, as described herein, we continue to retain selling rights to chips for
digital payloads. The strategic transaction also establishes deep cooperation with MDA to utilize our digital payload chip-based technology
for advanced digital satellite payloads and is expected to open up our solutions to broader markets and new customers. The strategic transaction
is in line with our strategy to focus on being a top leading technology provider to satellite payload design companies, with its unique
offering of multi-beam forming and beam-hopping, using its on-board-processing radiation-hardened chipsets.
Satellite payloads must be engineered to meet the technical specifications
of the satellite mission for which it is intended. We have completed our prototype payload, sponsored by ESA, which was launched in the
second quarter of 2023
User
Terminals, Modems and Antennas
Our user terminals consist of a modem and antenna.
| • |
Modems. We have developed our modems based on our proprietary SX-3000 and SX-3099 Very Small
Aperture Terminal (“VSAT”) chips, a part of our ASIC technology and one of the base building blocks for all our terminal products.
We produce modem modules designed to bring the fastest performance available today in a compact form factor and with low power. All of
our modems are designed for easy integration with our customers’ hardware, and software solutions and are available for a variety
of applications. Our modems are designed to natively support the entire DVB-RCS2 / DVB-S2X industry standards as well as a complete SDR
for any other waveform, to ensure maximum flexibility and relevance to our customer base. These industry standards are intended to ensure
that systems that utilize them perform with better efficiency, more throughput and better network reliability. We were directly involved
in writing the DVB-S2X standard which is based in part on our technology and patents. |
To date, we have sold, in the aggregate, more than 210.000 units
of our S-IDU modems based on our SX-3000 chip and of our SX-3000 chips on a stand-alone basis
| • |
Antennas. We offer a line of advanced ESMA products based on our proprietary BEAT and PRIME
ASIC chip technologies for both ground and Aero/IFC terminal connectivity. |
Our Onyx IFC terminal (the “Onyx”) is an all-inclusive,
high-performance satellite communications aero terminal designed for use on small to mid-size aircraft, delivering superior in-flight
connectivity. Characterized by its compact form factor, the Onyx features our cutting-edge digital beam-forming technology, along with
multi-orbit connectivity capabilities. Onyx is built on our supreme ASIC technology, incorporating PRIME as the antenna digital beamformer,
BEAT as the antenna Ku-band RFIC, and Sx-3099 as the terminal software defined radio (SDR) modem and antenna control unit (ACU.) Onyx
is currently in the testing and certification process. We are working towards manufacturing the first units to be shipped to customers
and to be installed on aircrafts in the second half of 2024.
Through Jet Talk, developing a large Aero/IFC terminal
designed for commercial aviation that enable in-flight broadband connectivity via connection with multiple satellites, including LEO satellites,
enabling high performance broadband communications for hundreds of passengers in commercial or private flights.
We are also developing a COTM user terminal capable of delivering
broadband Internet capacity to vehicles, serving markets such as public transportation and emergency services.
Additionally, we are also developing a direct-to-home broadband
user terminal in connection with our ESA-sponsored project with OneWeb, which is designed as a low-cost user terminal variant that we
believe can be the lowest-cost ESMA on the market, providing large data transfer rates and low latency via LEO constellation operators.
Hubs
and Gateways
We offer our Shepherd managed communications system, known as a
hub, which serves as a smart satellite resource manager that uses a common forward channel to transmit data and allows our customers to
monitor and manage advanced terminals in their networks. We also offer gateway modem products based on our SX-3099 modem chips, supporting
high-capacity links and beam-hopping with reduced power consumption and cell size.
Market Opportunity
The space industry is undergoing a dramatic transformation due
to lower cost communication solutions and miniaturization in the small satellite sector, which is driven by the increasing capability
of small electronics, materials and sensors. We believe this paradigm shift in the industry represents a significant opportunity for SatixFy.
Within the broader satellite communications industry, we are positioned to target three markets with our advanced satellite chips and
communications systems: the satellite communications systems market, the Aero/IFC market and the COTM market.
We believe our technology, which is built on our advanced ASICs
and RFICs, enables customers to unlock the full potential of LEO, MEO and GEO satellites. Our satellite and ground ESMA, and advanced
chips with beamforming and beam-hopping capabilities, will be especially advantageous to overcoming the technological challenges of connecting
with, and maximizing the utility of, the new LEO constellations. We anticipate, based on internal estimates using data published in a
May 2020 McKinsey article titled “Large LEO satellite constellations: Will it be different this time?” (the “McKinsey
data”) and our own estimates of the projected demand for satellite communications systems and unit pricing, that our total addressable
market (“TAM”) for our products can exceed $20 billion by the end of the current decade.
While the McKinsey data estimated that approximately 60,000 LEO
and other communications satellites are expected to be in operation by 2030, recent developments, including geopolitical instability and
economic uncertainty, has led us to believe that it may take longer for this estimate to be achieved. See “Item
3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Results — Our
estimates, including market opportunity estimates and market growth forecasts, are subject to inherent challenges in measurement and significant
uncertainty, and real or perceived inaccuracies in those metrics and estimates may harm our reputation and negatively affect our business.
Satellite Communications Systems
The non-geostationary orbit includes satellites operating in LEO,
with an altitude typically between 200 and 870 miles (325 to 1,400 kilometers) and satellites operating in MEO, between the LEO and GEO
orbits. Unlike GEO satellites that operate in a fixed orbital location above the equator, LEO and MEO satellites travel over the surface
of the earth at high relative velocities, requiring user terminals and hubs capable of tracking their movement. LEO satellite systems
have the potential to offer a number of advantages over GEO satellites to meet growing requirements for commercial and consumer broadband
services by providing increased data speeds and capacity, and global coverage.
According to the McKinsey data, a total of approximately 60,000
satellites are planned to be in operation by the end of the current decade. We expect most of them to be LEO, which will need advanced
satellite payloads and user terminals to enable their use. Additionally, because LEO satellites are expected to have a shorter lifespan
than GEO satellites, approximately 5 years based on estimates for Starlink’s SpaceX constellation, satellite providers will require
access to a recurring supply of satellite communications systems and components in order to replenish constellations as the satellites
approach obsolescence. We anticipate, based on the above figures and our own estimates of the projected demand for satellite communications
systems and unit pricing, that by the end of the current decade, the TAM for satellite payloads could reach approximately $4 to $5 billion
and the TAM for user terminals will reach approximately $5 to $6 billion.
We believe we are well positioned to meet the demand for technologies
that enable communication via this anticipated wave of LEO satellites, which will require satellite communications systems (payloads,
user terminals and hubs) with strong on-board processing capabilities, electronically steerable antennas, wideband modems, the ability
to transfer large volumes of data and chips with desirable SWaP-C characteristics.
Cost-effective ESMA are desirable for both mobile applications,
removing the need for unreliable mechanical parts and associated maintenance, and fixed applications, for ease of installation. We believe
these key characteristics of our proprietary technologies will offer customers compelling advantages, from ground to orbit. We believe
that our chips’ capabilities to power customers’ needs across the entire satellite communications value chain is an important
competitive advantage, ensuring compatibility and efficiency.
We expect that future satellite communications systems will be
able to leverage the benefits of, and integrate with, existing communication networks, including cellular networks, satellite communications
systems operating at L-band frequency ranges, as well as 5G communications networks, to provide continuous and reliable communication
at quality and prices competitive with the current terrestrial networks. Additionally, Ka and Ku-band frequency LEO satellites will enable
satellite communications systems to compete with terrestrial systems, even in urban areas where terrestrial systems currently operate
at more attractive prices. We believe there is a trend in the global telecommunications industry moving towards a convergence between
satellite and terrestrial-enabled capability. Terrestrial players, including telecoms and other cellular service providers, are investing
significantly in space capability to this end. Our chips and products can be implemented to bridge the technical gap between satellite
and terrestrial systems, enabling seamless, ubiquitous connectivity across the globe.
While we are not currently developing any telecommunications-related
products, we believe that the expected rapid expansion of 5G networks presents a substantial opportunity for the satellite communications
industry. We also believe that our proprietary chip technology is well-suited to adaptation to the expected requirements of 5G telecommunications
satellites.
Satellite communications systems for in-flight broadband connectivity
on aircraft have undergone significant changes over recent years, as demand has intensified for in-flight broadband communication services
at a level and quality more comparable to home use, supporting broadband and streaming applications. The modern airline passenger desires
reliable, high speed data connectivity in-flight (which aggregates up to one (1) gigabit per second for a wide body aircraft serving hundreds
of passengers), consistent, high-quality service from gate-to-gate, without the additional costs typically charged for such premium service.
Currently, Aero/IFC terminals are based on communication from the
ground to the aircraft or from GEO satellites to the aircraft. The data volume and transmission speeds via these communications systems
are limited, in part because the tracking antenna systems typically used for connection with GEO satellites and terrestrial broadband
networks are mechanical and susceptible to signal disruptions or gaps as the antenna mechanically switches from source to source. Download
and upload speeds are often limited, as is latency. The new generation of LEO satellite constellations operating at Ku-band frequency
ranges provide a partial solution to this connectivity issue, because they are deployed in far greater numbers and provide more extensive
signal coverage than GEO constellations. However, in order for aircraft to connect with these LEO satellite constellations, they will
need to be equipped with a user terminal capable of tracking the fast-moving and numerous LEO satellites, or accessing both LEO networks
and GEO networks simultaneously. This electronically steered multibeam connectivity is essential to providing seamless handover between
satellites and simultaneous multi-orbit operation.
Based on September 2020 EuroConsult estimates, by the end of 2019,
approximately 9,000 commercial aircraft and 22,500 private aircraft were equipped with an IFC system, many of which are not compatible
with the new LEO satellite technologies yet to be fully deployed. EuroConsult estimates that up to approximately 17,500 commercial and
30,000 private aircraft could have an IFC system by 2029, marking growth in demand for enhanced in-flight Internet and communication capabilities.
We anticipate that, based on EuroConsult estimates and our estimates of demand and unit pricing, the TAM for Aero/IFC terminals will reach
$5 to $6 billion by 2029. Electronically steered multibeam connectivity is essential to provide seamless handover between satellites and
simultaneous multi-orbit operation.
Through Jet Talk, we are designing an advanced Aero/IFC terminal
based on our chips with the ESMA beamforming and multibeam capabilities necessary to address the challenges of mechanical signal tracking.
Our Aero/IFC terminal is designed to enable broadband connection between aircraft and LEO satellite constellations to provide enhanced
data speeds and signal coverage for Aero/IFC providers. Improved speeds and latencies from LEO constellations are expected to enable airlines
to promote more “bring-your- own-devices” for inflight entertainment, a longstanding ambition of the industry that could now
become reality. Additionally, our Aero/IFC terminal is designed to be easier and faster to install than existing IFC systems. Our system
will also be multi-orbit capable, able to send and receive signals to LEO, MEO and GEO networks simultaneously, a feature desired by customers
for service resilience and flexibility.
Further, we expect to benefit from STE’s industry experience
and strong presence in East Asia in the marketing and sale of our Aero/IFC terminals, which will be marketed and sold to the commercial
aviation market exclusively through our Jet Talk joint venture. See “Item 5. — Operating
and Financial Review and Prospects — Our Revenue Model and Prospects.”
We have continued to invest in research and development and also
believe the circumstances have provided us with an opportunity to gain IFC market share. Significant delays occurred in the procurement
of IFC antennas as a result of the COVID-19 pandemic, providing us with the opportunity to mature our technology and design lower cost,
more powerful and easier to install Aero/IFC terminals at a time when our principal competitors’ market-ready products, based on
more traditional mechanical antennas operating over GEO, did not receive substantial orders. We anticipate that our Aero/IFC terminals
will now come to market at the time the industry is likely to begin procuring their next generation of IFC equipment, also coinciding
better with new services being introduced by new LEO constellations. See “Item 3. Key Information
— D. Risk Factors— Risks Related to SatixFy’s Business, Operations and Industry — The global COVID-19 pandemic
has harmed and could continue to harm our business, financial condition, and results of operations” and “Item
5. — Operating and Financial Review and Prospects — Impact of COVID-19.”
Communications On The Move (“COTM”)
We believe that LEO constellations further provide the potential
to facilitate connectivity for applications requiring continuous communication while on the move. There are many such satellite-enabled
mobile applications such as connected cars and commercial vehicle fleets, broadband to public transport, and connected emergency service
vehicles. Satellite communications systems with high coverage capability will have an important role in supporting the development of
the broader mobility market and enabling full ubiquitous connectivity. We believe that our proprietary chip technology is well-suited
to adaptation to the expected requirements of the COTM device market in the future.
As part of our current strategy, we have decided to pause development
and marketing related to our satellite-enabled Internet-of-Things Diamond product in order to continue to focus on our other satellite
communications chips and products described herein.
Our Technology
We have a broad portfolio of technology leading silicon chips and
systems for the entire satellite communications value chain. Our team of over 120 engineers is focused on developing cutting-edge systems,
powered by our chip technologies, to lead innovation in satellite communications. We are committed to enhancing our technology, which
is demonstrated by our over $243 million in R&D investment from the commencement of operations in June 2012 through December 31, 2023.
| • |
Cutting-Edge Chips. We believe we are positioned to be a leading provider of satellite communications
systems for the next generation of satellites. Our modem chips have the ability to split data for retransmission and combine received
data from nearby satellites or ground hubs efficiently and quickly. Our chip technology enables us to develop communications systems that
are high performing, low weight, energy efficient and sized to be compatible for a wide array of applications and satellite technologies.
|
| • |
Advanced Antennas and Modems. Our technology in the field of multibeam management, transmission
and beamforming and hopping, based on our advanced chips, introduces a new and advanced generation of flat electronic antennas that will
be critical to enabling user terminals to track multiple LEO satellites at a time. Our ESMA chips enable efficiency, modularity and scalability
to support multibeam and high data rates. We are designing efficient and innovative digital interfaces for our modems to enable them to
handle numerous transmission and reception beams, which will be necessary for LEO satellite networks. |
| • |
Tailor Made. We have the ability to design and present customers with customized solutions
using our whole family of highly flexible chips and modules that integrate with their planned or existing systems, and which can be tailored
to meet their requirements. We believe that providing optimized cost-effective solutions, in an era when satellite technology is rapidly
evolving, is important for positioning us at the technological forefront of the market and securing relationships with leading communications
providers. |
| • |
End-to-End Solutions. Our development team manages the entire product development life cycle,
beginning with the characterization stage, through to the design and third-party manufacture of the chips, integration of the chips within
communications systems, testing of the systems and culminating with delivery and the provision of operational support to the customer.
The solutions we provide enable customers to enjoy an efficient and continuous process for the development of their systems with a single
supplier and single point of contact throughout the entire development and implementation process. We develop the chips, design the systems
that integrate the chips, write the software needed to operate the chips and manage integration of the various components into a single,
cohesive satellite communications systems that fits our customers’ needs. |
Our Strengths
Our core chip technology and satellite communications systems leverage
our track record in satellite communications chip development, and our deep understanding of RF device processing, silicon chip design
and related system architecture to address the emerging needs of the satellite communications markets. We believe our leadership position
in developing chips and satellite communications systems is a result of the following core strengths:
| • |
Superior Technology Leading to Superior Performance. We believe we are a technology and product
leader in the growing satellite communications industry, as evidenced by our innovative technologies such as the digital beamforming and
the beam-hopping chip technology. Our chips are designed to power our satellite communications systems, which in turn enhance satellite
communications capabilities, including on-board processing capabilities driven by channel switching and flexibility. |
Our systems are optimized to unlock the full potential of new LEO
satellite constellations. We believe that the proprietary and innovative features of our modem and antenna chips enable us to create satellite
communications systems that are superior in capacity, performance and functionality to our competitors’
systems.
| • |
Tailor-Made Innovation of Next-Generation Satellite Communications Technology. Our SDR modem
and antenna chips are designed to be tailored and optimized to meet the technical requirements of our customers in their respective end
markets without the traditional expense of developing bespoke chips each time. This is a significant differentiator from, and combined
with the over $243 million we have invested in research and development, creates significant barriers to entry for, our competitors. Our
communications systems are also capable of being tailored to our customers’ needs, while promoting efficiency through a common chip
set across the entire satellite communications value chain. In many cases, our close relationships with our customers in the design stage
and our deep engineering expertise, position us in a limited group of satellite communications system developers capable of providing
the necessary solutions to our customers. We believe these close working relationships, coupled with our proprietary technology and experience,
help our customers achieve higher throughput capacity and better integration of all key components of the satellite communications system,
while providing advantages in terms of lower weight and power consumption. We believe our solution enables overall lower systems costs
relative to our principal competitors. |
| • |
Silicon Enabled SWaP-C. The use of silicon-based technologies in our satellite communications
chips and systems is key to achieving the industry’s goal of producing systems that are smaller in size and lower in weight, power
consumption and cost. |
| • |
Higher Reliability, Lower Maintenance and Faster Installation. The use of silicon in our
antenna systems makes them more reliable than the mechanical antennas available in the market due to fewer moving parts, fewer failure
points and faster installation time of our antennas. We have designed our antenna systems to be easier to install and require less maintenance
than systems using mechanical elements with complex packaging. |
| • |
End-to-End Capabilities Promoting Long-term Customer Relationships. We often cover the entire
life cycle of the systems we deliver to our customers, from defining specifications according to our customers’ requirements, to
designing or redesigning the chips, to oversight of the assembly of the final product and the subsequent delivery of custom-tailored products
to the customer. We believe that our participation in serving the entire life cycle of the customer’s satellite communications system
promotes long-term customer relationships, as once our tailor-made systems are integrated in a customer’s satellite constellation
or the ground communications infrastructure, the costs of switching to a different provider of satellite communications systems could
often be substantial. |
| • |
Proven Management Team. Our founders and executive management team have extensive experience
in effectively guiding companies through various industry cycles and technology transitions. We have recently strengthened our leadership
with the joining of Mr. Nir Barkan as a Chief Executive Officer as of June 1, 2023 and the addition of Itzik Ben Bassat as our Chief Operating
Officer as of February 12, 2023. Mr. Nir brings extensive experience of leading high tech technologies and products companies, including
Curvalux, Orbit and Texas Instruments. Mr. Yoav Leibovitch, our Executive Chairman of the Board, has vast experience in leading the financial
strategizing and investor relations of public companies. Our management team provides us with steady, reliable leadership, uniquely capable
of identifying strong investments, executing through change, and maintaining stability during market uncertainty. |
Our Strategy
We aim to be the leading global provider of digital satellite communications
systems that enable satellite-based broadband delivery to markets across the globe. The key elements of our strategy are:
| • |
Strengthen our Technology Leadership. We believe that our success thus far is largely attributable
to our digital silicon chip design expertise. We aim to leverage our design expertise to continue developing high-performing chips and
systems that are smaller, lighter, have lower power consumption and a lower cost, while continuing to invest in research and development
to maintain our technology leadership in this market. |
| • |
Capitalize on LEO and IFC Market Opportunities. The satellite communications market presents
significant opportunities for innovative solutions. The introduction of the new LEO satellite constellations creates the need for smaller
satellite communications systems that can handle higher speeds, larger capacity and operate with lower power consumption. Our modem and
antenna chips, as well as our satellite payload, user terminal and hub systems were developed to meet the new technological needs of the
LEO satellite constellations. New opportunities in the Aero/IFC market are emerging as the demand for “home-like” broadband
connectivity on commercial flights increases, creating the need for IFC systems that can deliver fast and reliable connectivity. By developing
our chips and systems to meet new market opportunities, we intend to expand the deployment of our next generation chips and systems.
|
| • |
Leverage and Expand our Existing Customer Base. We intend to continue to develop long-term,
collaborative relationships with top tier customers who are regarded as leaders in their respective markets. We intend to continue to
focus on sales to these customers and build on our relationships with them to define and enhance our product roadmap and expand our scope
of business with them. Engaging with market leaders will also enable us to participate in emerging technology trends and new industry
standards. |
| • |
Attract and Retain Top Talent. We are committed to recruiting and retaining talented professionals
with proven expertise in the design, development, marketing and sales of satellite communications chips and systems. We believe we have
assembled a high-quality global multinational team in all the areas of expertise required for a leading satellite communications company.
We believe that our ability to attract the best engineers is a critical component of our future growth and success. |
| • |
Expand our Global Presence. We intend to continue strengthening our relationships with our
existing customers, while also planning for increased demand as our brand recognition grows. We intend to continue expanding our presence
worldwide as we grow in our market to serve the needs of clients in additional geographies and tap into talent pools from international
markets. |
| • |
Vertical Integration- As part of our go-to-market strategy, we are working on vertical integration with leading market players. For
example, In August 2023, we announced a $60 million transaction with MDA Ltd. (“MDA”) (TSX: MDA), a leading provider of advanced
technology and services to the rapidly expanding global space industry. The MDA Agreement establishes cooperation between the companies
to utilize our digital payload chip-based technology to advanced digital satellite payloads, which the parties believe to be unparalleled
in today’s market, and is expected to open up our solutions to broader markets as well as new customers. The MDA Agreement is an
example of our strategy towards vertical integration for the space payload business. |
Our Chips and Satellite Communications Systems
Modem Chips — SX-3000/3099/4000
SX-3000/3099 v
Our SX-3000 is the first generation of modem chip we developed.
It is a VSAT modem chip, System on a Chip and an ASIC designed for ground user terminals. The SX-3000 is a core element with empowered
SDR capabilities and is compatible with the latest industry standards, such as DVB-S2X/RCS2, with a transponder throughput rate of up
to 500 Msps HTS. In addition to providing VSAT modem SDR functions, additional embedded Central Processing Units and multiple Digital
Signature Processing, the SX-3000 enables advanced features, such as fast beam- hopping, is custom designed for wide-band high throughput
satellite terminals, and is highly compatible and designed to serve as a core component in VSAT modem systems. The SX-3000 serves applications
from standard satellite broadcast to mobile satellite data terminals, and TV broadcast. The SX-3000 also includes “Over the Air”
capability, which enables firmware upgrades in the field for long term system viability and a long product life cycle with future proof
upgradability enabling future-proof systems.
Our SX-3099 VSAT modem chip is the new generation of SX-3000 that
represents an improvement over the SX-3000. SX-3099 is capable of supporting 1GHz bandwidth, up to eight instances in receive and transmit
paths, beam-hopping, and is smaller in size, consumes less power, and is lower in cost compared with the SX-3000. The beam-hopping capability
is compatible with the DVB S2X standard, which is the latest revision of the industry standard for the satellite communications systems,
written and led by our engineers and is based on our technology and patents. We believe our SX-3099 is the first and currently the only
modem chip supporting wideband channels and beam hopping. The primary target uses of our SX-3099 modem chips include ground terminals
and hubs and IFC systems.
As of December 31, 2023, we have sold approximately an aggregate
of 210,000 of our satellite communications modems (S-IDU) with our SX-3000 chips and of our SX-3000 chips on a standalone basis.
SX-4000
The SX-4000 is a highly integrated, low-power, satellite baseband
modem chip suitable for use in satellite payloads, with on-board processing, also supporting Inter-satellite Links. The chip is based
on our SX-3000 and SX-3099 modem chips and is treated with a radiation hardening process to be suitable for space usage. The radiation
hardening process used on the SX-4000 chip includes software features that are designed to reduce the occurrence of radiation-induced
errors in the operating system. The software is also designed to identify and recover from errors caused by radiation, minimizing downtime
and disconnection.
We designed our SX-4000 payload chip to meet the signal regeneration,
beam-hopping and on-board processing needs of the next generation of LEO/MEO satellite constellations and high throughput GEO satellites
using modern satellite architectures.
Antenna Chips — PRIME
and BEAT
PRIME/
PRIME 2
The PRIME chip is a commercial digital beamforming ASIC implementing
electronic steering of the beams by means of true-time delay of the electromagnetic waves received or transmitted by the antenna. Use
of the digital beamforming technology allows the antenna to handle a wide bandwidth using a large number of antennae radiating elements
and without beam squint. Each PRIME chip combines the radiation pattern from 32 antenna elements simultaneously, operates entirely in
the digital domain and could be cascaded to any size antenna. The PRIME chip can point, track and manage multiple beams at multiple polarization
angles simultaneously.
In order to address the in-orbit beamforming needs of our payload
customers, we have developed a beamformer chip called PRIME 2.0. We believe that PRIME 2.0 offers the best SWaP-C digital multi-beamforming
solution for satellite payloads on the market, capable of generating up to 128 simultaneous beams in any band up to Ka-band.
We believe our PRIME chips can reduce the number of LEO satellites
needed in a constellation and allow for larger coverage areas than possible with conventional phased arrays.
BEAT
The BEAT chip is an RFIC that includes four independent transmit
and receive channels in Ku-band, Ka-band and additional required satellite bands at any polarization. The chip includes four Power Amplifiers,
four Low Noise Amplifiers and interfaces with the PRIME chip, on one side, and directly to the antenna radiating elements that transmit
or receive the electromagnetic waves, on the other side.
Combining the PRIME and BEAT chips enables the construction of
flat antennas or even conformal antennas at any size, and each antenna can generate multiple beams to communicate with satellites in multiple
orbits at the same time. Target applications of the PRIME and BEAT chips include satellite payloads, ground user terminals, IFC and more.
Chips for Satellite Payloads
We have developed a line of chips for satellite payload systems
that can provide data throughput of many gigabits per second, are power efficient and weigh significantly less than competing solutions.
The chips for payload systems will be used in satellites providing broadband access, backhauling, mobility and other services.
Our chips for satellite payloads are designed to consist of an
OBP, our satellite ESMA powered by our PRIME 2.0 digital beamforming chip and our advanced SDR SX-4000 payload chip. Our chips for satellite
payloads are designed for LEO, MEO and GEO satellite applications and are fundamentally flexible, enabling the transmission of large amounts
of data supporting the full range of satellite communications business opportunities. Our chips for satellite payloads have a digital
regenerative onboard processing capability that enables satellite interconnectivity, separate handling of communications coming from the
ground and communications transmitted from the satellite to the ground, while ensuring more effective use of the communication bandwidth,
improving system performance. Our payload chips also support transparent modes used in more classic satellite systems.
Operators using our payload chip technology can actively move satellite
beams to direct services to customers on the ground, improving satellite efficiency and increasing the number of users served, leading
to a substantial opportunity for enhanced service and operator profitability. Additionally, the on-board processing enables more efficient
use of bandwidth and a significant improvement in system spectral efficiency, reducing the number of ground gateways required, which could
lead to a substantial reduction in operator ground segment costs.
Chips for satellite payloads must be engineered to meet the
specifications of a specific satellite and the mission for which it is destined.
In August 2023, we announced a $60 million transaction with MDA.
The MDA Agreement establishes cooperation between the companies to utilize our revolutionary digital payload chip-based technology to
advanced digital satellite payloads, which the parties believe to be unparalleled in today’s market, and is expected to open up
our solutions to broader markets as well as new customers. We have decided strategically to focus our space business on being a technology
provider to satellite payload design companies offering its unique digital multi beam forming and beam-hopping on-board-processing radiation
hardening chipsets. The transaction is a combination of a $40 million share purchase agreement, selling our holdings in SatixFy Space
Systems UK Ltd, one of our UK based subsidiaries, to MDA as well as an additional $20 million in advanced payments under new commercial
agreements which includes the previous $10 million advanced payment made in June 2023 to be applied to future orders of space grade chips.
SatixFy Space Systems was our satellite payload subsidiary expert in the development of digital satellite payloads systems and subsystems,
including digital beam forming antennas and on-board processing. digital payloads. In October 2023, we announced the completion of the
transaction with MDA. We continue to retain all its related ASIC intellectual property and new chips’ development to support the
growing market. The strategic transaction also establishes deep cooperation with MDA to utilize our revolutionary digital payload chip-based
technology for advanced digital satellite payloads and is expected to open up our solutions to broader markets and new customers. The
strategic transaction is in line with our strategy to focus on being a top leading technology provider to satellite payload design companies,
with its unique offering of multi-beam forming and beam-hopping, using its on-board-processing radiation-hardened chipsets.
User Terminals, Modems and
Antennas
User
Terminals
User terminals consist of a modem and an antenna. The following
is a description of our user terminal products, both current and under development.
Aero Onyx terminals. SatixFy’s Onyx In-Flight-Connectivity
(IFC) terminal is an all-inclusive, high-performance satellite communications Aero terminal designed for use on small to mid-size aircraft,
delivering superior in-flight connectivity. Characterized by its compact form factor, the Onyx Aero features SatixFy's cutting edge digital
beam-forming technology, along with multi-orbit connectivity capabilities. Onyx is built on SatixFy’s supreme ASIC technology, incorporating
PRIME as the antenna digital beamformer, BEAT as the antenna Ku-band RFIC, and Sx-3099 as the terminal Software Defined Radio (SDR) modem
and Antenna Control Unit (ACU.) Onyx is currently in testing and certification process, towards manufacturing of first units to be shipped
to customers and to be installed on first aircrafts at the 2nd half of 2024 and beginning of General Availability. This is a mature version
after successfully completed flight test with first prototype. Onyx is our optimal offering for the business aviation market, having smaller
platforms that usually accommodate smaller or less populated aircraft. Communicating both with Ku-band GEO and LEO networks, the Onyx
is future proof for new constellations that will soon start their services to the Aero market
Aero/IFC terminals. Our
large Aero/IFC terminal is designed to provide online broadband connectivity via multiple satellites to simultaneously support hundreds
of passengers in commercial and private flights with high performance communication. We intend to offer a commercial Aero/IFC terminal,
which is targeted at airlines operating narrow-body (single-aisle) aircrafts or wide- body (double-aisle) aircrafts. Our commercial Aero/IFC
terminals, as well as all other satellite antenna systems for commercial aircraft applications, will be offered exclusively in the commercial
aviation market through our Jet Talk joint venture with STE. In furtherance of his arrangement, we have granted an exclusive, royalty-
free, worldwide, perpetual, non-transferable, irrevocable license to certain of our intellectual property to Jet Talk for this purpose.
We have two contracts with Jet Talk, both related to the development of an Aero/IFC satellite communications terminal for commercial aircraft.
Jet Talk pays for our development services associated with these contracts with the proceeds of a $20.0 million investment by our joint
venture partner, STE.
Our large Aero/IFC terminal is designed for high reliability, low
maintenance and fast, simple installation. Our Aero/IFC terminal is equipped with our beamforming technology and is designed to enable
seamless communication with multiple LEO, MEO and/or GEO satellites to provide “home-like” broadband connectivity and streaming
capabilities to passengers. Relying on scalable technology, the terminal’s antenna arrays reaches much higher performance, providing
satellite bandwidth efficiency – a clear advantage over competition, especially in the LEO constellations market. The gained experience
and lessons learned from Onyx will be of much help for the larger Aero/IFC product performance and shortening the time for coming to the
market.
Our Aero/IFC terminal includes an embedded modem, based on our
SX-3099 chip. The modem is digitally interfaced with receive and transmit antenna arrays for high-performance data communication and is
combined with a programmable SDR.
Ground Terminals. We offer
or are developing a family of ground terminals to address a broad number of market verticals such as fixed (e.g., direct-to-home, etc.)
and mobile (e.g., public transport, etc.) broadband applications.
We are also developing a direct-to-home broadband user terminal
in connection with our ESA-sponsored project with OneWeb, which is designed as a low-cost user terminal variant that we believe can be
the lowest-cost ESMA on the market, providing large data transfer rates and low latency via LEO constellation operators. We expect that
this user terminal will be capable of delivering speeds greater than 100 Mbps at a very competitive price point.
Hubs and Gateways. We offer
our Shepherd managed communications system, known as a hub, which serves as a smart satellite resource manager that uses a common forward
channel to transmit data and allows our customers to monitor and manage advanced terminals in their networks. We also offer gateway modem
products based on our SX-3099 modem chips, supporting high-capacity links and beam-hopping with reduced power consumption and cell size.
Modems
The following is a description of our modem products, both current
and under development.
We have developed our modems based on our proprietary SX-3000 and
SX-3099 VSAT chips, a part of our ASIC technology and one of the base building blocks for all our terminal products. We produce modem
modules designed to bring the fastest performance available today in a compact form factor and with low power. All of our modems are designed
for easy integration with our customers’ hardware and software solutions and are available for a variety of applications. Our modems
are designed to natively support the entire DVC-RCS2 / DVB-S2X industry standards, as well as a complete SDR for any other waveform, to
ensure maximum flexibility and relevance to our customer base.
As part of our current strategy, we have decided to pause development
and marketing related to our ToM product in order to continue to focus on our other satellite communications chips and products described
herein.S-IDU. The S-IDU, our first product to market, is a VSAT modem enabling satellite communications
based on our SDR modem chips. The unit, which is marketed mainly to enterprise users of satellite communications services, provides base
VSAT capabilities with advanced features for end-user enterprises and satellite communications service providers, and is designed to provide
a complete communication solution. Satellite communications service providers can port their existing software stack to our S-IDU to benefit
from affordable and advanced features.
The S-IDU is based on a SDR approach and supports the latest DVB-S2X
and DVB-RCS2 standards. It is also designed to support beam-hopping, enabling migration to the next generation of satellite systems.
To date, we have sold over approximately an aggregate of 210,000
units of our S-IDU modems based on our SX-3000 chip and of our SX-3000 chips on a standalone basis.
Antennas
Our ESMA is designed for fixed and mobile applications and is able
to receive from, and transmit data to, existing Ku-band LEO, MEO and GEO satellites. The ESMA is based on our developed family of PRIME
and BEAT antenna chips. The basic unit of the ESMA is comprised of one PRIME chip and multiple BEAT chips. The units are then integrated
into an antenna module of 32 radiating elements, which are then cascaded into anywhere from 64 to thousands of antenna elements and can
serve various applications, including as a building block for larger sized antennas or Aero/IFC systems.
We are currently developing an ESMA with a new RFIC to receive
data from and transmit data to Ka-band LEO, MEO and GEO satellites. Our ESMA can handle a number of beams and can switch between LEO,
MEO and GEO satellites in microseconds. ESMA supports acquisition and tracking capabilities from multiple beams at multiple polarizations
and can be integrated with our SDR modem chip to provide a full terminal solution or with the SX-4000 chip to provide a full satellite
payload solution.
The ESMA can also be integrated with external modems produced by
other vendors to operate on their own ecosystems.
Manufacturing and Raw Materials
We are a fabless chip manufacturer, and as such we manufacture
our chips under contract with a fab manufacturer. After the manufacturing stage, the chips are then cut, packaged and tested by service
providers that we have arrangements with for each of our chip lines. Additionally, we have a relationship with a leading supplier of software
development tools to support the design, development, simulation and verification of new chip enhancements.
We currently rely on a small number of third parties for a substantial
amount of our chip manufacturing and system assembly operations, and for electronic components and chip development software. Currently,
the majority of our chips are supplied by a single foundry, GlobalFoundries, on a purchase order-by-purchase order basis and we purchase
chip development software and software libraries from a limited number of providers, such as Cadence Design Systems, Inc. and Siemens
AG. We currently do not have long term supply contracts with most of our other third-party vendors, and we negotiate pricing with our
main vendors on a purchase order-by-purchase order basis. The majority of our chips are designed to be compatible with the manufacturing
processes and equipment employed by GlobalFoundries and switching to a new foundry vendor for these chips may require significant cost
and time. Additionally, we may establish additional foundry and other vendor relationships as such arrangements become economically useful
or technically necessary.
For our communications systems, which consist primarily of a printed circuit board (“PCB”),
chips and other electronic components, we have arrangements with third-party manufacturers to produce our PCBs, and we source electronic
components and other parts that comprise the non-chip components of our systems from a variety of suppliers. Additionally, we outsource
the assembly of our systems to third-party service providers. While most of the electronic components used for our communications systems
are commoditized, the subassemblies and other necessary services for the production of our communications systems are obtained from a
limited group of suppliers. If one or more of these vendors terminates its relationship with us, or if they fail to produce and deliver
our products or provide services according to our requested demands in specification, quantity, cost and time, our ability to ship our
chips or satellite communication systems to our customers on time and in the quantity required could be adversely affected, which in turn
could cause an unanticipated decline in our sales and damage our customer relationships. See “Item
3. Key Information— D. Risk Factors— Risks Related to SatixFy’s Business, Operations and Industry — We rely on
third parties for manufacturing of our chips and other satellite communications system components. We rely on third parties for the manufacturing
of our chips and other satellite communications system components. We do not have long-term supply contracts with our foundry or most
of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands
for our solutions.” and “ — Risks Related to SatixFy’s Business, Operations
and Industry — We rely on a third-party vendor to supply chip development software to us for the development of our new chips and
satellite communications systems, and we may be unable to obtain the tools necessary to develop or enhance new or existing chips or satellite
communications products.”
Our engineers work closely with our contractors to increase yield,
lower manufacturing costs and improve product quality. Our production objective is to produce systems that conform to customer and industry
specifications at a competitive production and customer cost. To achieve this objective, we primarily utilize a range of sub-contractors
that are selected based on the production volumes and complexity of the product.
The current global shortage in semiconductor and electronic components,
resulting mainly from macro trends such as strong demand for 5G devices and high performance computing, as well as an effect on supply
chain resulting from the Russia-Ukraine and Israel-Hamas wars, has resulted in increases in the prices we pay for the manufacturing of
our chips and assemblies, disruptions in our supply chain and disruptions in the operations of our suppliers and customers. These disruptions
have resulted in disruptions and delays in our development work and in delays in delivering our systems and products. In response to these
challenges, we have implemented mitigation strategies, such as procurement planning, purchasing widely-available components based on regularly
updated assessments of demand, while seeking longer-term supplier relationships and higher volume, longer-term orders for scarce components
and materials. In the future, industry supply chain challenges may also be exacerbated and the demand for our products may be adversely
affected as a result of the indirect effects of the Russia-Ukraine war, related sanctions or their impacts on global and regional economies.
See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business,
Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with
volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations.”
Sales and Marketing
Sales
Our experienced executives lead our sales activities and are responsible
for our overall market and business development. Our sales cycle is long and usually lasts between one-to-two years from identifying potential
customer needs, defining product specification and proof of concept to production of our final product in large numbers. We have three
dedicated global sales teams, one based out of Israel and two based out of the UK, each of which is specialized in one or more of our
key targeted product markets.
Our engineers interact with customers during all stages of design
and production, maintain regular contact with customer engineers and provide technical support. We maintain close relationships with our
customers and provide them with post-sale technical support until the stage in which the customer assumes full responsibility for such
product’s support.
We generated $10.7 million, $10.6 million, and $21.7 million
in revenues 2023, 2022 and 2021, respectively, of which approximately 64%, 85% and 49%, respectively, was attributable to U.K.-based
operations and the remaining revenues were attributable to Israel-based operations.
Marketing
Our marketing strategy is focused on promoting brand awareness
through differentiated positioning, messaging and pronounced leadership. We achieve this by communicating our product advantages and business
benefits and promoting our brand.
Our marketing team focuses on increasing the awareness of the SatixFy
brand through public relations, advertising, trade show participation and conference speaking engagements that inform the market on our
current systems. Our marketing efforts include identifying and sizing new market opportunities for our systems, creating awareness of
our company and systems, and generating contacts and leads within these targeted markets.
In addition, in connection with our Jet Talk joint venture, which
has the exclusive right to sell our Aero/ IFC terminals to the commercial aviation market, we expect to benefit from STE’s marketing
resources and experience in the aerospace industry.
Our Customers and Potential Revenue Pipeline
We design, develop, produce and market our modem and antenna chips
and our systems to leading international companies such as operators of LEO, MEO and GEO communication satellites, manufacturers in the
fields of Aero/ IFC systems and satellite communications systems’ manufacturers.
The structure of our contracts with customers varies based on the
needs and preferences of our individual customers. For example, while we may enter into agreements with some customers that cover the
whole life cycle of a project, from the definition of requirements to the development and delivery of a system, at the outset of the engagement,
other customers may prefer a phased approach, placing a contract with us for an initial product demonstration, followed by a second phase
for the delivery of a commercial- ready product. Accordingly, the length and nature of our contracts vary across our customer base.
We are focused on attracting new customers and expanding our relationships
and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and systems
that make our offerings compatible with the latest advances in satellite-enabled communication. We actively track our customer relationships,
including by monitoring progress under our committed contracts and our prospective customer relationships. While our contracts are typically
terminable by us or our customers upon prior notice, once our tailor-made systems are embedded in a customer’s satellite constellation
or communication infrastructure, the costs of switching to a different provider could often be substantial.
A significant portion of our net revenue has historically been generated by a limited
number of customers. Our three largest customers accounted for, in the aggregate, approximately 77% and 78 % of our total revenue for
the years ended December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023, we had binding contracts with five customers
under which we recorded revenues in 2023, or expect to record future revenues. See “Item 3. Key
Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We generate a significant
percentage of our revenue from certain key customers, and anticipate this concentration will continue for the foreseeable future, and
the loss of one or more of our key customers could negatively affect our business and operating results..”
Backlog and Potential Revenue Pipeline
As of December 31, 2023, we had signed revenue contracts representing
backlog of approximately $59 million. Our backlog consists of estimated revenue pursuant to customer orders and signed contracts. Our
customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach our
contracts, and most of our customer contracts are terminable upon prior notice to us, without penalty. There is no assurance that we will
be able to expand our customer relationships, and therefore our backlog, or that our backlog will translate into revenue or cash flows.
Additionally, we previously reported estimates of our potential
future revenue pipeline, however, due to the cessation or narrowing of negotiations of new contracts with existing and prospective customers,
our potential revenue pipeline is uncertain and we do not plan to report this metric in future periods unless and until these circumstances
change, as such pipeline information would be of limited utility to investors.
Research and Development
As of December 31, 2023 we had a team of over 120 engineers supporting
our mission to innovate the satellite communications industry, including hardware and software engineers (20), very large scale integration
(“VLSI”) engineers (40), product and antenna engineers (50), and algorithms, system engineers and satellite payload
engineers (10). Continued investment in research and development is critical to our business. We conduct our R&D across centers in
Israel, the United Kingdom and Bulgaria. By spreading our R&D team across multiple locations, we increase our access to highly skilled
engineering talent, which we believe provides us with opportunities for evolution and growth.
Our R&D efforts focus primarily on developing new chips, systems
and technologies, as well as improving our existing systems with additional innovative features and functionality. For example, based
on our SX-3099 chip, we developed the SX-4000 chip to be used in space by applying a radiation hardening process. The development of modem
and antenna chips requires us to improve the performance, size, power consumption, product roadmap, resilience and cost of our chips.
We combine technologies, such as beamforming, beam-hopping and silicon development processes with our proprietary design methods, intellectual
property and our expertise to develop new technologies and advanced systems. To date, our R&D efforts have yielded, in addition to
our proprietary chips, satellite-capable modems that are in production and several products, including satellite payloads, Aero/IFC terminals
and ground terminals and hubs, that are in late stage development or nearing the prototype phase.
Our research and development expenses were $33.4 and $29.1 million in 2023 and 2022,
respectively, before the deduction of R&D grants. Since we commenced operations in 2012, we have invested over $243 million in R&D.
We conduct our R&D across centers in Israel, the United Kingdom and Bulgaria. By spreading our research and development team across
multiple locations, we increase our access to highly skilled engineering talent, which we believe provides us with opportunities for evolution
and growth.
We have received significant research and development funding from
ESA, with the support of the UKSA, through its ARTES program since establishing and growing a presence in the U.K. in 2016. We have won
multiple contracts with ESA, including as a subcontractor to leading satellite communications companies, and through December 31, 2023
have obtained over $77.5 million in grants from the ESA and $6.3 million in other forms of funding from the IIA. These development contracts
span the full range of our product portfolio, including our PRIME, BEAT, SX-3099, SX-4000 payload, Ka-band Aero/IFC terminal and the development
of OneWeb’s consumer user terminal and payload prototype currently expected to be delivered to the customer in the second half of
2023. In connection with the ESA grants, which are intended to fund 50%-75% of the cost of development and manufacturing of the integrated
chip sets and the communications systems, our agreement stipulates that the resulting intellectual property will be available to ESA on
a free, worldwide license for its own requirements. In addition, ESA can require us to license the intellectual property to certain bodies
that are part of specified ESA programs, for ESA’s own requirements on acceptable commercial terms, and can also require us to license
the intellectual property to any other third party for purposes other than ESA’s requirements, subject to our approval that such
other purposes do not contradict our commercial interests.
Competition
The satellite communications industry is competitive and characterized
by rapid advances in technology, new product introductions, high levels of investment in R&D and high costs associated with generating
marketable systems. Our competitiveness depends on our ability to develop and launch systems superior in performance and SWaP-C than our
competitors and our ability to anticipate and adjust to changes in our customers’ requirements. The competition in the satellite
communications market focuses primarily on performance, size, power consumption, product roadmap resilience and cost. We believe that
we compete favorably as measured against these criteria. Our customers’ selection process is highly competitive, and there are no
guarantees that our systems will be included in the next generation of our customers’ systems.
We compete with many major chip and satellite communications system
manufacturers that currently, or may in the future, develop satellite-specific communication technology, as well as smaller niche companies
that produce systems or chips that compete with our individual offerings on a product-by-product basis. Additionally, in the future we
may compete with telecommunication-based connectivity providers as 5G broadband coverage increases. We compete in different product lines
to various degrees on the basis of price, technical performance, product features, product system compatibility, customized design, availability,
quality, and sales and technical support. In particular, standard systems may involve greater risk of competitive pricing, inventory imbalances
and severe market fluctuations than differentiated systems.
Many of our current and potential competitors have existing customer
relationships, established patents and other intellectual property, and substantial technological capabilities. In some cases, our competitors
are also our customers or suppliers. Some of our competitors have recently introduced products with more advanced technologies than in
the past, which increases competition with our products. Additionally, many of our competitors may have significantly greater financial,
technical, manufacturing and marketing resources than we do, which may allow them to implement new technologies and develop new systems
more quickly than we can. For further information, see “Item 3. Key Information — D. Risk
Factors — Risks Related to SatixFy’s Business, Operations and Industry — We operate in a highly competitive industry
and may be unsuccessful in effectively competing in the future.”
Intellectual Property
We seek to establish and maintain our intellectual property and
proprietary rights in our technology and systems through a combination of patent, trademark, copyright and trade secret laws, as well
as contractual rights and confidentiality obligations. We seek to maintain the confidentiality of our trade secrets and confidential information
through nondisclosure policies, the use of appropriate confidentiality agreements and other security measures. We have registered a number
of patents worldwide and have a number of patent applications pending determination, including provisional patent applications for which
we are considering whether to file a non-provisional patent application.
As of March 28, 2024, we owned approximately 46 issued patents
and 20 pending patent applications, including provisional and Patent Cooperation Treaty applications, across the United States, the United
Kingdom, Europeand Israel. Our issued patents and pending patent applications cover, among other things, our satellite communications
systems, ESMA technology, beam-hopping, satellite payload technology and a broad array of applications from aero mechanics and cooling
to mechanical design, digital design and software verification. As part of the MDA Agreement, we granted MDA a non-exclusive license to
certain of our intellectual property related to digital payloads. Certain of our affiliates and MDA also entered into a Three-Party Escrow
Service Agreement (the “Escrow Service Agreements”) and a License Agreement (the “License Agreement”) pursuant
to which certain SatixFy intellectual property with respect to certain of our space grade chips is to placed into escrow for the benefit
of MDA and released to MDA for its use of the licensed intellectual property (including without limitation principally the right to complete
the development of certain space grade chips and incorporate it in its payload products), or otherwise under the License Agreement,
There can be no assurance that our patent rights can be successfully
enforced against competitive systems in any particular jurisdiction. Although we believe the protection afforded by our intellectual property
portfolio (including our patents and trade secrets) and confidentiality agreements has value, the rapidly changing technology in the satellite
communications industry and uncertainties in the legal process make our future success dependent primarily on the innovative skills, technological
expertise and management abilities of our personnel, rather than on the protections afforded by our intellectual property portfolio and
contractual rights. Accordingly, while these legal protections are important, they must be supported by other factors, such as the expanding
knowledge, ability and experience of our personnel and the continued development of new systems and product enhancements.
Certain of our systems include software or other intellectual property
licensed from third parties.
While it may be necessary in the future to seek new licenses or
to renew existing licenses relating to various elements of the technology we use to develop these systems or our future systems, we believe,
based upon past experience and standard industry practice, that such licenses generally could be obtained on commercially reasonable terms.
Nonetheless, there can be no assurance that such licenses would be available on commercially reasonable terms, if at all.
The industries in which we compete are characterized by rapidly
changing technologies, a large number of patents, and claims and related litigation regarding patent and other intellectual property rights.
We cannot ensure that our patents and other intellectual property and proprietary rights will not be challenged, invalidated or circumvented,
that others will not assert that we have infringed, misappropriated or otherwise violated their intellectual property rights, or that
our rights will give us a competitive advantage. In addition, the laws of some foreign countries may not adequately protect our systems
or intellectual property or proprietary rights.
For further information, see “Item
3. Key Information — D. Risk Factors— Risks Related to Intellectual Property, Information Technology, Data Privacy and Cybersecurity.”
Grants from the Israel Innovation Authority
We have received grants in an aggregate amount of $6.3 million,
from the government of Israel through the IIA for the financing of our research and development expenditures in Israel. As a recipient
of grants, we are subject to certain obligations and restrictions under the Innovation Law, including the following:
Royalty payment obligations:
We are obligated to pay the IIA royalties from the revenues generated from the sale of products (and related services) developed, directly
or indirectly, as a result of the Approved Programs, or deriving therefrom, at rates which are determined under the Innovation Law (currently
a yearly rate of between 3% to 5% on sales of products or services developed under the Approved Programs), up to the aggregate amount
of the total grants received by the IIA, plus annual interest based on the 12-month LIBOR. Until October 25, 2023, the interest was calculated
at a rate based on 12-month LIBOR applicable to US Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning
changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January
1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR,
or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the
annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.
Reporting obligations: We
are subject to periodic and event-based reporting obligations, and, among other requirements, must report to the IIA regarding any change
of control in Satixfy or regarding any change in the holding of the means of control of Satixfy which results in any non-Israeli citizen
or entity becoming an “interested party,” as defined in the Innovation Law, in the company. In the latter case, the non-Israeli
citizen or entity will also be required to execute an undertaking, in a form prescribed by IIA, acknowledging the restrictions imposed
by the Innovation Law and agreeing to abide by its terms.
IIA Funded Know-How transfer restrictions:
IIA Funded Know-How may not be transferred outside of Israel except under limited circumstances, and only with the approval of
the IIA and in certain circumstances, subject to the payment to the IIA of a redemption fee calculated in accordance with the Innovation
Law (generally capped at six times the grants received (dollar linked) plus interest). A “transfer” for the purpose of the
Innovation Law means a sale of the IIA Funded Know-How or any other transaction which in essence constitutes a transfer of such know-how
(for example, grant of an exclusive license to a non-Israeli entity for R&D purposes which precludes the grant recipient from further
using the IIA Funded Know-How). The calculation of the amount due to the IIA in the event of the transfer of IIA Funded Know-How outside
of Israel will take into consideration the amounts received from the IIA, the royalties that have already paid to the IIA, the amount
of time that has elapsed between the date on which the IIA Funded Know-How was transferred and the date on which the IIA grants were received,
the sale price and the form of transaction. Upon payment of such redemption fee, the IIA Funded Know-How and the manufacturing rights
of the products supported by such IIA funding cease to be subject to the Innovation Law. An IIA grant recipient may transfer IIA Funded
Know-How to another Israeli entity subject to the IIA’s prior approval. Such transfer will not be subject to the payment of a redemption
fee but the grant recipient will be required to pay royalties to the IIA from the proceeds of such transaction as part of the royalty
payment obligation.
Local manufacturing obligations:
Products developed using the IIA grants must, as a general matter, be manufactured in Israel. The IIA grant recipient is prohibited
from manufacturing products developed with IIA grants outside of the State of Israel without receiving prior approval from the IIA (except
for the transfer of less than 10% of the manufacturing capacity in the aggregate which only requires submitting a notice following which
the IIA has a right, within 30 days following the receipt of such notice, to deny the transfer of manufacturing). If approval to manufacture
products developed with IIA grants outside of Israel is received, the grant recipient will be generally required to pay increased royalties
to the IIA, up to 300% of the grant amount plus interest at annual rate, depending on the manufacturing volume that is performed outside
of Israel. The grant recipient may also be subject to an accelerated royalty repayment rate as defined under the Innovation Law. The grant
recipient also has the option to declare in its original IIA grant application its intention to perform a portion of the manufacturing
capacity outside of Israel, thus avoiding the need to obtain additional approval and to pay the increased royalty amount. The company
has declared in all of its IIA grant applications its intention to perform between 70% – 95% of the manufacturing capacity outside
of Israel. This requires the payment of royalties at an accelerated rate.
IIA Funded Know-How license restrictions:
The grant of a license to use the IIA Funded Know-How (which does not amount to a “transfer”) to a non-Israeli licensee
is subject to the IIA’s prior approval and the payment of license fees calculated in accordance with the Innovation Law (such fee
shall be no less than the amount of the IIA grants received (plus annual interest), and no more than six times the grants received (dollar
linked) plus interest and will generally be due only upon the receipt of the license fee from the licensee).
For further information, see “Item
3. Key Information — D. Risk Factors — Risks Related to Litigation, Laws and Regulation and Governmental Matters.”
Regulatory Environment
Our customers are subject to certain laws and regulations with
regard to the performance of their communications systems. Therefore, our systems must comply with their applicable requirements. We are
subject to export control laws and regulations, and trade and economic sanctions laws and regulations, with respect to the export of such
systems and equipment. For further information, see “Item 3. Key Information — D. Risk Factors
— Risks Related to Litigation, Laws and Regulation and Governmental Matters.”
Product Testing and Verification
Certain equipment and systems manufactured by our customers must
comply with applicable technical requirements intended to minimize radio interference to other communication services and ensure product
safety. In the United States, the Federal Communications Commission is responsible for ensuring that communication devices comply with
technical requirements for minimizing radio interference and human exposure to radio emissions. Other regulators, mainly in our European
markets, perform similar functions of publishing and enforcing their own requirements. These requirements flow down as technical requirements
from our customers to the technical specifications of our systems with which we must comply. The systems we deliver to our customers are
tested either by us or by a private testing organization to ensure compliance with all applicable technical requirements, and such testing
is backed up with a compliance certification as part of the delivery process.
Export Controls
Due to the nature and classification of our communications systems,
we must comply with applicable export control regulations in the countries from which we export our systems. These regulations often require
obtaining export licenses from local governments for the export of our systems, which could increase our costs. Failure to comply with
these regulations could result in substantial harm to the company, including fines, penalties and the forfeiture of future rights to sell
or export these systems.
Data Privacy and Cybersecurity
In the ordinary course of our business, we collect, use, transfer,
store, maintain and otherwise process certain sensitive and other personal information regarding our employees, customers and service
providers that is subject to complex and evolving laws, regulations, rules, and standards regarding data privacy and cybersecurity. Internationally,
many jurisdictions have established their own data privacy and cybersecurity legal frameworks with which we may need to comply. For example,
in the European Union the GDPR requires covered businesses to comply with rules regarding the processing of personal data, including its
use, protection and the ability of persons whose personal data is processed to access, to correct or delete personal data about themselves.
Failure to meet GDPR requirements could result in penalties of up to 4% of annual worldwide turnover or EUR 20 million (UK£17.5 million)
(whichever is the greater). Additionally, in the U.K., the U.K. GDPR (i.e., a version of the GDPR as implemented into U.K. law) is in
effect. The GDPR and the U.K. GDPR include certain limitations and stringent obligations with respect to the transfer of personal data
from the EU and the U.K. to certain third countries (including the United States).
At the U.S. federal level, we are subject to the rules and regulations
promulgated under the authority of the Federal Trade Commission, which regulates unfair or deceptive acts or practices, including with
respect to data privacy and cybersecurity. Moreover, the United States Congress has recently considered, and is currently considering,
various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed. Data privacy
and cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to various state
laws and regulations regarding data privacy and cybersecurity. For example, the CCPA applies to for-profit businesses that conduct business
in California and meet certain revenue or data collection thresholds.
Other states where we do business, or may in the future do business,
or from which we otherwise collect, or may in the future otherwise collect, personal information of residents have enacted or are considering
enacting similar laws, with laws in four such states (Virginia, Colorado, Connecticut and Utah) having taken effect or scheduled to take
effect in 2024. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to
consumers whose personal information has been disclosed as a result of a data breach.
Any failure or perceived or inadvertent failure by us to comply
with existing or new laws, regulations, rules, and standards regarding data privacy or cybersecurity could harm our reputation, distract
our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products, and ultimately
result in the imposition of liability. For further information, see “Item 3. Key Information —
D. Risk Factors — We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding
data privacy and cybersecurity, which can increase the cost of doing business, compliance risks and potential liability.”
| D. |
Organizational Structure |
SatixFy Communications Ltd. is the parent company of the SatixFy corporate group, which
has five wholly owned subsidiaries, including: (1) SatixFy Israel Ltd., which is incorporated in Israel; (2) SatixFy UK Limited, which
is incorporated in the United Kingdom; (3) SatixFy Bulgaria Ltd., which is incorporated in Bulgaria, (4) SatixFy US LLC, which is incorporated
in Delaware, United States; (5) Endurance Acquisition Corporation, a Cayman Islands exempted company; and one partially owned subsidiary
(6) Jet-Talk Limited, which is incorporated in the United Kingdom.
Property, Plants and Equipment
Our corporate headquarters is located in Rehovot, Israel, which
also serves as VLSI R&D and Operations Center and which comprises 2,409 square meters. We also have one design center in the United
Kingdom, which comprises 1,668 square meters, one design center in Bulgaria, which comprises 966 square meters and one center in
the United States that comprises 140 square meters. The one U.K. location serves as the R&D and operations center for our hardware,
software and test teams, and the Bulgaria center is where we employ our antenna development team.
We lease all of our facilities. Our headquarters facility lease
currently expires in May 2028. We believe our facilities are sufficient to meet our current needs and anticipate that suitable additional
space will be readily available to accommodate any foreseeable expansion of our operations.
ITEM 4A. UNRESOLVED
STAFF COMMENTS
Not applicable.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and
analysis of our financial condition and results of operations together with SatixFy’s consolidated financial statements and the
related notes thereto appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis, including
information with respect to SatixFy’s plans and strategy for SatixFy’s business, includes forward-looking statements that
involve risks and uncertainties. As a result of many factors, including those factors set forth in “Item 3. Key Information –
D. Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” SatixFy’s actual results could
differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and
analysis. Our discussion and analysis for the year ended December 31, 2022 compared to December 31, 2021 can be found in our annual report
on Form 20-F for the fiscal year ended December 31, 2022, filed with the SEC on May 1, 2023.
Overview
We are a vertically integrated satellite communications systems
provider using our own semiconductors, focused on designing chips and systems that serve the entire satellite communications value chain
— from the satellite payload to user terminals. We create chip technologies capable of enabling satellite-based broadband delivery
to markets around the world. Since we commenced operations in June 2012, through December 31, 2023 we have invested over $243 million
in R&D to create what we believe are the most advanced satellite communications and ground terminal chips in the world.
We develop advanced ASICs and RFICs based on technology designed
to meet the requirements of a variety of satellite communications applications, mainly for LEO, MEO and GEO satellite communications systems,
Aero/IFC systems and certain COTM applications. Our chip technology supports ESMA, digital beamforming and beam-hopping, on-board processing
for payloads and SDR modems — each of which will be critical for providing optimized access to LEO satellite constellations.
We believe we are the only vertically integrated maker of satellite
communications systems selling products across the entire satellite communications value chain. All of our systems integrate our proprietary
semiconductor chips, of which we are a fabless manufacturer. We design our chips, code our software and design end-to-end communications
systems for use in various satellite communications applications.
Our end-to-end solutions for the satellite communications industry
include satellite payloads, user terminals (ground and Aero/IFC) and hubs, each built around our advanced ASICs and RFICs. We have a diverse
customer base in terms of types of customers, including satellite operators, airlines, manufacturers of satellite communications systems,
and other connectivity service providers that integrate our chips and systems in their satellite communications infrastructure. We believe
that our modular, scalable and software controllable technology, our focus on producing products for the entire satellite communications
value chain and our ability and experience in designing our systems to meet our customers’ specifications, differentiate us from
our competitors.
Our Revenue Model and Prospects
We seek to provide end-to-end solutions for the satellite communications
industry, driven by our proprietary chip technology, which we believe allow us to develop and provide satellite communications systems
that have higher system processing capacities and throughputs and that are lighter in weight, consume less power and are lower in cost
than competing systems. In most cases, our systems must be tailored to our customers’ specifications. A typical system development
life cycle starts with an assessment of the customer’s needs and specifications, is followed by the design of a communications system
based on those specifications and the integration of our proprietary chips, and culminates in the delivery of the final product to the
customer.
The structure of our contracts with customers varies based on the
needs and preferences of our individual customers. For example, while we may enter into agreements with some customers that cover the
whole life cycle of a project from the definition of requirements to the development and delivery of a system, at the outset of the engagement,
other customers may prefer a phased approach, placing a contract with us for an initial product demonstration, followed by a second phase
for the delivery of a commercial-ready product. Accordingly, the length and nature of our contracts vary across our customer base. We
are an early-stage company and, to date, a substantial portion of our revenues has been derived from relatively few customers.
We recorded $10.7 million and $10.6 million in revenues for the
years ended December 31, 2023 and 2022, respectively. To date, most of our customer contracts have covered the early phases of satellite
communications system development, typically requiring our R&D personnel to team with our customers on the development of system specifications.
Accordingly, over the last three years, most of our customer revenues have related to these phases of product development, and have been
recorded under “development services and preproduction,” which accounted for approximately 77% and 95% of our total revenues
in the years ended December 31, 2023 and 2022, respectively. Our revenues from sales of products have related mainly to sales of modems
and chips, which amounted to $2.5 million and $0.5 million in the years ended December 31, 2023 and 2022, respectively. Ongoing macro-level
events and supply-chain constraints across the satellite industry have resulted in order delays and project cancellations by certain of
our current and prospective customers, which we expect will continue to impact our business in the near term.
Our three largest customers accounted for, in the aggregate, approximately
77% and 78%, of our revenues in the years ended December 31, 2023 and 2022, respectively . See “— Principal
Components of Our Results of Operations — Share in the loss of a company accounted by equity method, net” below.
We have two commercial contracts with Jet Talk, both related to
the development of an Aero/IFC satellite communications terminal for commercial aircraft, which under our joint venture agreement Jet
Talk will have the exclusive right to commercialize and sell. Jet Talk pays for the development services associated with these contracts
with the proceeds of a $20.0 million investment by our joint venture partner, STE. We believe our partnership with STE, which under our
joint venture contributes to Jet Talk’s funding and its marketing and other activities, will allow us to benefit from STE’s
resources, commercial aviation industry expertise and strong presence in East Asia, thus providing us with an added advantage in commercializing
our Aero/IFC satellite communications terminals, once their development is complete.
Jet Talk did not generate any revenue in 2023 and is not expected
to generate material revenue until at least 2024. Once we complete the development of and are able to commercialize our Aero/IFC satellite
communications terminal product, the revenues and margins attributable to such sales will not be fully reflected in our consolidated financial
statements, which will instead reflect revenue from our sales of products and services to Jet Talk on a contract basis (which we expect
Jet Talk to sell to end-users in the commercial aviation market) and our equity in Jet Talk’s net income or loss for each reporting
period. Accordingly, our consolidated statements of operations for future periods may not fully reflect the underlying revenues and margins
of our future IFC/Aero terminals business. See Note 7 to SatixFy’s consolidated financial statements included elsewhere in this
Annual Report.
Our mix of revenue has begun to gradually shift to sales of products
since the end of 2023 and we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products
and begin to deliver satellite communications systems at scale. Our ability to generate revenue and profits is subject to numerous contingencies
and uncertainties, including those discussed below under “— Key Factors and Trends Affecting
our Performance” and “Item 5. Operating and Financial Review and Prospects Liquidity
and Capital Resources” and in “Item 3. – D. Risk Factors.”
Key Factors and Trends Affecting our Performance
We believe that our performance and future success depend on several
factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section
titled “Item 3.D.—Risk Factors.”
Expanding our Customer Base and Relationships
We are focused on attracting new customers and expanding our relationships
and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and products
that make our offerings compatible with the latest advances in satellite-enabled communications. As of December 31, 2023, we had binding
contracts with our 12 customers under which we recorded revenues in the 2023 or in 2022, or expect to record future revenues. Ongoing
business developments discussed elsewhere in this Annual Report continue to impact our customer base and plans for expansion.
Backlog
As of December 31, 2023, we had signed contracts representing revenue
backlog of approximately $59 million. Our backlog consists of estimated revenue pursuant to customer orders and signed contracts. Our
customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach our
contracts and most of our customer contracts are terminable upon prior notice to us, without penalty. There is no assurance that we will
be able to expand our customer relationships with existing customers, and therefore our backlog, or that our backlog will translate into
revenue or cash flows. See “Item 3.D. Risk Factors – Amounts included in backlog may not
result in actual revenue and are an uncertain indicator of our future earnings.
Development of New Products
Since commencing operations in 2012, we have invested a total of approximately $243
million in R&D as of December 31, 2023, a portion of which has been defrayed by government and public entity grants (recognized in
our statement of operations as reductions in research and development expenses). To date, we have received over $77.5 million in grants
from the ESA, sponsored by the UKSA, and over $6.3 million in grants from the IIA. Our net research and development expenses amounted
to $29.1 million and $16.8 million in the years ended December 31, 2023 and 2022, respectively. Our gross R&D spend, exclusive of
the impact of offsetting government and public entity grants, amounted to $33.4 million and $29.1 million in 2023 and 2022, respectively.
In some cases, such as with grants from the IIA, we are required to repay a portion of the grants at a future date in the form of a royalty
on the sales of products developed with the assistance of such grants. See “Item 5. Operating and
Financial Review and Prospects Liquidity and Capital Resources—Commitments." Our R&D efforts also benefit from our experience
on customer projects, including collaborations with leading companies in the satellite communications industry. We have generated $8.2
million and $10.1 million in revenues from the provision of R&D services (recorded under “Development services and preproduction”
in our statements of income) in the years ended December 31, 2023 and 2022, respectively, while maintaining ownership of our intellectual
property developed in connection with such projects and licensing such intellectual property to our customers.
Market Trends and Uncertainties
The markets in which our customers operate, including the satellite payloads, ground
terminals and IFC markets, are characterized by increasingly rapid technological changes, product obsolescence, competitive pricing pressures,
evolving standards and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform
changes that may render our products obsolete and require us to devote significant additional R&D resources to compete effectively.
We believe we have a significant opportunity ahead of us, with an aggregate TAM across our key markets that is expected to reach approximately
$18 to $22 billion by the end of the current decade (see “Item 4. Information on the Company —
B. Business — Market Opportunity”). However, we have no control over market demand and there is no assurance that we
will be successful in capturing a substantial portion of the TAM, and our ability to do so will be contingent on numerous factors, including
developments in the satellite communications industry and geopolitical and macroeconomic conditions and our ability to meet demand, to
overcome chip supply shortages and other supply chain capacity challenges, among others. See “Item
3. Key Information - D. Risk Factors — Our estimates, including market opportunity estimates and market growth forecasts, are subject
to inherent challenges in measurement and significant uncertainty, and real or perceived inaccuracies in those metrics and estimates may
harm our reputation and negatively affect our business..”
Our revenues amounted to $10.7 million and $10.6 million in the years ended December
31, 2023, and 2022, while our net losses amounted to $29.7 million. We had an accumulated deficit (i.e., negative retained earnings)
of $511 million as of December 31, 2023 (mostly derived from $333 million non-recurring listing expenses in 2022) . There is no assurance
that we will achieve profitability in the near future, if at all, and may require additional funding to support our continuing operations,
fund our R&D and capital expenditure requirements and service our debt obligations. See “— Liquidity
and Capital Resources” below for more information.
We currently rely on third parties for a substantial amount of
our chip manufacturing and system assembly operations, and for assemblies and chip development software. The majority of our chips are
supplied by a single foundry, GlobalFoundries, and we purchase chip development software and software libraries from a limited number
of providers, such as Cadence Design Systems, Inc. and Siemens. The majority of our chips are designed to be compatible with the manufacturing
processes and equipment employed by GlobalFoundries and switching to a new foundry vendor for these chips may require significant cost
and time. The current global shortage in semiconductor and related electronic components and assemblies, resulting mainly from macro trends
such as strong demand for 5G devices and high-performance computing has resulted in increases in the prices we pay for the manufacturing
of our chips and assemblies, disruptions in our supply chain and disruptions in the operations of our suppliers and customers. If one
or more of our vendors terminates its relationship with us, or if they fail to produce and deliver our products or provide services according
to our requested demands in specification, quantity, cost and time, our ability to ship our chips or satellite communications systems
to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline
in our sales and damage our customer relationships. While in some cases we may be able to leverage our relationships with certain large,
well-known customers to secure contract manufacturing capacity on better price and delivery terms, this cannot be assured and our ability
to mitigate potential adverse impacts of supply chain constraints is limited at this time.
Additionally, we may experience supply chain and other disruptions
to our business that may be caused by a range of factors beyond our control, including, but not limited to, geopolitical uncertainty,
international trade disputes, armed conflicts and sanctions, such as the ongoing Israel-Hamas and Russia-Ukraine wars and the related
sanctions, or economic and political instability in Asia, such as the military threat posed by China against Taiwan, climate change, increased
costs of labor, freight cost and raw material price fluctuations, a shortage of qualified workers or material changes in macroeconomic
conditions.
The effects of the ongoing Russia-Ukraine war, including the changes
for the timing of new satellite launches by SatixFy’s current and prospective customers that previously launched from Russia, increased
supply chain difficulties for SatixFy and its customers, and recent developments in SatixFy’s discussions with prospective customers,
pose challenges to SatixFy’s business and future financial results, particularly in the near-term. For example, in March 2022, OneWeb,
one of our significant customers, announced that it was suspending all satellite launches from Russia’s Baikonur Cosmodrome and
recently announced that it would partner with companies in other countries, which may result in a significant delay of its test launch
of satellites equipped with our payload systems if it is unable to transition its expected satellite launches on a timely basis. See “Item
3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently
experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as
a result of supply chain or procurement disruptions, which may adversely affect our operations.” Industry supply chain challenges
may be exacerbated and the demand for our products may be adversely affected as a result of the indirect effects of the Russia-Ukraine
war, related sanctions or their impacts on global and regional economies. Recent global inflationary trends, higher interest rates and
financial markets volatility have also resulted in funding constraints that have affected and created more uncertainty about the timing
and scale of investments in new communications satellite constellations, new aircraft fleets and updated IFC solutions and related infrastructure
by some of our existing and prospective customers. For example, the scale and timing of Telesat’s plans to launch a new LEO communications
satellite constellation will depend on its ability to obtain the necessary funding for this project. The effects of recent macroeconomic
uncertainties on our customers have also resulted in delays to contract negotiations or customer orders, and may result in further delays.
See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business,
Operations and Industry — Deterioration of the financial condition of our customers could adversely affect our operating results.”
SatixFy believes that recent media and regulatory scrutiny of SPAC business combinations may lead customers to view SatixFy as a riskier
or undercapitalized partner. Prior to the consummation of the Business Combination, two customers (including a significant customer that
recently announced an agreement to enter into a merger of equals with another major satellite operator) with whom SatixFy was discussing
prospective new contracts informed SatixFy that they selected SatixFy’s larger competitors with longer track records of providing
space-based and aircraft-based satellite communications solutions as principal contractors for their satellite communications needs. While
SatixFy’s management believes that these developments are unlikely to materially impact the long-term demand for our products or
our long-term customer relationships (including with the two customers that terminated new contract discussions, for whom SatixFy believes
it may be selected as the provider of satellite communication chips in connection with these ongoing projects in the future), they make
it more difficult for us to budget for expected customer demand and therefore may adversely impact our results of operations and financial
condition, especially in the near-term. Our ability to mitigate these supply chain and other disruptions, including the potential adverse
impacts of the Russia-Ukraine conflict on our supply chain or the supply chains of our customers, is limited, as the impacts are largely
indirect and it is difficult for us to predict at this time how our suppliers and customers will adjust to the new challenges or how these
challenges will impact our costs or demand for our products and services. See “Item 3. Key Information
— D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing,
and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply
chain or procurement disruptions, which may adversely affect our operations,” “ — We
rely on third parties for manufacturing of our chips and other satellite communications system components. We do not have long-term supply
contracts with our foundry or most of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable
prices to meet future demands for our solutions” and “— Deterioration of the
financial condition of our customers could adversely affect our operating results.”
In addition, the recent escalation of the Israel-Hamas conflict
could cause disruptions to our operations, and a delay in the development, production and shipment of our products and the heightened
tension in our relations with various Middle Eastern countries could adversely affect our customer relationships as well as our sales
and performance of existing or future contracts, which in turn could adversely affect our operating results, financial conditions and
the expansion of our business. Furthermore, the latest Israel-Hamas war and the resulting measures that have been taken, and could be
taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries
have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact
of this ongoing conflict are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity
prices and supply chain disruptions. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s
Operations in Israel — Our headquarters and other significant operations are located in Israel, and, therefore, our results may
be adversely affected by political, economic and military instability in Israel, including the recent attack by Hamas and other terrorist
organizations from the Gaza Strip and Israel’s war against them.”
Basis of Presentation
We currently conduct our business through one reportable operating
segment. We prepare our consolidated financial statements under IFRS as issued by the International Accounting Standards Board.
Our functional and reporting currency is the U.S. dollar (which
is also the functional currency of our Israeli subsidiary), as the demand for satellite communications chips and systems, and many of
the development costs with respect thereto, are priced in U.S. dollars. Certain of our subsidiaries, on the other hand, have other functional
currencies (being the currencies in which their assets, liabilities, revenues and expenses are recorded). The functional currency of our
U.K. subsidiary is the GBP and the functional currency of our Bulgarian subsidiary is the EUR. Accordingly, in the preparation of our
consolidated financial statements, we are required to translate these subsidiaries’ GBP and EUR balances to U.S. dollars. Assets
and liabilities are generally translated at year-end exchange rates, while revenues and expenses are generally translated at the average
exchange rates for the period presented. The differences resulting from currency translations are presented in our consolidated statements
of comprehensive loss under Exchange gain (loss) arising on translation of foreign operations, but are not reflected in our loss for the
period. As a result of our foreign currency translation exposure, certain amounts in our consolidated financial statements may not be
comparable between periods. Additionally, subsidiary cash and financial asset and liability balances that are denominated in currencies
other than the functional currency of the subsidiary are remeasured into the functional currency, with the resulting gain or loss recorded
in the financial income or financial expenses line-items in our statements of income. For more information about the comparability impact
of our foreign currency translation exposure, see below under “Item 11 — Quantitative
and Qualitative Disclosure About Market Risk — Foreign Currency Exchange Risk.”
Key Financial and Operating Metrics
We monitor several financial and operating metrics in order to
measure our current performance and project our future performance. These metrics are presented in the following table.
|
Year Ended December 31 |
||||||||
|
2023 |
2022 |
|||||||
|
(U.S.$ in thousands, except percentages) |
||||||||
|
Revenues |
$ |
10,730 |
$ |
10,626 |
||||
|
Gross profit |
$ |
4,792 |
$ |
6,128 |
||||
|
Gross margin |
45 |
% |
58 |
% | ||||
|
Net loss |
$ |
(29,715 |
) |
$ |
(397,789 |
)(*) | ||
(*) Net loss for the year ended December 31, 2022 reflects the
impact of a $333 million non-recurring listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2
(Share-based Payments) and a $37 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the
transactions under the Forward Purchase Agreement. Neither of the afore-mentioned non-cash expenses had any impact on our income tax expense
or benefit for the year ended December 31, 2022 or on our deferred tax assets or liabilities as of that date.
Principal Components of Our Results of Operations
Revenues
In the periods discussed in this Annual Report, we have generated
substantial revenues from development services and preproduction provided to our customers in connection with projects on which we are
engaged (although we maintain ownership of the intellectual property developed in connection with such projects). Our revenue from sales
of products consisted mostly of revenue from contracts for the provision of products, including product prototypes, and components, including
our proprietary chips.
Our mix of revenue has begun to gradually shift to sales of products
since the end of 2023 and we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products
and begin to deliver satellite communications systems at scale.
Cost of sales and services
Our cost of sales and services includes mainly salaries (including
bonuses, share-based awards, benefits and related expenses) of our service personnel and the costs of our chip manufacturing subcontractors,
chip manufacturing tools and materials and models, shipping cost, and related depreciation and amortization, including amortization of
intangible assets, if any.
Research and development expenses
Research and development expenses consist primarily of salaries
(including bonuses, benefits and related expenses) of personnel involved in R&D and the cost of development tools, third- party intellectual
property licenses, and subcontractors, net of public sector grants, including from ESA, which offset some of our research and development
expenses. See Note 22 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
To date, we have expensed all of our R&D costs as incurred.
See “— Critical Accounting Policies and Estimates — Research and Development Costs.”
We expect to continue investing in R&D and, accordingly, expect our research and development expenses to increase. We also expect
to benefit from additional funding from the ESA and other government and public sector entities, which, if obtained, would offset a portion
of our research and development expenses.
Selling and marketing expenses
Selling and marketing expenses consist mainly of salaries (including
bonuses, share-based awards, benefits and related expenses) of our personnel involved in the sales and marketing of our products, as well
as advertising, exhibition and related expenses (including related travel).
We expect our sales and marketing costs to increase as we bring
more products to market, the demand for our products increases and we hire more sales and marketing personnel.
General and administrative expenses
General and administrative expenses consist mainly of salaries
(including bonuses, share-based awards, benefits and related expenses) of management and administrative personnel, overhead costs (including
facilities rent and utilities), legal expenses, depreciation and amortization of property and equipment not used in the manufacturing
of our products or provisions of our services and costs associated with being a public company, such as costs related to director and
officer liability insurance, director fees and public company-related auditing and compliance costs.
Share in the loss of a company accounted by equity method, net
This represents our share in the loss of a company accounted by
equity method, net, which reflects our proportionate share of the loss of Jet Talk, a joint venture with STE. We own 51% of Jet Talk’s
equity, but do not control the company, as STE controls the company’s financing, participates substantially in directing its marketing
and R&D activities (the latter generally being contracted to us) and also participates in the appointment of the chief executive officer,
among other senior management personnel. We are committed to provide Jet Talk with future development services for a large Aero/IFC terminal,
exclusive marketing rights for the commercial aviation market, technical skills, staff expertise, R&D facilities and an exclusive,
royalty-free, world-wide, perpetual, non-transferable, irrevocable license to use and commercially exploit our intellectual property for
the development, production, sales and marketing of satellite antenna systems for the commercial aviation market. While Jet Talk has generated
losses to date, we expect Jet Talk to contribute significantly to our results of operations in the future. See Note 7 to SatixFy’s
consolidated financial statements included elsewhere in this Annual Report.
Finance Income and Expenses
Finance income includes mainly the impact of foreign exchange remeasurement
of certain subsidiary financial assets and liabilities (see “— Basis of Presentation”),
fair value adjustments related to financial assets and liabilities and interest on bank deposits.
Finance expenses include mainly interest on loans and bank fees,
depreciation of our right-of-use assets, amortization of debt and warrant discounts, fair value adjustments related to financial assets
and liabilities (including, in 2022, our outstanding warrants and repayable grants from the IIA) and the impact of foreign exchange remeasurement
of certain subsidiary financial assets and liabilities.
Income taxes
To date, we have not been subject to income taxes associated with our operating activity,
due to the fact that we have incurred losses in every year since commencing operations, and we have not recorded any income tax benefits
since there is uncertainty as to our ability to utilize our tax loss carryforwards in future periods. As part of the MDA Agreement, we
recorded a tax liability associated with the sale of SatixFy Space Systems UK Ltd. as a potential capital gain. See Note 26 to SatixFy’s
consolidated financial statements included elsewhere in this Annual Report.
| A. |
Results of Operations |
Results of Operations for the Year Ended December 31, 2023 Compared
with the Year Ended December 31, 2022
The following table provides our consolidated statements of operations
for the years ended December 31, 2023 and 2022:
|
|
Year Ended
December 31, |
|||||||||||||||
|
|
2023
|
2022
|
Change
|
% |
||||||||||||
|
|
(U.S.$ in thousands,
except percentages) |
|||||||||||||||
|
Revenues:
|
||||||||||||||||
|
Development services and preproduction |
$ |
8,249 |
$ |
10,081 |
$ |
(1,832 |
) |
(18 |
)% | |||||||
|
Sale of products |
2,481 |
545 |
1,936 |
355 |
% | |||||||||||
|
Total revenues |
$ |
10,730 |
$ |
10,626 |
$ |
104 |
1 |
% | ||||||||
|
Cost of sales and
services: |
||||||||||||||||
|
Development services and preproduction |
4,930 |
4,166 |
764 |
18 |
% | |||||||||||
|
Sale of products |
1,008 |
332 |
676 |
204 |
% | |||||||||||
|
Total cost of sales and services |
5,938 |
4,498 |
1,440 |
32 |
% | |||||||||||
|
|
||||||||||||||||
|
Gross profit |
$ |
4,792 |
$ |
6,128 |
$ |
(1,336 |
) |
(22 |
)% | |||||||
|
Research and development expenses |
29,126 |
16,842 |
12,284 |
73 |
% | |||||||||||
|
Selling and marketing expenses |
2,866 |
2,335 |
531 |
23 |
% | |||||||||||
|
General and administrative expenses |
14,561 |
9,249 |
5,312 |
57 |
% | |||||||||||
|
Loss from operations |
$ |
(41,761 |
) |
$ |
(22,298 |
) |
$ |
19,463 |
87 |
% | ||||||
|
Finance Income |
83 |
17 |
66 |
388 |
% | |||||||||||
|
Finance Expenses |
(12,129 |
) |
(9,919 |
) |
2,210 |
22 |
% | |||||||||
|
Derivatives Revaluation |
(17,217 |
) |
(37,377 |
) |
(20,160 |
) |
(54 |
%) | ||||||||
|
Other Income |
41,657 |
5,474 |
36,183 |
661 |
% | |||||||||||
|
Listing Expenses |
- |
(333,326 |
) |
(333,326 |
) |
(100 |
)% | |||||||||
|
Share in the loss of a company accounted by equity
method, net |
(226 |
) |
(360 |
) |
(134 |
) |
(37 |
)% | ||||||||
|
|
||||||||||||||||
|
Loss before income taxes
|
$ |
(29,593 |
) |
$ |
(397,789 |
) |
$ |
(368,196 |
) |
(93 |
)% | |||||
|
Tax expenses |
(122 |
) |
- |
122 |
100 |
% | ||||||||||
|
Loss for the period (1) |
$ |
(29,715 |
) |
$ |
(397,789 |
) |
$ |
(368,074 |
) |
(93 |
)% | |||||
| (1) |
Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring, listing expense, of which $318
million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and a $37.4 million non-cash finance expense reflecting
the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the aforementioned
non-cash expenses had any impact on our income tax expense or benefit for the year ended December 31, 2022 or on our deferred tax assets
or liabilities as of that date. See 25 to our consolidated financial statements included elsewhere in this Annual Report for more information.
|
Revenues
Total Revenues
Total revenues of $10.7 million increased by $0.1 million, or 1%,
for the year ended December 31, 2023 compared to $10.6 million for the year ended December 31, 2022. See “Item
3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry.”
Development services and preproduction
Development services and preproduction of $8.2 million decreased
by $1.8 million, or 18%, for the year ended December 31, 2023 compared to $10.1 million for the year ended December 31, 2022. The decrease
was primarily driven by a delay in progress in one of our projects in 2023 due to a customer request and completion of one of our projects
which in 2022.
Sale of products
Sale of products of $2.48 million increased by $1.9 million, or 355%, for the year ended December 31, 2023
compared to 545,000 for the year ended December 31, 2022. The increase was primarily driven by deliveries of an order that was received
during 2022.
Cost of sales and services of Development services and preproduction
Total cost of sales and services of $4.9 million increased by $0.8
million, or 18%, for the year ended December 31, 2023 compared to $4.1 million for the year ended December 31, 2022. The increase is associated
with the Company’s engagement in 2023 in projects which carry lower gross margins compared to 2022.
Cost of sales and services of Sale of Products
Total cost of sales and services of $1 million increased by $0.7
million, or 204%, for the year ended December 31, 2023 compared to $0.3 million the year ended December 31, 2022. The increase reflects
increased revenues from sale of products as described above.
Gross profit
Gross profit of $4.8 million decreased by $1.3 million, or 22%,
for the year ended December 31, 2023, compared to $6.1 million for the year ended December 31, 2022, reflecting our decrease in revenue
from the sale of development services and preproduction, which bears a higher gross margin. Our gross margin in the year ended December
31, 2023 decreased due to the higher revenue from sale of products, which bears a lower gross margin.
Research and development expenses
Research and development net expenses of $29.1 million increased by $12.3 million, or
73%, for the year ended December 31, 2023 compared to $16.8 million the year ended December 31, 2022. Our gross R&D expenditure increased
by $4.2 million, or 14%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was mostly driven
by an increase in production cost associated with our space grades ASICs of approximately $2 million, combined with an increase of approximately
$2 million in payroll and related expenses and RSU grants that were granted during the year. Research and development expenses were affected
mostly by a net decrease in ESA grants and tax credits for the year ended December 31, 2023, and a decline in contributions from government
support and grants, which all are recorded as offsets to R&D expenses, by $8.1 million, to $4.2 million in the year ended December
31, 2023 from $12.3 million in the year ended December 31, 2022.
Selling and marketing expenses
Selling and marketing expenses of 2.9 million increased by $0.5
million, or 23%, for the year ended December 31, 2023 compared to $2.3 million in the year ended December 31, 2022. The increase was primarily
driven by our increased participation in trade shows, related travel costs and a slight increase in payroll and RSU grants.
General and administrative expenses
General and administrative expenses of $14.6 million increased
by $5.3 million, or 57%, for the year ended December 31, 2023 compared to $9.2 million for the year ended December 31, 2022. The increase
was primarily driven by the settlement of a legal proceeding with Alta of $2.3 million , as well as an increase in legal costs of
$2 million, an increase of director and officer insurance expenses of $1 million, a provision for expected credit loss of $1.8 million,
offset by a decrease of $2 million in bonuses to the chairman of our board of directors. See “Item
8.A. Financial Information—Legal Proceedings” for additional information.
Loss from operations
Loss from regular operations of $41.8 million increased by $19.5 million, or 87%, for
the year ended December 31, 2023 compared to $22.3 million in the year ended December 31, 2022, reflecting the factors discussed above.
Finance Expenses
Finance expenses of $12.1 million increased
by $2.2 million, or 22%, for the year ended December 31, 2023 compared to $9.9 million for the year ended December 31, 2022. The increase
was primarily driven by a $3 million expense of interest recorded on the advanced payments from MDA (See Note 3 to our audited consolidated
financial statements for the fiscal year ended December 31, 2023) offset by $1 million in currency fluctuation affects. The increase in
interest expenses associated with the amendments of the 2022 Credit Agreement were offset almost entirely by the finance income associated
with the economical effects of the modified loan terms (See Note 12 to our consolidated financial statements included elsewhere in this
Annual Report).
Derivatives revaluation
Derivatives revaluation of $17.2 million
decreased by $20.2 million, or 54%, for the year ended December 31, 2023 compared to $37 million for the year ended December 31, 2022.
The decrease was primarily driven by a decrease in our stock price, which effected our financial instruments (PAS and Warrants).
Other Income
Other income of $41.7 million increased by $36.2,
or 661%, for the year ended December 31, 2023, compared to $5.5 million for the year ended December 31, 2022, which was primarily due
to the MDA Agreement See “Item 4 Information on the Company — B. Business Overview”
and Note 3 to our consolidated financial statements, included elsewhere in this Annual Report,
for further information.
Listing Expenses
We had no listing expenses for the year ended December 31, 2023,
compared to listing expenses of $333 million for the year ended December 31, 2022. For further information regarding listing expense,
see Note 25 to our audited consolidated financial statements for the fiscal year ended December 31, 2023, included elsewhere in this Annual
Report.
Share in the loss of a company accounted by equity method, net
Share in the loss of a company accounted by equity method, net,
decreased by $0.1 million, or 37%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease reflects
a decrease in R&D expenses by Jet Talk due to the substantial completion of its development project and lower activity levels at Jet
Talk in the absence of commercial production of IFC terminals.
Tax expenses
Tax expenses were $0.1
million for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022. The tax expenses were primarily
attributable to the MDA Agreement with respect to the sale of Satixfy Space Systems UK Ltd (See Note 3 to our consolidated financial statements
included elsewhere in this Annual Report).
Net loss for the period
Net loss for the period decreased by $368.2
million, or 93%, for the year ended December 31, 2023 compared to $397.8 million for the year ended December 31, 2022, reflecting the
factors discussed above.
| B. |
Liquidity and Capital Resources |
Our primary cash needs are for working capital, including funding
our R&D and meeting our contractual obligations and other commitments, and payment of principal and interest on our outstanding debt.
To date, we have funded these working capital requirements and other expenses mainly through issuances of equity capital and borrowings,
as further discussed below, as well as grants and other funds received from the ESA and the IIA. Our ability to expand our business and
become cash flow positive will depend on many factors, including our working capital needs, the availability of equity or debt financing
and, over time, our ability to generate positive cash flows from operations, all of which depend on our ability to attract and retain
customers, develop new products and compete effectively, as well as certain factors outside of our control. See “— Key
Factors and Trends Affecting our Performance.”
As of December 31, 2023, our cash and cash equivalents amounted
to $14 million and our financial debt amounted to $59.8 million.
Accordingly, we plan to try to raise additional capital, whether
in the public or private markets, and are currently examining different alternatives. If the financing is not available, or if the terms
of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back
our operations, which could have a material adverse impact on our business and financial prospects, seek protection under insolvency laws
or cease our operations altogether. “Item 3. Key Information—D. Risk Factors—We are
an early stage company with a history of losses, have generated less revenues than our prior projections, and have not demonstrated a
sustained ability to generate predictable revenues or cash flows. If we do not generate revenue as expected, our financial condition will
be materially and adversely affected.”
As discussed above under “Item
3. Key Information—D. Risk Factors—Risks Related to Ownership of Our Securities —The market price of our equity securities
may be volatile, and your investment could suffer or decline in value” and elsewhere in this Annual Report, the sales and
further issuances of our ordinary shares could materially adversely affect the market price for our securities, which could, in turn,
materially adversely affect our ability to raise additional capital in the public or private markets or the terms on which such capital
could be raised. Further, recent declines in our share price mean that our ability to raise new capital under the Equity Line of Credit
Facility, which limits the number of shares we can sell based on their daily average trading volume, could be substantially less than
we initially expected.
We have based our estimates on assumptions that may prove to be
wrong, and we could utilize our available capital resources sooner than we expect. Changing circumstances could also cause us to consume
capital faster than we currently anticipate, and we may need to spend more than currently expected.
If we are successful in overcoming our short-term funding challenges,
over the long term we may decide to develop new products, enter new markets or build additional or expand current manufacturing facilities,
any of which would require substantial additional capital. The timing of the completion of the development and engineering, and commercial
launch of our satellite communications systems that are expected to drive our future results is uncertain. The commercialization of these
products may also entail unpredictable costs and delays and is subject to significant risks, uncertainties and contingencies, many of
which are beyond our control. Certain of these risks and uncertainties are described in more detail in this Annual Report under “Item
3. Key Information – D. Risk Factors” and include, but are not limited to, changed business conditions, continued supply
chain challenges, and governmental responses thereto, geopolitical uncertainty, competitive pressures, regulatory developments or the
cessation of public sector R&D funding, among other potential developments.
Debt and other financing arrangements
As of December 31, 2023, we had total borrowings (not including
lease liabilities) of approximately $59.8 million, all of which is long-term debt under the 2022 Credit Agreement entered into in connection
with the Debt Financing, a portion of the proceeds from which we used to repay our prior borrowings.
Business Combination Agreement and 2022 Debt Financing
On March 8, 2022, we and one of our subsidiaries entered the Business
Combination Agreement and on October 27, 2022, our subsidiary, Merger Sub, merged with and into Endurance, with Endurance continuing as
the surviving company and becoming our direct, wholly owned subsidiary.
In anticipation of the Business Combination, on February 1, 2022,
we entered into the 2022 Credit Agreement with FP pursuant to which we borrowed an aggregate principal amount of $55.0 million in the
form of a term loan, which is guaranteed by certain of our subsidiaries. The obligations under the 2022 Credit Agreement, as amended,
are secured by a lien and security interest over substantially all of our and the guarantors’ assets. In order to preserve liquidity
and allow us more time to evaluate our financing and strategic alternatives, on April 23, 2023, we entered into the Waiver and Second
Amendment to the Credit Agreement, which, among other things, (i) provided a waiver of certain defaults or potential defaults, (ii) permitted
us to make our interest payments for 2023 on a pay-in-kind basis if its cash balance is less than $12.5 million, (iii) temporarily reduced
our minimum cash requirement from $10 million to $8 million and $7 million for the months of April and May 2023, respectively, and thereafter
to $10 million, in each case plus an amount sufficient to cover our and our subsidiaries’ accounts payable that are past 60 days
due, (iv) increased the interest rate of the loan to SOFR + 8.50% (with a 3% SOFR floor) and (v) provided for certain additional reporting
obligations by us. The 2022 Credit Agreement provides that the term loan matures on February 1, 2026.
The 2022 Credit Agreement contains customary covenants that restrict
the way in which we may conduct our business and our ability to take certain actions. In particular, it limits our ability to incur additional
indebtedness or liens, dispose of assets to third parties, repurchase our shares and pay dividends. The 2022 Credit Agreement also imposed
a financial maintenance covenant, requiring that, for so long as we have a leverage ratio (debt to Consolidated Adjusted EBITDA (as defined
in the 2022 Credit Agreement)) greater than or equal to 6.00 to 1.00, SatixFy must maintain a minimum cash balance of $8 million and $7
million for the months of April and May 2023, respectively, and thereafter of $10 million, in each case plus an amount sufficient to cover
its and its subsidiaries’ accounts payable that are past 60 days due, which cash is held in deposit accounts subject to a security
interest in favor of the Agent. The 2022 Credit Agreement also contains customary events of default, which provide that the lenders are
entitled to automatically accelerate payment of the loans upon the occurrence of an event of default.
In connection with the Debt Financing, SatixFy also entered into
an equity grant agreement, dated February 1, 2022, pursuant to which it issued 808,907 SatixFy Ordinary Shares (before giving effect to
the Pre-Closing Recapitalization) to the lenders under the 2022 Credit Agreement in consideration for the funds borrowed.
In June 2023 , the parties to the 2022 Credit Agreement entered into the Third Amendment.
The Third Amendment provides that, among other things, upon our receipt of such prepayment, interest payable thereunder will be added
to the principal of the term loan on a “pay in kind” basis through June 28, 2024, the payments made in connection with the
pre-purchase agreement will not be applied to repay debt under the 2022 Credit Agreement, a limited waiver, subject to certain conditions,
of the liquidity covenant therein, and following closing of the MDA Agreement, a reduced interest rate and the grant of the 4.1 million
ordinary shares under the 2022 Credit Agreement. On October 31, 2023, we entered into the Fourth Amendment and the Fifth Amendment to
the 2022 Credit Agreement, whereby the lenders provided their consent to those certain agreements entered into by us. Further, the Fifth
Amendment extended the period of time by which we must issue or cause the transfer the 4.1 million ordinary shares pursuant to the Third
Amendment to the Credit Agreement from four business days to 90 days following the date the Fifth Amendment became effective; and reduced
the 4.1 million ordinary shares which we must issue or cause the transfer of pursuant to the Third Amendment to the 2022 Credit Agreement,
by the amount of shares transferred pursuant to the Vellar Termination Agreement and the ACM Termination Agreement, and, subject to the
timely transfers of shares as contemplated in the Vellar Termination Agreement and ACM Termination Agreement, we will also issue 500,556
new ordinary shares to the lenders(which is the difference between 4.1 million ordinary shares and the shares to be transferred to the
lenders from Vellar and ACM). In addition, we agreed to issue the lenders 1,000,000 Price Adjustment Shares in a private placement within
30 days, which shares will be subject to substantially the same terms governing the Price Adjustment Shares previously issued in connection
with our business combination with Endurance and as further described in the Fifth Amendment.
Equity Line of Credit
Concurrently with the execution of the Business Combination Agreement,
SatixFy and CF Principal Investments entered into that certain CF Purchase Agreement and that certain CF Registration Rights Agreement
in connection with the Equity Line of Credit. Pursuant to the CF Purchase Agreement, following the Closing, the Company has the right
to sell to CF Principal Investments up to the lesser of (i) $77,250,000 aggregate principal amount of newly issued SatixFy Ordinary Shares
(before the 3.0% purchase price discount on sales under the Equity Line of Credit discussed below) and (ii) the number of shares equal
to 19.99% of the voting power or number of SatixFy Ordinary Shares issued and outstanding after giving effect to the Business Combination
and other transactions contemplated by the Business Combination Agreement (the “Exchange Cap”), subject to certain exceptions
as provided in the CF Purchase Agreement.
Upon the satisfaction of the conditions to CF Principal Investments’
purchase obligation set forth in the CF Purchase Agreement (the “Commencement”), SatixFy will have the right, but not the
obligation, from time to time at its sole discretion over the 36-month period from and after the Commencement, to direct CF Principal
Investments to purchase up to a specified maximum amount of its ordinary shares as set forth in the CF Purchase Agreement by delivering
written notice to CF Principal Investments prior to the commencement of trading of the SatixFy Ordinary Shares on the NYSE on any trading
day, so long as all of its ordinary shares subject to all prior purchases by CF Principal Investments under the CF Purchase Agreement
have theretofore been received by CF Principal Investments electronically as set forth in the CF Purchase Agreement. The purchase price
of the ordinary shares that SatixFy may elect to sell to CF Principal Investments pursuant to the CF Purchase Agreement will be determined
by reference to the VWAP defined for this agreement of the SatixFy Ordinary Shares on the date of purchase, which is when SatixFy has
timely delivered written notice to CF Principal Investments directing it to purchase its ordinary shares under the CF Purchase Agreement,
less a fixed 3.0% discount to such VWAP.
SatixFy controls the timing and amount of any sales of its ordinary
shares to CF Principal Investments. Actual sales of its ordinary shares to CF Principal Investments under the CF Purchase Agreement will
depend on a variety of factors to be determined by SatixFy from time to time, including, among other things, market conditions, the trading
price of its ordinary shares and SatixFy’s needs for financing resources.
Forward Purchase Agreement
On October 24, 2022, Endurance, SatixFy, Merger Sub and Vellar
entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”), which was subsequently
amended on October 25, 2022 (as amended, the “Forward Purchase Agreement”). Subsequent to entering into the Amendment, Endurance,
SatixFy, Merger Sub and Vellar entered into an Assignment and Novation Agreement with ACM ARRT G LLC (together with Vellar, the “Sellers”),
pursuant to which Vellar assigned its rights and obligations with respect to up to 4,000,000 ordinary shares (the “Subject Shares”)
under the Forward Purchase Agreement to ACM ARRT G LLC (the “Assignment and Novation Agreement”),
Pursuant to the terms of the Forward Purchase Agreement,
the Sellers thereunder purchased, through a broker in the open market, (i) 8,544,284 Endurance Class A ordinary shares. Following the
closing of the Business Combination, we issued to Vellar, in a private placement pursuant to the Forward Purchase Agreement, 1,605,100
additional ordinary shares (the “Additional Shares”). Pursuant to the Forward Purchase Agreement, the Sellers were paid directly,
out of the funds held in Endurance’s trust account, approximately $86.5 million.
Pursuant to the Forward Purchase Agreement, we filed the Registration
Statement with the SEC. The Sellers paid to SatixFy approximately $10.0 million.
On October 31, 2023, we entered into termination agreements (the
“Termination Agreements”) with the Sellers, dated October 31, 2023. Pursuant to the Termination Agreements, the parties agreed
(i) terminating Forward Purchase Agreement, (ii) terminating the Assignment and Novation Agreement, and (iii) that Vellar and ACM relinquish
their rights to an aggregate of 3,599,444 ordinary shares (which includes all remaining Subject Shares held by ACM and Vellar),
which are to be transferred to the lenders in connection with their consent to the transactions contemplated by the MDA Agreement. Further,
we will pay Vellar and ACM an aggregate amount of approximately $6.5 million in installments until May 31, 2024, in the case of Vellar,
and March 31, 2024, in the case of ACM. The Termination Agreements further provide that if we fail to make the required payments to ACM
on time (subject to certain conditions as described therein), the total amount payable by us to ACM will increase by $3.7 million (which
amount will be payable on the final installment date).
PIPE Financing
Concurrently with the execution of the Business Combination Agreement,
Endurance and SatixFy entered into Subscription Agreements with certain investors. Pursuant to the Subscription Agreements, the PIPE Investors
agreed to subscribe for and purchase, and SatixFy agreed to issue and sell to the PIPE Investors, immediately prior to the closing of
the Business Combination, an aggregate of 2,910,000 PIPE Units consisting of (i) one PIPE Share and (ii) one-half of one PIPE Warrant
exercisable for one SatixFy Ordinary Share at a price of $11.50 per share for a purchase price of $10.00 per PIPE Unit, for gross proceeds
of $29,100,000, on the terms and subject to the conditions set forth in the applicable Subscription Agreement. Affiliates of the Sponsor
agreed to purchase $10,000,000 of PIPE Units on the same terms and conditions as all other PIPE Investors. Each PIPE Warrant will entitle
the holder to one SatixFy Ordinary Share at an exercise price $11.50 per share. The terms of the PIPE Warrants are substantially the same
as the existing Endurance warrants.
Pursuant to the terms of the Subscription Agreements, concurrently
with the Closing, SatixFy delivered 1,175,192 ordinary shares issuable to certain SatixFy shareholders and 391,731 ordinary shares on
behalf of the Sponsor into an escrow account (collectively, the “Escrow Shares”). In March 2023, we instructed our transfer
agent to release from escrow the 1,163,077 Escrow Shares held by the Sponsor and shareholders.
As described above, pursuant to the terms of the Subscription Agreements,
SatixFy delivered the Escrow Shares into the escrow account, and on or about March 31, 2023, subsequently released the Escrow Shares to
the PIPE Investors and SatixFy shareholders pursuant to the terms thereof.
In connection with the Subscription Agreements pursuant to which
SatixFy has agreed to sell the PIPE Units to the PIPE Investors, SatixFy and Continental entered into a warrant agreement, pursuant to
which SatixFy issued 1,000,000 warrants, each entitling the warrant holder to purchase one (1) SatixFy Ordinary Share at an exercise price
of $11.50 per share, subject to adjustment and on the terms and subject to the limitations described therein. The original PIPE Warrants
were issued on terms identical to the Endurance Public Warrants (and, accordingly, the SatixFy Public Warrants) in all material respects,
except for a distinct CUSIP, certain resale restrictions and registration rights set forth in the Subscription Agreements, and a book
entry restrictive legend. On January 12, 2023, we exchanged, on a one-for-one and cashless basis, the 1,000,000 original PIPE Warrants
previously issued to the Sponsor and Cantor in connection with the PIPE Financing for new PIPE Warrants under the terms of the SatixFy
A&R Warrant Agreement. The new PIPE Warrants have the same terms as the Public Warrants and are identical to the Public Warrants,
except that they will bear restrictive legends until they are resold by the applicable PIPE Investors pursuant to an effective registration
statement or Rule 144 under the Securities Act.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
For the year ended December 31 (in thousands of USD) |
||||||||
|
2023
|
2022
|
|||||||
|
Cash Flow Data: |
||||||||
|
Net cash used in operating activities |
(24,635 |
) |
(31,480 |
) | ||||
|
Net cash used in investing activities |
17,341 |
(582 |
) | |||||
|
Net cash provided by financing activities |
9,114 |
40,523 |
||||||
|
Increase (decrease) in cash and cash equivalents
|
1,820 |
8,461 |
||||||
|
Cash and cash equivalents balance at the beginning
of the year |
11,934 |
3,854 |
||||||
|
Effect of changes in foreign exchange rates on cash
and cash equivalents |
225 |
(381 |
) | |||||
|
Cash and cash equivalents balance at the end of the
period |
13,979 |
11,934 |
||||||
Operating Activities
During the year ended December 31, 2023, net cash used in operating
activities was $25 million, compared to $31 million in the year ended December 31, 2022, reflecting the factors discussed under “—
Results of Operations” above and the evolution of our working capital. The principal drivers
of working capital were prepayment from customers, which increased by $15.6 million in 2023 compared to a $ 11.8 million increase in 2022,
offset by advances from ESA, which decreased by $1.3 million in 2023 compared to a $7.6 million increase in 2022, other current assets
(comprised mainly of prepaid expenses and accruals for tax credits), which decreased by $3.5 million in 2022 compared to a $7 million
increase in 2022, and trade account payables, accounts payable and accrued expenses, which together increased by $5.2 million in 2023
compared to a decrease of $7.8 million in 2022.
During the year ended December 31, 2022, net cash used in operating
activities was $31 million, compared to $5.8 million in the year ended December 31, 2021, reflecting the factors discussed under “—
Results of Operations” above and the evolution of our working capital. The principal drivers
of working capital were prepayments from customers, which increased by $11.8 million in 2022 compared to a $ 1.5 million increase in 2021,
offset by advances from ESA, which decreased by $7.6 million in 2022 compared to a $1.9 million increase in 2021, other current assets
(comprised mainly of prepaid expenses and accruals for tax credits), which increased by $7.0 million in 2022 compared to a $3.3 million
decrease in 2021, and trade account payables, accounts payable and accrued expenses, which together decreased by $7.8 million in 2022
compared to an increase of $4.7 million in 2021.
Investing Activities
During the year ended December 31, 2023, net cash received in investing activities was
$17 million. Net cash used in investing activities for year ended December 31, 2023 is attributable to the MDA transaction (see Note 3
to SatixFy’s consolidated financial statements included elsewhere in this Annual Report).
During the year ended December 31, 2022, net cash used in investing activities was $0.6
million.
Financing Activities
During the year ended December 31, 2023, net cash from financing activities amounted
to $9 million, consisting mainly of issuance of shares of $10 million as part of the Forward Purchase Agreement.
During the year ended December 31, 2022, net cash from financing
activities amounted to $41 million, consisting mainly of proceeds under our 2022 Credit Agreement and issuance of shares due to conversion
of warrants of $6.5 million net of repayment of existing loans in the sum of $18.8 million.
Commitments
As of the date of this Annual Report, our material financial commitments
were comprised of the amounts outstanding under the Debt Facility, as described above, and the lease liabilities described in Note 6 to
our consolidated financial statements included elsewhere in this Annual Report.
In connection with the ESA grants described above, which are intended
to fund 50%-75% of the cost of development of integrated chip sets for several industries (depending on the nature of the engagement),
including both hardware and software, our agreement stipulates that the resulting intellectual property will be available to ESA on a
free, worldwide license for its own requirements. In addition, ESA can require us to license the intellectual property to certain bodies
that are part of specified ESA programs, for ESA’s own requirements on acceptable commercial terms, and can also require us to license
the intellectual property to any other third party for purposes other than ESA’s requirements, subject to our approval that such
other purposes do not contradict our commercial interests.
Additionally, approximately $3.3 million of the $6.3 million in
R&D grants we obtained from the IIA is subject to repayment through royalties. We are required to pay the IIA royalties of 3% to 4%
of total sales of products resulting from R&D funded by such grants, up to a maximum amount of 100% of total grants received, plus
interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to US Dollar deposits. However,
on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such
directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024
the annual interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%;
and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate,
plus 1%, or (ii) a fixed annual interest rate of 4%. We record the royalty liability once the repayment obligation is deemed probable.
Our royalty liability to the IIA amounted to $1.3 million as of December 31, 2023. Of the $1.3 million subject to repayment through royalties,
approximately $1.2 million represented a contingent liability (fair value measured based on discounted future royalties and an interest
rate of 20%).
Other than the commitments and contingencies disclosed in this
discussion and analysis and our consolidated financial statements included elsewhere in this Annual Report, we did not have material contractual
commitments or contingencies for payments of cash as of the date of this Annual Report.
Off-balance Sheet Arrangements
Other than the contingencies described above, we did not have any
off-balance sheet arrangements as of the date of this Annual Report.
Seasonality
We do not believe that demand for our products and services is
seasonal. As an early-stage company, most of our revenue to date has been project-based. Accordingly, our revenue and results of operations
may fluctuate from period to period based on the number of customer projects or the achievement of key milestones under our customer contracts.
| C. |
Research and Development, Patents and Licenses |
For a discussion of our research and development policies, see
“Item 4. – Information on the Company – B. Business Overview – Research and Development.”
| D. |
Trend Information |
Other than as disclosed elsewhere in this Annual Report, we are
not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on
our revenue, income, profitability, liquidity or capital resources, or that caused that disclosed financial information to be not necessarily
indicative of future operating results or financial condition.
| E. |
Critical Accounting Policies and Estimates |
Our discussion and analysis of financial condition results of operations
are based upon our consolidated financial statements included elsewhere in this Annual Report. The preparation of our consolidated financial
statements in accordance with IFRS requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances,
and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.
Our critical accounting policies are those that materially affect
our consolidated financial statements and involve difficult, subjective or complex judgments by management. A thorough understanding of
these critical accounting policies is essential when reviewing our consolidated financial statements. We believe that the critical accounting
policies listed below involve the most difficult management decisions because they require the use of significant estimates and assumptions
as described above. See Note 2 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report for a summary
of our significant accounting policies. Our critical accounting policies are the following.
Revenue Recognition
We recognize revenue using the five-step model set forth in IFRS
15, Revenue from Contracts with Customers. To date, we have earned revenue mainly from providing customers with development services and
the sale of ground-based modems for satellite communications and related products.
We recognize revenue from the provision of NRE services at the
time the service is transferred to the customer and measure the revenue in an amount that represents the consideration that we expect
to be entitled to for the same goods or services, while revenue from the sale of satellite communications modems and related products
is recognized when control of the products is transferred to our customers, both as described in Note 2 to our consolidated financial
statements included elsewhere in this Annual Report. In connection with the recognition of revenue from NRE services, we measure the progress
of our performance commitments based on the portion of completion of each project or project deliverable. Changes in these estimates could
have a material impact on the amount of revenue recognized for a given period.
Research and Development
Costs
To date, we have recognized all expenditures on R&D activities
in our statement of operations as they were incurred. Going forward, we may elect to capitalize expenditures incurred on development activities
where the expenditure will lead to new or substantially improved products and only if all the following can be demonstrated:
| • |
the product is technically and commercially feasible; |
| • |
we intend to complete the product so that it will be available for use or sale; |
| • |
we have the ability to use or sell the product; |
| • |
we have the technical, financial and other resources to complete the development and to use or sell the product; |
| • |
we can demonstrate the probability that the product will generate future economic benefits; and |
| • |
we are able to reliably measure the expenditure attributable to the product during its development. |
Capitalized development costs are included in the carrying amount
of an intangible asset, and the capitalization of costs ceases when the asset is in the condition necessary for it to be capable of operating
in the manner intended by management. Capitalized development costs are amortized on a straight-line basis over their estimated useful
lives once the development is completed and the assets are in use. Subsequent expenditure on capitalized intangible assets is capitalized
only where it clearly increases the economic benefits to be derived from the asset to which it relates. All other expenditure, including
that incurred in order to maintain an intangible asset’s current level of performance, is expensed as incurred. As of December 31,
2022, our management concluded that we did not meet the aforementioned requirements for capitalization of any research and development
expenses. Management’s conclusions may change in future periods, which could have a material impact on the comparability of our
financial results for future periods with the results presented in this Annual Report.
Share-based payments
We record share-based payments to employees, which are measured
at the value of the equity instrument at the time of grant, and record a corresponding expense.
As our ordinary shares are not listed on a public market, the calculation
of the fair value of our ordinary shares is subject to a greater degree of estimation in determining the basis for share- based grants.
Accordingly, we are required to estimate the fair value of both the instrument entitling the recipient to purchase shares, as well as
the shares themselves, at the time of each grant. We consider objective and subjective factors in determining the estimated fair value
of our shares, with input from management and an independent valuation firm. We determined the value of our shares based on interpolating
from the valuations in our most recent external equity financing rounds and, when applicable, an expected valuation for a public offering,
subject to discounts for the probability and timing of an exit event and lack of marketability, among other factors.
In turn, we measure the value of options or warrants to purchase
our shares based on the value of the shares and an option pricing or hybrid model. We used the Black-Scholes model to determine the fair
value of options to buy our shares, based on assumptions as to dividend yield (0%), expected volatility (56.43%), risk-free interest rate
(1.6%) and expected life of the instrument (3 years). We used a hybrid of the Black-Scholes and Merton (Structural Model) models for the
purpose of determining the fair value of our warrants, based on assumptions as to risk- free interest rate (0.59%), expected exercise
period (between 5 and 8 years) and expected volatility (approximately 40%).
The assumptions underlying the valuations represent our best estimates,
which involve inherent uncertainties and the application of management judgment. As a result, if we used significantly different assumptions
or estimates, our share-based compensation expense for prior periods could have been materially different.
We expect to use the market price of our ordinary shares as the
basis for the valuation of future grants, based on the reported closing price of such shares on the date of grant. We expect to record
a substantial expense in our future financial statements for periods that include the date of consummation of the Business Combination
as a result of the issuance of the Price Adjustment Shares and IFRS accounting for Founder Shares.
Inventory
Inventories are recognized at the lower of cost and net realizable
value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present
location and condition. We measure the cost of raw materials on a first-in, first-out basis and finished goods according to costs based
on direct costs of materials and labor. We review the net realizable value of our inventory at the end of each reporting period. Factors
that may affect inventory selling prices include the existing market demand, competition, the availability of superior technology in the
market, the prices of raw materials and the solvency of customers and suppliers. Write-downs in the value of inventory are also expensed
on our statement of operations. While we have not historically held significant inventory on hand, and have not experienced inventory
write-downs, we expect this to change over time as develop more customer relationships and commercialize more products.
Quantitative and Qualitative Disclosures about Market Risk
For a discussion of our quantitative and qualitative disclosures about market risk, please see “Item
11. Quantitative and Qualitative Disclosures about Market Risk.”
Emerging Growth Company Status
We are an emerging growth company, as defined in Section 102(b)(1)
of the JOBS Act. The JOBS Act exempts emerging growth companies from certain SEC disclosure requirements and standard and we intend to
take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long
as we qualify as an emerging growth company, including, but not limited to, (1) not being required to comply with the auditor attestation
requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and (2) not being required to comply with any requirement that may be
adopted by the PCAOB regarding mandatory audit firm rotation or current or future PCAOB rules requiring supplements to the auditor’s
report providing additional information about the audit and the consolidated financial statements (critical audit matters or auditor discussion
and analysis). Although under the JOBS Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent
to the enactment of the JOBS Act until such time as those standards apply to private companies, this exemption does not apply to companies,
such as us, reporting under IFRS since IFRS does not provide for different transition periods for public and private companies.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| A. |
Directors and Senior Management |
The following table sets forth the name, age and position of each
of our executive officers and directors as of the date of this Annual Report. For biographical information concerning the executive officers
and directors, see below.
|
Name |
Age |
Position | ||
|
Yoav Leibovitch(8)
|
66 |
Executive Chairman of the Board of Directors | ||
|
Nir Barkan |
45 |
Acting Chief Executive Officer | ||
|
Oren Harari |
49 |
Interim Chief Financial Officer | ||
|
Doron Rainish |
68 |
Chief Technology Officer | ||
|
Divaydeep Sikri |
45 |
Vice President and Chief Engineer | ||
|
Stephane Zohar |
57 |
Executive Vice President — VLSI | ||
|
Itzik Ben Bassat |
55 |
Chief Operating Officer | ||
|
Mary P. Cotton((1)2)((3)(4)(
(7) |
66 |
Director | ||
|
Yair Shamir(6) |
78 |
Director | ||
|
David L. Willetts(7)
|
68 |
Director | ||
|
Richard C. Davis(8)
|
58 |
Director | ||
|
Moshe Eisenberg(1)(2)(3)(4)(5)
|
57 |
Director | ||
|
Yoram Stettiner(1)(2)((3)(4)(5)
|
66 |
Director |
|
Executive Officers |
| (1) |
Member of the Compensation Committee |
| (2) |
Member of the Audit Committee |
| (3) |
Independent Director (as defined under Israeli law) |
| (4) |
Independent Director (as defined under NYSE American LLC Company Guide Manual Section 803(A)(2), or NYSE American Section 803(A)(2))
|
| (5) |
External director, if required under the Companies law |
| (6) |
Class I directors hold office until the annual general
meeting to be held in 2026 and until their successors shall have been elected and qualified |
| (7) |
Class II directors hold office until the annual general
meeting to be held in 2024 and until their successors shall have been elected and qualified |
| (8) |
Class III directors hold office until the annual general
meeting to be held in 2025 and until their successors shall have been elected and qualified |
Yoav Leibovitch
is a member of our board of directors, , and was appointed as our Executive Chairman of the board of directors in March 2022 and
served as our interim Chief Executive Officer from April 2022 to June 2022, following the passing of our co-founder and Chief Executive
Officer, Mr. Yoel Gat. Mr. Leibovitch also served as our Chief Financial Officer from 2012 until the closing of the Business Combination
in October 2022. Prior to SatixFy, Mr. Leibovitch was the Chief Executive Officer of Raysat, Inc. from 2009 to 2012, a leading developer
of Communication-On-The-Move antennas. Additionally, Mr. Leibovitch was the Vice President of Business Development at Gilat Satellite
Networks Ltd. (“Gilat”), a company founded by our late co-founder and Chief Executive Officer, Mr. Yoel Gat, from 2005 to
2008, and the Chief Financial Officer of Gilat from 1991 to 2003. Mr. Leibovitch holds an M.B.A. from the Hebrew University of Jerusalem.
Mr. Leibovitch is a Certified Public Accountant in Israel.
Nir Barkan
has served as our Acting Chief Executive Officer since June 1, 2023. Mr. Barkan has previously served as our Chief Commercial Officer
from 2014 until 2018. Prior to joining SatixFy, from 2018 to 2023, Mr. Barkan was a Co-Founder, Group Chief Technology Officer and the
General Manager as well as a Director of Curvalux UK Limited (“Curvalux”), a company operating in the field of sustainable
fixed wireless broadband technology. Prior to Curvalux, Mr. Barkan served as a Satcom Product Marketing Manager at Orbit Technologies
Ltd. from 2013 to 2014 , as a Director of Marketing, Pre-Sale and Support at Novelsat from 2011 to 2013, as a Product Marketing Manager
in SanDisk from 2010 to 2011 and also served as a Strategic Marketing Manager, a Customer Programs Manager and an application engineer
at Texas Instruments from 2004 to 2009. Mr. Barkan also served as an R&D Engineer and a Captain in Reserve in the IDF. Mr. Barkan
holds an MBA in Strategy and Entrepreneurship University and a B.SC in Electronics and Electricity from Tel-Aviv University.
Oren Harari
has served as our Interim Chief Financial Officer since October 2022. Prior to that, Mr. Harari was our Vice President of Finance,
a position he has held since joining SatixFy in 2018. Prior to joining SatixFy, Mr. Harari was the Chief Financial Officer of MICT Inc.
(NASDAQ:MICT) from 2016 to 2018, a holding company operating in the field of telematics and commercial MRM. Prior to MICT, Mr. Harari
served as a VP Finance at AGT international SpA, a global homeland security company, from 2012 until 2015. Prior to that, he served as
a VP Finance at Raysat Antenna Systems LLC, a leading developer of Communication-On-The-Move antennas. Additionally, Mr. Harari was a
Finance Director at Telrad Connegy, Inc. (a subsidiary of Telrad Networks Ltd. (TASE:TLRD)). Mr. Harari holds an M.B.A. from the College
of Management Academic Studies and is a Certified Public Accountant in Israel.
Doron Rainish
is our Chief Technology Officer, a position he has held since co-founding SatixFy in 2012, and served as a director for the same
period until October 2022. Mr. Rainish has over 40 years of experience in algorithm research and management of large teams of researchers
in the field of advanced wireless communications. Mr. Rainish is an expert in information theory and digital signal processing and has
over 30 patents issued and many publications on the field of digital communications. Prior to SatixFy, from 2006 to 2011, Mr. Rainish
served as the Communication Director for RaySat Broadcasting Corporation Israel Ltd. and served as a research group leader for Intel Mobile
Communication from 1999 to 2006. Mr. Rainish holds a M.Sc. in Electrical Engineering from Tel Aviv University and a B.Sc. in Electrical
Engineering from the Technion, Israel Institute of Technology. He is not director anymore.
Divaydeep Sikri
is a Vice President and the Chief Engineer of SatixFy, positions he has held since joining SatixFy in August 2016. In this role,
Mr. Sikri leads SatixFy’s R&D for Antenna technology, including Digital Beamforming Chip Architecture, RFIC Chip development,
and Antenna system designs and software. Prior to SatixFy, Mr. Sikry held various Staff Systems Engineer roles with Qualcomm (Nasdaq:QCOM)
between 2004 and 2016, where he led various aspects of Qualcomm’s 2G/2.5G/3G/4G modem technology development. Mr. Sikry holds a
M.S. in Electrical and Electronics Engineering from the New Jersey Institute of Technology and a Bachelors in Engineering from the Netaji
Subhas Institute of Technology.
Stephane Zohar
is our Executive Vice President of VLSI, a position he has held since February 2019. Mr. Zohar has over 25 years of research and
development experience in executive and VLSI expert roles. Prior to joining SatixFy, from 2011 to 2019, Mr. Zohar served as a Director
of VLSI at Multiphy, a complex signal processing and mixed signal VLSI solution company. Prior to this, from 2005 to 2011, Mr. Zohar served
as a Director of VLSI at Ethernity Networks, a leading provider of networking and security software solutions on Field Programmable Gate
Arrays (FPGAs) company, and from 1997 to 2005 he was the VLSI Manager at Metalink, a silicon solutions for wireless and wireline broadband
communications company. Mr. Zohar holds a B.Sc. in Computer Engineering from the Technion, Israel Institute of Technology with specialization
in digital communication, signal processing and VLSI.
Itzik Ben Bassat has been
our Chief Operating Officer since December 2023, prior to which he was our Executive Vice President of Product Development and Operation
since February 12, 2023. Prior to joining Satixfy, Mr. Ben Bassat served as a Chief Operating Officer of Nexite from 2019 until 2023.
Mr. Ben Bassat also served as VP Business Development and Strategic Partnership in Flex from 2017-2019. Prior to this, between 2008 until
2016, Mr. Ben Bassat served as Chief Executive Officer of Siklu, he also served as Chief Operating Officer of Metalnik between the years
2006 until 2008. From 2002 until 2004, Mr. Ben Bassat served as the VP of R&D and Chief Technology Officer of Scopus Video Networks
Ltd. In the years 1996 until 2002, he worked in Gilat Satellite Networks Ltd. and served as a Marketing Senior Director and Satellite
IP product line as well as a R&D Director. Mr. Ben Bassat served in the IDF – Intelligence Technical Research Department, as
the head of the R&D Group, Project Leader and R&D engineer. Mr. Ben Bassat holds a B.Sc. degree in Electrical Engineering from
the Technion - Israel Institute of Technology.
Directors
Mary P. Cotton
has served as a member of our board of directors since 2014. Ms. Cotton previously served at ST Engineering iDirect as Chief Executive
Officer from 2007 to 2017, as a director from 2007 to 2018, and as a Senior Advisor until 2022. Ms. Cotton previously served on the board
of Seachange International from 2004 to 2019 and as the chair of Seachange’s audit and compensation and governance committees. Ms.
Cotton holds a B.Sc. in accounting from Boston College.
Yair Shamir
has served as a member of our board of directors since 2016. . Mr. Shamir co-founded Catalyst Investments L.P. in 1993 and served
as a Managing Partner from 1993 to 2013 and has served in this role since 2015. Mr. Shamir was elected as a member of the Israeli Parliament
(Knesset) and served as Minister of Agriculture of the State of Israel from 2013 to 2015. Mr. Shamir served as the Chairman of the Board
of the N.T.A. Metropolitan Mass Transit System from 2017 to August 2018 and as the Chairman of the Israeli Road Safety Authorities from
September 2018 until November 2020. Mr. Shamir served as the Chairman of Israel’s National Roads Company from 2011 to 2012 and Chairman
of Israel Aerospace Industries Ltd. from 2005 until 2011. Mr. Shamir also served as the Chairman and Chief Executive Officer of VCON Telecommunications
Ltd. from 1997 to 2010 and Chairman of El Al (Israeli Airlines), where he led El Al’s privatization from 2004 to 2005. Mr. Shamir
holds a B.Sc. in Electronics Engineering from the Technion, Israel Institute of Technology.
Lord David
L. Willetts has served as a member of our board of directors since 2020. The Rt. Hon. Lord Willetts served as a British Member
of Parliament from 1992 to 2015 and since 2015 has been a member of the House of Lords. Lord Willetts served as Minister for Universities
and Science in the British Government from 2010 to 2014 and oversaw space policy issues. He served as an Adviser to Dresdner Kleinwort
Bank from 1997 to 2008. Lord Willetts has served on the boards of several public companies, including Surrey Satellites Technology Ltd.,
a subsidiary of Airbus PLC (since 2015), Biotech Growth Trust PLC (since 2015), Verditek Ltd., a solar cell company (since 2018), Tekcapital
PLC (since 2020), and Darktrace PLC (since its initial public offering in 2021). Lord Willetts holds a first class honors degree in politics,
philosophy and economics from Christ Church, Oxford, a constituent college of the University of Oxford, and is a visiting Professor at
King’s College, London.
Richard C. Davis has been
a member of our board of directors since October 2022, and was the Chief Executive Officer and a director of Endurance from April 2021
until the consummation of the Business Combination in October 2022. Mr. Davis is a highly experienced executive with over 25 years of
experience in corporate finance, private equity and the space industry. Since July of 2022, he has served as Chief Executive Officer of
Descartes Labs, Inc., a leading provider of geospatial intelligence products. Since March 2021, he has served as a Managing Director of
ADP. He is also a founder and Managing Member of ArgoSat Advisors LLC, a premier global advisory firm focused on the space industry that
was founded in 2009. Mr. Davis has been a director of EarthDaily Analytics Corporation since February 2021, a director of Descartes Labs
since July 2022, and a Director of AscendArc, Inc. since July 2023. Mr. Davis was formerly an instructor pilot in the United States Air
Force. He received his B.S. in Astrophysics (cum laude) from the University of Minnesota, and his MBA from the University of Virginia.
Moshe Eisenberg
has been a member of our board of directors since October 2022. Mr. Eisenberg currently serves as the Chief Financial Officer of
Camtek Ltd., a position he has held since 2011. Prior to Camtek, Mr. Eisenberg served as the Chief Financial Officer of Ex Libris Group,
a global provider of library automation solution for the academic market, from 2010 to 2011, and as the Chief Financial Officer of Scopus
Video Networks Ltd., a leading provider of digital compression, decoding & video processing equipment, from 2005 to 2009. Mr. Eisenberg
holds an MBA from Tel Aviv University and a B.Sc. in Agricultural Economics from the Hebrew University of Jerusalem.
Yoram Stettiner
has been a member of our board of directors since October 2022. Dr. Stettiner currently serves as the Chief Scientist Officer at
Arbe Robotics, Ltd., a position he has held since 2016. Dr. Stettiner is a Signal Processing Ph.D. with 35 years of R&D experience.
Dr. Stettiner specializes in RTLS Radio Location and Tracking Systems, Array Processing, Sensor Fusion, Speech Signal Processing and VoIP.
Dr. Stettiner has held various leadership positions at eight startups from foundation or early stage, with five of them having gone public
or acquired. Dr. Stettiner holds a B.Sc. in Electrical Engineering, a M.Sc. and Ph.D. in Speech Signal Processing all from the Tel Aviv
University.
CEO Succession
On June 1, 2023, Nir Barkan became our acting Chief Executive Officer.
He succeeded Ido Gur, who had served as our Chief Executive Officer since January 15, 2023. Mr. Gur succeeded David Ripstein, who had
served as our Chief Executive Officer since June 26, 2022 after succeeding our late co-founder and Chief Executive Officer, Mr. Yoel Gat.
CFO Succession
Mr. Yoav Leibovitch was required to step down as Chief Financial
Officer in connection with the consummation of the Business Combination pursuant to Israeli law, which stipulates that a chairman of the
board of directors of a public company should not also serve as its chief financial officer.
Notwithstanding his resignation as Chief Financial Officer, Mr.
Leibovitch remains actively involved in our strategy, governance and oversight as Chairman of the board of directors and will continue
to contribute to our day-to-day operations as a consultant under his existing services agreement.
In the interim, Mr. Oren Harari has been appointed as SatixFy’s
Interim Chief Financial Officer.
Arrangements for Election of Directors and Members of Management
There are no arrangements or understandings with major shareholders
or others pursuant to which any of our executive officers or directors are selected.
| B. |
Compensation |
Aggregate Compensation of Directors and Executive Officers
The aggregate compensation (not including share-based compensation)
paid by us and our subsidiaries to our executive officers and directors as a group for the year ended December 31, 2023 was approximately
$5.6 million (including amounts set aside or accrued to provide pension, severance, retirement or similar benefits), and does not include
business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefits
commonly reimbursed or paid by companies in Israel. This amount includes bonuses earned with respect to 2023. It does not include the
grant-date value of share-based compensation awarded in 2023.
As of December 31, 2023, options to purchase 3,316,936 of our ordinary
shares granted to our executive officers and directors as a group were outstanding under our equity incentive plans at a weighted average
exercise price of $2.24 per ordinary share, and 1,508,874 RSUs were outstanding.
The table and summary below outline the compensation paid and/or
accrued to our five highest compensated directors and executive officers during the year ended December 31, 2023. The compensation detailed
in the table below refers to actual compensation granted or paid to the director or officer during the year 2023. The compensation paid
to Mr. Nir Barkan was in GBP and converted into U.S. dollars for the purposes of the table below at the exchange rate of GBP 1.2747 =
U.S. $1.00, based on the rate of exchange between the GBP and the U.S. dollar as reported by the Bank of England on December 29, 2023.
The compensation for the remaining individuals in the table below was paid in New Israel Shekels and converted into U.S. dollars for purposes
of the table below at the exchange rate of NIS 3.627 = U.S.$1.00, based on the rate of exchange between the NIS and the U.S. dollar as
reported by the Bank of Israel on December 29, 2023.
|
Name and Position of
Director or Officer |
Base Salary or
Other Payment (1) |
Value of
Social Benefits (2) |
Bonuses |
Value of
Equity- Based Compensation
Granted (3) |
All Other
Compensation (4) |
Total |
||||||||||||||||||
|
Yoav Leibovitch |
1,200,000 |
0 |
1,000,000 |
38,309 |
0 |
2,238,309 |
||||||||||||||||||
|
Nir Barkan |
207,356 |
60,073 |
195,768 |
128,875 |
0 |
592,072 |
||||||||||||||||||
|
Oren Harari |
229,942 |
64,384 |
191,538 |
73,590 |
0 |
559,454 |
||||||||||||||||||
|
Itzik Ben Bassat |
220,223 |
61,663 |
110,284 |
279,516 |
0 |
671,686 |
||||||||||||||||||
|
Simona Gat (5) |
605,000 |
0 |
38,309 |
38,309 |
0 |
643,309 |
||||||||||||||||||
| (1) |
“Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to the
Company’s executive officers and members of the board of directors for the year 2023. |
| (2) |
“Social Benefits” include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites
may include, to the extent applicable to the relevant officers, payments, contributions and/or allocations for savings funds (e.g., Managers’
Life Insurance Policy), education funds (referred to in Hebrew as "keren hishtalmut"), pension, severance, vacation, car or car allowance,
rent for relocated officers, medical insurances and benefits, risk insurance (e.g., life, disability, accident), telephone, convalescence
pay, payments for social security, tax gross-up payments and other benefits and perquisites. |
| (3) |
Represents the equity-based compensation expenses recorded in the Company's consolidated financial statements for the year ended
December 31, 2023, calculated in accordance with accounting guidance for equity-based compensation. For a discussion on the assumptions
used in reaching this valuation, see Note 18 to our consolidated financial statements included elsewhere in this Annual Report.
|
| (4) |
“All Other Compensation” includes, among other things, car-related expenses (including tax gross-up), communication expenses,
basic health insurance, and holiday presents. |
| (5) |
Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy
Bulgaria effective April 30, 3023. |
Employment and Incentive Arrangements with our Directors and CEO
Employment Agreement — Mr. Nir Barkan
SatixFy Israel Ltd. entered into an agreement on
May 23, 2023 with Mr. Nir Barkan, effective June 1, 2023, pursuant to which Mr. Nir Barkan agreed to serve as Acting Chief Executive Officer.
The compensation to be paid to Mr. Nir Barkan pursuant to this agreement consists of GBP 244,134 (approximately $26 thousand per month)
annual salary. In addition, as part of his prior role with the Company, he received an annual bonus opportunity of up to $160,000, 500,000
RSUs, which shall vest quarterly in equal installments over 15 quarters, provided that 25% of the RSUs vests on January 1, 2024 and if
a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within 24 months
of the effective date of the agreement and thereafter Mr. Barkan’s employment with the Company is terminated by the Company without
cause, 100% of the unvested RSUs shall automatically vest, and (v) other customary executive perquisites and benefits.
Separation Agreement — Mr. Ido Gur
On June 6, 2023, SatixFy Israel Ltd. entered into
a separation agreement with Mr. Ido Gur, pursuant to which Mr. Gur resigned from his position as CEO as of the date of the agreement.
Pursuant to the separation agreement, Mr. Gur remained an employee of the Company until November 20, 2023 solely for the purpose of transition
of his position to the new CEO. We agreed to pay Mr. Gur his monthly salary of NIS 130,000 (approximately $36 thousand per month) and
other benefits (including vacation, pension insurance fund, cellular phone, and leased car) up to the date of termination.
Separation Agreement — Mr. David Ripstein
On January 12, 2023, we entered into a separation agreement with
Mr. David Ripstein, our former CEO, pursuant to which SatixFy and Mr. Ripstein mutually agreed to the termination of Mr. Ripstein’s
employment as CEO effective January 13, 2023. In connection with the termination of Mr. Ripstein’s employment as CEO, SatixFy agreed
to provide compensation to Mr. Ripstein consisting of, (i) continued payment of regular salary and access to certain benefits under his
existing employment agreement through his employment termination date on April 12, 2023, (ii) a one-time bonus of $125,000 for fiscal
year 2022 pursuant to Mr. Ripstein’s existing employment agreement, (iii) a one-time bonus of $95,000 payable on April 12, 2023,
(iv) a one-time payment of $30,000 in exchange for Mr. Ripstein’s agreement to assist with transition of our new CEO, and (v) other
customary terms and conditions.
Separation Agreement — Ms. Simona Gat
On April 30, 2023, SatixFy Communications Ltd. and Ilan Gat Ltd.
entered into a Separation Agreement pursuant to which Ms. Gat resigned from all positions at the Company and its subsidiaries, including
serving as the President of the Company. Effective May 1, 2023, she instead began serving as an observer on the board of directors of
the Company. We agreed to pay Ms. Gat compensation consisting of (i) five monthly payments in the gross sum of $55,000 plus VAT from May
through September 2023; (ii) one monthly payment of $110,000 plus VAT in October 2023, totaling in the aggregate, $385,000 plus VAT; and
(iii) other customary terms and conditions.
Employment Agreement — Mr. Itzik Ben
Bassat
SatixFy Israel Ltd. SatixFy Israel Ltd. entered into an agreement
on February 7, 2023 with Mr. Itzik Ben Bassat, effective February 12, 2023, pursuant to which Mr. Ben Bassat agreed to serve as EVP Product
Development and Operation. The compensation to be paid to Mr. Ben Bassat pursuant to this agreement consists of, (i) a monthly gross salary
of NIS 75,000 (which is equivalent to approximately $21,000 as of March 1, 2023), (ii) an annual bonus opportunity of up to NIS 450,000
(which is equivalent to approximately $125,000 as of March 1, 2023), (iii) 400,000 RSUs convertible into 400,000 ordinary shares, which
shall vest yearly in equal installments over four years, provided that 25% of the RSUs shall vest on the first anniversary of the agreement
and if a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within
24 months of the effective date of the agreement and thereafter Mr. Ben Bassat’s employment with the Company is terminated by the
Company without cause, 100% of the unvested RSUs shall automatically vest, and (iv) other customary executive perquisites and benefits.
On November 29, 2023, the board approved a new title of Chief Operating Officer.
Employment Agreement — Mr. Oren Harari
SatixFy Israel Ltd. entered into an agreement on April 1, 2018
with Mr. Oren Harari, which was subsequently amended on October 28, 2022, pursuant to which Mr. Oren Harari agreed to serve as Interim
Chief Financial Officer. The compensation to be paid to Mr. Oren Harari pursuant to this agreement consists of, (i) a monthly gross salary
of NIS 60,000 (which is equivalent to approximately $16,000 as of March 1, 2023), (ii) an annual bonus opportunity in 2023 of up to four
times the then applicable month salary, and (iii) other customary executive perquisites and benefits. Effective April 1, 2023, Mr. Harari’s
salary was raised to NIS 70,000 (approximately $20,000).
Services Agreement — Mr. Yoav Leibovitch
SatixFy Israel Ltd. and RaySat Ltd. (“RaySat”), an
entity organized under the laws of the State of Israel and controlled by Mr. Yoav Leibovitch, our Chairman of the board of directors and
one of our significant shareholders, are parties to a Services Agreement effective as of January 1, 2013 (as amended as of June 27, 2017,
September 6, 2020,January 4, 2021 and February 24, 2022). Pursuant to this agreement, Mr. Yoav Leibovitch provides financial management,
business development, presidential and management services to SatixFy Israel Ltd. and its affiliates. On September 15, 2022, SatixFy’s
board approved an amendment, which was approved by SatixFy’s shareholders on September 28, 2022, to Mr. Leibovitch’s compensation
under this agreement to (i) grant Mr. Leibovitch a $2 million success bonus payable upon the Closing of the Business Combination, (ii)
increase Mr. Leibovitch’s monthly fee for services provided to $100,000 per month, effective as of October 1, 2022, increase Mr.
Leibovitch’s yearly bonus such that the yearly bonus shall be 2% of the incremental year-over-year growth of the shareholders’
equity in the consolidated financial statements of the Company and increase Mr. Leibovitch’s annual bonus such that the annual bonus
shall be 2% of the incremental year- over-year growth of revenues in the consolidated financial statements of the Company.
Employment Agreement — Mr. Doron Rainish.
Effective as of the incorporation of our subsidiary, SatixFy Israel
Ltd., in 2012, SatixFy Israel Ltd. entered into an employment agreement with Doron Rainish to serve as Chief Technology Officer, which
was amended on December 1, 2016. The employment agreement provided for compensation equal to an annual gross amount of $160,000, plus
$60,000” paid in four quarterly installments of $15,000 in the NIS equivalent. The employment agreement further provided for severance
equal to two months’ base salary and an additional 8.33% employer contribution to any pension insurance. The employment agreement
further provided for (i) pension insurance up to 14.33% employer contribution, depending on the type of insurance, (ii) advanced study
fund with 7.5% employer contribution up to the limit recognized by the Income Tax Authority and (iii) employer car and mileage payments.
Services Agreement and Option Grant —
Lord David Willetts.
On September 7, 2020, we entered into a Board Member Services Agreement
with Lord David Willets, who serves as a director of the Company. With respect to his services as a director of the Company, Lord Willetts
shall be entitled to receive annual remuneration and remuneration for participating in meetings at a fixed amount according to the applicable
U.K. remuneration regulations. Pursuant to this agreement, Lord Willets is entitled to receive 50,000 non-tradable options exercisable
into 50,000 SatixFy Ordinary Shares in accordance with the terms of the 2020 Share Award Plan (which was updated to 52,798 following the
initial listing of our securities as a result of the Business Combination).
Director Compensation
We pay each of our external directors and to each other (non-external
director) member of the compensation committee of the board (i) a fee of NIS 10,000 per month, (ii) a per meeting fee for participation
in board and committee meetings of NIS 4,000 plus VAT, to the extent applicable, and (iii) reimbursement of expenses incurred in connection
with service on the board and its committees, all in accordance with the Israeli Companies Law and applicable regulations. The other members
of the board are entitled to reimbursement of expenses to the same extent to which the external directors are entitled to such reimbursement.
No other compensation is currently paid to these other members of the board.
Internal Auditor
Under the Israeli Companies Law, the board of directors of a public
company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among
other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Israeli
Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office
holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party”
is defined in the Israeli Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii)
any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company,
or (iii) any person who serves as a director or as a chief executive officer of the company. On September 28, 2022, the Company’s
Board approved the appointment of Mr. Yisrael Gewirtz from Fahn Kanne Grant Thornton as the Company’s internal auditor.
Approval of Related Party Transactions under Israeli Law
Fiduciary Duties of Directors and Executive Officers
The Israeli Companies Law imposes a duty of care and a duty of loyalty on all office
holders of a company. An office holder is defined in the Israeli Companies Law as a general manager, chief business manager, deputy general
manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s
title, a director, and any other manager directly subordinate to the general manager. Each person listed in the table under “Management
— Management and Board of Directors” is an office holder under the Israeli Companies Law.
An office holder’s fiduciary duties consist of a duty of
care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder
in the same position would act under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means,
in light of the circumstances, to obtain:
| • |
information on the business advisability of a given action brought for the office holder’s approval or performed by virtue
of the office holder’s position; and |
| • |
all other important information pertaining to such action. |
The duty of loyalty requires an office holder to act in good faith
and for the benefit of the company, and includes, among other things, the duty to:
| • |
refrain from any act involving a conflict of interest between the performance of the office holder’s duties in the company
and the office holder’s other duties or personal affairs; |
| • |
refrain from any activity that is competitive with the business of the company; |
| • |
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for the office holder
or others; and |
| • |
disclose to the company any information or documents relating to the company’s affairs which the office holder received as
a result of the office holder’s position. |
Under the Israeli Companies Law, a company may approve an act,
specified above, which would otherwise constitute a breach of the office holder’s fiduciary duty, provided that the office holder
acted in good faith, neither the act nor its approval harms the company, and the personal interest of the office holder is disclosed (including
any significant fact or document) a sufficient time before the approval of such act. Any such approval is subject to the terms of the
Israeli Companies Law setting forth, among other things, the appropriate bodies of the company required to provide such approval and the
methods of obtaining such approval.
Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions
The Israeli Companies Law requires that an office holder promptly
disclose to the Company any personal interest and all related material information known to such office holder concerning any existing
or proposed transaction with the company. The Israeli Companies Law does not specify to whom within us or the manner in which required
disclosures are to be made. We require our office holders to make such disclosures to our board of directors. A personal interest includes
an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate
in which such person or a relative of such person is an interested party (as described above), but excluding a personal interest stemming
solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the
office holder holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf
of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest
in a non-extraordinary transaction (meaning any transaction that is in the ordinary course of business, on market terms or that is not
likely to have a material impact on the company’s profitability, assets or liabilities), approval by the board of directors is required
for the transaction unless the company’s articles of association provide for a different method of approval. Any such transaction
that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s audit committee and subsequently
by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary course of
business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities)
in which an office holder has a personal interest.
A director and any other office holder who has a personal interest
in a transaction which is considered at a meeting of the board of directors or at a committee meeting may generally not be present
at such a meeting or vote on that matter unless a majority of the directors or members of the committee, as applicable, have a personal
interest in the matter. If a majority of the members of the committee or the board of directors have a personal interest in the matter,
then all of the directors may participate in deliberations of the committee or board of directors, as applicable, with respect to such
transaction and vote on the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli
law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest,
and certain arrangements regarding the terms of service or employment of a controlling shareholder and his relatives. For these purposes,
a controlling shareholder is any shareholder that has the ability to direct the company’s actions, other than by virtue of being
an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights
in a company or has the right to appoint 50% or more of the directors of the company or its general manager. In the context of a transaction
involving a related party, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company
if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who
have a personal interest in the same transaction will be aggregated.
For a description of the approvals required under Israeli law for
compensation arrangements of officers and directors, see “Management — Compensation of Directors
and Executive Officers.”
Shareholder Duties
Pursuant to the Israeli Companies Law, a shareholder has a duty
to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power
with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect
to the following matters:
| • |
an amendment to the company’s articles of association; |
| • |
an increase of the company’s authorized share capital; |
| • |
a merger; or |
| • |
interested party transactions that require shareholder approval. |
In addition, a shareholder has a general duty to refrain from discriminating
against other shareholders. Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling
shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote, and any shareholder who has
the power to appoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under
the company’s articles of association with respect to the company. The Companies Law does not define the substance of this duty
of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach
of the duty of fairness.
| C. |
Board Practices |
Corporate
Governance Practices
A majority of our board of directors are composed of directors
who are “independent” as defined by the rules of the NYSE, although we may decide to rely on the foreign private issuer exemption
from this requirement in the future. The board of directors is expected to establish categorical standards to assist it in making its
determination of director independence.
The board of directors will assess on a regular basis the independence
of directors and will make a determination as to which members are independent. The term “executive officer” above is expected
to have the same meaning specified for such term in the NYSE listing standards.
For a discussion of certain home country corporate governance practices
we are permitted to follow as a foreign private issuer whose shares are listed on the NYSE instead of certain requirements of the rules
of the NYSE, see “Item 16G. Corporate Governance.”
External Directors
Under the Israeli Companies Law, except as provided below, companies
incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on
the NYSE are required to appoint at least two external directors who meet the qualification requirements set forth in the Israeli Companies
Law.
Pursuant to the regulations promulgated under the Israeli Companies
Law, companies whose shares are traded on specified U.S. stock exchanges, including the NYSE, which do not have a controlling shareholder
(as such term is defined in the Israeli Companies Law) and which comply with the independent director requirements and the audit committee
and compensation committee composition requirements of U.S. law and the U.S. stock exchange applicable to domestic issuers, may (but are
not required to) elect to opt out of the requirement to maintain external directors and opt out of the composition requirements under
the Israeli Companies Law with respect to the audit and compensation committees. We currently do not qualify for such exemption.
In January 2023, the general meeting of shareholders approved the
re-appointment of Moshe Eisenberg and Yoram Stettiner, as external directors for a three year period from January 12, 2023.
The provisions of the Israeli Companies Law set forth special approval
requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting
at a meeting of shareholders, provided that either:
| • |
such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not
have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with
a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or
|
| • |
the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the election
of the external director against the election of the external director does not exceed 2% of the aggregate voting rights in the company.
|
The term “controlling shareholder” as used in the Israeli
Companies Law for purposes of all matters related to external directors and for certain other purposes (such as the requirements related
to appointment to the audit committee or compensation committee, as described below), means a shareholder with the ability to direct the
activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if
the shareholder holds 50% or more of the voting rights in a company or has the right to appoint a majority of the directors of the company
or its general manager.
With respect to certain matters (various related party transactions),
a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in a public company if no other
shareholder holds more than 50% of the voting rights in the company, but excludes a shareholder whose power derives solely from his or
her position as a director of the company or from any other position with the company. For the purpose of determining the holding percentage
stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval
are deemed as joint holders.
The initial term of an external director is three years. Thereafter,
an external director may be re-elected, subject to certain circumstances and conditions, by shareholders to serve in that capacity for
up to two additional three-year terms, provided that either:
| • |
his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s
voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling,
disinterested shareholders voting for such re-election exceeds 2% of the aggregate voting rights in the company, subject to additional
restrictions set forth in the Israeli Companies Law with respect to affiliations of external director nominees; |
| • |
the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described
in the paragraph above; or |
| • |
his or her service for each such additional term is recommended by the board of directors and is approved at a meeting of shareholders
by the same majority required for the initial election of an external director (as described above). |
Our Class I director, Yair Shamir, will hold office until our 2026
Annual General Meeting of Shareholders. Our Class II directors, Mary Cotton and David Willetts, will hold office until our 2024 Annual
General Meeting of Shareholders. Our Class III directors, Yoav Leibovitch and Richard Davis, will hold office until our 2025 Annual General
Meeting of Shareholders. The directors (other than the outside directors) are elected by a vote of the holders of a majority of the voting
power present and voting at the meeting. Each director will hold office and, unless otherwise provided, serve on the committees to which
he or she have been appointed by the Board, until the annual general meeting of our shareholders for the year in which his or her term
expires and until his or her successor is duly elected and qualified, unless the tenure of such director expires earlier pursuant to the
Companies Law or unless he or she resigns or is removed from office.
The term of office for external directors for Israeli companies
traded on certain foreign stock exchanges, including the NYSE, may be extended indefinitely in increments of additional three- year terms,
in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s
expertise and special contribution to the work of the board of directors and its committees, the re-election for such additional period(s)
is beneficial to the company, and provided that the external director is re-elected subject to the same shareholder vote requirements
(as described above regarding the re- election of external directors). Prior to the approval of the re-election of the external director
at a general meeting of shareholders, the company’s shareholders must be informed of the term previously served by him or her and
of the reasons why the board of directors and audit committee recommended the extension of his or her term.
External directors may be removed from office only by a special
general meeting of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage
required for their election or by a court order, in each case, only under limited circumstances, including ceasing to meet the statutory
qualifications for appointment or violating their duty of loyalty to the company. An external director may also be removed by order of
an Israeli court if, following a request made by a director or shareholder of the company, the court finds that such external director
has ceased to meet the statutory qualifications for his or her appointment as stipulated in the Israeli Companies Law or has violated
his or her duty of loyalty to the company.
If an external directorship becomes vacant and there are fewer
than two external directors on the board of directors at the time, then the board of directors is required under the Israeli Companies
Law to call a meeting of the shareholders as soon as practicable to appoint a replacement external director. Each committee of the board
of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee
and the compensation committee must include all external directors then serving on the board of directors and an external director must
serve as chair thereof. Under the Israeli Companies Law, external directors of a company are prohibited from receiving, directly or indirectly,
any compensation from the company other than for their services as external directors pursuant to the Israeli Companies Law and the regulations
promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during
his or her term subject to certain exceptions.
The Israeli Companies Law provides that a person is not qualified
to be appointed as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person
or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under
the person’s control, has or had during the two years preceding the date of appointment as an external director: (a) any affiliation
or other disqualifying relationship with the company, with any person or entity controlling the company or a relative of such person,
or with any entity controlled by or under common control with the company; or (b) in the case of a company with no controlling shareholder
or any shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director any affiliation or
other disqualifying relationship with a person then serving as chair of the board or chief executive officer, a holder of 5% or more of
the issued share capital or voting power in the company or the most senior financial officer.
The term “relative” is defined in the Israeli Companies
Law as a spouse, sibling, parent, grandparent or descendant, a spouse’s sibling, parent or descendant and the spouse of each of
the foregoing persons. Under the Israeli Companies Law, the term “affiliation” and the similar types of disqualifying relationships
include (subject to certain exceptions):
| • |
an employment relationship; |
| • |
a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);
|
| • |
control; and |
| • |
service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares
if such director was appointed as a director of the private company in order to serve as an external director following the initial public
offering. |
The term “office holder” is defined in the Israeli
Companies Law as a general manager (i.e., chief executive officer), chief business manager, deputy general manager, vice general manager,
any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other
manager directly subordinate to the general manager.
In addition, no person may serve as an external director if that
person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities
as a director or otherwise interfere with that person’s ability to serve as an external director or if the person is an employee
of the Israel Securities Authority, or ISA, or an Israeli stock exchange. A person may also not continue to serve as an external director
if he or she received direct or indirect compensation from the company including amounts paid pursuant to indemnification or exculpation
contracts or commitments and insurance coverage for his or her service as an external director, other than as permitted by the Israeli
Companies Law and the regulations promulgated thereunder.
Following the termination of an external director’s service
on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit
by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement
as an office holder of the company or a company controlled by its controlling shareholder or employment by, or provision of services to,
any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director.
This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for
one year with respect to other relatives of the former external director.
If at the time at which an external director is appointed all members
of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same
gender, the external director to be appointed must be of the other gender. A director of one company may not be appointed as an external
director of another company if a director of the other company is acting as an external director of the first company at such time.
According to the Israeli Companies Law and regulations promulgated
thereunder, a person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting
and financial expertise (each, as defined below); provided that at least one of the external directors must be determined by our board
of directors to have accounting and financial expertise. However, if at least one of our other directors (i) meets the independence requirements
under the Exchange Act, (ii) meets the independence requirements of the NYSE rules for membership on the audit committee and (iii) has
accounting and financial expertise as defined under the Israeli Companies Law, then neither of our external directors is required to possess
accounting and financial expertise as long as each possesses the requisite professional qualifications.
A director with accounting and financial expertise is a director
who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting
matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion
about the presentation of financial data. A director is deemed to have professional qualifications if he or she has any of the following:
(i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed
another form of higher education in the primary field of business of the company or in a field which is relevant to his or her position
in the company or (iii) at least five years of experience serving in one of the following capacities or at least five years of cumulative
experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant
volume of business, (b) a senior position in the company’s primary field of business or (c) a senior position in public administration
or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional
qualifications.
Chairman of the Board
The A&R Articles of Association provide that the chairman of
the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as a director,
unless resolved otherwise by the board of directors. Under the Israeli Companies Law, the chief executive officer (or any relative of
the chief executive officer) may not serve as the chairman of the board of directors, and the chairman (or any relative of the chairman)
may not be vested with authorities of the chief executive officer without shareholder approval consisting of a majority vote of the shares
present and voting at a shareholders meeting, for a period of not exceeding three (3) years, provided that either:
| • |
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval
voted at the meeting are voted in favor (disregarding abstentions); or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment
voting against such appointment does not exceed 2% of the aggregate voting rights in the company. |
In addition, a person subordinated, directly or indirectly, to
the chief executive officer may not serve as the chairman of the board of directors; the chairman of the board may not be vested with
authorities that are granted to those subordinated to the chief executive officer; and the chairman of the board may not serve in any
other position in the company or a controlled company, but he may serve as a director or chairman of a subsidiary.
Committees of the Board of Directors
The board of directors has the following standing committees: an
audit committee and a compensation committee.
Audit Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public
company must appoint an audit committee (the “Audit Committee”). The audit committee must be comprised of at least three directors,
including all of the external directors, one of whom must serve as chair of the committee. The audit committee may not include the (i)
chair of the board; (ii) a controlling shareholder of the company; (iii) a relative of a controlling shareholder; (iv) a director employed
by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder;
or (v) a director who derives most of his or her income from a controlling shareholder. In addition, under the Israeli Companies Law,
the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an “unaffiliated
director” under the Israeli Companies Law is defined as either an external director or as a director who meets the following criteria:
| • |
he or she meets the qualifications for being appointed as an external director, except for the requirement (i) that the director
be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed
for trading outside of Israel) and (ii) for accounting and financial expertise or professional qualifications; and |
| • |
he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of
less than two years in his or her service as a director shall not be deemed to interrupt the continuity of the service. A majority of
our audit committee (each, as identified in the second paragraph under “— Listing Requirements”
below) are external directors under the Israeli Companies Law, thereby fulfilling the foregoing Israeli law requirement for the composition
of the audit committee. |
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies
are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and
one of whom has accounting or related financial management expertise.
The members of the Audit Committee are our two external directors,
Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. We have designated Mr. Moshe Eisenberg and Ms. Mary P. Cotton as
“audit committee financial experts” as defined by the SEC and each member of the Audit Committee is “financially literate”
under the NYSE rules. The board of directors has determined that each member of the Audit Committee is “independent” as defined
under the NYSE rules and Exchange Act rules and regulations.
Audit Committee Role
Our board of directors has adopted an audit committee charter setting
forth the responsibilities of the audit committee, which are consistent with the Israeli Companies Law, the SEC rules, and the corporate
governance rules of the NYSE. These responsibilities include:
| • |
retaining and terminating our independent auditors, subject to ratification by the board of directors and by the shareholders;
|
| • |
pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms; |
| • |
overseeing the accounting and financial reporting processes of our company; |
| • |
managing audits of our financial statements; |
| • |
preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act;
|
| • |
reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication, filing,
or submission to the SEC; |
| • |
recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement
fees and terms, in accordance with the Israeli Companies Law as well as approving the yearly or periodic work plan proposed by the internal
auditor; |
| • |
reviewing with counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements;
|
| • |
identifying irregularities in our business administration, including by consulting with the internal auditor (if any) or with the
independent auditor, and suggesting corrective measures to the board of directors; |
| • |
reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services)
between the company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course
of the Company’s business and deciding whether to approve such acts and transactions if so required under the Israeli Companies
Law; and |
| • |
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to
be provided to such employees. |
Additionally, under the Israeli Companies Law, the role of the
audit committee includes the identification of irregularities in our business management, among other things, by consulting with the internal
auditor or our independent auditors and suggesting an appropriate course of action to the board of directors. The audit committee is required
to assess the company’s internal audit system and the performance of its internal auditor. The Israeli Companies Law also requires
that the audit committee assess the scope of the work and compensation of the company’s external auditor. In addition, the audit
committee is required to determine whether certain related party actions and transactions are “material” or “extraordinary”
for the purpose of the requisite approval procedures under the Israeli Companies Law and whether certain transactions with a controlling
shareholder will be subject to a competitive procedure.
Compensation Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public
company must appoint a compensation committee (the “Compensation Committee”). The compensation committee generally must be
comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation
committee. The chair of the compensation committee must be an external director. Each compensation committee member who is not an external
director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee
is subject to the same Israeli Companies Law restrictions as the audit committee as to who may not be a member of the compensation committee.
Each member of our compensation committee (each, as identified in the second paragraph under “— Listing
Requirements” below) fulfills the foregoing Israeli law requirements related to the composition of the compensation committee.
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies are required to maintain a compensation
committee consisting of at least two independent directors.
The members of the Compensation Committee are our two external
directors, Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. The board of directors has determined that each member
of the Compensation Committee is “independent” as defined under the NYSE listing standards, taking into consideration the
additional independence criteria applicable to the members of a compensation committee. The Compensation Committee has the authority to
retain compensation consultants, outside counsel and other advisers.
Compensation Committee Role
In accordance with the Israeli Companies Law, the responsibilities
of the compensation committee are, among others, as follows:
| • |
recommending to the board of directors with respect to the approval of the compensation policy for “office holders” (a
term used under the Israeli Companies Law, which essentially means directors and executive officers) and, once every three years, regarding
any extensions to a compensation policy that has been in effect for a period of more than three years; |
| • |
reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any
amendments or updates of the compensation plan; |
| • |
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
|
| • |
exempting, under certain circumstances, from the requirement of approval by the general meeting of shareholders, transactions with
a candidate to serve as the chief executive officer of SatixFy. |
Our board of directors has adopted a compensation committee charter
setting forth the responsibilities of the committee, which include among others:
| • |
recommending to our board for its approval a compensation policy in accordance with the requirements of the Israeli Companies Law
as well as other compensation policies, incentive- based compensation plans and equity-based compensation plans, and overseeing the development
and implementation of such policies and recommending to our board of directors any amendments or modifications the committee deems appropriate,
including as required under the Israeli Companies Law; |
| • |
reviewing and approving the granting of options and other incentive awards to our Chief Executive Officer and other executive officers,
including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other
executive officers, including evaluating their performance in light of such goals and objectives; |
| • |
approving and exempting certain transactions regarding office holders’ compensation pursuant to the Israeli Companies Law
|
| • |
administer our clawback policy; and |
| • |
administering our equity-based compensation plans, including without limitation, approving the adoption of such plans, amending and
interpreting such plans and the awards and agreements issued pursuant thereto, and making awards to eligible persons under the plans and
determining the terms of such awards. |
Compensation Policy under the Israeli Companies Law
In general, under the Israeli Companies Law, a public company must
have a compensation policy approved by the board of directors after receiving and considering the recommendations of the compensation
committee. In addition, a compensation policy must be approved at least once every three years, first, by the issuer’s board of
directors, upon recommendation of its compensation committee, and second, by a general shareholders meeting, provided that either:
| • |
such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and do not have
a personal interest in such compensation policy and who are present and voting (excluding abstentions); or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation
policy and who vote against the policy, does not exceed 2% of the company’s aggregate voting rights. |
In the event that the shareholders fail to approve the compensation
policy in a duly convened meeting, the board of directors may nevertheless override that decision, provided that the compensation committee
and then the board of directors decide, on the basis of detailed reasons and after further review of the compensation policy, that approval
of the compensation policy is for the benefit of the company despite the failure of the shareholders to approve the policy.
If a company that adopts a compensation policy in advance of its
initial public offering (or in this case, prior to the closing of the Business Combination) describes the policy in its prospectus for
such offering, then that compensation policy shall be deemed validly adopted in accordance with the Israeli Companies Law and will remain
in effect for term of five years from the date such company becomes a public company.
The compensation policy must serve as the basis for decisions concerning
the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment
or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors as set forth in
the Israeli Companies Law, including advancement of the company’s objectives, business plan and long-term strategy, and creation
of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and
the nature of its operations. The compensation policy must furthermore consider the following additional factors:
| • |
the education, skills, experience, expertise and accomplishments of the relevant office holder; |
| • |
the office holder’s position, responsibilities and prior compensation agreements with him or her; |
| • |
the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the
company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost,
the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in
the company; |
| • |
if the terms of employment include variable components — the possibility of reducing variable components at the discretion
of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and
|
| • |
if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms
of his or her compensation during such period, the company’s performance during such period, his or her individual contribution
to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the
company. |
The compensation policy must also include, among other things:
| • |
with regard to variable components of compensation: |
| • |
with the exception of office holders who report directly to the chief executive officer, provisions determining the variable components
on the basis of long-term performance and on measurable criteria; however, the company may determine that an immaterial part of the variable
components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount is not higher
than three monthly salaries per annum, while taking into account such office holder’s contribution to the company; and |
| • |
the ratio between variable and fixed components, as well as the limit on the values of variable components at the time of their grant.
|
| • |
a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation
policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered
to be wrong, and such information was restated in the company’s financial statements; |
| • |
the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable,
while taking into consideration long-term incentives; and |
| • |
a limit on retirement grants. |
Our compensation policy is designed to promote retention and motivation
of directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers
with our long-term performance and provide a risk management tool. To that end, a portion of an executive officer compensation package
is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand,
its compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may
harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between
the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.
The compensation policy also addresses our executive officers’
individual characteristics (such as their respective positions, education, scope of responsibilities and contribution to the attainment
of its goals) as the basis for compensation variation among its executive officers and considers the internal ratios between compensation
of its executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted
to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with
respect to any special achievements, such as outstanding personal achievement or outstanding company performance), equity-based compensation,
benefits and retirement and termination of service arrangements and the compensation that may be granted to the chairman of our board
of directors may include, among others, an annual cash retainer, annual bonuses and other cash bonuses as an executive officer other than
our chief executive officer and equity based compensation. All cash bonuses are limited to a maximum amount linked to the executive officer’s
base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may not exceed 90% of
each executive officer’s total compensation package with respect to any given calendar year.
An annual cash bonus may be awarded to executive officers and the
chairman of our board of directors upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that
may be granted to our executive officers other than its chief executive officer is based on performance objectives and a discretionary
evaluation of the executive officer’s overall performance by the chief executive officer. The annual cash bonus that may be granted
to executive officers other than our chief executive officer and to the chairman of our board of directors may be based entirely on a
discretionary evaluation. Furthermore, our chief executive officer is entitled to recommend performance objectives, and such performance
objectives will be approved by the Compensation Committee (and, if required by law, by our board of directors).
The performance measurable objectives of our chief executive officer
will be determined by our Compensation Committee and board of directors. A non-material portion of the chief executive officer’s
annual cash bonus may be based on a discretionary evaluation of the chief executive officer’s overall performance by the Compensation
Committee and the board of directors based on quantitative and qualitative criteria.
The equity-based compensation under the compensation policy for
our executive officers is designed in a manner consistent with the underlying objectives in determining the base salary and the annual
cash bonus. Primary objectives include enhancing the alignment between the executive officers’ interests and our long-term interests
and those of its shareholders and strengthening the retention and the motivation of executive officers in the long term. Our compensation
policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares
and RSUs, in accordance with its share incentive plan then in place. All equity-based incentives granted to executive officers shall be
subject to vesting periods in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall
be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business
experience, qualifications, role and the personal responsibilities of the executive officer.
In addition, the compensation policy contains compensation recovery
provisions which allow us under certain conditions to recover bonuses paid in excess, enables its chief executive officer to approve immaterial
changes in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our
compensation policy) and allows us to exculpate, indemnify and insure its executive officers and directors to the maximum extent permitted
by Israeli law, subject to certain limitations as set forth therein.
The compensation policy also provides for compensation to the members
of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation
and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded on Stock Exchanges
Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in
the compensation policy.
Compensation of Directors and Executive Officers
Directors
Under the Israeli Companies Law, the compensation of a public company’s
directors requires the approval of (i) its compensation committee, (ii) its board of directors and, unless exempted under regulations
promulgated under the Israeli Companies Law, (iii) the approval of its shareholders at a general meeting. In addition, if the compensation
of a public company’s directors is inconsistent with the company’s compensation policy, then those inconsistent provisions
must be separately considered by the compensation committee and board of directors, and approved by the shareholders by a special majority
by one of the following:
| • |
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval
voted at the meeting are voted in favor (disregarding abstentions); or |
| • |
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment
voting against the inconsistent provisions of the compensation package does not exceed 2% of the aggregate voting rights in the company.
|
Executive Officers other than the Chief Executive
Officer
The Israeli Companies Law requires the compensation of a public
company’s office holders (other than the chief executive officer) be approved in the following order: (i) the compensation committee,
(ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated
compensation policy, the company’s shareholders (by a special majority as described above).
However, there are exceptions to the foregoing approval requirements
with respect to non-director office holders. If the shareholders of the company do not approve the compensation of a non-director office
holder, the compensation committee and board of directors may in special circumstances override the shareholders’ disapproval for
such non-director office holder provided that the compensation committee and the board of directors each detailed reasons for their decision
to override the disapproval of the shareholders and approve the compensation, , including regarding the shareholders of the Company objection.
An amendment to an existing compensation arrangement with a non-director
office holder requires only the approval of the compensation committee, if the compensation committee determines that the amendment is
immaterial. However, if the non-director office holder is subordinate to the chief executive officer, an amendment to an existing compensation
arrangement shall not require the approval of the compensation committee if (i) the amendment is approved by the chief executive officer,
(ii) the company’s compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii)
the engagement terms are consistent with the company’s compensation policy.
Chief Executive Officer
Under the Israeli Companies Law, the compensation of a public company’s
chief executive officer is required to be approved by: (i) the company’s compensation committee, (ii) the company’s board
of directors and (iii) the company’s shareholders (by a special majority as described above). However, if the shareholders of the
company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors
may in special circumstances override the shareholders’ decision provided that they each detailed reasons for their decision, after
rediscussing the terms of the compensation and the shareholders decline the approval thereof, and if the compensation is in accordance
with the company’s compensation policy.
In the case of a new chief executive officer, the compensation
committee may waive the shareholder approval requirement with regard to the compensation of a candidate for the chief executive officer
position if the compensation committee determines that: (i) the compensation arrangement is consistent with the company’s compensation
policy , (ii) the chief executive officer candidate did not have a prior business relationship with the company or a controlling shareholder
of the company and (iii) subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ
the chief executive officer candidate. However, if the chief executive officer candidate will serve as a member of the board of directors,
such candidate’s compensation terms as chief executive officer must be approved in accordance with the rules applicable to approval
of compensation of directors.
| D. |
Employees |
As of December 31, 2023, we had 135 full-time employees, based
primarily in Israel, the United Kingdom and Bulgaria, of whom more than 120 are engineers focused on the development of Very Large Scale
Integration (VLSI), hardware, software, algorithms, satellite payloads and communications systems. None of our employees are represented
by a labor union, and we consider our relations with our employees to be good. To date, we have not experienced any work stoppages.
| E. |
Share Ownership |
Information regarding the ownership of our ordinary shares by our
executive officers and directors is set forth in “Item 7. – Major Shareholders and Related
Party Transactions – A. Major Shareholders.”
2020 Share Award Plan.
On May 12, 2020, we adopted our 2020 Share Award Plan and the EMI
options (for UK employees). Addendum to the 2020 Share Award Plan, and on September 30, 2020, we adopted the U.S. Addendum to the
2020 Share Award Plan (as amended from time to time, together the “Plans”). The purpose of the Plans is to advance our and
our shareholders’ interests by attracting and retaining the best available personnel for positions of substantial responsibility
and provide additional incentive to our officers, directors, employees and other key persons, upon whose judgment, initiative and efforts
we depend for the successful conduct of our business, to acquire a proprietary interest in the Company and/or its Affiliates. Under the
Plans, select eligible participants have been granted share options and RSUs. The Plans are administered by our board of directors or,
at the discretion of our board, a committee of directors.
The Plans provide for the grant of options and/or shares, including
restricted shares, and/or RSUs and/or stock appreciation rights and/or performance units, performance shares and other stock or cash awards
to employees, officers, directors, advisors and consultants of SatixFy and its subsidiaries. The Plans are administered by our board of
directors, or a committee of the board of directors, appointed by the board.
The Plans provide for granting awards under various tax regimes,
including in compliance with Section 102 (“Section 102”) of the Israeli Income Tax Ordinance (New Version), 5721-1961, or
the “Ordinance,” and Section 3(i) of the Ordinance, and for awards granted to our United States employees or service providers,
including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the
U.S. Internal Revenue Code (the “Code”).
Section 102 allows employees, directors and officers who are not
controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares
or options under certain terms and conditions. Our non-employee consultants and/or controlling shareholders who are considered Israeli
residents may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102
includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and
also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance,
the most favorable tax treatment for the grantee, permits the issuance to a trustee under the “capital gain track.”
Options granted under the U.S. Addendum to the 2020 Share Award
Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of
the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value
of the underlying share on the date of grant (or 110% in the case of incentive stock options granted to certain significant shareholders).
In the event of termination of a grantee’s employment or
service with SatixFy or any of its affiliates, all vested and exercisable awards held by such grantee as of the date of termination may
be exercised within three months after such date of termination, unless otherwise determined by the administrator. After such three month
period, all such unexercised awards will terminate and the shares covered by such awards shall again be available for issuance under the
Plans.
In the event of termination of a grantee’s employment or
service with SatixFy or any of its affiliates due to such grantee’s death or total and permanent disability, all vested and exercisable
awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal guardian, estate,
or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within twelve months after such
date of termination, unless otherwise provided by the administrator or specified in the terms and conditions included in the Plans.
If a grantee’s employment or services with SatixFy or any
of its affiliates is terminated for “cause” (as defined in the 2020 Share Award Plan), unless otherwise determined by the
administrator or specified in the terms and conditions included in the Plans, all outstanding awards held by such grantee (whether vested
or unvested) will terminate on the date of such termination and all shares issued upon previous exercise or vesting of awards of such
grantee shall be subject to repurchase at their nominal value, for no value or for the exercise price previously received by SatixFy,
as the administrator deems fit, and the shares covered by such awards shall again be available for issuance under the Plans.
| F. |
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. |
Not applicable.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| A. |
Major Shareholders |
The following table sets forth information regarding the beneficial
ownership of our ordinary shares by:
| • |
each person who is the beneficial owner of more than 5% of the outstanding shares of any series of our voting ordinary shares;
|
| • |
each of our then-current executive officers and directors;
and |
| • |
all executive officers and directors of the Company,
as a group. |
The beneficial ownership of ordinary shares of the Company is based
on 83,586,790 ordinary shares issued and outstanding as of March 28, 2024.
Beneficial ownership is determined in accordance with the rules
of the SEC and includes voting or investment power with respect to, or the power to receive the economic benefit of ownership of, the
securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares that
the person has the right to acquire within 60 days are included, including through the exercise of any option or other right or the conversion
of any other security. However, these shares are not included in the computation of the percentage ownership of any other person.
Unless otherwise indicated, we believe that all persons named in
the table have sole voting and investment power with respect to all of our ordinary shares beneficially owned by them.
| (1) |
Consists of 5,673,846 SatixFy Ordinary Shares, including 500,000 Price Adjustment Shares, and 3,765,096 SatixFy Ordinary Shares underlying
the SatixFy Warrants. Richard C. Davis shares voting and investment control over shares held by the Sponsor by virtue of his shared control
of the Sponsor. By virtue of this relationship, Richard C. Davis may be deemed to share beneficial ownership of the securities held of
record of the Sponsor. Richard C. Davis has disclaimed beneficial ownership of the shares, except to the extent of his pecuniary interest
therein, if any. The business address for Endurance Antarctica Partners, LLC is 200 Park Avenue, 32nd Floor New York, NY 10166.
|
| (2) |
Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy
Bulgaria, effective April 30, 2023. |
| (3) |
Consists of 16,186,297 SatixFy Ordinary Shares held directly.
Ms. Simona Gat is one of SatixFy’s founders. Ms. Simona Gat’s holdings include 9,000,000 Price Adjustment Shares, and 1,403,981
SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
| (4) |
The business address for each of the directors and officers of SatixFy is 2 Hamada St., Rehovot 670315, Israel. |
| (5) |
Consists of 1,153,679 SatixFy Ordinary Shares held directly and
179,513 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. And
10,586 vested RSUs. |
| (6) |
Mr. Yair Shamir is a director of CEL Catalyst Communications Limited and has the power to direct it to vote and dispose of the shares
and has shared voting and investment power over the shares. Mr. Yair Shamir disclaims any beneficial ownership of any shares owned by
CEL Catalyst Communications Limited other than to the extent of any pecuniary interest he may have therein, directly or indirectly.
|
| (7) |
Consists of 39,600 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares
exercisable within 60 days of March 28, 2024. |
| (8) |
Consists of 21,903,349 SatixFy Ordinary Shares held directly. Mr. Yoav Leibovitch is one of SatixFy’s
founders. Mr. Yoav Leibovitch’s holdings include 18,000,000 Price Adjustment Shares and 1,403,981 SatixFy Ordinary Shares underlying
options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
| (9) |
Consists of 53,328 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable
within 60 days of March 28, 2024. And 54,688 vested RSUs |
| (10) |
Consists of 64,944 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable
within 60 days of March 28, 2024.and 54,688 vested RSUs |
As of March 25, 2024, we had 37 record holders,
of which 10 record holders were located in Israel and held approximately 83.6 million ordinary shares.
| B. |
Related Party Transactions |
The following is a description of related party transactions for
the period from January 1, 2023 to the date of this Annual Report with any of our executive officers, directors or their affiliates and
holders of more than 10% of any class of our voting securities in the aggregate, which we refer to as related parties, other than employment,
compensation and indemnification arrangements which are described under “Management,”
which are incorporated by reference herein.
Business Combination Agreement
For a description of the Business Combination Agreement, please see “Item
5. Operating and Financial Review and Prospects – B. Liquidity and Capital Resources – Business Combination Agreement and
2022 Debt Financing.
Immediately following the Effective Time, SatixFy issued a total
of 27,500,000 Price Adjustment Shares with SatixFy’s founders receiving 27,000,000 Price Adjustment Shares and the Sponsor receiving
500,000 Price Adjustment Shares. The Price Adjustment Shares, giving effect to the December Letter Agreement, vest upon three price adjustment
achievement dates: (i) one- third of the Price Adjustment Shares will vest if at any time 45 days after the date of effectiveness of the
Registration Statement and within the 10-year period following the closing, the volume weighted average price (“VWAP”) of
SatixFy Ordinary Shares is greater than or equal to $12.50 for any seven trading days within a period of 30 consecutive trading days,
(ii) one-third of the Price Adjustment Shares will vest if at any time 45 days after the date of effectiveness of the Registration Statement
and within the 10-year period following the closing, the VWAP of SatixFy Ordinary Shares is greater than or equal to $14.00 for any seven
trading days within a period of 30 consecutive trading days and (iii) one-third of the Price Adjustment Shares will vest if at any time
45 days after the date of effectiveness of the Registration Statement and within the 10-year period following the closing, the VWAP of
SatixFy Ordinary Shares is greater than or equal to $15.50 for any seven trading days within a period of 30 consecutive trading days.
The share price targets shall be equitably adjusted for stock splits,
reverse stock splits, stock dividends, reorganizations, recapitalization, reclassifications, combinations, exchanges of shares and other
similar changes or transactions to the SatixFy Ordinary Shares occurring on or after the Closing. In the event of a SatixFy change in
control transaction within 10 years following the closing of the Business Combination, all of the unvested Price Adjustment Shares not
earlier vested will vest immediately prior to the closing of such change in control. If the Price Adjustment Shares do not vest according
to the achievement dates in the Business Combination Agreement, or if a change of control has not occurred after the Closing and prior
to the date that is 10 years following the Closing Date, then any unvested Price Adjustment Shares shall automatically be forfeited back
to SatixFy for no consideration.
A&R Shareholders’ Agreement
Concurrently with the execution of the Business Combination Agreement,
SatixFy, the Sponsor and certain shareholders of SatixFy entered into the A&R Shareholders’ Agreement, pursuant to which various
parties to the A&R Shareholders’ Agreement will be entitled to customary piggyback registration rights, in each case subject
to certain limitations set forth in the A&R Shareholders’ Agreement. In addition, the A&R Shareholders’ Agreement
provides that SatixFy will pay certain expenses relating to such registrations and indemnify the securityholders against certain liabilities.
A&R Registration Rights Agreement
Concurrently with the execution of the Business Combination Agreement,
Endurance, the Sponsor and Cantor Fitzgerald & Co. entered into the A&R Registration Rights Agreement pursuant to which, following
completion of the Transactions, the parties to the A&R Registration Rights Agreement will receive the same registration rights as
those persons party to the A&R Shareholders’ Agreement. The parties to the A&R Registration Rights Agreement are also entitled
customary demand and/or piggyback registration rights, in each case subject to certain limitations consistent with the A&R Shareholders’
Agreement.
Warrant Letter Agreement.
On January 12, 2023, we entered into the Warrant Letter Agreement
with the Sponsor and Cantor pursuant to which the holders of warrants issued in connection with the PIPE agreed to exchange such warrants,
on a one-for-one basis, new PIPE warrants issued pursuant to the SatixFy A&R Warrant Agreement.
Special Success Bonus to the Chairman of our Board of Directors
On October 19, 2023, upon recommendation of our board and compensation
committee, our shareholders approved a one-time special success bonus of up to $1 million in the aggregate to our Executive Chairman of
the Board, Mr. Yoav Leibovitch, who is also a controlling shareholder of the Company, in connection with the MDA Agreement. The MDA Bonus
is to be paid in nine installments, with the first installment paid within 30 days following the closing of the MDA Agreement in amount
equal to approximately 55% of the MDA Bonus amount, the next seven in monthly installments paid through April 2024 (six of which each
amounting to 4.8% of the special success bonus amount and one amounting to approximately 13% of the special success bonus amount), and
the last expected in January 2025, amounting to approximately 3.3% of the special success bonus amount. Each of the special success bonus
amounts relate to proceeds we have received and expect to receive with respect to the MDA Agreement during the relevant month. The MDA
Bonus shall not be paid if for any reason whatsoever, whether due to default by the Company or otherwise, we do not actually receive the
relevant proceeds with respect to the MDA Agreement. In connection with the special success bonus, Mr. Leibovitch agreed that, for so
long as there is no reduction in Mr. Leibovitch’s compensation package, he will not be entitled to request special bonuses in respect
of certain other potential commercial transactions of the Company.
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers.
Each such indemnification agreement provides the office holder with indemnification permitted under applicable law and up to a certain
amount, and to the extent that these liabilities are not covered by directors and officers insurance.
Approval of Related Party
Transactions under Israeli Law
For a discussion of the approval of related party transactions
under Israeli law, see “Item 7. Major Shareholders and Related Party Transactions —B. Related
Party Transactions.”
| C. |
Interests of Experts and Counsel |
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
| A. |
Financial Statements and Other Financial Information |
The financial statements required by this item are found at the
end of this Annual Report, beginning on page F-1.
Legal Proceedings
From time to time, we may be subject to other legal proceedings
and claims in the ordinary course of business. We are not currently a party to any litigation, except as described above. Regardless of
the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and
other factors.
We are presently involved in a proceeding brought by certain plaintiffs,
who purport to be stockholders of SatixFy, that have filed two suits, in an Israeli court in Tel Aviv, against SatixFy, Satixfy Limited,
Yoel Gat, Doron Rainish, Yair Shamir and Yoav Leibovitch, arguing that plaintiffs are entitled to an aggregate of two million of our Ordinary
Shares, and seeking, among other things, an order enjoining the defendants from executing any transaction, including the Business Combination,
or taking any other action that could harm plaintiffs’ rights as shareholders to the extent it does not affect all shareholders
equally. The plaintiffs base their claims on their prior ownership stakes in Satixfy Limited, a company incorporated in Hong Kong, whose
business was assigned to SatixFy in exchange for the issuance of identical holdings in SatixFy, except for certain shares placed in trust
for the benefit of certain service providers (including the plaintiffs) subject to a future arrangement regarding their actual ownership.
Plaintiffs maintain that they were entitled to direct holdings in SatixFy. SatixFy intends to vigorously contest the plaintiffs’
claims. SatixFy has issued and placed in trust sufficient shares to provide for the plaintiffs’ alleged stakes in SatixFy if the
plaintiffs prevail on the merits. In May 2022, the court rejected plaintiff’s request for specific injunctive relief while ordering
the appointment of a former judge, Mr. Yossi Shapira, as the new trustee to exercise fiduciary authority over such shares. The plaintiffs’
claim on the merits remains pending, and statements of defense have been filed by the respondents on July 2022. After the preliminary
stage of the proceeding, the plaintiffs are expected to file their evidence during April 2024, followed by the respondents’ evidence.
SatixFy believes that these proceedings will not have a material impact on SatixFy.
On October 27, 2022, Sensegain defaulted on its commitment to purchase
units it had subscribed for in connection with the PIPE financing pursuant to its Subscription Agreement with SatixFy and Endurance. As
a result of the default, out of the $29,100,000 previously committed by subscribers pursuant to the Subscription Agreements, SatixFy received
$20 million in proceeds from the PIPE financing. On December 12, 2022, we filed a complaint against Sensegain in the New York Supreme
Court, County of New York, seeking specific performance by Sensegain under the Subscription Agreement or, in the alternative, damages
in the amount Sensegain owes pursuant to the Subscription Agreement (plus applicable interest and fees). We intend to withdraw this matter
due to enforceability limitations.
In June 2023, Alta Partners, LLC (“Alta”) filed a complaint
against us in the U.S. District Court for the Southern District of New York claiming unspecified damages for an alleged breach by us of
the warrant agreement in relation to certain of its public warrants allegedly held by Alta In December 2023, we and Alta, reached a settlement
agreement according to which, we shall pay to Alta the sum of $2.3 million as follows: (i) $1 million no later than five business
days after the effective date; and (ii). $1.3 million in thirteen (13) monthly installments of one hundred thousand ($100,000) each
with the first instalment no later than March 1, 2024. Upon reception of the first instalment Alta had agreed to dismiss all actions in
against. Following receipt of the first installment on January 24, 2024, Alta dismissed the matter.
Dividend Policy
We have never declared or paid cash dividends to our shareholders.
Currently, we do not intend to pay cash dividends, and we are prohibited from doing so under our 2022 Credit Agreement. We currently intend
to reinvest any future earnings, if any, in developing and expanding our business. Any future determination relating to our dividend policy
will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, if any, our financial
condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors
our board of directors may deem relevant.
| B. |
Significant Changes |
Except as otherwise disclosed in this Annual Report, no significant
change has occurred since December 31, 2023.
ITEM 9.
THE OFFER AND LISTING
| A. |
Offer and Listing Details |
Our ordinary shares are traded on the NYSE under the symbol “SATX.”
| B. |
Plan of Distribution |
Not applicable.
| C. |
Markets |
See “—A. Offer and Listing Details” above.
| D. |
Selling Shareholders |
Not applicable.
| E. |
Dilution |
Not applicable.
| F. |
Expenses of the Issue |
Not applicable.
ITEM 10.
ADDITIONAL INFORMATION
| A. |
Share Capital |
Not applicable.
| B. |
Memorandum and Articles of Association |
A copy of our amended and restated articles of association is attached
as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this Item is set forth in Exhibit 2.3 to this annual
report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.
| C. |
Material Contracts |
We have not entered into any material contract within the two years
prior to the date of this Annual Report, other than contracts entered into in the ordinary course of business, as otherwise described
herein in “Item 4.A. History and Development of the Company” above, “Item 4.B. Business Overview” above, “Item
6.C Board Practices – Indemnification,” “Item 6.E Share Ownership,” “Item 7.A. Major Shareholders,”
or “Item 7.B. Related Party Transactions,” above, or as otherwise described below:
| D. |
Exchange Controls |
Israeli law and regulations do not impose any material foreign exchange restrictions
on Israeli holders of our Ordinary Shares. Dividends, if any, paid to holders of our Ordinary Shares, and any amounts payable upon our
dissolution, liquidation or winding up, as well as the proceeds of any sale in Israel of our Ordinary Shares to an Israeli resident may
be paid in non-Israeli currency or, if paid in Israeli currency, may be converted into U.S. dollars at the rate of exchange prevailing
at the time of conversion.
| E. |
Taxation |
Israeli Tax Considerations
General
The following description is not intended to constitute a complete
analysis of all tax consequences relating to the acquisition, ownership, and disposition of the SatixFy Ordinary Shares and SatixFy Warrants.
You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences
that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli tax considerations
The following is a brief summary of certain material Israeli tax
laws applicable to SatixFy, and certain Israeli Government programs that benefit SatixFy. This section also contains a discussion of certain
material Israeli tax consequences concerning the ownership and disposition of SatixFy Ordinary Shares and SatixFy Warrants purchased by
investors. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of
his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of
such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion.
To the extent that the discussion is based on tax legislation that has not yet been subject to judicial or administrative interpretation,
SatixFy cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion
below is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.
The discussion is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative
interpretations of Israeli law, which change could affect the tax consequences described below, possibly with a retroactive effect.
THEREFORE, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO
THE ISRAELI OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES AND WARRANTS, INCLUDING, IN PARTICULAR,
THE EFFECT OF ANY FOREIGN, STATE OR LOCAL TAXES.
General corporate tax structure in Israel
Israeli companies are generally subject to corporate tax at a flat
rate. In December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic
Policy for the 2017 and 2018 Budget Years) which reduced the corporate income tax rate from 25% to 24% effective from January 1, 2017,
and to 23% effective from January 1, 2018 and thereafter. However, the effective tax rate payable by a company that derives income from
an Approved Enterprise, a Preferred Enterprise, a Benefited Enterprise or a Technological Enterprise (as discussed below) may be considerably
less. Capital gains derived by an Israeli company are generally subject to corporate tax rate.
Law for the Encouragement of Industry (Taxes),
5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally
referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.” SatixFy may qualify
as an Industrial Company within the meaning of the Industry Encouragement Law.
The Industry Encouragement Law defines an “Industrial Company”
as an Israeli resident-company, of which 90% or more of its income in any tax year, other than certain income (such as income from certain
government loans, capital gains, interest and dividends) is derived from an “Industrial Enterprise” owned by it and located
in Israel or in the “Area,” in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version)
1961, or the Ordinance. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year
is industrial production.
Following are the main tax benefits available to Industrial Companies:
| • |
Amortization of the cost of purchased patent, rights to use a patent, and know-how, which were purchased in good faith and are used
for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights
were first exercised; |
| • |
Under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; |
| • |
Expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering.
|
Eligibility for benefits under the Industry Encouragement Law is
not contingent upon approval of any governmental authority.
Tax benefits and grants for research and development
Israeli tax law allows, under certain conditions, a tax deduction
for expenditures, including capital expenditures related to scientific research and development, for the year in which they are incurred.
Expenditures are deemed related to scientific research and development projects, if:
| • |
The research and development expenditures are approved by the relevant Israeli government ministry, determined by the field of research;
|
| • |
The research and development must be for the promotion of the company; and |
| • |
The research and development is carried out by or on behalf of the company seeking such tax deduction. |
The amount of such deductible expenses is reduced by the sum of
any funds received through government grants for the finance of such scientific research and development projects. No deduction under
these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable
under the general depreciation rules of the Israeli Income Tax Ordinance (New Version) 5721-1961, or the Ordinance. Expenditures that
are unqualified under the conditions above are deductible, under certain conditions, in equal amounts over three years.
From time to time we may apply to the Israel Innovation Authority
for approval to allow a tax deduction for all or most of research and development expenses during the year incurred. There can be no assurance
that such application will be accepted. If we will not be able to deduct research and development expenses during the year of the payment,
we may be able to deduct research and development expenses in equal amounts over a period of three years commencing in the year of the
payment of such expenses.
Law for the Encouragement of Capital Investments,
5719-1959
The Law for the Encouragement of Capital Investments, 5719-1959,
generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible
assets). Generally, an investment program that is implemented in accordance with the provisions of the Investment Law, referred to as
an Approved Enterprise, a Beneficiary Enterprise, a Preferred Enterprise, a Preferred Technological Enterprise, or a Special Preferred
Technological Enterprise, is entitled to benefits as discussed below. These benefits may include cash grants from the Israeli government
and tax benefits, based upon, among other things, the geographic location in Israel of the facility in which the investment is made. In
order to qualify for these incentives, the Company is required to comply with the requirements of the Investment Law.
The Investment Law was significantly amended effective as of April
1, 2005 (the “2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”) and as of January 1, 2017 (the “2017
Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior
to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended
Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the
Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior
to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead,
irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for
Technological Enterprises, alongside the existing tax benefits.
Tax benefits under the 2011
Amendment
The 2011 Amendment introduced new benefits for income generated
by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law)
as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental
entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011
Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its income derived by its Preferred
Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be
10%. Under the 2011 Amendment, such corporate tax rate was reduced from 15% and 10%, respectively, to 12.5% and 7%, respectively, in 2013,
16% and 9% respectively, in 2014, 2015 and 2016, and 16% and 7.5%, respectively, in 2017 and thereafter. Income derived by a Preferred
Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, subject to
certain conditions and during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise
is located in a certain development zone.
Dividends distributed from income which is attributed to a “Preferred
Enterprise” will be subject to tax at the following rates: (i) Israeli resident corporations — 0% (although, if such dividends
are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii) and (iii) shall apply);
(ii) Israeli resident individuals — 20%; and (iii) non-Israeli residents (individuals and corporations) — 20%, or such lower
rate under the provisions of any applicable double tax treaty (subject to the receipt in advance of a valid withholding certificate from
the ITA allowing for a reduced tax rate). The withholding tax rate applicable to distribution of dividend from such income to non-Israeli
residents is 25% (or 30% if distributed to a “substantial shareholder” at the time of the sale or at any time during the preceding
twelve months period, as defined below), which may be reduced by applying in advance for a withholding certificate from the Israel Tax
Authority. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another
person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “Means
of Control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a
director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act,
regardless of the source of such right.
The 2011 Amendment also provided transitional provisions to address
companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things,
that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to
be derived as of January 1, 2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the
2011 Amendment came into effect, provided that certain conditions are met.
SatixFy currently does not intend to implement the 2011 Amendment.
New tax benefits under the 2017 Amendment that
became effective on January 1, 2017
The 2017 Amendment was enacted as part of the Economic Efficiency
Law that was published on December 29, 2016 and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for two
types of “Technological Enterprises,” as described below, and is in addition to the other existing tax beneficial programs
under the Investment Law.
The 2017 Amendment provides that a Preferred Company satisfying
certain conditions will qualify as having a “Preferred Technological Enterprise” and will thereby enjoy a reduced corporate
tax rate of 12% on income that qualifies as “Preferred Technological Income,” as defined in the Investment Law. The corporate
tax rate is further reduced to 7.5% with respect to a Preferred Technological Enterprise located in development zone “A.”
In addition, a Preferred Company that qualifies as having a “Preferred Technological Enterprise” will enjoy a reduced corporate
tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment
Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017
for at least NIS 200 million, and the sale receives prior approval from the Israel Innovation Authority.
The 2017 Amendment further provides that a Preferred Company satisfying
certain conditions (including group consolidated revenues of at least NIS 10 billion) may qualify as having a “Special Preferred
Technological Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technological Income”
regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technological Enterprise will enjoy
a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related
foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Enterprise or acquired from a foreign
company on or after January 1, 2017, and the sale received prior approval from the Israel Innovation Authority. A Special Preferred Technological
Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these
benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed by a Preferred Technological Enterprise or
a Special Preferred Technological Enterprise, paid out of Preferred Technological Income, are generally subject to tax at the rate of
20% (in the case of non-Israeli shareholders — subject to the receipt in advance of a valid withholding certificate from the Israel
Tax Authority allowing for a reduced tax rate of 20%, or such lower rate as may be provided in an applicable tax treaty). However, if
such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed
to individuals or a non-Israeli company, the aforesaid will apply). The withholding tax rate applicable to distribution of dividend from
such income to non-Israeli residents is 25% (or 30% if distributed to a “substantial shareholder” at the time of the sale
or at any time during the preceding twelve months period), which may be reduced by applying in advance for a withholding certificate from
the Israel Tax Authority. In addition, if such dividends are distributed to a foreign company that holds solely or together with other
foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% (subject to the
receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate). However, if such dividends are
paid to an Israeli company, no tax is required to be withheld.
SatixFy believes that it may be eligible to the tax benefits under
the 2017 Amendment.
Taxation of our shareholders
Capital Gains Tax on Sales
of SatixFy Ordinary Shares and SatixFy Warrants
Israeli law generally imposes a capital gains tax on the sale of
any capital assets by Israeli residents, as defined for Israeli tax purposes, and on the sale of capital assets located in Israel, including
shares of Israeli companies, by both Israeli residents and non-Israeli residents, unless a specific exemption is available or unless a
tax treaty between Israel and the shareholder’s country of residence provides otherwise. The Ordinance distinguishes between real
gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain equivalent to the increase of the relevant
asset’s purchase price attributable to an increase in the Israeli consumer price index, or, in certain circumstances, a foreign
currency exchange rate, between the date of purchase and the date of sale. Inflationary surplus is currently not subject to tax in Israel.
The real gain is the excess of the total capital gain over the inflationary surplus.
Capital gains taxes applicable
to non-Israeli resident shareholders.
A non-Israeli resident who derives capital gains from the sale
of shares and warrants in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange
outside of Israel, may be exempt from Israeli tax if, among other conditions, the capital gain derived from the sale of shares was not
attributed to a permanent establishment that the non- resident maintains in Israel. However, non-Israeli corporations will not be entitled
to the foregoing exemption if Israeli residents: (i) have a controlling interest more than 25% in such non-Israeli corporation or (ii)
are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly
or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares
are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident may
be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Convention Between the
Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the
“United States Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States
resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident
by the U.S. Israel Tax Treaty (a “U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital
gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from
such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition
is attributed to a permanent establishment in Israel, under certain terms; (iv) such U.S. Resident holds, directly or indirectly, shares
representing 10% or more of the voting capital during any part of the 12 month period preceding the disposition, subject to certain conditions;
or (v) such U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In any such
case, the sale, exchange or disposition of such shares by the U.S. Resident would be subject to Israeli tax (unless exempt under the Israeli
domestic law as described above). Under the United States Israel Tax Treaty, the gain may be treated as foreign source income for United
States foreign tax credit purposes, upon an election by the U.S. Resident, and such U.S. Resident may be permitted to claim a credit for
such taxes against the United States federal income tax imposed on such sale, subject to the limitations under the United States federal
income tax laws applicable to foreign tax credits. The United States Israel Tax Treaty does not provide such credit against any United
States state or local taxes.
Regardless of whether shareholders may be liable for Israeli tax
on the sale of SatixFy Ordinary Shares and SatixFy Warrants, the payment of the consideration may be subject to the withholding of Israeli
tax at source. Holders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding
at source at the time of sale (i.e., provide resident certificate and other documentation).
Capital gains taxes applicable
to Israeli resident shareholders.
An Israeli resident corporation that derives capital gains from
the sale of shares in an Israeli resident company will generally be subject to tax on the real capital gains generated on such sale at
the corporate tax rate (currently of 23% in 2023). An Israeli resident individual will generally be subject to capital gain tax at the
rate of 25%. However, if the individual shareholder is a “substantial shareholder” at the time of the sale or at any time
during the preceding twelve months period, such gain will be taxed at the rate of 30%. Individual holders dealing in securities in Israel
for whom the income from the sale of securities is considered “business income” as defined in section 2(1) of the Ordinance
are taxed at the marginal tax rates applicable to business income (up to 47% in 2022 plus 3% Surtax, if applicable). Certain Israeli institutions
who are exempt from tax under section 9(2) or section 129(C)(a)(1) of the Ordinance (such as exempt trust funds and pension funds) may
be exempt from capital gains tax from the sale of the shares.
Exercise of Warrants and
Certain Adjustments to the Warrants
Investors will generally not recognize gain or loss for Israeli
tax purposes on the exercise of a warrant and related receipt of an ordinary share (unless, for instance, cash is received in lieu of
the issuance of a fractional ordinary share). Nevertheless, the Israeli income tax treatment and the tax consequences of a cashless exercise
of warrants into ordinary shares is unclear. Furthermore, the exercise terms of warrants may be adjusted in certain circumstances. An
adjustment to the number of ordinary shares that will be issued on the exercise of the warrants or an adjustment to the exercise price
of the warrants may be treated as a taxable event under Israeli tax law even if the holder of such warrants does not receive any cash
or other property in connection with the adjustment. Investors should consult their tax advisors regarding the proper treatment of any
exercise of and/or adjustments to the warrants.
Taxation of Israeli shareholders
on receipt of dividends.
An Israeli resident individual is generally subject to Israeli
income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%. With respect to a person who is a “substantial
shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is
30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company
(whether the recipient is a substantial shareholder or not). If the recipient of the dividend is an Israeli resident corporation such
dividend income will be exempt from tax provided the income from which such dividend is distributed was derived or accrued within Israel
and was received directly or indirectly from another corporation that is liable to Israeli corporate tax. An exempt trust fund, pension
fund or other entity that is exempt from tax under section 9(2) or section 129C(a)(1) of the Ordinance is exempt from tax on dividend.
Dividend distribution by a Preferred Technological Enterprise or
a Special Preferred Technological Enterprise is subject to beneficial withholding tax rates. For a further discussion, see “See
“Item 10. Additional Information — E. Taxation- Israeli Tax Considerations — Law for
the Encouragement of Capital Investments, 5719-1959 — New tax benefits under the 2017 Amendment that became effective on January
1, 2017.”
Taxation of non-Israeli
shareholders on receipt of dividends.
Non-Israeli residents (either individuals or corporations) are
generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be
withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect
to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve
months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares
are registered with a nominee company (whether the recipient is a substantial shareholder or not), unless a reduced rate is provided under
an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced
tax rate). For example, under the United States Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid
to a holder of our ordinary shares who is a U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends,
not generated by an Approved Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital
throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more
than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing,
dividends distributed from income attributed to an Approved Enterprise, Benefited Enterprise or Preferred Enterprise are not entitled
to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S. corporation,
provided that the conditions related to the outstanding voting rights and the gross income for the previous year (as set forth in the
previous sentences) are met. If the dividend is attributable partly to income derived from an Approved Enterprise, Benefited Enterprise
or Preferred Enterprise, and partly to other sources of income, the withholding rate may be a blended rate reflecting the relative portions
of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’
tax liability. Application for the reduced tax rate requires appropriate documentation presented and specific instruction received from
the Israeli Tax Authorities to the extent tax is withheld at source at the maximum rates (see above), a qualified tax treaty recipient
will have to comply with some administrative procedures with the Israeli Tax Authorities in order to receive back the excess tax withheld.
A foreign resident who had income from a dividend that was accrued
from Israeli source, from which the full tax was deducted (among other conditions), will be generally exempt from filing a tax return
in Israel, unless (i) such income was generated from a business conducted in Israel by him, (ii) he has other taxable sources of income
in Israel with respect to which a tax return is required to be filed, or (iii) he is liable to additional Surtax (see below) in accordance
with section 121B of the Ordinance.
Dividend distribution by a Preferred Technological Enterprise or
a Special Preferred Technological Enterprise is subject to beneficial withholding tax rates. For a further discussion, see “Item
10. Additional Information – E. Taxation — Israeli Tax Considerations — Law for the Encouragement of Capital Investments,
5719-1959 — New tax benefits under the 2017 Amendment that became effective on January 1, 2017.”
Surtax
Subject to the provisions of an applicable tax treaty, individuals
who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional
tax at a rate of 3% on annual income (including, but not limited to, dividends, interest and capital gain) exceeding NIS 663,240 for 2022,
which amount is linked to the annual change in the Israeli consumer price index.
Estate and Gift Tax
Israeli law presently does not impose estate or gift taxes.
Israeli Tax Ruling
In addition to all of the above, any payment made by an Israeli
resident company may be subject to Israeli withholding tax, regardless of whether the recipient should be subject to Israeli tax with
respect to the receipt of such payment, unless the recipient provides the company with a valid certificate issued by the Israel Tax Authority
to exempt the recipient from such withholding tax liability.
U.S. Federal Income Tax Considerations
The following discussion is a summary of the material U.S. federal
income tax considerations of the ownership and disposition of SatixFy Ordinary Shares and SatixFy Warrants. This discussion applies only
to SatixFy Ordinary Shares and SatixFy Warrants, as the case may be, that are held as “capital assets” within the meaning
of Section 1221 of the Code (generally, property held for investment).
The following discussion does not purport to be a complete analysis
of all potential tax considerations arising in connection with the ownership and disposal of SatixFy Ordinary Shares and SatixFy Warrants.
The effects and considerations of other U.S. federal tax laws, such as estate and gift tax laws, alternative minimum tax or Medicare contribution
tax consequences and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury
Regulations promulgated thereunder, judicial decisions, published rulings and administrative pronouncements of the IRS and the income
tax treaty between the United States and Israel (the “Treaty”), in each case in effect as of the date hereof. These authorities
may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner
that could adversely affect the tax consequences discussed below. SatixFy has not sought nor will seek any rulings from the IRS regarding
the matters discussed below. There can be no assurance the IRS will not take or a court will not sustain a contrary position to that discussed
below regarding the tax consequences discussed below.
This discussion does not address all U.S. federal income tax consequences
relevant to a holder’s particular circumstances. In addition, it does not address consequences relevant to holders subject to special
rules, including, without limitation:
| • |
banks, insurance companies, and certain other financial institutions; |
| • |
regulated investment companies and real estate investment trusts; |
| • |
brokers, dealers or traders in securities that use a mark to market method of tax accounting; |
| • |
tax-exempt organizations or governmental organizations; |
| • |
U.S. expatriates and former citizens or long-term residents of the United States; |
| • |
persons holding SatixFy Ordinary Shares and/or SatixFy Warrants, as the case may be, as part of a hedge, straddle, constructive sale,
or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
| • |
persons subject to special tax accounting rules as a result of any item of gross income with respect to SatixFy Ordinary Shares and/or
SatixFy Warrants, as the case may be, being taken into account in an applicable financial statement; |
| • |
persons that actually or constructively own 5% or more (by vote or value) of the outstanding SatixFy Ordinary Shares; |
| • |
“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate
earnings to avoid U.S. federal income tax; |
| • |
S corporations, partnerships or other entities or arrangements treated as partnerships or other flow- through entities for U.S. federal
income tax purposes (and investors therein); |
| • |
persons subject to the “base erosion and anti-abuse” tax; |
| • |
U.S. Holders having a functional currency other than the U.S. dollar; |
| • |
persons who hold or received SatixFy Ordinary Shares and/or SatixFy Warrants, as the case may be, pursuant to the exercise of any
employee share option or otherwise as compensation; and |
| • |
tax-qualified retirement plans. |
If an entity or arrangement treated as a partnership for U.S. federal
income tax purposes holds SatixFy Ordinary Shares and/or SatixFy Warrants, the tax treatment of an owner of such entity will depend on
the status of the owners, the activities of the entity or arrangement and certain determinations made at the owner level. Accordingly,
entities or arrangements treated as partnerships for U.S. federal income tax purposes and the partners in such partnerships should consult
their tax advisors regarding the U.S. federal income tax consequences to them.
YOU ARE URGED TO CONSULT YOUR TAX
ADVISOR REGARDING THE U.S. FEDERAL, STATE, AND LOCAL, AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR
INVESTMENT OR TAX CIRCUMSTANCES, OF ACQUIRING, HOLDING, AND DISPOSING OF SATIXFY ORDINARY SHARES AND SATIXFY WARRANTS.
For purposes of this discussion, a “U.S. Holder” is
a person eligible for Treaty benefits that is, for U.S. federal income tax purposes, a beneficial owner of SatixFy Ordinary Shares and/or
SatixFy Warrants, as the case may be, and:
| • |
an individual who is a citizen or resident of the United States; |
| • |
a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States, any state thereof,
or the District of Columbia; |
| • |
an estate, the income of which is subject to U.S. federal income tax regardless of its sources; or |
| • |
a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons”
(within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a “United States
person” (within the meaning of Section 7701(a)(30) of the Code) for U.S. federal income tax purposes. |
Certain recent Treasury regulations may in some circumstances prohibit
a U.S. person from claiming a foreign tax credit with respect to certain non-U.S. taxes that are not creditable under applicable income
tax treaties. Accordingly, U.S. investors that are not eligible for Treaty benefits should consult their tax advisors regarding the creditability
or deductibility of any Israeli taxes imposed on dividends on, or dispositions of, SatixFy Ordinary Shares and/or SatixFy Warrants. This
discussion does not apply to investors in this special situation.
Ownership and Disposition of SatixFy Ordinary Shares and SatixFy Warrants by U.S. Holders
Distributions on SatixFy Ordinary Shares
If SatixFy makes distributions of cash or property on the SatixFy
Ordinary Shares, such distributions will be treated for U.S. federal income tax purposes first as a dividend to the extent of SatixFy’s
current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), and then as a tax-free return of capital
to the extent of the U.S. Holder’s tax basis, with any excess treated as capital gain from the sale or exchange of the shares. SatixFy
does not intend to provide calculations of its earnings and profits under U.S. federal income tax principles.
A U.S. Holder should expect all cash distributions to be reported
as dividends for U.S. federal income tax purposes. Any dividend generally will not be eligible for the dividends received deduction allowed
to corporations in respect of dividends received from U.S. corporations.
Subject to the discussion below under “— Passive
Foreign Investment Company Rules,” dividends received by certain non-corporate U.S. Holders (including individuals) may be
“qualified dividend income,” which is taxed at the lower applicable capital gains rate, provided that:
| • |
the SatixFy Ordinary Shares are readily tradable on an established securities market in the United States; |
| • |
SatixFy is neither a PFIC (as discussed below under “— Passive Foreign Investment Company
Rules”) nor treated as such with respect to the U.S. Holder in any taxable year in which the dividend is paid or the preceding
taxable year; |
| • |
the U.S. Holder satisfies certain holding period requirements; and |
| • |
the U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related
property. |
There can be no assurance that SatixFy Ordinary Shares will be
considered “readily tradable” on an established securities market in the United States in accordance with applicable legal
authorities. Furthermore, there can no assurance that SatixFy will not be treated as a PFIC in any taxable year. See discussion below
under “— Passive Foreign Investment Company Rules.” U.S. Holders should consult
their tax advisors regarding the availability of the lower rate for dividends paid with respect to SatixFy Ordinary Shares.
Subject to certain exceptions, dividends on SatixFy Ordinary Shares
will constitute foreign source income for foreign tax credit limitation purposes and will generally be treated as passive category income
or, in the case of certain types of U.S. Holders, general category income for purposes of computing allowable foreign tax credits for
U.S. foreign tax credit purposes. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible,
subject to a number of complex limitations, to claim a foreign tax credit not in excess of the applicable rate provided in the Treaty
in respect of any foreign withholding taxes imposed on dividends received on SatixFy Ordinary Shares. In lieu of claiming a foreign tax
credit, a U.S. Holder may elect to deduct foreign taxes in computing its taxable income, subject to applicable limitations.
An election to deduct foreign taxes instead of claiming foreign
tax credits applies to all foreign taxes paid or accrued in the taxable year.
THE RULES GOVERNING THE
FOREIGN TAX CREDIT ARE COMPLEX, AND THE OUTCOME OF THEIR APPLICATION DEPENDS IN LARGE PART ON THE U.S. HOLDER’S INDIVIDUAL FACTS
AND CIRCUMSTANCES. ACCORDINGLY, U.S. HOLDERS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE AVAILABILITY OF THE FOREIGN
TAX CREDIT IN THEIR PARTICULAR CIRCUMSTANCES.
Sale, Exchange, Redemption or Other Taxable Disposition of SatixFy Ordinary Shares
or SatixFy Warrants.
Subject to the discussion below under “— Passive
Foreign Investment Company Rules,” a U.S. Holder generally would recognize gain or loss on any sale, exchange, redemption
or other taxable disposition of SatixFy Ordinary Shares or SatixFy Warrants in an amount equal to the difference between (i) the amount
realized on the disposition and (ii) such U.S. Holder’s adjusted tax basis in such SatixFy Ordinary Shares or such SatixFy Warrants,
as applicable. Any gain or loss recognized by a U.S. Holder on a taxable disposition of SatixFy Ordinary Shares or SatixFy Warrants generally
will be capital gain or loss. A non-corporate U.S. Holder, including an individual, who has held the SatixFy Ordinary Shares or SatixFy
Warrants for more than one year generally will be eligible for reduced tax rates for such long-term capital gains. The deductibility of
capital losses is subject to limitations. Any such gain or loss recognized generally will be treated as U.S. source gain or loss. In the
event any non-U.S. tax (including Israeli withholding tax) is imposed upon such sale or other disposition, a U.S. Holder’s ability
to claim a foreign tax credit for such non-U.S. tax is subject to various limitations and restrictions. U.S. Holders should consult their
tax advisors regarding the ability to claim a foreign tax credit.
Exercise or Lapse of a SatixFy Warrant
Subject to the PFIC rules discussed under “— Passive
Foreign Investment Company Rules” below and except as discussed below with respect to the cashless exercise of a SatixFy
Warrant, a U.S. Holder generally will not recognize gain or loss upon the acquisition of a SatixFy Ordinary Share on the exercise of a
SatixFy Warrant for cash. A U.S. Holder’s initial tax basis in its SatixFy Ordinary Shares received upon exercise of the SatixFy
Warrant generally should equal the sum of its tax basis in the SatixFy Warrant exercised therefor and the exercise price. The U.S. Holder’s
holding period for an SatixFy Ordinary Share received upon exercise of the SatixFy Warrant will begin on the date following the date of
exercise (or possibly the date of exercise) of the SatixFy Warrant and will not include the period during which the U.S. Holder held the
SatixFy Warrant. If a SatixFy Warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to
such holder’s tax basis in the SatixFy Warrant.
The tax consequences of a cashless exercise of a SatixFy Warrant
are not clear under current tax law. Subject to the PFIC rules discussed under “— Passive
Foreign Investment Company Rules” below, a cashless exercise may be tax-deferred, either because the exercise is not a gain
realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation,
a U.S. Holder’s basis in the SatixFy Ordinary Shares received generally would equal the U.S. Holder’s basis in the SatixFy
Warrants exercised therefor. If the cashless exercise is not treated as a gain realization event, a U.S. Holder’s holding period
in the SatixFy Ordinary Shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise)
of the SatixFy Warrants and will not include the period during which the U.S. Holder held the SatixFy Warrants. If the cashless exercise
were treated as a recapitalization, the holding period of the SatixFy Ordinary Shares would include the holding period of the SatixFy
Warrants exercised therefor.
It is also possible that a cashless exercise of a SatixFy Warrant
could be treated in part as a taxable exchange in which gain or loss would be recognized in the manner set forth above under “—
Sale, Exchange, Redemption or Other Taxable Disposition of SatixFy Ordinary Shares or SatixFy Warrants.”
In such event, a U.S. Holder could be deemed to have surrendered warrants having an aggregate fair market value equal to the exercise
price for the total number of warrants to be exercised. Subject to the discussion below under “— Passive
Foreign Investment Company Rules,” the U.S. Holder would recognize capital gain or loss with respect to the SatixFy Warrants
deemed surrendered in an amount generally equal to the difference between (i) the fair market value of the SatixFy Ordinary Shares that
would have been received in a regular exercise of the SatixFy Warrants deemed surrendered, net of the aggregate exercise price of such
SatixFy Warrants and (ii) the U.S. Holder’s tax basis in such SatixFy Warrants. In this case, a U.S. Holder’s aggregate tax
basis in the SatixFy Ordinary Shares received would equal the sum of (i) U.S. Holder’s tax basis in the SatixFy Warrants deemed
exercised and (ii) the aggregate exercise price of such SatixFy Warrants. A U.S. Holder’s holding period for the SatixFy Ordinary
Shares received in such case generally would commence on the date following the date of exercise (or possibly the date of exercise) of
the SatixFy Warrants and will not include the period during which the U.S. Holder held the SatixFy Warrants.
Due to the absence of authority on the U.S. federal income tax
treatment of a cashless exercise of warrants, including when a U.S. Holder’s holding period would commence with respect to the SatixFy
Ordinary Share received, there can be no assurance regarding which, if any, of the alternative tax consequences and holding periods described
above would be adopted by the IRS or a court of law. Accordingly, U.S. Holders should consult their tax advisors regarding the tax consequences
of a cashless exercise of SatixFy Warrants.
Adjustment to Exercise Price
The terms of each SatixFy Warrant provide for an adjustment to
the number of SatixFy Ordinary Shares for which the SatixFy Warrant may be exercised or to the exercise price of the SatixFy Warrant in
certain events, as discussed under the heading “Description of SatixFy Warrants.”
Under Section 305 of the Code, if certain adjustments are made (or not made) to the number of shares to be issued upon the exercise of
a SatixFy Warrant or to the SatixFy Warrant’s exercise price, a U.S. Holder may be deemed to have received a constructive distribution
with respect to the warrant, which could result in adverse consequences for the U.S. Holder, including the inclusion of dividend income
(with the consequences generally as described above under the heading “— Distributions on
SatixFy Ordinary Shares”). The rules governing constructive distributions as a result of certain adjustments with respect
to a SatixFy Warrant are complex, and U.S. Holders are urged to consult their tax advisors on the tax consequences any such constructive
distribution with respect to a SatixFy Warrant.
Passive Foreign Investment Company Rules
The treatment of U.S. Holders of the SatixFy Ordinary Shares and/or
SatixFy Warrants could be materially different from that described above, if SatixFy is treated as a PFIC for U.S. federal income tax
purposes. A non-U.S. entity treated as a corporation for U.S. federal income tax purposes generally will be a PFIC for U.S. federal income
tax purposes for any taxable year if either:
| • |
at least 75% of its gross income for such year is passive income; or |
| • |
at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is
attributable to assets that produce passive income or are held for the production of passive income. |
| • |
Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property
producing such income and net foreign currency gains. For this purpose, cash is categorized as a passive asset and the company’s
unbooked intangibles associated with active business activity are taken into account as a non- passive asset. Goodwill is an active asset
under the PFIC rules to the extent attributable to activities that produce active income. For this purpose, SatixFy will be treated as
owning its proportionate share of the assets and earning its proportionate share of the income of any other entity treated as a corporation
for U.S. federal income tax purposes in which SatixFy owns, directly or indirectly, 25% or more (by value) of the stock. |
| • |
Whether SatixFy or any of its subsidiaries is treated as a PFIC is determined on an annual basis. Based on the current and anticipated
composition of our and our subsidiaries’ income, assets and operations, including goodwill, which is based on the trading prices
of our Satixfy Ordinary Shares during 2023, we believe that we were not a PFIC for the taxable year of 2022. However, whether we or any
of our subsidiaries are a PFIC for any taxable year is a factual determination that depends on, among other things, the composition of
our and our subsidiaries’ income and assets. Changes in the composition of our and our subsidiaries’ income or assets may
cause us to be or become a PFIC for the current or subsequent taxable years. In addition, because the value of our goodwill may be determined
based on our market capitalization, the decline in our market capitalization (or a further such decline) could cause us to be treated
as a PFIC for 2022, the current taxable year or a future taxable year. Our PFIC status for our 2023 taxable year can be determined only
after the end of the year. Even if the value of our goodwill is respected for 2022, we may be a PFIC for the current taxable year or future
taxable years if our market capitalization does not increase significantly and we continue to hold substantial amounts of cash and financial
investments. Therefore, there is a risk that we may be a PFIC due to our declined market capitalization. The application of the PFIC rules
is subject to uncertainty in several respects, and SatixFy can make no assurances that the IRS will not take a contrary position or that
a court will not sustain such a challenge by the IRS. |
Under the PFIC rules, if SatixFy were considered a PFIC at any
time that a U.S. Holder owns SatixFy Ordinary Shares and/or SatixFy Warrants, SatixFy would continue to be treated as a PFIC with respect
to such investment unless (i) it ceased to be a PFIC and (ii) the U.S. Holder made a “deemed sale” election under the PFIC
rules. If such election is made, a U.S. Holder will be deemed to have sold its SatixFy Ordinary Shares and/or SatixFy Warrants at their
fair market value on the last day of the last taxable year in which SatixFy is classified as a PFIC, and any gain from such deemed sale
would be subject to the consequences described below. After the deemed sale election, the SatixFy Ordinary Shares and/or SatixFy Warrants
with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless SatixFy subsequently becomes a
PFIC.
For each taxable year that SatixFy is treated as a PFIC with respect
to a U.S. Holder’s SatixFy Ordinary Shares or SatixFy Warrants, the U.S. Holder will be subject to special tax rules with respect
to any “excess distribution” (as defined below) received and any gain realized from a sale or disposition (including a pledge)
of its SatixFy Ordinary Shares or SatixFy Warrants (collectively the “Excess Distribution Rules”), unless the U.S. Holder
makes a valid QEF election or mark-to-market election as discussed below. Distributions received by a U.S. Holder in a taxable year that
are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the U.S.
Holder’s holding period for the SatixFy Ordinary Shares or SatixFy Warrants will be treated as excess distributions. Under these
special tax rules:
| • |
the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the SatixFy Ordinary Shares
and/or SatixFy Warrants; |
| • |
the amount allocated to the current taxable year, and any taxable years in the U.S. Holder’s holding period prior to the first
taxable year in which SatixFy is a PFIC, will be treated as ordinary income; and |
| • |
the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations,
as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting
tax attributable to each such year. |
Under the Excess Distribution Rules, the tax liability for amounts
allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses, and gains
(but not losses) realized on the sale of the SatixFy Ordinary Shares or SatixFy Warrants cannot be treated as capital gains, even though
the U.S. Holder holds the SatixFy Ordinary Shares or SatixFy Warrants as capital assets.
Certain of the PFIC rules may impact U.S. Holders with respect
to equity interests in subsidiaries and other entities which SatixFy may hold, directly or indirectly, that are PFICs (collectively, “Lower-Tier
PFICs”). There can be no assurance, however, that SatixFy does not own, or will not in the future acquire, an interest in a subsidiary
or other entity that is or would be treated as a Lower-Tier PFIC. U.S. Holders should consult their tax advisors regarding the application
of the PFIC rules to any of SatixFy’s subsidiaries.
If SatixFy is a PFIC, a U.S. Holder of SatixFy Ordinary Shares
(but not SatixFy Warrants) may avoid taxation under the Excess Distribution Rules described above by making a “qualified electing
fund” (“QEF”) election. However, a U.S. Holder may make a QEF election with respect to its SatixFy Ordinary Shares only
if SatixFy provides U.S. Holders on an annual basis with certain financial information specified under applicable U.S. Treasury Regulations.
Because SatixFy currently does not intend to provide U.S. Holders with such information on an annual basis, U.S. Holders generally would
not be able to make a QEF election with respect to the SatixFy Ordinary Shares.
A U.S. Holder of SatixFy Ordinary Shares (but not SatixFy Warrants)
may also avoid taxation under the Excess Distribution Rules by making a mark-to-market election. The mark-to-market election is available
only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in
applicable U.S. Treasury Regulations. The SatixFy Ordinary Shares, which are currently listed on the NYSE, are expected to qualify as
marketable stock for purposes of the PFIC rules, but there can be no assurance that they will be “regularly traded” for purposes
of these rules. Because a mark-to-market election cannot be made for equity interests in any Lower-Tier PFICs, a U.S. Holder generally
will continue to be subject to the Excess Distribution Rules with respect to its indirect interest in any Lower-Tier PFICs as described
above, even if a mark-to-market election is made for SatixFy.
If a U.S. Holder makes a valid mark-to-market election with respect
to its SatixFy Ordinary Shares, such U.S. Holder will include in income for each year that SatixFy is treated as a PFIC with respect to
such SatixFy Ordinary Shares an amount equal to the excess, if any, of the fair market value of the SatixFy Ordinary Shares as of the
close of the U.S. Holder’s taxable year over the adjusted basis in the SatixFy Ordinary Shares. A U.S. Holder will be allowed a
deduction for the excess, if any, of the adjusted basis of the SatixFy Ordinary Shares over their fair market value as of the close of
the taxable year. However, deductions will be allowed only to the extent of any net mark-to-market gains on the SatixFy Ordinary Shares
included in the U.S. Holder’s income for prior taxable years. Amounts included in income under a mark-to-market election, as well
as gain on the actual sale or other disposition of the SatixFy Ordinary Shares, will be treated as ordinary income. Ordinary loss treatment
will also apply to the deductible portion of any mark-to-market loss on the SatixFy Ordinary Shares, as well as to any loss realized on
the actual sale or disposition of the SatixFy Ordinary Shares, to the extent the amount of such loss does not exceed the net mark-to-market
gains for such SatixFy Ordinary Shares previously included in income. A U.S. Holder’s basis in the SatixFy Ordinary Shares will
be adjusted to reflect any mark-to-market income or loss. If a U.S. Holder makes a mark-to-market election, any distributions SatixFy
makes would generally be subject to the rules discussed above under “— Distributions on SatixFy
Ordinary Shares,” except the lower rates applicable to qualified dividend income would not apply.
A U.S. Holder that is eligible to make a mark-to-market election
with respect to its SatixFy Ordinary Shares may do so by providing the appropriate information on IRS Form 8621 and timely filing that
form with the U.S. Holder’s tax return for the year in which the election becomes effective. U.S. Holders should consult their tax
advisors as to the availability and desirability of a mark- to-market election, as well as the impact of such election on interests in
any Lower-Tier PFICs.
A U.S. Holder of a PFIC generally is required to file an IRS Form
8621 on an annual basis. U.S. Holders are strongly encouraged to consult their tax advisors regarding the application of the PFIC rules
and the associated reporting requirements to their particular circumstances.
Non-U.S. Holders
The section applies to Non-U.S. Holders of SatixFy Ordinary Shares
and SatixFy Warrants. For purposes of this discussion, a Non-U.S. Holder means a beneficial owner (other than a partnership or an entity
or arrangement so characterized for U.S. federal income tax purposes) of SatixFy Ordinary Shares or SatixFy Warrants, as the case may
be, that is not a U.S. Holder, including:
| • |
a nonresident alien individual, other than certain former citizens and residents of the United States; |
| • |
a foreign corporation; or |
| • |
a foreign estate or trust. |
Ownership and Disposition of SatixFy Ordinary Shares and SatixFy Warrants by Non-U.S.
Holders
Any (i) distributions of cash or property paid to a Non-U.S. Holders
in respect of SatixFy Ordinary Shares or (ii) gain realized upon the sale or other taxable disposition of SatixFy Ordinary Shares or SatixFy
Warrants generally will not be subject to U.S. federal income taxation unless:
| • |
the gain or distribution is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United
States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States
to which such gain is attributable); or |
| • |
in the case of any gain, the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more
during the taxable year of the disposition and certain other requirements are met. |
Gain or distributions described in the first bullet point above
generally will be subject to U.S. federal income tax on a net income basis at the regular rates in the same manner discussed in “—
Distributions on SatixFy Ordinary Shares” and “— Sale,
Exchange, Redemption or Other Taxable Disposition of SatixFy Ordinary Shares or SatixFy Warrants.”
Gain described in the second bullet point above will be subject
to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by
U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided
the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
The U.S. federal income tax treatment of a Non-U.S. Holder’s
exercise of a SatixFy Warrant, or the lapse of a SatixFy Warrant held by a Non-U.S. Holder, generally will correspond to the U.S. federal
income tax treatment of the exercise or lapse of a warrant by a U.S. Holder, as described under “— U.S.
Holders — Exercise or Lapse of a SatixFy Warrant” above, although to the extent
a cashless exercise or lapse results in a taxable exchange, the consequences would be similar to those described in the preceding paragraphs
above for a Non-U.S. Holder’s gain on the sale or other disposition of the SatixFy Ordinary Shares and SatixFy Warrants.
Non-U.S. Holders should consult their tax advisors regarding potentially
applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
U.S. Holders
Information reporting requirements may apply to distributions on
the SatixFy Ordinary Shares and the proceeds received on sale or other taxable disposition of the SatixFy Ordinary Shares or SatixFy Warrants
effected within the United States (and, in certain cases, outside the United States), in each case other than U.S. Holders that are exempt
recipients (such as corporations). Backup withholding (currently at a rate of 24%) may apply to such amounts if the U.S. Holder fails
to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent of the U.S. Holder’s
broker) or is otherwise subject to backup withholding. U.S. Holders should consult their tax advisors regarding the application of the
U.S. information reporting and backup withholding rules.
Non-U.S. Holders
Information returns may be filed with the IRS in connection with,
and Non-U.S. Holders may be subject to backup withholding on amounts received in respect of, a Non-U.S. Holder’s disposition of
SatixFy Ordinary Shares or SatixFy Warrants, unless the Non-U.S. Holder furnishes to the applicable withholding agent the required certification
as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, as applicable, or the Non-U.S.
Holder otherwise establishes an exemption. Dividends paid with respect to SatixFy Ordinary Shares and proceeds from the sale of other
disposition of the SatixFy Ordinary Shares or SatixFy Warrants received in the United States by a Non-U.S. Holder through certain U.S.-related
financial intermediaries may be subject to information reporting and backup withholding unless such Non-U.S. Holder provides proof an
applicable exemption or complies with certain certification procedures described above, and otherwise complies with the applicable requirements
of the backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding generally may be credited against the taxpayer’s U.S. federal income tax liability, and a taxpayer may obtain
a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for a refund with the
IRS and furnishing any required information.
| F. |
Dividends and Paying Agents |
Not applicable.
| G. |
Statement by Experts |
Not applicable.
| H. |
Documents on Display |
We are subject to the information reporting requirements of the
Exchange Act, applicable to foreign private issuers, and under those requirements, we file reports with the SEC. Those other reports or
other information are available to the public through the SEC’s website at http://www.sec.gov.
As a foreign private issuer, we are exempt from the rules under
the Exchange Act, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are
not required under the Exchange Act, to file annual, quarterly and current reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to comply with the informational
requirements of the Exchange Act, and, accordingly, file reports on Form 6-K, annual reports on Form 20-F and other information with the
SEC.
We maintain a corporate website at www.satixfy.com.
Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report.
| I. |
Subsidiary Information |
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial
position because of adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure resulting
from potential changes in inflation, exchange rates or interest rates. We do not hold financial instruments for trading purposes.
Foreign Currency Exchange
Risk
As discussed above under “Item
5. Operating and Financial Review and Prospects — Basis of Presentation,” we
have been and continue to be exposed to foreign currency translation effects, which may be material. In 2023, a hypothetical 10% increase
or decrease in the average value of each of the NIS, GBP and EUR against the U.S. dollar in 2023 would have reduced or increased our operating
loss by approximately $0.4 million.
In addition, we are also exposed to foreign exchange remeasurement
with respect to our subsidiaries’ financial assets and liabilities denominated in currencies other than such subsidiaries’
functional currencies. See “Item 5. Operating and Financial Review and Prospects —
Basis of Presentation.” We may also be exposed to foreign currency transaction risk as a
result of funding our operations in one currency and paying our expenses in another, and consequently our earnings or losses may fluctuate
from period to period as a result of changes in exchange rates.
Interest Rate Risk
Fluctuations in interest rates may impact the level of interest
income we earn on short-term deposits. All of our outstanding debt bears interest at fixed rates, although the interest rate on our term
loan under the 2022 Credit Agreement is subject to adjustment in certain cases, as described under “Item
5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Debt and other financing arrangements”
above. We do not enter into derivative financial instruments, including interest rate swaps, for hedging or speculative purposes.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| A. |
Debt Securities |
Not applicable.
| B. |
Warrants and Rights |
Not applicable.
| C. |
Other Securities |
Not applicable.
| D. |
American Depositary Shares |
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO
THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15.
CONTROLS AND PROCEDURES
| (a) |
Disclosure Controls and Procedures |
We performed an evaluation of the effectiveness of our disclosure
controls and procedures that are designed to ensure that information required to be disclosed on Form 20-F and filed with the SEC is recorded,
processed, summarized and reported timely within the time period specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act, is accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. There can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons
within the company to disclose information otherwise required to be set forth in our reports. Nevertheless, our disclosure controls and
procedures are designed to provide reasonable assurance of achieving the desired control objectives. Based on our evaluation, our management,
including our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report are effective at such
reasonable assurance level.
| (b) |
Management’s Annual Report on Internal Control over Financial
Reporting |
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting based principally on the framework and criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission as of the end of
the period covered by this report. Based on that evaluation, our management has concluded that our internal control over financial reporting
was effective as of December 31, 2023, at providing reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
| (c) |
Attestation Report of Registered Public Accounting Firm
|
This Annual Report does not include an attestation report of our
registered public accounting firm since we are an emerging growth company and non-accelerated filer and, accordingly, are exempt
from the requirement to provide such a report for as long as we remain an emerging growth company or non-accelerated filer.
| (d) |
Changes in Internal Control Over Financial Reporting
|
There were no material changes in our internal control over financial
reporting that occurred during the year ended December 31, 2023, that have materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
ITEM 16.
[RESERVED]
ITEM 16A. AUDIT
COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Moshe Eisenberg
and Ms. Mary P. Cotton are audit committee financial experts. The board of directors has determined that each member of the Audit Committee
is “independent” as defined under the NYSE rules and Exchange Act rules and regulations.
ITEM 16B. CODE OF ETHICS
We have a code of conduct and business ethics that applies to our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
This code of conduct and business ethics is posted on our website, https://s201.q4cdn.com/902419104/files/doc_downloads/gov_docs/11/SATX-Code-of-Conduct-and-Business-Ethics.pdf
. We intend to post on our website any amendments or waivers to the code of conduct and business ethics that apply to our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
ITEM 16C. PRINCIPAL
ACCOUNTANT FEES AND SERVICES-
Fees Paid to Independent Registered Public Accounting Firm
The following table sets forth, for each of the years indicated,
the aggregate fees paid by us to our independent registered public accounting firm for professional services.
|
Year Ended December 31,
|
||||||||
|
Services Rendered |
2023 |
2022
|
||||||
|
(U.S. dollars in thousands)
|
||||||||
|
Audit fees (1) |
230 |
343 |
||||||
|
Audit-related fees (2) |
69 |
146 |
||||||
|
Tax fees (3) |
20 |
12 |
||||||
|
All Other Fees |
- |
- |
||||||
|
Total |
319 |
501 |
||||||
| (1) |
Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements,
including services that generally only the independent accountant can reasonably provide. |
| (2) |
Audit-related fees relate to work regarding preparation of our Registration Statement on Form F-1 and ongoing consultation.
|
| (3) |
Tax fees relate to tax compliance, planning and advice. |
Audit Committee Pre-Approval Policies and Procedures
Our audit committee’s specific responsibilities in carrying
out its oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company include the approval
of audit and non-audit services to be provided by the external auditor. The audit committee approves in advance the particular services
or categories of services to be provided to the Company during the following yearly period and also sets forth a specific budget for such
audit services. All non-audit services are pre-approved by the audit committee.
ITEM 16D. EXEMPTIONS FROM
THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY
SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNT
None.
ITEM 16G. CORPORATE
GOVERNANCE
As a foreign private issuer whose shares are listed on the NYSE, we are permitted to
follow certain home country corporate governance practices instead of certain requirements of the rules of the NYSE. We are permitted
to comply with Israeli corporate governance practices instead of the NYSE corporate governance rules (although we intend to comply with
many of these rules), provided that we disclose which NYSE requirements we are not following and the equivalent Israeli requirements.
Pursuant to this “home country practice exemption” we:
| • |
did not implement and publish corporate governance guidelines; |
| • |
do not have a lead independent or non-management director that presides over regularly scheduled meetings of the Board without the
participation of management; |
| • |
have a compensation committee that complies with Israeli law and may not comply with all of the NYSE requirements applicable to U.S.
domestic public companies, including the requirements that the compensation committee must be composed entirely of directors determined
to be independent under NYSE compensation committee rules and conduct an independence assessment with respect to any compensation consultant,
legal counsel or other adviser that provides advice to the compensation committee; |
| • |
adopt and approve material changes to equity incentive plans in accordance with the Israeli Companies Law, which does not impose
a requirement of shareholder approval for such actions, instead of the NYSE corporate governance rule, which requires shareholder approval
prior to an issuance of securities in connection with equity-based compensation of officers, directors, employees or consultants;
|
| • |
follow the quorum requirements for shareholder meetings under the Israeli Companies Law instead of the NYSE corporate governance
requirements, which would require 33-1⁄3% of the |
| • |
total outstanding voting power of our shares present at meetings, as further described in “Description of SatixFy Ordinary
Shares — Voting Rights — Quorum Requirements;” and |
| • |
follow Israeli corporate governance practice in respect of private placements instead of the NYSE corporate governance requirements
to obtain shareholder approval for certain dilutive events, such as issuances that will result in a change of control, certain transactions
other than a public offering involving issuances of a 20% or greater equity interest in us and certain acquisitions of the stock or assets
of another company. |
Under the Israeli Companies Law we will be permitted to create
and issue shares having rights different from those attached to the SatixFy Ordinary Shares. For a discussion of such different rights,
see “Item 10. Additional Information — Memorandum and Articles of Association — Anti-takeover
Measures under Israeli Law.” SatixFy may rely on additional foreign private issuer exemptions with respect to some or all
of the other corporate governance rules.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE
REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING
POLICIES
Not applicable.
ITEM 16K. CYBERSECURITY
Our board recognizes the critical importance of maintaining
the trust and confidence of our customers, clients, business partners and employees. The board of directors is actively involved in oversight
of our risk management program, and cybersecurity represents an important component of our overall approach to risk management. In general,
we seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality,
security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats
and effectively responding to cybersecurity incidents when they occur.
Risk management and strategy
We prioritize the management of cybersecurity risk and the protection
of information across our enterprise by embedding data protection and cybersecurity risk management in our operations. Our processes for
assessing, identifying, and managing material risks from cybersecurity threats have been integrated into our overall risk management processes.
As described in more detail under the heading “Governance,”
the board of directors’ oversight of cybersecurity risk management is supported by the Risk Management Team (“RMT”)
which regularly interacts with it and with Mr. Assi Levi, our Director of Information Technology (“IT”), other members of
management and relevant management committees.
These efforts include a wide range of activities, including audits,
assessments, tabletop exercises, threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of
our cybersecurity measures and planning. Our RMT is alerted as appropriate to cybersecurity incidents, as well as other crises, such as
natural disasters and outages. This team also periodically oversees tabletop drills on various cybersecurity incidents. The RMT is also
responsible for reviewing the materiality of cyber incidents for disclosure purposes and providing periodic presentations to senior management
and the board of directors on cybersecurity risk and mitigation.
Our operations rely on the secure processing, storage and transmission
of confidential and other information in our computer systems and networks. Computer viruses, hackers, and employee or vendor misconduct,
and other external hazards could expose our data systems and those of our vendors to security breaches, cybersecurity incidents or other
disruptions, any of which could materially and adversely affect our ability to conduct our business.
We regularly engage third parties to perform assessments on our
cybersecurity measures, including cyber drill exercises and threat assessments to evaluate our information security control environment
and operating effectiveness. The results of such assessments, and reviews are reported to the RMT. We adjust our cybersecurity processes
and practices as necessary based on the information provided by these assessments and reviews. We are in the process of engaging a third
party to risks from cybersecurity threats associated with our use of any third-party service provider.
At the level of the general employee population, we intend to hold
trainings on privacy and information security, records and information management, and information security regulatory compliance, conduct
phishing tests and generally seek to promote awareness of cybersecurity risk through broad communication and educational initiatives,
depending on the employee’s level, role and exposure to sensitive systems and the associated cybersecurity risk profile.
To date, we are not aware that we have experienced a material cybersecurity
incident and we have conducted a cyber drill to assess and evaluate our readiness, as part of our risk management process.
The sophistication of cybersecurity threats continues to increase,
and the controls and preventative actions we take to reduce the risk of cybersecurity incidents and protect our systems including internal
and external penetration testing and cybersecurity risk assessments.
Governance
As part of our overall risk management approach, we prioritize
the management of cybersecurity risk at several levels, including risk assessment and strategy by our RMT, coupled with oversight from
the board of directors, executive commitment and employee training. The board of directors, in coordination with the RMT, oversees our
risk management process, including the management of risks arising from cybersecurity threats. Our RMT is responsible for providing regular
reports to the board of directors addressing a wide range of topics including recent developments, evolving standards, vulnerability assessments,
third party and independent reviews, the threat environment, technological trends and information security considerations arising with
respect to our peers and third parties.
Our Director of IT oversees compliance of out information
security standards and mitigation of risks. He works in coordination with the RMT, which includes our CFO, COO, and CFO, and collaboratively
across the Company to implement a program designed to protect our information systems from cybersecurity threats and to promptly respond
to any cybersecurity incidents in accordance with the Company’s incident response and recovery plans. Mr. Levi has been our Director
of IT since January 2013.
Cybersecurity threats, including as a result of any previous cybersecurity
incidents, have not materially affected or are reasonably likely to affect our Company, including our business strategy, results of operations
or financial condition.
PART
III
ITEM 17.
FINANCIAL STATEMENTS
Not applicable.
ITEM 18.
FINANCIAL STATEMENTS
The financial statements required by this item are found at the
end of this Annual Report, beginning on page F-1.
ITEM 19.
EXHIBITS
See Exhibit Index below.
EXHIBIT INDEX
| 1.1 |
| 2.1 |
| 2.2 |
| 2.3 |
| 2.4* |
| 4.1 |
| 4.2 |
| 4.3 |
| 4.4 |
| 4.6 |
| 4.7 |
| 4.8 |
| 4.9 |
| 4.10 |
| 4.11 |
| 4.12 |
| 4.13 |
| 4.14 |
| 4.15 |
| 4.16 |
| 4.17 |
| 4.18 |
| 4.19 |
| 4.20 |
| 4.21 |
| 4.22 |
| 4.23 |
| 4.24* |
| 8.1* |
| 12.1* |
| 12.2* |
| 13.1** |
| 13.1** |
| 15.1* |
| 97.1* |
| 101 |
The following financial statements from the Company’s 20-F for the fiscal year ended December 31, 2023, formatted in Inline
XBRL: (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Comprehensive Loss, (iii) Consolidated Statements
of Shareholders’ Deficit, (iv) Consolidated Statements of Cash Flows and (v) Notes to the Consolidated Financial Statements.
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
______________________
† Certain schedules and/or exhibits to this Exhibit have been omitted in accordance with the
instructions to Item 19 of Form 20-F. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities
and Exchange Commission or its staff upon request.
* Filed herewith.
** Furnished herewith.
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements
for filing this Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
|
SATIXFY COMMUNICATIONS LTD | ||
| | ||
|
By: |
| |
|
Name: Nir Barkan | ||
|
Title: Acting Chief Executive Officer | ||
|
By: |
 |
|
|
Name: Oren Harari | ||
|
Title: Interim Chief Financial Officer | ||
|
Date: March 29, 2024 |
||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2023
SATIXFY COMMUNICATIONS LTD.
TABLE OF CONTENTS
|
Report of Independent registered public accounting firm (Ziv Haft; Tel-Aviv, Israel; PCAOB ID#1185)
|
F-2
|
|
F-3 - F-4
|
|
|
F-5
|
|
|
F-6 - F-8
|
|
|
F-9 - F-11
|
|
|
F-12 - F-78
|
The amounts are stated in thousands of USD
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and stockholders of SatixFy Communications LTD.
Rehovot, Israel.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Satixfy Communications LTD. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, changes in shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and Interpretations (collectively “IFRS”).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated Financial Statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ziv Haft
Certified Public Accountants (Isr.)
BDO Member Firm
We have served as the Company’s auditor since August 2019.
March 28, 2024
Tel Aviv, Israel
SATIXFY COMMUNICATIONS LTD.
Consolidated statements of financial position
(in thousands of USD)
|
March 28, 2024
|
||||||
|
Date of approval of the financial statements
|
Nir Barkan
Acting CEO
|
Oren Harari
Interim CFO
|
Yoav Leibovitch
Chairman of Board
|
The accompanying notes are an integral part of the consolidated financial statements.
SATIXFY COMMUNICATIONS LTD.
Consolidated statements of financial position
(in thousands of USD)
|
As of December 31,
|
|||||||||||
|
2023
|
2022
|
||||||||||
|
Note
|
In USD thousands
|
||||||||||
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|||||||||||
|
CURRENT LIABILITIES:
|
|||||||||||
|
Trade payables
|
1,378
|
1,459
|
|||||||||
|
Contract Liabilities
|
9
|
1,720
|
622
|
||||||||
|
ESA advance payments
|
19 (a)
|
3,842
|
5,800
|
||||||||
|
Prepayment from Customer
|
3,858
|
(*) | 3,301 |
|
|||||||
|
Advanced payments from MDA against future orders
|
3
|
28,138
|
(*) | 8,875 |
|
||||||
|
Lease liabilities
|
6
|
639
|
1,021
|
||||||||
|
Other accounts payable and accrued expenses
|
10
|
9,704
|
7,843
|
||||||||
|
Related Parties
|
14
|
740
|
408
|
||||||||
|
Total current liabilities
|
50,019
|
29,329
|
|||||||||
|
NON-CURRENT LIABILITIES:
|
|||||||||||
|
Long term loans from financial institutions, net
|
12
|
59,792
|
54,926
|
||||||||
|
Lease liabilities
|
6
|
2,067
|
2,280
|
||||||||
|
Derivatives Instruments Liabilities
|
15
|
114
|
20,305
|
||||||||
|
Other long-term liabilities
|
16
|
1,496
|
1,107
|
||||||||
|
Total non-current liabilities
|
63,469
|
78,618
|
|||||||||
|
SHAREHOLDERS’ DEFICIT:
|
18
|
||||||||||
|
Share Capital
|
-
|
-
|
|||||||||
|
Share Premium
|
451,093
|
446,488
|
|||||||||
|
Capital reserves
|
1,444
|
3,498
|
|||||||||
|
Accumulated deficit
|
(511,323
|
)
|
(481,608
|
)
|
|||||||
|
Total shareholders’ deficit
|
(58,786
|
)
|
(31,622
|
)
|
|||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
54,702
|
76,325
|
|||||||||
(*) Reclassified
The accompanying notes are an integral part of the financial statements.
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands of USD)
|
For the year ended December 31
|
|||||||||||||||
|
Note
|
2023
|
2022
|
2021
|
||||||||||||
|
Revenues:
|
20
|
||||||||||||||
|
Development services and preproduction
|
8,249
|
10,081
|
19,237
|
||||||||||||
|
Sale of products
|
2,481
|
545
|
2,483
|
||||||||||||
|
Total revenues
|
10,730
|
10,626
|
21,720
|
||||||||||||
|
Cost of sales and services:
|
21
|
||||||||||||||
|
Development services and preproduction
|
4,930
|
4,166
|
7,326
|
||||||||||||
|
Sale of products
|
1,008
|
332
|
1,517
|
||||||||||||
|
Total cost of sales and services
|
5,938
|
4,498
|
8,843
|
||||||||||||
|
Gross profit
|
4,792
|
6,128
|
12,877
|
||||||||||||
|
Research and development expenses, Net
|
22
|
29,126
|
16,842
|
17,944
|
|||||||||||
|
Selling and marketing expenses
|
23
|
2,866
|
2,335
|
1,752
|
|||||||||||
|
General and administrative expenses
|
24
|
14,561
|
9,249
|
3,735
|
|||||||||||
|
Loss from operations
|
(41,761
|
)
|
(22,298
|
)
|
(10,554
|
)
|
|||||||||
|
Finance Income
|
83
|
17
|
-
|
||||||||||||
|
Finance Expenses
|
(12,129
|
)
|
(9,919
|
)
|
(4,399
|
)
|
|||||||||
|
Derivatives revaluation
|
15
|
(17,217
|
)
|
(37,377
|
)
|
(199
|
)
|
||||||||
|
Other Income
|
3
|
41,657
|
5,474
|
-
|
|||||||||||
|
Listing Expenses
|
25
|
-
|
(333,326
|
)
|
-
|
||||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
7
|
(226
|
)
|
(360
|
)
|
(1,898
|
)
|
||||||||
|
Loss before income taxes
|
(29,593
|
)
|
(397,789
|
)
|
(17,050
|
)
|
|||||||||
|
Tax expenses
|
26
|
(122
|
) |
-
|
-
|
||||||||||
|
Loss for the period
|
(29,715
|
)
|
(397,789
|
)
|
(17,050
|
)
|
|||||||||
|
Other comprehensive income (loss) net of tax:
|
|||||||||||||||
|
Items that will or may be reclassified to profit or loss:
|
|||||||||||||||
|
Exchange gain (loss) arising on translation of foreign operations
|
(609
|
)
|
3,272
|
1,131
|
|||||||||||
|
Total comprehensive loss for the period
|
(30,324
|
)
|
(394,517
|
)
|
(15,919
|
)
|
|||||||||
|
Basic and diluted loss per share (in dollars)
|
27
|
(0.37
|
)
|
(13.25
|
)
|
(0.91
|
)
|
||||||||
|
Basic and diluted weighted average common shares outstanding (quantity)
|
80,975
|
30,031
|
18,732
|
||||||||||||
The accompanying notes are an integral part of the financial statements.
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(in thousands of USD)
|
Ordinary shares
|
Preferred Shares A
|
Preferred Shares B
|
Preferred Shares C
|
Share capital
|
Share premium
|
Accumulated deficit
|
Capital reserves
|
Total
|
||||||||||||||||||||||||||||
|
Number of shares
|
In USD thousand
|
|||||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2023
|
80,672,674
|
-
|
-
|
-
|
-
|
446,488
|
(481,608
|
)
|
3,498
|
(31,622
|
)
|
|||||||||||||||||||||||||
|
Shares issued to employees
|
940,953
|
-
|
-
|
-
|
-
|
27
|
-
|
-
|
27
|
|||||||||||||||||||||||||||
|
Shares issued to Financial Institutions
|
1,500,566
|
-
|
-
|
-
|
-
|
1,628
|
-
|
-
|
1,628
|
|||||||||||||||||||||||||||
|
Share based payments
|
-
|
-
|
-
|
-
|
-
|
2,950
|
-
|
2,950
|
||||||||||||||||||||||||||||
|
Comprehensive Loss for the year
|
-
|
-
|
-
|
-
|
-
|
(29,715
|
)
|
(609
|
)
|
(30,324
|
)
|
|||||||||||||||||||||||||
|
Currency translation reserve realization due the sell of SSS |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,445
|
)
|
(1,445
|
)
|
|||||||||||||||||||||||||
|
Balance as of December 31, 2023
|
83,114,193
|
-
|
-
|
-
|
-
|
451,093
|
(511,323
|
)
|
1,444
|
(58,786
|
)
|
|||||||||||||||||||||||||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(in thousands of USD)
|
Ordinary shares
|
Preferred Shares A
|
Preferred Shares B
|
Preferred Shares C
|
Share capital
|
Share premium
|
Accumulated deficit
|
Capital reserves
|
Total
|
||||||||||||||||||||||||||||
|
Number of shares
|
In USD thousand
|
|||||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2022
|
18,783,168
|
7,638,647
|
4,999,651
|
895,710
|
4
|
46,203
|
(83,819
|
)
|
226
|
(37,386
|
)
|
|||||||||||||||||||||||||
|
Exercise of employee's options
|
236,446
|
-
|
-
|
-
|
|
101
|
-
|
-
|
101
|
|||||||||||||||||||||||||||
|
Shares issued to Financial Institutions
|
846,432
|
-
|
-
|
-
|
-
|
1,978
|
-
|
-
|
1,978
|
|||||||||||||||||||||||||||
|
Warrant exercised
|
-
|
-
|
57,660
|
860,802
|
-
|
5,399
|
-
|
-
|
5,399
|
|||||||||||||||||||||||||||
|
Share based payments
|
-
|
-
|
-
|
-
|
|
570
|
-
|
-
|
570
|
|||||||||||||||||||||||||||
|
Issuance of shares following SPAC transaction- (see note 1)
|
56,647,836
|
(7,638,647
|
)
|
(5,057,311
|
)
|
(1,756,512
|
)
|
(4
|
)
|
339,858
|
-
|
-
|
339,854
|
|||||||||||||||||||||||
|
SPAC Exercise of warrants
|
2,553,692
|
-
|
-
|
-
|
-
|
2,381
|
-
|
-
|
2,381
|
|||||||||||||||||||||||||||
|
Issuing shares as part of FPA
|
1,605,100
|
-
|
-
|
-
|
-
|
49,998
|
-
|
-
|
49,998
|
|||||||||||||||||||||||||||
|
Comprehensive Loss for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
(397,789
|
)
|
3,272
|
(394,517
|
)
|
|||||||||||||||||||||||||
|
Balance as of December 31, 2022
|
80,672,674
|
-
|
-
|
-
|
-
|
446,488
|
(481,608
|
)
|
3,498
|
(31,622
|
)
|
|||||||||||||||||||||||||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(in thousands of USD)
For the year ended December 31, 2021
|
Ordinary shares
|
Preferred Shares A
|
Preferred Shares B
|
Preferred Shares C
|
Share capital
|
Share premium
|
Accumulated deficit
|
Capital reserves
|
Total
|
||||||||||||||||||||||||||||
|
Number of shares
|
In USD thousand
|
|||||||||||||||||||||||||||||||||||
|
Balance as of January 1, 2021
|
18,722,010
|
7,638,647
|
4,999,651
|
895,710
|
4
|
45,990
|
(66,769
|
)
|
(905
|
)
|
(21,680
|
)
|
||||||||||||||||||||||||
|
Exercise of options
|
61,158
|
-
|
-
|
-
|
(
|
)
|
64
|
-
|
-
|
64
|
||||||||||||||||||||||||||
|
Share based payments
|
-
|
-
|
-
|
-
|
(
|
)
|
149
|
|
|
149
|
||||||||||||||||||||||||||
|
Comprehensive Loss for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,050
|
)
|
1,131
|
(15,919
|
)
|
|||||||||||||||||||||||||
|
Balance as of December 31, 2021
|
18,783,168
|
7,638,647
|
4,999,651
|
895,710
|
4
|
46,203
|
(83,819
|
)
|
226
|
(37,386
|
)
|
|||||||||||||||||||||||||
(*) Represents an amount less than one thousand.
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of USD)
|
For the year ended December 31
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Loss for the year
|
(29,715
|
)
|
(397,789
|
)
|
(17,050
|
)
|
||||||
|
Adjustments to reconcile net profit to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
1,245
|
1,162
|
1,421
|
|||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
226
|
360
|
1,898
|
|||||||||
|
Finance expenses on loans
|
6,613
|
5,211
|
917
|
|||||||||
|
Change in the fair value of derivatives
|
17,227
|
37,374
|
200
|
|||||||||
|
Share based payments
|
2,950
|
570
|
149
|
|||||||||
|
Adjustment to Loss due to SPAC transaction
|
-
|
332,272
|
-
|
|||||||||
|
Decrease (Increase) in trade accounts receivable
|
(885
|
)
|
(587
|
)
|
(305
|
)
|
||||||
|
Decrease (Increase) in contract assets
|
1,220
|
537
|
(4,119
|
)
|
||||||||
|
Increase in inventory
|
(644
|
)
|
(146
|
)
|
(10
|
)
|
||||||
|
Decrease (Increase) in other current assets
|
3,508
|
(7,007
|
)
|
3,256
|
||||||||
|
Increase (Decrease) in trade payables
|
(75
|
)
|
(6,236
|
)
|
1,461
|
|||||||
|
Increase (Decrease) in ESA prepayments
|
(1,268
|
)
|
(7,609
|
)
|
1,882
|
|||||||
|
Decrease in deferred revenues
|
-
|
-
|
(612
|
)
|
||||||||
|
Increase (Decrease) in other accounts payable and accrued expenses
|
(2,601
|
) |
(1,571
|
)
|
3,282
|
|||||||
|
Increase in prepayments from customers
|
682
|
2,936
|
1,504
|
|||||||||
|
Increase Prepayments from MDA (See note 3)
|
18,139
|
8,875
|
-
|
|||||||||
|
MDA Agreement (See note 3)
|
(41,657
|
)
|
-
|
-
|
||||||||
|
Increase in other long-term liabilities
|
300
|
-
|
-
|
|||||||||
|
Increase in liability for royalties payable
|
100
|
168
|
260
|
|||||||||
|
Net cash used in operating activities
|
(24,635
|
)
|
(31,480
|
)
|
(5,866
|
)
|
||||||
|
Cash flows from investing activities
|
||||||||||||
|
Decrease (Increase) in long-term bank deposit
|
(7
|
)
|
(11
|
)
|
201
|
|||||||
|
Proceeds from selling a subsidiary (See Appendix C)
|
17,583
|
-
|
-
|
|||||||||
|
Purchase of property, plant and equipment
|
(235
|
)
|
(571
|
)
|
(211
|
)
|
||||||
|
Net cash provided (used in) investing activities
|
17,341
|
(582
|
)
|
(10
|
)
|
|||||||
|
Cash flows from financing activities
|
||||||||||||
|
Receipt of long-term loans from a financial institution
|
-
|
52,837
|
7,300
|
|||||||||
|
Repayment of loan to shareholder
|
-
|
(5,000
|
)
|
-
|
||||||||
|
Repayment of loans from banks
|
-
|
(13,818
|
)
|
(2,930
|
)
|
|||||||
|
Repayment of royalty liability
|
(11
|
) |
(429
|
)
|
(488
|
)
|
||||||
|
Payments of lease liabilities
|
(927
|
)
|
(1,029
|
)
|
(1,191
|
)
|
||||||
|
Issuance of shares- SPAC transactions
|
-
|
1,362
|
-
|
|||||||||
|
Option exercises to shares by employees
|
26
|
100
|
64
|
|||||||||
|
Exercise of Warrants, net
|
-
|
6,500
|
-
|
|||||||||
|
Issuance of shares to FPA (See note 17)
|
10,026
|
-
|
-
|
|||||||||
|
Net cash provided by financing activities
|
9,114
|
40,523
|
2,755
|
|||||||||
|
Increase (decrease) in cash and cash equivalents
|
1,820
|
8,461
|
(3,121
|
)
|
||||||||
|
Cash and cash equivalents balance at the beginning of the year
|
11,934
|
3,854
|
6,983
|
|||||||||
|
Effect of changes in for foreign exchange rates on cash and cash equivalents
|
225
|
(381
|
)
|
(8
|
)
|
|||||||
|
Cash and cash equivalents balance at the end of the year
|
13,979
|
11,934
|
3,854
|
|||||||||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of USD)
|
For the year ended December 31
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Appendix A – Cash paid and received during the year for:
|
||||||||||||
|
Interest paid
|
1,241
|
921
|
1,625
|
|||||||||
|
Appendix B – Non Cash transactions during the year for:
|
||||||||||||
|
Purchase of Fixed Assets in credit
|
-
|
319
|
-
|
|||||||||
|
Issuance of shares against liability
|
-
|
49,998
|
-
|
|||||||||
|
Issuance of shares against loan
|
1,628
|
1,978
|
-
|
|||||||||
|
Issuance of shares against warrants
|
-
|
1,280
|
-
|
|||||||||
The accompanying notes are an integral part of the financial statements
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of USD)
|
For the year ended
December 31
|
||||
|
2023
|
||||
|
Appendix C – Proceeds from selling a subsidiary
|
||||
|
Cash that was sold
|
417
|
|||
|
Prepaid expenses and other
|
218
|
|||
|
Short term Deposits
|
85
|
|||
|
Other accounts receivables
|
932
|
|||
|
Property, plant and equipment, net
|
150
|
|||
|
Trade accounts payable
|
(175
|
)
|
||
|
Contract liabilities
|
(96
|
)
|
||
|
Other accounts payable
|
(585
|
)
|
||
|
ESA Prepayments
|
(994
|
)
|
||
|
Related party
|
(164
|
)
|
||
|
Capital Gain
|
41,657
|
|||
|
Capital reserve
|
(1,445 | ) | ||
|
Net assets and liabilities
|
40,000
|
|||
|
Less assets received
|
||||
|
Promissory Notes
|
20,000
|
|||
|
Other long-term receivables
|
2,000
|
|||
|
Cash received
|
18,000
|
|||
|
Cash sold
|
(417
|
)
|
||
|
Net Cash inflows
|
17,583
|
|||
The accompanying notes are an integral part of the financial statements
NOTE 1 - GENERAL:
| a. |
Satixfy Communications LTD (hereinafter: the "Company") was originally incorporated in Hong Kong as Satixfy Limited in 2012 and in 2020 was reorganized and re-incorporated in Israel as a private limited company, in accordance with the provisions of the Israeli Companies Law with the approval from the Israeli Tax Authorities for tax exemption in accordance with the provisions of section 104B (f) of the Income Tax Ordinance.
|
| b. |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
|
As of December 31, 2023, we had incurred accumulated losses of $511 million. In October 2023, The Company announced the completion of the sale of one of its UK subsidiaries (Satixfy Space Systems UK Ltd) to MDA Ltd (See Note 3) for a total consideration of $40 million combined with additional $20 million in advanced payments against delivery of future products. The Company believes that the funds received and yet to be received as part of the MDA agreement including our mature pipeline from existing and new customers combined with the cost reduction associated with the MDA agreement and a further cost reduction plan and the Equity line of credit with Cantor Fitzgerald & Co (See Note 3), will generate sufficient cash for the foreseeable future.
| c. |
Business Combination Agreement SPAC Transaction ("Business Combination Agreement" OR "Transactions"):
|
On March 8, 2022, the Company and one of its subsidiaries, SatixFy MS, which was incorporated in 2022 for that purpose, entered into the Business combination agreement with Endurance Acquisition Corp. (“Endurance”). Under that agreement, SatixFy MS merged into Endurance, with Endurance continuing as the surviving company and becoming the Company’s direct, subsidiary. The Business Combination Agreement, as amended, and the related transactions (the "SPAC merger") were completed on October 27, 2022 (the “Closing”).
As a result of the Business Combination, the Company recorded a gross increase in cash of $20 million and had $18.7 million expenses in cash related to the Transactions.
The Business Combination was accounted for as a capital reorganization, with no goodwill or other intangible assets recorded, in accordance with IFRS 3, Business Combination. The Company is the accounting acquirer and SatixFy Ordinary Shares were registered under the U.S. Securities Exchange Act of 1934, as amended, and listed on the NYSE American, LLC (“NYSE”).
Concurrently with the execution of the Business Combination Agreement, the Company entered into the Equity Line of Credit with CF Principal Investments LLC, an affiliate of Cantor Fitzgerald & Co. (“CF”), pursuant to which the Company may issue and sell to CF, from time to time and subject to the conditions in the related purchase agreement, up to an aggregate amount of $77.25 million in the Company’s Ordinary Shares for aggregate gross proceeds to the Company of up to $75 million after deducting the applicable purchase price discount on sales to CF thereunder.
In addition, the company entered into an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction” or "FPA") with Vellar Opportunity Fund SPV LLC – Series 7 (“Vellar”) and ACM ARRT G LLC (“ACM”), which was terminated on October 31, 2023 (“Vellar”, together with ACM, the “Seller”) (see note 17).
As part of the Business Combination Agreement, the Company has also issued different derivatives (see note 15).
| d. |
The Company and its subsidiaries are engaged in the development and marketing of integrated circuit products for specific applications, antennas and terminals used for satellite communications. The Company has developed a new generation of integrated silicon chips for modems and antennas based on its own proprietary technology and provides end-to-end solutions for the satellite communications industry, including terminals, payload subsystems and hubs. The Company develops its advanced chips (Application Specific Integrated Circuit chips (ASICs) and Radio Frequency Integrated Circuit chips (RFICs)) based on technology designed to meet a variety of applications and services, such as broadband aviation, IOT, mobility and maritime, and operating on GEO, LEO and MEO satellites. The Company’s technology includes electronically steered antenna arrays, forming and design of digital beams, beam hopping, on-board processing payload chips and software-defined radio (SDR) modem chips. The affiliated company "Jet Talk" is engaged in the development and marketing of a unique antenna for IFC passenger aircraft and computers that receive broadband video transmissions from satellites.
|
| e. |
The Company operates primarily through five wholly owned subsidiaries: Satixfy Israel LTD, Satixfy UK Limited, Satixfy Space Systems UK (hereinafter: “SSS) (which was sold in October 2023 to MDA- See note 3), Satixfy Bulgaria Eood and SatixFy US LLC (collectively together with Company, the "Group"), all of which have been consolidated in these consolidated financial statements.
|
|
Name
|
Holding percentage as of December 31,
|
Held By
|
Country of incorporation
|
||||||||
|
2023
|
2022
|
||||||||||
|
Satixfy Israel LTD.
|
100
|
%
|
100
|
%
|
Satixfy Communications LTD.
|
Israel
|
|||||
|
Satixfy UK
|
100
|
%
|
100
|
%
|
Satixfy Communications LTD.
|
England and Wales
|
|||||
|
Satixfy Space Systems UK (See Note 3)
|
0
|
%
|
100
|
%
|
Satixfy Communications LTD.
|
England and Wales
|
|||||
|
Satixfy Bulgaria
|
100
|
%
|
100
|
%
|
Satixfy UK
|
Bulgaria
|
|||||
|
Satixfy US LLC
|
100
|
%
|
100
|
%
|
Satixfy Communications LTD.
|
USA
|
|||||
|
Endurance Acquisition Corporation
|
100
|
%
|
100
|
%
|
Satixfy Communications LTD.
|
Cayman Islands
|
|||||
F - 13
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 1 - GENERAL (CONT.):
In addition, the Company's holds 51% of the shares of the following entity (see also Note 7):
|
Name
|
Holding percentage
as of December 31, |
Held By |
Country of incorporation
|
||||||||
|
2023
|
2022
|
||||||||||
|
Jet talk Limited (“Jet-Talk”)
|
51
|
%
|
51
|
%
|
Satixfy UK
|
UK
|
|||||
| f. |
Russia- Ukraine war:
|
The Russia-Ukraine war poses indirect but unpredictable risks of disruption to the Company’s business mostly associated with its current and prospective customers which have experienced delays in deploying their satellites. Additionally, the Russia-Ukraine conflict has an adverse impact on the supply of certain commodities used in the fabrication of silicon chips (such as neon gas), of which Ukraine and Russia were significant producers. The Company's ability to mitigate the potential adverse impacts is limited, as the impacts on it are largely indirect. The effects of sanctions implemented by certain governments in response to the conflict may also adversely affect the Company’s industry, including chip supply chains, to the extent that they lead to higher energy and manufacturing costs, lower economic growth, or deferrals of investment in satellite communications technology.
As of the date of approval of this report, the Company's management has not identified any difficulties in the Company's liquidity due to the Russia-Ukraine war or a material impact on the availability of financing sources.
| g. |
Israel - Hamas War:
|
We are incorporated under the laws of the State of Israel, and our principal offices are located in Israel. Accordingly, political, economic, and geo-political instability in Israel may affect our business. Any armed conflicts, political instability, terrorism, cyberattacks or any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could affect adversely our operations. Ongoing and revived hostilities in the Middle East or other Israeli political or economic factors, could harm our operations and solution development and cause any future sales to decrease.
F - 14
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 1 - GENERAL (CONT.):
| g. |
Israel - Hamas War (Cont.):
|
|
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. The intensity and duration of Israel’s current war is difficult to predict, as are such war’s implications on our business and operations. While none/some of our supply chains have been impacted since the war broke out on October 7, 2023, the ongoing war may create supply and demand irregularities in Israel’s economy in general or lead to macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on us and our ability to effectively conduct our operations. Moreover, we cannot predict how this war will ultimately affect Israel’s economy in general, which may involve a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative”).
In connection with the Israeli security cabinet’s declaration of war against Hamas and possible or currently occurring hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. Five of our employees, none of whom are members of management, have been called to active military duty since October 7, 2023.
Some of these employees have since returned, but there can be no assurance that they will not be called to military service again. In addition, we rely on service providers located in Israel and our employees or employees of such service providers may be called for service in the current or future wars or other armed conflicts with Hamas and such persons may be absent from their positions for a period of time. As of March 28, 2024, any impact as a result of the number of absences of our personnel and personnel at our service providers or counterparties located in Israel has been manageable. However, military service call ups that result in absences of personnel from our service providers or contractual counterparties in Israel may disrupt our operations and absences for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations.
F - 15
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 1 - GENERAL (CONT.):
| g. |
Israel -Hamas War (Cont.):
|
|
Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in southern Lebanon. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank or the Houthis in Yemen, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include terror and missile attacks. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies used in the preparation of the financial statements, on a consistent basis, are:
| A. |
Basis of preparation:
|
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and Interpretations (collectively “IFRS”) . The financial statements have been prepared under the historical cost convention except for certain financial liabilities which are measured at fair value untit conversion. The Company has elected to present the consolidated statements of comprehensive loss using the function of expense method.
| B. |
Basis of consolidation:
|
Subsidiaries:
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
In addition, the financial statements of the subsidiaries were prepared using a consistent accounting policy with the Company regarding similar transactions and events in similar circumstances.
Investments in affiliated companies and joint ventures:
When the Company has the ability to influence the business operation of another entity, but the influence does not constitute control, then the Company has a significant influence which will be presented as an affiliate company and accounted for based on the equity method. Potential voting rights which can be exercised on an immediate basis also taking into account as part of the above influence.
F - 17
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| B. |
Basis of consolidation (cont.):
|
Investments in affiliated companies and joint ventures (cont.):
The holding in an affiliate company is presented based on the equity method unless the investment is held for sale. The financial statements of the affiliated company have been prepared using the same accounting policy of the Company. Any goodwill arising from the affiliated company purchase is part of the investment and is not amortized unless there is objective evidence for impairment.
If the Company's share in the losses of an affiliated company or joint venture is equal to or exceeds its rights in the affiliated company or in the joint venture, the Company ceases to recognize its share in additional losses. Once the Company's rights have been reduced to zero, the Company recognizes additional losses only to the extent that it has incurred legal or implied liabilities or to the extent that payments have been made for the affiliated company or for the joint venture. The Company recognizes the gains that arise thereafter only when the Company's share in the profits equals the share in unrecognized losses.
The Company performs an impairment test (see Note 2.T below) for a net investment in an affiliated company or in a joint venture as a whole when there is objective evidence of impairment of the investment. An impairment loss is allocated to an investment as a whole.
The Company ceases to use the equity method as of the date on which an investment ceases to be an affiliated company or joint venture. Any investment remaining in the former affiliate or former joint venture is measured at fair value. The difference between the fair value of the remaining investment and any consideration from the realization of part of the investment and the book value of the investment at the time the use of the equity method is discontinued is recognized in profit or loss. Amounts previously recognized in other comprehensive income with respect to the same investment are treated in the same manner that would have been required if the invested entity had itself realized the related assets or related liabilities.
Transactions eliminated on consolidation:
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in these investments. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
| C. |
Use of critical estimates and assumptions in the preparation of the financial statements:
|
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. By their nature, these estimates are subject to measurement uncertainty and are reviewed periodically and adjustments, if necessary, are made in the year which they are identified. Actual results could differ from those estimates.
The following is a description of assumptions about the future and other factors for uncertainty in estimates at the end of the reporting period, which results in a significant risk that will result in material correlation to book values of assets and liabilities during the next reporting period:
Useful life of fixed assets and intangible assets – Useful life is based on management’s estimates of the period in which the assets will generate income, which are reviewed periodically for the purpose of examining the adequacy of these estimates. Changes in management’s estimates may lead to material changes in depreciation expense recognized in profit or loss.
Fair value of financial instruments – The fair value of financial instruments that are not quoted in an active market is measured in accordance with model-based valuation techniques. These techniques are significantly influenced by assumptions that serve as a basis for calculation, such as capitalization rates and estimates of future cash flows.
Inventory - The net realizable value of the inventory is reviewed at the end of each reporting period. Factors that may affect selling prices include the existing market demand for the company's inventory, the activity of competitors in the market, superior technology in the market, the prices of raw materials and the bankruptcy of customers and suppliers.
F - 19
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| C. |
Use of estimates and assumptions in the preparation of the financial statements (Cont.):
|
Estimates of Receipts or Payments of Financial Instruments - If the Company updates the estimates of receipts or payments of financial instruments, it adjusts the value in the books of the financial instrument to reflect the actual cash flows and the updated estimate of the cash flows.
Contracts with customers - Measuring the progress of performance commitments that exist over time the company estimates the total cost of completing each project based on estimates of material costs, labor costs, subcontractor performance and more.
| D. |
Foreign currency:
|
The consolidated financial statements are prepared in U.S. Dollars (which is the functional and reporting currency of the Company). Transactions and balances in foreign currencies are converted into US Dollars in accordance with the principles set forth by International Accounting Standard (IAS) 21 "The Effects of Changes in Foreign Exchange Rates". Accordingly, transactions and balances have been converted as follows:
| • |
Monetary assets and liabilities – at the rate of exchange applicable at the consolidated statements of financial position date.
|
| • |
Exchange gains and losses from the aforementioned conversion are recognized in the statement of comprehensive loss.
|
| • |
Expense items – at exchange rates applicable as of the date of recognition of those items.
|
|
| • |
Non-monetary items are converted at the rate of exchange used to convert the related consolidated statements of financial position items (i.e., converted at the time of the transaction).
|
Foreign operations:
On consolidation, the results of foreign operations are translated into US Dollars at exchange rates ruling when the transactions took place. All assets and liabilities of foreign operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date.
F - 20
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| D. |
Foreign currency (Cont.):
|
Exchange rate differences arising on translating the opening net assets at opening rate and the results of foreign operations at actual rate of exchange are recognized in other comprehensive income and accumulated in the foreign exchange reserve. Exchange differences recognized in profit or loss in the Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the foreign operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognized in the foreign exchange reserve relating to that operation up to the date of disposal are classified to profit or loss as part of the profit or loss on disposal.
| E. |
Cash and cash equivalents:
|
Cash equivalents are considered by the Company to be highly liquid investments, including, inter alia, short-term deposits with banks where the maturity of which does not exceed three months at the time of deposit and which are not restricted.
Overdrafts, which are due on demand and form an integral part of the Company's cash management, were included as a component of cash and cash equivalents for the purposes of presenting the statement of cash flows.
| F. |
Linkage:
|
Assets and liabilities linked to the consumer price index were included according to the appropriate index for each asset or liability.
CPI-linked loans are measured at reduced cost when the balance at the end of the reporting period is CPI-linked.
| G. |
Provisions:
|
Provisions are recognized when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result, and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.
F - 21
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| G. |
Provisions (Cont.):
|
The effect of the time value is material, the amount of the provision is measured according to the present value of the projected expenses that will be required to settle the obligation.
The reduction of a provision is recognized in profit or loss as the reduction of the appropriate consequential item when the Company actually bears it or at the date of its termination, whichever is later.
| H. |
Research and development costs:
|
Expenditure on research activities is recognized in profit or loss as incurred. Expenditure incurred on development activities including the Company’s development is capitalized where the expenditure will lead to new or substantially improved products and only if all the following can be demonstrated:
| • |
the product is technically and commercially feasible;
|
| • |
the Company intends to complete the product so that it will be available for use or sale;
|
| • |
the Company has the ability to use the product or sell it;
|
| • |
the Company has the technical, financial and other resources to complete the development and to use or sell the product;
|
| • |
the Company can demonstrate the probability that the product will generate future economic benefits; and.
|
| • |
the Company is able to measure the expenditure attributable to the product during the development.
|
Recognition of costs in the carrying amount of an intangible asset, ceases, when the asset is in the condition necessary for it to be capable of operating in the manner intended by management. Capitalized development costs are amortized on a straight-line basis over their estimated useful lives once the development is completed and the assets are in use.
Subsequent expenditure on capitalized intangible assets is capitalized only where such expenditure clearly increases the economic benefits to be derived from the asset to which it relates. All other expenditure, including that incurred in order to maintain an intangible assets current level of performance, is expensed as incurred. The Company did not meet the requirements for capitalization of research and development expenses during the periods covered by this report.
| I. |
Leases:
|
The Company applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases:
| • |
Applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
|
| • |
Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application and do not contain a purchase option.
|
| • |
Applied the practical expedient provided by the standard to recognize right-of-use assets equal to the lease liability upon initial application.
|
Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases. The Company adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (January 1, 2019), without restatement of comparative figures.
On initial application of IFRS 16, the Company recognized right-of-use assets and lease liabilities in relation to leases of office facilities and motor vehicles, which had previously been classified as operating leases. The lease liabilities were measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate as at January 1, 2019. The Company’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 4.5%. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
Right-of-use assets:
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets comprises the amount of the initial measurement of the lease liability; lease payments made at or before the commencement date less any lease incentives received; and initial direct costs incurred.
F - 23
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| I. |
Leases (Cont.):
|
The recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities:
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option that is reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
Lease term:
The term of a lease is determined as the non-cancellable period for which a lessee has the right to use an underlying asset, together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
| J. |
Share-based payment:
|
The Company has recognized share-based payment transactions, inter alia, for the purchase of goods or services. These transactions include transactions with employees and non-employee parties that will be settled in the Company's equity instruments, such as shares or stock options, or that will be settled in cash based on the price or value of the Company's equity instruments, and transactions that allow the Company to choose between cash in cash and disposal in the company's equity instruments.
F - 24
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| J. |
Share-based payment (Cont.):
|
In the case of share-based payment transactions for employees disposed of in equity instruments, the value of the benefit is measured at the time of grant with respect to the fair value of the equity instruments granted.
With respect to share-based payment transactions for non-employee parties settled in equity instruments, the value of the transaction is measured with respect to the fair value of the goods and/ or services received. If the Company is unable to reliably measure the fair value of the goods or services received, their fair value is measured with respect to the fair value of the equity instruments granted.
In the case of share-based payment transactions that are settled in cash, the value of the benefit is presented as a liability, which is measured at fair value at the end of each reporting period and at the date of settlement.
The benefit value of share-based payment transactions is recognized in profit or loss, unless the expense is included in the cost of an asset, against a capital fund over the vesting period based on the best estimate obtainable of the number of equity instruments expected to mature.
When the Company received services in exchange for a payment granted based on the Company's equity instruments, it is a share-based payment transaction that is settled on equity instruments, so that an expense is recognized in profit or loss.
When changes are made to a share-based payment plan, the Company recognizes the effects of changes that increase the total fair value of the plan during the remaining vesting period.
| K. |
Transactions with related parties:
|
An asset transferred to the Company by its related parties is presented in the Company's financial statements at its fair value at the date of the transfer. Any difference between the amount of consideration determined for the property and its fair value was recognized in equity.
An asset transferred from the Company to its related parties is deducted from the Company's financial statements at its fair value at the date of the transfer. The difference between the fair value of the property and the book value at the date of transfer is recognized in profit or loss and the difference between the amount of consideration determined for the property at the time of transfer and its fair value is recognized in equity.
When the Company's liability to a third party, in whole or in part, is taken by a related party, the liability is deducted from the Company's financial statements at fair value at the date of settlement when the difference between the book value of the liability and the fair value at the date of disposal is recognized in profit or loss. The obligation at the time of settlement and the amount of consideration is determined by a capital seller.
| L. |
Loss per share:
|
Loss per share is calculated by dividing the net loss attributed to the Company's shareholders by the number of weighted ordinary shares that exist during the period. The basic loss per share includes only shares that actually exist during the period. Potential ordinary shares (convertible securities such as convertible bonds, warrants and employee stock options) are included only in the calculation of diluted earnings per share to the extent that their effect dilutes loss per share by converting them to decreases earnings per share or increases losses per share.
In addition, potential ordinary shares converted during the period are included in the diluted earnings per share only up to the date of conversion, and from that date are included in the basic loss per share.
| M. |
IIA grants:
|
A grant from the “Israel Innovation Authority” (or “IIA”) received for research and development activities, for which the Company undertook making royalties’ payments to the government contingent on making future sales resulting from such grant financing, was treated as a loan that could be forgiven and recognized as a reimbursement of related research expenses or development costs.
The grant was recognized as a liability in the financial statements. Unless there is reasonable assurance that the Company will meet the conditions for the forgiveness of the loan, then it has been recognized as a government grant. When the liability to the government does not bear market interest, the liability was recognized at its fair value in accordance with the market interest rate at the time the grant was received. The difference between the consideration received and the liability recognized in the statement of financial position at the time of receiving the grant was treated as a government grant and recognized as a reimbursement of research expenses or as a reduction of development costs capitalized as the case maybe. Repayment of the liability to the government is reviewed every reporting period, with changes in the liability resulting from a change in the expected royalties recognized in profit or loss.
| N. |
Credit costs:
|
The Company recognized credit costs as an expense in the period of formation, except in cases where they can be directly attributed to the acquisition, construction or production of eligible assets, and in such cases these costs were capitalized as part of the cost of those assets. The Company capitalized credit costs when exits were formed in respect of the property, credit costs were formed, and the activities required to prepare the property for its intended use or sale were carried out. The Company stops capitalizing credit costs when substantially all the activities required to prepare the eligible asset for its intended use or sale have been completed. During prolonged periods in which the active development of a qualifying asset has stopped, the Company delayed the capitalization of credit costs.
| O. |
Capital instrument:
|
Any contract that classifies a residual right in a company's assets after deducting all its liabilities is classified as an equity instrument. Costs directly related to the issuance of an equity instrument are presented in equity less the issue.
Rights, options, or warrants offered in proportion to all existing owners of the same type of shares for the purchase of a fixed number of shares for a fixed amount in any currency have been classified as an equity instrument.
| P. |
Warrants:
|
Equity Warrants: Receipts in respect of warrants for the purchase of shares of the company/ subsidiary, which give the holder the right to purchase a fixed number of equity instrument (e.g., ordinary shares) in exchange for a fixed amount of cash, are classified as equity.
Financial liability: Receipts in respect of warrants for the purchase of shares of the Company, which give the holder the right to purchase a fixed number of ordinary shares in exchange for a variable amount, including when the exercise of the warrants is linked to any index or foreign currency, are classified as liabilities (See also Note 15).
| Q. |
Fair value measurement:
|
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
1. In the principal market for the asset or liability, or
2. In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The Company measures the following balances according to Fair value: financial lability warrants.
Classification of fair value hierarchy
The financial instruments presented in the statement of financial position at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value. The classification of an item into the below levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur:
|
Level 1
|
-
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
Level 2
|
-
|
Inputs other than quoted prices included within Level 1 that are observable either directly or indirectly.
|
|
Level 3
|
-
|
Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).
|
| R. |
Financial instruments:
|
Financial assets:
The Company classifies its financial assets into the following categories, based on the business model for managing the financial asset and its contractual cash flow characteristics. The Company's accounting policy for the relevant category is as follows:
Amortized cost: These assets arise principally from the services rendered to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest.
They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment. Impairment provisions for trade receivables are recognized based.
On the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables.
For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognized within general and administrative expenses in the consolidated statements of comprehensive income. On assessment that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
For this purpose, the Company relied on historical data that includes debt settlement, failure rate of lost debt to each company in the group in the period of the last 5 years up to the date of measurement. The Company updates the impairment provision at the end of each reporting period, and the change in the provision as it exists is recognized as a gain or loss from an impairment loss or loss.
At the end of each reporting period the Company assesses whether an asset has been impaired due to credit risk (i.e. if an event has occurred that has a detrimental effect on the future cash flows of the estimated asset). Evidence that a property is defective includes for example a significant financial difficulty of the debtor.
F - 29
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| R. |
Financial instruments (Cont.):
|
The Company writes off the value in the gross books of a financial asset, in whole or in part, when the Company has no reasonable expectation of the return of the asset, for example when the debtor enters into a foreclosure or bankruptcy proceeding.
Fair value: All other financial assets, including debt instruments when first recognized at fair value through profit or loss to eliminate or significantly reduce inconsistency in measurement or recognition, were first measured at fair value, and changes in fair value after initial recognition were recognized in profit or loss. Transaction costs that were directly attributed to these assets were recognized in profit or loss at the time they were incurred.
Reclassification of measurement groups after initial recognition is not possible unless the Company changes its business model for managing financial assets.
Financial liabilities:
The Company's accounting policy for its financial liabilities is as follows:
| • |
Fair value: This category comprises convertible securities and warrants which are carried in the consolidated statement of financial position at fair value with changes in fair value recognized in the consolidated statement of comprehensive loss.
|
| • |
Amortized cost: other financial liabilities, including bank borrowings, loans from bank, trade payables, loan from major shareholder, leases and financial liability from government grants, are initially recognized at fair value less any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortized cost using the effective interest method, which ensures that any interest expense over the period is at a constant interest rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs, as well as any interest or coupon payable while the liability is outstanding.
|
F - 30
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| R. |
Financial instruments (Cont.):
|
De-recognition:
| ● |
Fair value: This category comprises convertible securities and warrants which are carried in the consolidated statement of financial position at fair value with changes in fair value recognized in the consolidated statement of comprehensive income.
|
| ● |
Financial Liabilities - the Company derecognizes financial liability when its contractual obligations are discharged or cancelled or expire.
|
Impairment of financial assets:
The Company assesses at the end of each reporting period whether there is any objective evidence of impairment of a financial asset as follows. Financial assets carried at amortized cost: there is objective evidence of impairment of other accounts receivable if one or more events have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments.
Write-off policy:
The Company writes off its financial assets if any of the following occur:
| 1. |
Inability to locate the debtor.
|
| 2. |
Discharge of the debt in a bankruptcy.
|
| 3. |
It is determined that the efforts to collect the debt are no longer cost effective given the size of receivable.
|
| S. |
Issue of a unit of financial instruments:
|
The issue of a unit of financial instruments like a financial liability (e.g., a loan) and free-standing derivative (e.g. warrants) involves the allocation of the proceeds received (before issue expenses) to the instruments issued in the unit based on the following order: financial derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs are allocated to each component pro rata to the amounts determined for each component in the unit.
| T. |
Impairment of non-financial assets:
|
Other intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. A cash-generating unit is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets.
| U. |
Assets and liabilities arising from engagements with customers:
|
| • |
Customers -
|
The Company presents an unconditional right to receive consideration as debtors in respect of contracts (customers). The right to compensation is not conditional if only a lapse of time is required until the due date, even if it may be subject to repayment in the future. Upon first recognition of customers, any difference between the measurement of customers in accordance with IFRS 9 and the corresponding amount of recognized revenue will be presented as an expense. The Company treats debtors in respect of contracts as financial assets.
| • |
Assets in respect of contracts –
|
The Company presents a right to receive consideration for goods or services transferred to the customer as an asset in respect of a contract, when this right is conditional on a factor other than the passage of time. The Company handles the impairment of an asset in respect of a contract on the same basis as a financial asset at a reduced cost.
| • |
Liabilities in respect of contracts –
|
The Company presents an obligation to transfer goods or services to the customer, for which the company has received consideration from the customer (or unconditional consideration that has matured), as an obligation in respect of a contract (advances from customers).
| V. |
Inventories:
|
Inventories are recognized at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The Company measures cost of raw materials on a First In First Out ("FIFO") basis and finished goods according to costs based on direct costs of materials and labor.
| W. |
Property, plant and equipment:
|
Items of property, plant and equipment are initially recognized at cost. Cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. Depreciation is computed by the straight-line method, based on the estimated useful lives of the assets, as follows:
|
%
|
||||
|
Leasehold Improvement
|
25-33
|
(*) | ||
|
Machinery and Equipment
|
7-14
|
|||
|
Computers
|
33.3
|
|||
|
Furniture
|
15
|
|||
(*) In case that the duration of the lease contract is less than the lease improvement, the depreciation is being made over the contract’s period.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The assets’ residual values, depreciation rates, and depreciation methods are reviewed, and adjusted if appropriate, at the end of reporting period year. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.
| X. |
Employee benefits:
|
The Group has several employee benefit plans:
| 1. |
Short-term employee benefits: Short-term employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.
|
| 2. |
Post-employment benefits: The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans. In Israel, the Group funds its employee’s contribution plans pursuant to Section 14 to the Severance Pay Law since 2004 under which the Group pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. There are no post-employment benefits in the UK.
|
| Y. |
Revenue recognition:
|
Revenue is recognized based on the five-step model outlined in IFRS 15, Revenue from Contracts with Customers. IFRS 15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance with the said core principle by implementing a five-step model framework:
| 1. |
Identify the contracts with a customer.
|
| 2. |
Identify the performance obligations in the contract.
|
| 3. |
Determine the transaction price.
|
| 4. |
Allocate the transaction price to the performance obligations in the contract.
|
| 5. |
Recognize revenue when the entity satisfies a performance obligation.
|
The Company's revenue consists mostly of revenue from the sale of chip development services and the sale of modems for satellite communications and related products.
F - 34
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Y. |
Revenue recognition (cont.):
|
The Company recognizes revenue from chip development services, at the time the service is rendered to the customer and measures the revenue in an amount that represents the consideration that the Company expects to be entitled to for the service.
The Company recognizes revenue from the sale of satellite communications modems and related products when control is transferred to its customers (i.e., once the products have been physically delivered at the agreed location, the Company no longer has a physical holding, and usually has a present right to receive payment and does not retain any significant risks from the products). In most of the Company's product sales, control is transferred when the products are shipped.
The Company presents revenues from products and revenues from development and pre-production services in separate line items on its consolidated statement of comprehensive loss.
The Company evaluates the products and services committed in each contract in order to determine whether the contract includes a commitment/ or performance obligation. The Company treats goods or services as a separate performance obligation if they can be distinguished and the commitment to deliver the same goods or services is identifiable separately from other commitments in the contract. One of the Company's contracts includes a commitment to license the Company's intellectual property together with ancillary specialized services that are generally indistinguishable from each other because they are interdependent and closely related.
The Company determines the transaction price for each contract based on the consideration that the Company expects to be entitled to for the products or services provided subject to the contract. Sales tax, value added tax and other taxes which are levied by the Company from income-generating activities are not included in the Company’s revenues. For contracts where part of the price may vary, the Company estimates a variable consideration in the most reasonable amount, which is included in the transaction price if and only when it is unlikely that there will be a significant cancellation of the recognized cumulative revenue. When the transaction price includes non-cash consideration, the Company has measured its fair value at the time of the engagement, with subsequent changes in the fair value that are not due to the form of consideration being treated in accordance with the guidelines regarding variable consideration. The Company has chosen, as a practical relief, not to adjust the amount of consideration promised to the effects of a significant financing component in contracts when the period between execution by the Company and payment by the customer is one year or less. When the Company receives an upfront payment for a multi-period supply agreement (see Master Purchase Agreement on Note 3), the Company adjusts the transaction price in the contract for the time value of money in order to reflect the financing provided by customer.
F - 35
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Y. |
Revenue recognition (Cont.):
|
Ancillary items that are not material to the contract are recognized as an expense.
When a contract includes a license to use the Company's intellectual property, together with other goods or services, the Company assesses the nature of the combined performance obligation to determine whether it is met over time or at a point in time.
When the commitment to the customer is to provide a right of access to the Company's intellectual property, the Company recognizes revenue over time. The Company measures progress towards the fulfillment of the Company's performance obligations in methods based on outputs such as a performance survey completed as of any given date.
The Company presents a contract liability (deferred income) when cash payments are received or are due for payment before the Company's performance subject to the contract, including amounts that are repayable. A right to consideration is presented as and asset only when it is not conditional (i.e., when only a lapse of time is required before the due date of the consideration arrives). When the Company delivers goods or services before the customer pays any consideration or before payment’s due date, the Company records it as a contractual asset, which is presented as part of other receivables.
AA. Reverse Merger:
SatixFy determined that it was the accounting acquirer based on evaluation of the following facts and circumstances:
| • |
SatixFy’s existing shareholders have the greatest voting interest in the combined entity.
|
| • |
SatixFy’s directors represent the majority of the board of directors of the combined company following the consummation of the Business Combination.
|
| • |
SatixFy’s senior management were the senior management of the combined company following the consummation of the Business Combination.
|
| • |
SatixFy is the larger entity based on historical operating activity and its employee base.
|
The Business Combination, which is not within the scope of IFRS 3 since Endurance does not meet the definition of a business in accordance with IFRS 3, was accounted for within the scope of IFRS 2. Any excess of fair value of SatixFy Ordinary Shares issued over the fair value of Endurance’s identifiable net assets acquired represented compensation for the service of a stock exchange listing for its shares and was expensed as incurred.
According to the International Financial Reporting Interpretations Committee’s (“IFRIC”) final agenda decision from October 2022, an accounting policy that results in allocating all the warrants issued to the acquisition of the stock exchange listing service solely to avoid the warrants being classified as financial liabilities applying IAS 32 would not give rise to a relevant and reliable accounting policy, it was suggested that an entity could allocate the shares and warrants to the acquisition of cash and other financial assets and the stock exchange listing service on the basis of the relative fair values of the instruments issued. Under this allocation method:
| • |
Warrants and Price Adjustments Shares ("PAS") in the scope of IFRS 2 will be classified as equity, as they are considered equity-settled share-based payment.
|
| • |
Warrants and price adjustment shares in the scope of IAS 32 will be classified as financial liabilities, as they fail the fixed-for-fixed requirement.
|
AB. Changes in accounting policies:
New standards, interpretations and amendments adopted from January 1, 2023
The following amendments are effective for the period beginning January 1, 2023:
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements);
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2. The amendments aim to make accounting policy disclosures more informative by replacing the requirement to disclose ‘significant accounting policies’ with ‘material accounting policy information’. The amendments also provide guidance under what circumstance, the accounting policy information is likely to be considered material and therefore requiring disclosure.
These amendments have no effect on the measurement or presentation of any items in the consolidated financial statements of the Company but affect the disclosure of accounting policies of the Company.
The amendments to IAS 8, which added the definition of accounting estimates, clarify that the effects of a change in an input or measurement technique are changes in accounting estimates, unless resulting from the correction of prior period errors. These amendments clarify how entities make the distinction between changes in accounting estimates, changes in accounting policy and prior period errors. These amendments had no effect on the consolidated financial statements of the Company.
New standards, interpretations and amendments not yet effective:
The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning January 1, 2024:
| • |
IFRS 16 Leases (Amendment – Liability in a Sale and Leaseback)
|
| • |
IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current)
|
F - 38
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
BB. Changes in accounting policies (Cont.):
| • |
Non-current Liabilities with Covenants (Amendments to IAS 1 Presentation of Financial Statements); and
|
| • |
Supplier Finance Arrangements (Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures).
|
The following amendments are effective for the period beginning January 1, 2025:
| • |
Lack of Exchangeability (Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates).
|
The Company is currently assessing the impact of these new accounting standards and amendments.
The Company does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Company.
The areas requiring the use of estimates and critical judgments that may potentially have a significant impact on the Group’s earnings and financial position are: capitalization and amortization of development costs and the useful life of property and equipment and share based payment
NOTE 3 - MDA AGREEMET:
In August 2023, the Company announced a $60 million transaction with MDA LTD. (“MDA”) (TSX: MDA), a leading provider of advanced technology and services to the rapidly expanding global space industry (the “MDA Agreement”). The MDA Agreement establishes cooperation between the Company and MDA to utilize the Company’s digital payload chip-based technology to advanced digital satellite payloads. The Company has decided to focus its space business on being a technology provider to satellite payload design companies offering its unique digital multi beam forming and beam-hopping on-board-processing radiation hardening chipsets.
The MDA Agreement is a combination of a $40 million share purchase agreement selling the Company’s holdings in SatixFy Space Systems LTD, one of our UK based subsidiaries, to MDA as well as an additional $20 million in advanced payments under new commercial agreements which includes the previous $10 million advanced payment made in June 2023 to be applied to future orders of space grade chips. SatixFy Space Systems was the Company’s satellite payload subsidiary expert in the development of digital satellite payloads systems and subsystems, including digital beam forming antennas and on-board processing digital payloads. In October 2023, the Company announced the completion of the MDA Agreement.
F - 39
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 3 - MDA AGREEMENT (CONT.):
In connection with the closing, the Company and/ or certain of its affiliates, entered into certain agreements with MDA and/ or certain of its affiliates as contemplated by the MDA Agreement and described including but not limited to a Non-Compete Agreement, Master Purchase Agreement, Investor Rights Agreement, License Agreement and Escrow Service Agreements.
The $40 million consideration as part of the share purchase agreement is comprised of $37 million Promissory Notes, converted from Inter-Company balance due to the Company's subsidiaries and $3 million to be paid to the Company in consideration for the Shares of SatixFy Space Systems LTD, of which, $1 million was paid at closing while the remaining $2 million will be to be received after eighteen month from closing upon satisfaction of the provided reps and warranties by the Company (“Hold- Back”).
The Promissory Notes are settled as follows: $17 million were paid at closing and the remaining $20 million are to be paid over seven monthly instalments of $2.85 million each.
As part of the MDA agreements, SatixFy UK Limited and MDA entered into a Master Purchase Agreement (the “Master Purchase Agreement”) at the closing, providing for the terms of orders of the Company’s space grade chips, including certain prepayment, exclusivity and preferred pricing terms in respect of such chips for MDA.
The Master Purchase Agreement is a continuation of a Pricing and Pre-Purchase Agreement entered into on January 27, 2022 between the Company and MDA (“the Pre-Purchase Agreement”), under which MDA has already paid $10 million as was amended in June and September 2023 according to which MDA paid an additional $15 million and intends to pay the remaining $5 million during 2024 (“Pre-Purchase Amount”).
F - 40
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 3 - MDA AGREEMET (CONT.):
Under the Master Purchase Agreement, in the event that MDA determines that it no longer requires the Company's product, or that it does not purchase product having an aggregate purchase price equal to the Pre-Purchase Amount by the date that is 48 months from the date that the Pre-Purchase Agreement was originally executed by the Parties, or that MDA terminates the agreement – the Company will pay MDA any positive difference between the Pre-Purchase Amount and the aggregate purchase price of the products purchased and accepted by MDA, together with 12% interest per annum, applied from the date of execution of the original pre-purchase agreement. As the Company does not have an unconditional right to avoid delivering cash to MDA, the Pre-Purchase Amount was accounted for as a financial liability and accumulated interest.
NOTE 4 - CONTRACT ASSETS:
|
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Related parties (See Note 14)
|
-
|
$ |
1,679
|
|||||
|
Other trade receivables
|
4,091
|
3,356
|
||||||
|
|
$ |
4,091
|
$ |
5,035
|
||||
|
December 31, 2023
|
December 31, 2022
|
|||||||
|
Balance at the beginning of the year
|
5,035
|
6,015
|
||||||
|
Revenue recognition in the period, net
|
643
|
(426
|
)
|
|||||
|
Provision
|
(1,876
|
)
|
-
|
|||||
|
Currency translation adjustments
|
289
|
(554
|
)
|
|||||
|
Balance at the End of the year
|
$
|
4,091
|
$
|
5,035
|
||||
NOTE 5 - INVENTORY:
Inventories are stated at the lower of cost or market, computed using the FIFO method.
Following is a breakdown of the Company’s inventory:
|
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Raw materials
|
$ |
1,397
|
$ |
817
|
||||
|
Finished goods inventory
|
78
|
14
|
||||||
|
|
$ |
1,475
|
$ |
831
|
||||
NOTE 6 - LEASE LIABILITIES AND RIGHT OF USE ASSETS, NET:
The Company has lease agreements that include leases of buildings and vehicles that are used for the purpose of carrying out the Company's ongoing activities.
The lease agreements of the buildings are for a period of up to 5 years. While the lease agreements of the vehicles are up to 3 years.
The Company leases the offices of its corporate headquarters located in Rehovot, Israel. The lease for this office expires in May 2028. The Company also leases an office in the UK in Farnborough. The office in the UK serves as a research and development and operations centers. The lease agreement for the office of Farnborough expires in October 2026. The Company also leases an office in Sofia Bulgaria, where it employs its antenna development team. The lease agreement for the office in Bulgaria included two agreements which will expire in May 2024. The Company also leases an office in Pennsylvania USA that serve as a research and development center. The lease agreement for the office in Pennsylvania expires in March 2025.
NOTE 6 - LEASE LIABILITIES AND RIGHT OF USE ASSETS (CONT.):
a. Extension and cancellation options:
The Company has lease agreements that include extension options. These options give the Company flexibility in managing the lease transactions and adjustment to the Company's business needs.
The Company exercises significant discretion in examining whether it is reasonably certain that the extension options will be exercised.
The Company included as part of the lease period the exercise of the extension options existing in the agreements, for assets in which the Company expects to exercise the option.
There are no extension options in vehicle lease agreements.
The Company also has certain leases of office facilities with lease terms of 12 months or less. The Company applies the exemption to the recognition of 'short-term leases' to these leases.
| b. |
The following is a list of the carried values of the lease assets recognized and the transactions during the period:
|
|
Buildings
|
Cars
|
Total
|
||||||||||
|
Cost
|
||||||||||||
|
January 1, 2023
|
4,918
|
155
|
5,073
|
|||||||||
|
Additions
|
662
|
103
|
765
|
|||||||||
|
Disposals- Sale of SSS
|
(1,741
|
)
|
(74
|
)
|
(1,815
|
)
|
||||||
|
December 31, 2023
|
3,839
|
184
|
4,023
|
|||||||||
|
Accumulated Depreciation
|
||||||||||||
|
January 1, 2023
|
(2,256
|
)
|
(23
|
)
|
(2,279
|
)
|
||||||
|
Additions
|
(916
|
)
|
(83
|
)
|
(999
|
)
|
||||||
|
Disposals- Sale of SSS
|
1,454
|
36
|
1,490
|
|||||||||
|
December 31, 2023
|
(1,718
|
)
|
(70
|
)
|
(1,788
|
)
|
||||||
|
Net Book value December 31, 2023
|
2,121
|
114
|
2,235
|
|||||||||
NOTE 6 - LEASE LIABILITIES AND RIGHT OF USE ASSETS (CONT.):
|
Buildings
|
Cars
|
Total
|
||||||||||
|
Cost
|
||||||||||||
|
January 1, 2022
|
5,294
|
82
|
5,376
|
|||||||||
|
Additions
|
434
|
156
|
590
|
|||||||||
|
Disposals
|
(810
|
)
|
(83
|
)
|
(893
|
)
|
||||||
|
December 31, 2022
|
4,918
|
155
|
5,073
|
|||||||||
|
Accumulated Depreciation
|
||||||||||||
|
January 1, 2022
|
(2,155
|
)
|
(74
|
)
|
(2,229
|
)
|
||||||
|
Additions
|
(911
|
)
|
(32
|
)
|
(943
|
)
|
||||||
|
Disposals
|
810
|
83
|
893
|
|||||||||
|
December 31, 2022
|
(2,256
|
)
|
(23
|
)
|
(2,279
|
)
|
||||||
|
Net Book value December 31, 2022
|
2,662
|
132
|
2,794
|
|||||||||
| c. |
Details regarding lease transactions:
|
|
For the year ended
|
||||||||
|
December 31, 2023
|
December 31, 2022
|
|||||||
|
Interest expenses in respect of lease liabilities
|
337
|
393
|
||||||
|
Lease principal payments during the year
|
927
|
1,029
|
||||||
NOTE 7 - INVESTMENT IN JET-TALK:
In March 2018 Satixfy UK Limited (the "UK subsidiary") signed a Joint Venture agreement with ST Electronics (Satcom & Sensor Systems) Pte LTD ("STE") according to which STE invested $20 million in the joint venture while the UK subsidiary had committed to provide to Jet Talk Limited (“Jet Talk”) with future development services of a an electronically steerable Panel Antenna Array (“PAA”) and supporting modem, exclusive marketing rights for the commercial aviation market, technical skills, staff expertise, R&D facilities and exclusive, royalty-free, world-wide, perpetual, non-transferable, irrevocable license to use and commercially exploit the Company's intellectual property for the purposes of development, production, sales and marketing of satellite antenna systems.
F - 43
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 7 - INVESTMENT IN JET-TALK (CONT.):
As part of the Company’s commitment to the future development services to Jet Talk, the Company signed two development agreements to provide an electronically steerable Panel Antenna Array (“PAA”) and supporting modem for a total consideration of $13 million to be provided during 2018 through 2023.
Accordingly, the joint venture company, Jet Talk, was incorporated in England and Wale and is 51% held by the UK subsidiary and 49% held by STE. Jet Talk developed the industry’s first Aero In Flight Connectivity (IFC) solution, delivering simultaneous high bit rate Internet and TV channels over current satellites.
Although the Company holds the majority of voting rights (51%), STE in fact participates in significant financial and operational decisions of Jet Talk made during the ordinary course of business including appointing a CEO, directing R&D activities, directing marketing activities while utilizing its East Asia business connections and its control over the Company’s financing activity. In view of the analysis of the relevant activities of the investee and the examination of the Company's ability to direct these operations, the Company concluded that it has no influence over all of the investee’s most relevant operations and hence the Company has no control over the investee. Consequently, the investment in Jet Talk is accounted for in accordance with the equity method and assessed under IFRS 28, Investments in Associates and Joint ventures. Condensed financial information of Jet-Talk:
|
|
December 31, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||||
|
Net loss Company share
|
442
|
705
|
3,722
|
|||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
226
|
360
|
1,898
|
|||||||||
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment consist of the following as of December 31, 2023, and 2022:
|
Computers
|
Leasehold improvements
|
Furniture
|
Machinery and Equipment
|
Total
|
||||||||||||||||
|
Cost
|
||||||||||||||||||||
|
January 1, 2023
|
1,092
|
600
|
347
|
1,043
|
3,082
|
|||||||||||||||
|
Additions
|
113
|
52
|
5
|
65
|
235
|
|||||||||||||||
|
Disposal -SSS sale
|
(13
|
)
|
(119
|
)
|
-
|
(53
|
)
|
(185
|
)
|
|||||||||||
|
December 31, 2023
|
1,192
|
533
|
352
|
1,055
|
3,132
|
|||||||||||||||
|
Accumulated Depreciation
|
||||||||||||||||||||
|
January 1, 2023
|
(832
|
)
|
(262
|
)
|
(162
|
)
|
(183
|
)
|
(1,439
|
)
|
||||||||||
|
Additions
|
(156
|
)
|
(62
|
)
|
(29
|
)
|
(61
|
)
|
(308
|
)
|
||||||||||
|
Disposal -SSS sale
|
1
|
34
|
-
|
-
|
35
|
|||||||||||||||
|
December 31, 2023
|
(987
|
)
|
(290
|
)
|
(191
|
)
|
(244
|
)
|
(1,712
|
)
|
||||||||||
|
Net Book value December 31,2023
|
205
|
243
|
161
|
811
|
1,420
|
|||||||||||||||
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET (CONT.):
|
Computers
|
Leasehold improvements
|
Furniture
|
Machinery and Equipment
|
Total
|
||||||||||||||||
|
Cost
|
||||||||||||||||||||
|
January 1, 2022
|
956
|
477
|
345
|
414
|
2,192
|
|||||||||||||||
|
Additions
|
136
|
123
|
2
|
629
|
890
|
|||||||||||||||
|
December 31, 2022
|
1,092
|
600
|
347
|
1,043
|
3,082
|
|||||||||||||||
|
Accumulated Depreciation
|
||||||||||||||||||||
|
January 1, 2022
|
(714
|
)
|
(212
|
)
|
(138
|
)
|
(156
|
)
|
(1,220
|
)
|
||||||||||
|
Additions
|
(118
|
)
|
(50
|
)
|
(24
|
)
|
(27
|
)
|
(219
|
)
|
||||||||||
|
December 31, 2022
|
(832
|
)
|
(262
|
)
|
(162
|
)
|
(183
|
)
|
(1,439
|
)
|
||||||||||
|
Net Book value December 31,2022
|
260
|
338
|
185
|
860
|
1,643
|
|||||||||||||||
Depreciation expenses totaled $308 and $219 the year ended December 31, 2023 and December 31, 2022, respectively.
F - 46
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 9 - CONTRACT LIABILITIES:
Contract liabilities fully reflect the remaining amount to be recognized for each cut-off period in respect of certain contracts with customers.
|
December 31, 2023
|
December 31, 2022
|
|||||||
|
Balance at the beginning of the year
|
622
|
475
|
||||||
|
Expenses recognition in the period, net
|
819
|
540
|
||||||
|
Currency translation adjustments
|
279
|
(393
|
)
|
|||||
|
Balance at the end of the year
|
$
|
1,720
|
$
|
622
|
||||
NOTE 10 - OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
|
|
December 31, 2023
|
December 31, 2022
|
||||||
|
Liabilities in respect of employees, wages and institutions in respect of wages
|
2,584
|
3,023
|
||||||
|
Accrued expenses
|
6,849
|
4,607
|
||||||
|
Liabilities to government institutions due to grants received
|
136
|
161
|
||||||
|
Tax accrual
|
122
|
-
|
||||||
|
Government departments and agencies
|
13
|
52
|
||||||
|
9,704
|
7,843
|
|||||||
NOTE 11 - LIABILITIES FOR EMPLOYEE SEVERANCE PAY, NET:
On May 7, 2006, an extension order in Israel came into force in the manufacturing industry (hereinafter - the “Extension Order”) which applied Section 14 of the Severance Pay Law. Thus, Israeli employees who began their work after May 7, 2006, will receive comprehensive pension insurance. The section also grants employees the right to receive, both in the event of dismissal and in the event of resignation, the component of severance pay, which has been accrued in the funds the Company has created for him/ her. On the other hand, the arrangement in Section 14 of the Israeli Severance Pay Law releases the company from the obligation to complement fund contributions if the amount accumulated in the funds does not reflect the amount of severance pay due to the employee under law. The Company applies Section 14 of the Severance Pay Law to its Israeli employees.
F - 47
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET:
| a. |
In July 2016, the Israeli subsidiary entered into an agreement for a bank loan (hereinafter - the “First Loan") in the amount of $2,000 for a period of 36 months, at an annual interest rate of LIBOR + 6.9%. In addition, the Company issued warrant for a period of 6 years.
The warrant was exercised in July 2022 on a cashless basis to 57,659 shares.
The loan was fully repaid in February 2022 using proceeds that were received from a new loan that the Company received from, Francisco Partners, See also Note 12(e).
|
| b. |
In May 2019 and in March 2020, the Israeli subsidiary took out a loan including two portions from a bank in the amounts of $5 million and $3 million, respectively, for a period of 36 months (hereinafter: the “Second Loan"). The Company issued warrants for a period of 10 years.
Following the closing of the SPAC transaction on October 27, 2022 the Bank decided to receive the Alternative Payment instead of exercising the warrants and following that decision, the $800 Alternative Payment was paid to the Bank in February 2023.
The loan was repaid in full in February 2022 using proceeds that were received from a new loan that the Company received from Francisco Partners. See also Note 12(e). As part of the SPAC merger (see Note 1) the bank has exercised the warrants into cash. |
|
c.
|
In April 2020 and in September 2020 , following the COVID-19 pandemic, the Israeli subsidiary took out a five-year state-guaranteed bank loans on preferential terms bearing a yearly interest of premium plus 1.5. The loans were fully repaid in February 2022 using proceeds that were received from a new loan that the Company received from Francisco Partners. See also Note 12(e).
|
| d. |
In April 2021 and in August 2021 the Company signed a $5 million and $2.3 million loan agreement, respectively, with a financial institution named Liquidity Capital II L.P. (“Liquidity”), with a repayment period of thirty (30) months.
For that purpose, the Company granted to Liquidity a warrant for a period of eight (8) years,
Following the closing of the SPAC transaction on October 27, 2022 the warrants were exercised on a cashless basis into 6,520 ordinary shares.
The loan was fully repaid in February 2022 using proceeds that were received from a new loan that the Company received from Francisco Partners. See also Note 12(e).
|
| e. |
On February 1, 2022, the Company signed a $55 million loan agreement ("the 2022 Credit Agreement" with affiliates of a financial institution named Francisco Partners L.P. ("FP"), with a repayment period of between 2.5 to 4 years depending on the Company completing a qualified public offering within 12 months of closing. The loan beard a yearly interest of 9.5% on the outstanding balance. In the event the Company will not complete a qualified public offering during the first year, then the interest rate shall increase by 100 basis points per year beginning in year 2 up to a maximum rate of 11.5% total. As long as the Company was private, there was an ability to Pay In Kind (“PIK”) 100% of interest in year 1, 75% of interest in year 2, and 50% of interest thereafter. Once the Company completes a qualified public offering, then 100% of interest is paid in cash thereafter. Until October 27, 2022 the PIK interest of $3,988 was added to the loan balance.
|
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET (CONT.):
As consideration for the loan, the Company also issued to the lenders under the credit agreement 808,907 of its ordinary shares. Following the receipt of the proceeds from the loan, The Company repaid all of its existing borrowings in an amount of $19.1 million, including a $5.3 million loan from a shareholder and $13.8 million of loans from financial institutions. The Company attributed $50,073 (net of transaction costs) to the loan, based on its fair value. The remaining proceeds of $1.978 million (net of transaction costs) were attributed to the ordinary shares issued. The fair value of the loan was estimated using a stochastic model incorporating the fair value of the Company and its ability to merge with a SPAC or enter into additional financing transactions given the timely value of the Company under different scenarios (a level 3 fair value measurement). The inputs used in determining the fair value are: a risk-free interest rate of 1.16%, expected volatility of approximately 50%.
On April 23, 2023, the Company and FP. entered into a waiver and amendment to the 2022 Credit Agreement whereby FP, (i) provided a waiver of certain defaults or potential defaults, (ii) permitted the Company to make its interest payments for 2023 on a pay-in-kind basis if its cash balance is less than $12.5 million, (iii) temporarily reduced the Company’s minimum cash requirement from $10 million to $8 million and $7 million for the months of April and May 2023, respectively, and thereafter to $10 million, in each case plus an amount sufficient to cover its and its subsidiaries’ accounts payable that are past 60 days due, (iv) increased the interest rate of the loan to Secured Overnight Financing Rate (“SOFR”) + 9.50% (with a 3% SOFR floor) and (v) provided for certain additional reporting obligations by the Company.
In June 2023 the Company and FP entered into an amendment which provides, among other things, upon the Company’s receipt of a $10 million prepayment as part of the MDA Agreement (see Note 3), interest payable thereunder will be added to the principal of the term loan on a “pay in kind” basis through June 28, 2024,the payments made in connection with the pre-purchase agreement will not be applied to repay debt under the 2022 Credit Agreement, a limited waiver, subject to certain conditions, of the $10 million minimum cash requirement liquidity covenant therein, and following closing of the MDA Agreement, a reduced interest rate and the issuance by the Company of 5,100,000 ordinary shares, of which 1,000,000 Price Adjustment Shares were issued in a private placement within 30 days, which shares will be subject to substantially the same terms governing the Price Adjustment Shares (See Note 15(g)) previously issued in connection with the business combination with Endurance. On October 31, 2023, the Company entered into another Amendment to the 2022 Credit Agreement, whereby the lenders provided their consent to the MDA agreements and to wave financial covenants which were associated with the 2022 Credit Agreement. This amendment was accounted for as an extinguishment of the loan. In reaching this conclusion, the Company considered the impact of consecutive modifications of the loan throughout 2023; also, the Company noted that the issuance of ordinary shares in terms similar to the ones governing the Price Adjustment Shares gives rise to a substantial qualitative change in the 2022 Credit Agreement. As such, the Company accounted for the modified loan as a derecognition of the existing loan and recognition of the modified loan at fair value with any differences as finance expenses. The finance incomes resulted from the modification amounted to $2.5 million.
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET (CONT.):
|
|
For the year ended
December 31
|
|||||||
|
|
2023
|
2022
|
||||||
|
Long term loans from financial institutions
|
59,792
|
54,926
|
||||||
Financial covenants:
According to the amended terms of the 2022 Credit Agreement, the Company’s cash must be held in deposit accounts subject to a security interest in favor of the Agent for the benefit of the lenders. In addition, the Company must meet affirmative and negative covenants customary for a financing of this type, including but not limited to, limitations on indebtedness, restricted payments, dividends, transactions with affiliates, investments, lines, acquisitions, and asset sales. The FP loan is guaranteed on a senior secured basis by the Company and its subsidiaries, subject to customary exceptions.
The Company complies with the covenants.
F - 50
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 13 - LOAN FROM SHAREHOLDER:
In March 2020 Satixfy UK signed a $5 million loan agreement with an existing shareholder of the company, with a repayment period of thirty-six (36) months.
As part of the loan agreement, the Company granted the shareholder warrants, the warrants were classified to equity and were first booked at fair value.
The Company took out a $5 million "key personnel" insurance policy as a guarantee for the loan on the Company's former CEO, Mr. Yoel Gat. After the passing of Mr. Yoel Gat (see note 14) in April 2022, the Company received $5.4 million as compensation under this life insurance policy.
The loan was fully repaid in February 2022 using proceeds that were received from a new loan that the Company received from Francisco Partners see also Note12 (e).
NOTE 14 - RELATED PARTIES:
The Company’s policy is to enter into transactions with related parties on terms that are on the whole no less favorable to it than those that would be available from unaffiliated parties at arm’s length. Based on its experience in the business sectors in which it operates and the terms of the transactions with unaffiliated third parties, the Company believes that all of the transactions described below met this policy standard at the time they occurred.
On May 4, 2017, the Company's Board of Directors approved the execution of a management and consulting services agreements with Ilan Gat Engineers LTD. (hereinafter: "Ilan Gat"), an entity which was controlled by Mr. Yoel Gat, the former CEO and a significant shareholder in the Company. According to this agreement, as of 2018, the management fees were paid to Ilan Gat, which consists of a monthly management fee of $50 and reimbursement of other monthly expenses for the services of Yoel Gat and Simona Gat, the former President and former COO of the Company. In November 2019 the Company’s board of directors approved a retroactive update of the monthly management fee starting in January 2019 to the amount of $100 and reimbursement of other monthly expenses.
In January 2021 the Company’s board of directors approved an update of the monthly management fee starting in January 2021 to the amount of $110 and reimbursement of other monthly expenses and a yearly bonus of 0.67% for Yoel Gat’s services and 0.67% for Simona Gat’s services out of the incremental year to year growth in Equity in the consolidated financial statements of the Company effective 2021 and Annual Bonus of 0.67% for Yoel Gat’s services and 0.67% for Simona Gat’s services out of the incremental year to year growth in revenues of the Company each year effective 2021. On December 24th, 2020 and on January 4th, 2021 the board and the shareholders, respectively approved the grant of 1.3 million options to Yoel Gat and 1.3 million options to Ms. Simona Gat to purchase ordinary shares of the Company according to the 2020 Share Award Plan.
On April 8, 2022 Mr. Yoel Gat, the Company’s former CEO, Chairman and founder passed away due to fatal illness and his entire holdings were inherited by Ms. Simona Gat.
On April 30, 2023, SatixFy Communications LTD. and Ilan Gat LTD. entered into a Separation Agreement pursuant to which Ms. Gat resigned from all positions at the Company and its subsidiaries, including serving as the President of the Company. Effective May 1, 2023, she instead began serving as an observer on the board of directors of the Company. The Company agreed to pay Ms. Gat compensation consisting of (i) five monthly payments in the gross sum of $55,000 plus VAT from May through September 2023; (ii) one monthly payment of $110,000 plus VAT in October 2023, totaling in the aggregate, $385,000 plus VAT; and (iii) other customary terms and conditions.
The Company and RaySat LTD. (“RaySat”), an entity organized under the laws of the State of Israel and controlled by Mr. Yoav Leibovitch, our Chairman of the board of directors and one of our significant shareholders, are parties to a Services Agreement effective as of January 1, 2013 (as amended as of June 27, 2017, September 6, 2020, January 4, 2021 and February 24, 2022). Pursuant to this agreement, Mr. Yoav Leibovitch provides financial management, business development, presidential and management services to the Company and its subsidiaries.
On September 15, 2022, the Company’s board approved an amendment, which was approved by The Company’s shareholders on September 28, 2022, to Mr. Leibovitch’s compensation under this agreement to (i) grant Mr. Leibovitch a $2 million success bonus payable upon the Closing of the Business Combination, (ii) increase Mr. Leibovitch’s monthly fee for services provided to $100,000 per month, effective as of October 1, 2022, increase Mr. Leibovitch’s yearly bonus such that the yearly bonus shall be 2% of the incremental year-over-year growth of the shareholders’ equity in the consolidated financial statements of the Company and increase Mr. Leibovitch’s annual bonus such that the annual bonus shall be 2% of the incremental year- over-year growth of revenues in the consolidated financial statements of the Company.
On October 19, 2023, upon recommendation of the Company’s board and compensation committee, our shareholders approved a one-time special success bonus of up to $1 million in the aggregate to our Executive Chairman of the Board, Mr. Yoav Leibovitch, in connection with the MDA Agreement (See note 3). The MDA bonus is to be paid in nine installments. Each of the special success bonus amounts relates to proceeds we have received and expect to receive with respect to the MDA Agreement during the relevant month. The MDA bonus shall not be paid if for any reason whatsoever, whether due to default by the Company or otherwise, we do not actually receive the relevant proceeds with respect to the MDA Agreement.
On February 6, 2018 and on February 14, 2020 the Company signed three development agreements with Jet Talk to provide an electronically steerable Panel Antenna Array (“PAA”) and supporting modem for a total consideration of $32,000 to be provided during 2018 through 2023. (See also Note 7).
Transactions with related parties:
|
For the year ended December 31, 2023:
|
|
Name |
Position |
Scope of
Position
|
Holding
Rate
|
Salary, bonuses and
related expenses
|
Expected
Bonus
|
Share-
Based Payments
|
||||||
|
Nir Barkan
|
Acting CEO
|
Full Time
|
0.25%
|
303
|
160
|
129
|
||||||
|
Ilan Gat (Simona Gat)
|
Former president and COO
|
Full Time
|
19.47%
|
605
|
-
|
39
|
||||||
|
Raysat (Yoav Leibovitch)
|
Chairman
|
Full Time
|
26.35%
|
1,750
|
450
|
39
|
For the year ended December 31, 2022:
|
Name |
Position
|
Scope of
Position
|
Holding
Rate
|
Salary, bonuses and
related expenses
|
Expected
Bonus
|
Share-
Based Payments
|
||||||
|
Ilan Gat (Simona Gat)
|
President and COO
|
Full Time
|
19.8%
|
660
|
40
|
39
|
||||||
|
Raysat (Yoav Leibovitch)
|
Chairman
|
Full Time
|
27.04%
|
5,065
|
60
|
39
|
Outstanding balances with related parties:
|
|
For the year ended
December 31
|
|||||||
|
|
2023
|
2022
|
||||||
|
Assets
|
||||||||
|
Contract assets (Jet Talk)
|
-
|
1,679
|
||||||
|
Jet Talk
|
75
|
157
|
||||||
|
Total Assets
|
75
|
1,836
|
||||||
|
Labilities
|
||||||||
|
Raysat Israel LTD.
|
550
|
160
|
||||||
|
Ilan Gat Engineers LTD
|
-
|
95
|
||||||
|
Former CEO
|
-
|
100
|
||||||
|
Current CEO
|
190
|
-
|
||||||
|
Jet Talk
|
-
|
53
|
||||||
|
Total Liabilities
|
740
|
408
|
||||||
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT:
The Company’s activities expose it to various financial risks, such as market risk, including currency risk, credit risk and liquidity risk. The Company’s overall risk management plan focuses on minimizing possible adverse effects on the Company’s financial performance.
Risk management is performed by the CFO, which includes examining certain exposures to risks, such as exchange rate risk, credit risk. In 2023 and 2022, the Company did not use derivative financial instruments to hedge its operations.
Credit risk:
Credit risk is created when the failure of parties against the fulfillment of their obligations may reduce the amount of future cash flows from the financial assets held by the Company to the balance sheet date. The Company’s main financial assets are cash and cash equivalents, customers and other receivables, and represent the Company’s maximum exposure to credit risks in connection with its financial assets. The Company holds cash in large financial institutions.
The par value of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the time of reporting was:
|
December 31, 2023
|
December 31, 2022
|
|||||||
|
Cash
|
13,979
|
11,934
|
||||||
|
Trade accounts receivables
|
2,260
|
1,295
|
||||||
|
Other accounts receivable
|
2,053
|
2,166
|
||||||
|
Promissory Notes
|
20,000
|
-
|
||||||
|
Other long term receivables
|
2,000
|
-
|
||||||
|
FPA
|
-
|
40,852
|
||||||
|
Contract assets
|
4,091
|
5,035
|
||||||
|
Total
|
44,383
|
61,282
|
||||||
| a. |
Currency risk:
|
Currency risk is the risk that the value of financial instruments will be affected by changes in exchange rates. Currency risk is created when future commercial transactions and recognized assets and liabilities are denominated in a currency other than the Company’s operating currency. The company is exposed to foreign currency risk resulting from exposures to various currencies, mainly in relation to the New Israeli Shekel ("NIS”), the Euro (“EUR”) and the British Pound (“GBP”).
The Company's policy is not to execute currency hedging transactions.
F - 55
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| a. |
Currency risk (cont.):
|
As of the balance sheet date, the Group’s exposure to currencies as follows:
|
December 31, 2023
|
||||||||||||||||||||
|
NIS
|
EUR
|
GBP
|
USD
|
Total
|
||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
1,120
|
1,372
|
235
|
11,252
|
13,979
|
|||||||||||||||
|
Trade receivables
|
-
|
55
|
-
|
2,205
|
2,260
|
|||||||||||||||
|
Prepaid expenses and other account receivables
|
2,036
|
17
|
2,053
|
|||||||||||||||||
|
Promissory Notes
|
-
|
-
|
-
|
20,000
|
20,000
|
|||||||||||||||
|
Other long-term receivables
|
-
|
-
|
-
|
2,000
|
2,000
|
|||||||||||||||
|
Contract Assets
|
-
|
-
|
128
|
3,963
|
4,091
|
|||||||||||||||
|
1,120
|
3,463
|
363
|
39,437
|
44,383
|
||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Current maturities long-term loans
|
- | - | - | - | - | |||||||||||||||
|
Liabilities in respect of leases-ST
|
(469 | ) | - | (144 | ) | (26 | ) | (639 | ) | |||||||||||
|
Advanced payments from MDA against future orders
|
-
|
-
|
-
|
(28,138
|
)
|
(28,138
|
)
|
|||||||||||||
|
Trade payables
|
(479
|
)
|
(368
|
)
|
(284
|
)
|
(247
|
)
|
(1,378
|
)
|
||||||||||
|
Payables and credit balances
|
(896
|
)
|
(618
|
)
|
(415
|
)
|
(5,942
|
)
|
(7,871
|
)
|
||||||||||
|
(1,844
|
)
|
(986
|
)
|
(843
|
)
|
(34,535
|
)
|
(38,026
|
)
|
|||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Liability for IIA Royalties
|
(1,196
|
)
|
-
|
-
|
-
|
(1,196
|
)
|
|||||||||||||
|
Liabilities in respect of leases-LT
|
(1,558 | ) | - | (495 | ) | (14 | ) | (2,067 | ) | |||||||||||
|
Long term loans from banks
|
-
|
-
|
-
|
(59,792
|
)
|
(59,792
|
)
|
|||||||||||||
|
Net balances
|
(3,478
|
)
|
2,477
|
(975
|
)
|
(54,722
|
)
|
(56,698
|
)
|
|||||||||||
F - 56
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| b. |
Sensitivity analysis:
|
|
December 31, 2022
|
||||||||||||||||||||
|
NIS
|
EUR
|
GBP
|
USD
|
Total
|
||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
1,281
|
640
|
607
|
9,406
|
11,934
|
|||||||||||||||
|
Trade receivables
|
-
|
187
|
804
|
304
|
1,295
|
|||||||||||||||
|
Prepaid expenses and other
|
-
|
2,149
|
-
|
17
|
2,166
|
|||||||||||||||
|
Derivatives FPA
|
-
|
-
|
-
|
40,852
|
40,852
|
|||||||||||||||
|
Contract Assets
|
-
|
-
|
3,720
|
1,315
|
5,035
|
|||||||||||||||
|
1,281
|
2,976
|
5,131
|
51,894
|
61,282
|
||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Current maturities long-term loans
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
Liabilities in respect of leases-ST
|
(430
|
)
|
-
|
(591
|
)
|
-
|
(1,021
|
)
|
||||||||||||
|
Trade payables
|
(614
|
)
|
(324
|
)
|
(433
|
)
|
(88
|
)
|
(1,459
|
)
|
||||||||||
|
Payables and credit balances
|
(2,644
|
)
|
(942
|
)
|
(721
|
)
|
(3,322
|
)
|
(7,629
|
)
|
||||||||||
|
(3,688
|
)
|
(1,266
|
)
|
(1,745
|
)
|
(3,410
|
)
|
(10,109
|
)
|
|||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Liability for IIA Royalties
|
(1,107
|
)
|
-
|
-
|
-
|
(1,107
|
)
|
|||||||||||||
|
Liabilities in respect of leases-LT
|
(1,830
|
)
|
-
|
(450
|
)
|
-
|
(2,280
|
)
|
||||||||||||
|
Long term loans from banks
|
-
|
-
|
-
|
(54,926
|
)
|
(54,926
|
)
|
|||||||||||||
|
Net balances
|
(5,344
|
)
|
1,710
|
2,936
|
(6,442
|
)
|
(7,140
|
)
|
||||||||||||
F - 57
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| b. |
Sensitivity analysis (cont.):
|
A 10% strengthening of the dollar against the following currencies would have resulted in an increase (decrease) in the equity and profit and loss in the amounts presented below. This analysis assumes that all other variables, and especially interest rates, remain constant. A 10% weakening of the currency against the relevant currencies will have the same effect in the opposite direction on equity and profit and loss.
|
December 31, 2023
|
December 31, 2022
|
|||||||
|
Linked to NIS
|
(3,478
|
)
|
(5,344
|
)
|
||||
|
10
|
%
|
10
|
%
|
|||||
|
(348
|
)
|
(534
|
)
|
|||||
|
Linked to EUR
|
2,477
|
1,710
|
||||||
|
10
|
%
|
10
|
%
|
|||||
|
248
|
170
|
|||||||
|
Linked to GBP
|
(975
|
)
|
2,936
|
|||||
|
10
|
%
|
10
|
%
|
|||||
|
(97
|
)
|
294
|
||||||
| c. |
Liquidity risks:
|
Liquidity risks arise from the management of the Group’s working capital as well as from the financing expenses and principal repayments of the Group’s debt instruments. Liquidity risk is the risk that the Group will find it difficult to meet obligations related to financial liabilities.
F - 58
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 – FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| c. |
Liquidity risks (cont.):
|
The following is an analysis of the contractual maturities of financial liabilities in accordance with nominal values for settlement.
Based on the earliest time the company will be required to pay:
|
December 31, 2023
|
Within 30 days
|
1-12 Months
|
1-5 Years
|
Total
|
||||||||||||
|
Liabilities in respect of leases-ST
|
172
|
467
|
-
|
639
|
||||||||||||
|
Trade payables
|
258
|
1,120
|
-
|
1,378
|
||||||||||||
|
Promissory Notes
|
-
|
20,000
|
-
|
20,000
|
||||||||||||
|
Other long term receivables
|
-
|
-
|
2,000
|
2,000
|
||||||||||||
|
Payables to related parties
|
-
|
740
|
-
|
740
|
||||||||||||
|
Other Accounts Payable
|
1,581
|
6,290
|
-
|
7,871
|
||||||||||||
|
Long term loans from banks, net
|
-
|
-
|
68,020
|
68,020
|
||||||||||||
|
Liabilities in respect of leases-LT
|
-
|
-
|
2,067
|
2,067
|
||||||||||||
|
Advanced payments from MDA against future orders
|
-
|
-
|
(28,138
|
)
|
(28,138
|
)
|
||||||||||
|
Liability for IIA Royalties
|
-
|
-
|
(1,107
|
)
|
(1,107
|
)
|
||||||||||
|
Derivatives Liabilities
|
-
|
-
|
(114
|
)
|
(114
|
)
|
||||||||||
|
Total
|
2,011
|
28,617
|
42,728
|
73,356
|
||||||||||||
|
December 31, 2022
|
Within 30 days
|
1-12 Months
|
1-5 Years
|
Total
|
||||||||||||
|
Liabilities in respect of leases-ST
|
269
|
752
|
-
|
1,021
|
||||||||||||
|
Trade payables
|
251
|
1,209
|
-
|
1,460
|
||||||||||||
|
Payables to related parties
|
-
|
-
|
-
|
-
|
||||||||||||
|
Other Accounts Payable
|
3,534
|
4,309
|
-
|
7,843
|
||||||||||||
|
Long term loans from banks, net
|
-
|
-
|
77,543
|
77,543
|
||||||||||||
|
Liabilities in respect of leases-LT
|
-
|
-
|
2,280
|
2,280
|
||||||||||||
|
Loan from Shareholder
|
-
|
-
|
-
|
-
|
||||||||||||
|
Derivatives Liabilities
|
-
|
-
|
20,305
|
20,305
|
||||||||||||
|
Total
|
4,054
|
6,270
|
100,128
|
110,452
|
||||||||||||
F - 59
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| d. |
Fair value of financial instruments measured at fair value on a periodic basis:
|
|
Level |
December 31, 2023 |
December 31, 2022 |
||||||||||
|
Financial Liabilities:
|
||||||||||||
|
Warrants
|
3
|
-
|
-
|
|||||||||
|
SPAC Public Warrant
|
1
|
-
|
286
|
|||||||||
|
SPAC Private Warrant
|
2
|
-
|
121
|
|||||||||
|
Advanced payments from MDA against future orders
|
3 | 28,138 |
-
|
|||||||||
|
Price Adjustment shares
|
3
|
114
|
19,898
|
|||||||||
|
Total
|
28,252 |
20,305
|
||||||||||
| e. |
Classification of financial instruments by fair value hierarchy:
|
The financial instruments measured in the balance sheet at fair value are classified, according to groups with similar characteristics, into a fair value ranking as follows, determined in accordance with the data source used to determine the fair value:
Level 1: Quoted prices (without adjustments) in an active market of identical assets and liabilities.
Level 2: Non-quoted prices data included in Level 1 which can be viewed directly or indirectly.
Level 3: Data that are not based on viewable market information (assessment techniques without the use of viewable market data).
As mentioned in Note 12, the warrants granted to the bank and to Liquidity are derivative financial liablities and accordingly measured at each balance date at fair value through profit or loss. All warrants balance as of December 31, 2021 were excersised to shares or cash (see note 11).
|
Warrants
|
||||
|
Balance at January 1, 2022
|
1,392
|
|||
|
Exercise of warrants to shares
|
(397
|
)
|
||
|
Exercise of warrants to cash (adjustment to other accounts payables)
|
(800
|
)
|
||
|
Changes in fair value recognized in finance expenses
|
(195
|
)
|
||
|
Balance at December 31, 2022
|
-
|
|||
|
Exercise of warrants to shares
|
-
|
|||
|
Exercise of warrants to cash (adjustment to other accounts payables)
|
-
|
|||
|
Changes in fair value recognized in finance expenses
|
-
|
|||
|
Balance at December 31, 2023
|
-
|
|||
F - 60
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| f. |
SPAC warrants:
|
As part of the Business Combination Agreement (see note 1) the company has issued new warrants: 7.63 million SPAC Private warrants, 10 million SPAC Public Warrants and 1 miliion Pipe warrants (together with the PAS called "Derivatives").
The Company is required to allocate the Warrants transferred between the identifiable assets received and the listing expense in accordance with IFRIC agenda decision from October 2022. The portion of the Warrants in the scope of IAS 32/ IFRS 9 would be recognized as a liability on initial recognition and re-measured through P&L until settlement.
The total value of the new SPAC warrants was $3,906 (see note 25) and was divided between equity and liability as follow: $3,490 for equity and $416 for liability under derivatives. The value of the warrants derivatives on October 27, 2022 was based on the market price of the closing date of the Business Combination $0.22.
On December 8, 2022, 3.364 million SPAC private warrants were exercised on a cashless basis into 553,692 ordinary shares.
On December 11, 2022, 0.935 million PIPE warrants were exercised into 2 million ordinary shares with in returen to $1.5 million.
|
SPAC Warrants
|
||||
|
Balance at December 31, 2022
|
407
|
|||
|
Issuance of warrant (SPAC transactions)
|
-
|
|||
|
Changes in fair value recognized in finance expenses
|
(407
|
)
|
||
|
Exercise of warrants
|
-
|
|||
|
Balance at December 31, 2023
|
-
|
|||
| g. |
Price Adjustment shares:
|
Immediately following the closing of the SPAC transaction, the Company issued a total of 27,500,000 Price Adjustment Shares ("PAS) with the Company’s founders receiving 27,000,000 Price Adjustment Shares (18,000,000 to Yoav Leibovitch and 9,000,000 to Simona Gat) and the Sponsor receiving 500,000 Price Adjustment Shares. In November 2023, we issued to FP, 1,000,000 Price Adjustment Shares as part of and amendment signed between the parties (See Note 12e).
F - 61
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| g. |
Price Adjustment shares (cont.):
|
The Price Adjustment Shares vest upon three price adjustment achievement dates: (i) one-third of the Price Adjustment Shares will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement (File no. 333-268510) and within the 10-year period following the closing, the volume weighted average price (“VWAP”) of SatixFy Ordinary Shares is greater than or equal to $12.50 for any seven (7) trading days within a period of 30 consecutive trading days, (ii) one-third of the Price Adjustment Shares will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement (File no. 333-268510) and within the 10-year period following the closing, the VWAP of SatixFy Ordinary Shares is greater than or equal to $14.00 for any seven (7) trading days within a period of 30 consecutive trading days and one-third of the Price Adjustment Shares will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement (File no. 333-268510) and within the 10-year period following the closing, the VWAP of SatixFy Ordinary Shares is greater than or equal to $15.50 for any seven (7) trading days within a period of 30 consecutive trading days.
The share price targets shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalization, reclassifications, combinations, exchanges of shares and other similar changes or transactions to the SatixFy Ordinary Shares occurring on or after the Closing. In the event of a SatixFy change in control transaction within ten (10) years following the closing of the Business Combination, all of the unvested Price Adjustment Shares not earlier vested will vest immediately prior to the closing of such change in control. If the Price Adjustment Shares do not vest according to the achievement dates in the Business Combination Agreement, or if a change of control has not occurred after the Closing and prior to the date that is ten (10) years following the Closing Date, then any unvested Price Adjustment Shares shall automatically be forfeited back to SatixFy for no consideration.
The Company allocated the price adjustment shares between the identifiable assets received and the listing expense (see also note 25). Following the logic of the tentative agenda decision, the portion in the scope of IAS 32/ IFRS 9 would be recognized as a liability on initial recognition and re-measured through the Company’s income statement until settlement.
The total value of the Price Adjustment Shares was $212,675 (see note 25) and was divided between equity and liability as follow: $191,132 as equity and $21,543 as liability under derivatives.
F - 62
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 15 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| g. |
Price Adjustment shares (cont.):
|
For the purpose of measuring the price of the Price Adjustment Shares derivatives on the merger date, a binomial model was used. The inputs used in determining the fair value are: a risk-free interest rate of 3.96%, an expected exercise period of 10.337 years and an expected volatility of approximately 50. The PAS price for October 27, 2022 is based on a valuation of an average of $7.73 per share.
|
PAS
|
||||
|
Balance on December 31, 2022
|
19,898
|
|||
|
Changes in fair value recognized in finance expenses
|
(19,784
|
)
|
||
|
Balance on December 31, 2023
|
114
|
|||
For the purpose of measuring the fair value of the PAS derivatives on December 31, 2023 and on December 31, 2022, a binomial model was used. The inputs used in determining the fair value are: a risk-free interest rate of 3.88%, an expected exercise period of 9.063 years and 10.161 years December 31, 2023 and on December 31, 2022, respectivly for and an expected volatility of approximately 50%. The PAS price for December 31, 2022 is based on a valuation of an average of $7.14 per share.
For the purpose of measuring the fair value of the PAS derivatives on December 31, 2023, a binomial model was used. The inputs used in determining the fair value are: Price per share: 0.3631 a risk-free interest rate of 3.88%, an expected exercise period of 9.8712 years and an expected volatility of approximately 50%.
NOTE 16 - OTHER LONG-TERM LIABILITIES:
| a. |
Breakdown of other long-term liabilities:
|
|
|
December 31,
2023
|
December 31,
2022
|
||||||
|
Liability for IIA Royalties (See Note 16(b) below)
|
1,196
|
1,107
|
||||||
|
Alta settlement (See note 19)
|
300
|
-
|
||||||
|
1,496
|
1,107
|
|||||||
| b. |
Liability for royalties payable:
|
The Company received the approval of the IIA for its participation in certain development expenses carried out by the Company, within the framework of determined budgets and time periods.
NOTE 16 - OTHER LONG-TERM LIABILITIES (CONT.):
| b. |
Liability for royalties payable (cont.):
|
|
In accordance with its commitment, the Company is obliged to pay the IIA royalties of 3-4% of sales, constituting the revenues derived from sales of the Company’s revenues based on the financing by the IIA, up to the total amount of the grant actually received, all linked to the exchange rate of the USD and bears an annual interest linked to the LIBOR. Therefore, the total amount of the grants that will be repaid through royalties and will increase until repayments begin.
The difference between the consideration received and the liability recognized at inception (present value) was treated as a government grant according to IAS 20 and recognized as a reimbursement of research expenses or a reduction in capitalized development costs.
|
|
December 31,
2023
|
December 31,
2022
|
||||||
|
|
||||||||
|
At January 1
|
1,107
|
1,368
|
||||||
|
Principal Payments
|
(11
|
)
|
(429
|
)
|
||||
|
Amounts recognized as an offset from research and development expenses
|
(113
|
)
|
(210
|
)
|
||||
|
Revaluation of the liability
|
213
|
378
|
||||||
|
As of December 31
|
1,196
|
1,107
|
||||||
NOTE 17 - FORWARD PURCHASE AGREEMENT:
The company entered into the Forward Purchase Transaction with the Seller. Pursuant to the Forward Purchase Agreement, the Seller thereunder purchased, through a broker in the open market shares and will sell the shares under certain conditions. Vellar will pay directly, out of the funds held in Endurance’s trust account, approximately $86.5 million. Accordingly, there was no net increase in cash as a result of the Forward Purchase Agreement at the time of the Closing of the Business Combination occurred on October 27, 2023. Upon the effective date of the applicable registration statement January 23, 2023, the Seller paid to SatixFy approximately $10.0 million (including $8.4 million with respect to the Subject Shares purchased by the Seller prior to the closing of the Business Combination and $1.6 million with respect to the Additional Shares issued to Vellar following the Closing of the Business Combination).
The difference between the fair value of the shares deemed to be issued to the SPAC holders, including the Seller's and the net financial instruments held by the SPAC (including the fair value of the FPA) are recognized as listing expenses. The financial instrument was measured at fair value initially and subsequently, with changes in fair value recognized in profit or loss.
F - 64
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 17 - FORWARD PURCHASE AGREEMENT (CONT.):
For the purpose of measuring the price of FPA assets a Monte Carlo simulation model was used. The inputs used in determining the fair value are: risk-free rate of 4.30%, volatility of 50% and contractual time of 3 years. The FPA liability value for October 27, 2022 is based on public share price of $8.29.
On October 31, 2023, the Company entered into a termination agreement with the Seller, dated October 31, 2023. Pursuant to the termination agreements, the parties agreed (i) terminating Forward Purchase Agreement, (ii) that Vellar and ACM relinquish their rights to an aggregate of 3,599,444 ordinary shares (which includes all remaining Subject Shares held by ACM and Vellar), which are to be transferred to FP in connection with their consent to the transactions contemplated by the MDA Agreement (See also Note 12(d). Further, the Company agreed to pay Vellar and ACM an aggregate amount of approximately $6.5 million in installments until May 31, 2024, in the case of Vellar, and March 31, 2024, in the case of ACM. The Termination Agreements further provide that if the Company fails to make the required payments to ACM on time (subject to certain conditions as described therein), the total amount payable by us to ACM will increase by $3.7 million (which amount will be payable on the final installment date).
|
At January 1, 2022
|
-
|
|||
|
FPA (SPAC transactions)- Assets
|
42,502
|
|||
|
FPA (SPAC transactions)- Liability
|
(13,306
|
)
|
||
|
FPA (SPAC transactions) net
|
29,196
|
|||
|
Revaluation as of 21.11.2022
|
(36,692
|
)
|
||
|
Issuance of shares in 21.11.2022
|
49,998
|
|||
|
Revaluation as of 31.12.2022
|
(1,650
|
) | ||
| As of December 31, 2022 | 40,852 | |||
|
Cash received |
(10,026 |
) | ||
|
Revaluation as of October 2023
|
(37,408 | ) | ||
|
Termination
|
(6,582
|
) | ||
|
As of December 31, 2023
|
-
|
F - 65
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 18 - EQUITY:
| a. |
Ordinary share:
|
Ordinary share confers upon its holders the rights to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends if declared.
| b. |
SPAC merger:
|
Prior to the SPAC Transaction (see Note 1), in additional to the ordinary shares, the Company held three classes of preferred shares (A, B and C) which beard different rights and preferences and which were issued at early stages of the Company, All Preferred Shares were converted into Ordinary Shares and the company has canceled its par value of the Ordinary Shares. In addition, all shares were split by exchange ratio of 1.046.
| c. |
Share Option Plan:
|
On September 4, 2013, the Company’s board directors adopted for the first time the 2013 Share Incentive Plan pursuant to which the board of directors is authorized to issue share options, restricted share and other awards to officers, directors, employees, consultants and other service providers of the Company’s Israeli subsidiary. Each option can be exercised for one ordinary share with a par value of $0.008 per share. Each option is exercisable over up to 10 years from the grant date. On May 12, 2020 following the Reorganization described in Note 1(a) the board of directors adopted 2020 Share Award Plan replacing the 2013 Share Incentive Plan and all the Israeli employees were re granted according to the 2020 Share Award Plan after receiving an approval from the Israeli Tax Authorities for tax exemption in accordance with the provisions of section 104B (f) of the Income Tax Ordinance.
The Options granted under the 2013 Share Incentive Plan and under 2020 Share Award Plan are subject to Section 102 of the Israeli Tax Ordinance, the minimum period in which the Allocated Options granted to a participant or, upon exercise or vesting thereof the Underlying Shares, are to be held by the Trustee on behalf of the participant, in accordance with Section 102, and pursuant to the Tax Track which the Company selects subject to the provisions of Section 102(g) of the Israeli Tax Ordinance.
In 2022, the Company granted 1,405,568 options to purchase shared of the Company’s employees. The Company didn’t grant options in 2023. In 2023 and 2022, 229,760 and 225,964 options respectively were exercised by employees and converted to shares. As of December 31, 2023 and 2022, 6,214,912 and 7,297,303 options to purchase the Company’s shares were outstanding, respectively, of which 2,669,614 were exercisable as of December 31, 2023.
F - 66
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 18 - EQUITY (CONT.):
| c. |
Share Option Plan (cont.):
|
|
In 2023 the Company granted for the first time 7,808,280 Restricted Stock Units (“RSU”) to employees and subcontractors. The RSUs represent the right to receive Ordinary Shares at a future time and vest over a period of four years with 1 year cliff and thereafter a quarterly vesting over the remaining of 3 years. The RSUs that were granted to the Israeli employees were granted under Section 102 of the Israeli Tax Ordinance. As of December 31, 2023, 5,219,101 RSU are outstanding.
On May 4, 2017 the Company’s board of directors approved EMI share option scheme pursuant to which the board of directors is authorized to issue share options, restricted share and other awards to officers, directors, employees, consultants and other service providers of the Company’s UK subsidiaries. Each option can be exercised for one ordinary stock with a par value of $0.008. Options granted vest in equal tranches over three years from the grant date. Each option is exercisable up to 10 years from the grant date. On May 12, 2020 following the Reorganization described in Note 1(a) the board of directors adopted 2020 EMI Share Option Plan replacing the EMI share option scheme and all the employees in UK were re granted according to the 2020 EMI Share Option Plan.
Under the rules of the scheme, share options only become exercisable upon an exit event. An exit event is defined as the sale or transfer of the whole of the undertaking or assets of the company and its subsidiaries or a successful listing on a recognized share exchange. If the share options remain unexercised after a period of ten years from the date of grant the share options will automatically lapse and cease to be exercisable. In the event that an employee leaves the employment of the company or its group, for whatever reason (including death), all share options are forfeited immediately. All share options granted are non-assignable under the rules of the scheme and any ordinary shares ultimately acquired on the exercise of a share option are subject to certain restrictions as stipulated in the company’s articles of association.
F - 67
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 18 - EQUITY (CONT.):
| c. |
Share Option Plan (cont.):
|
|
The following table summarizes information about share options outstanding and exercisable as of December 31, 2023:
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||
|
Number Outstanding on
December 31, 2023
(in thousands)
|
Weighted Average
Remaining Contractual Life |
Number Exercisable on
December 31, 2023
(in thousands)
|
Exercise Price
|
|||||||||||
|
Years
|
USD
|
|||||||||||||
|
768
|
1.06
|
768
|
0.0001
|
|||||||||||
|
563
|
0.17
|
563
|
0.536
|
|||||||||||
|
260
|
4.46
|
260
|
0.550
|
|||||||||||
|
1,162
|
5.26
|
1,095
|
1.102
|
|||||||||||
|
3,462
|
7.1
|
485
|
2.5
|
|||||||||||
|
6,215
|
3,171
|
|||||||||||||
|
|
2023
|
2022
|
||||||||||||||
|
|
Number of Options
|
Weighted Average Exercise Price
|
Number of Options
|
Weighted Average Exercise Price
|
||||||||||||
|
|
USD |
|
USD |
|
||||||||||||
|
Options outstanding at the beginning of year:
|
7,297
|
1.76
|
7,710
|
1.72
|
||||||||||||
|
Changes during the year:
|
||||||||||||||||
|
Granted
|
-
|
-
|
1,405
|
2.50
|
||||||||||||
|
Exercised
|
38
|
0.68
|
226
|
0.42
|
||||||||||||
|
Forfeited
|
1,044
|
2.38
|
1,592
|
0.22
|
||||||||||||
|
Options outstanding at end of year
|
6,215
|
1.67
|
7,297
|
1.76
|
||||||||||||
|
Options exercisable at year-end
|
3,171
|
0.90
|
3,169
|
0.87
|
||||||||||||
F - 68
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 18 – EQUITY (CONT.):
| c. |
Share Option Plan (cont.):
|
|
The fair value of each option granted is estimated on the date of grant, using the Black-Scholes framework with the following assumptions: dividend yield of 0% for all years; expected volatility:– 40%-60%; risk-free interest rate: 0.1%-2.5%-; and expected life: 2-4 years.
The Company is required to assume a dividend yield as an input in the Black-Scholes model. The dividend yield assumption is based on the Company’s historical experience and expectation of future dividends payouts and may be subject to change in the future.
The RSUs to employees and services providers outstanding as of December 31, 2023 as follows:
|
|
Number of RSUs
|
|||
|
Outstanding at beginning of year
|
-
|
|||
|
Granted
|
7,808,280
|
|||
|
Vested
|
(902,753
|
)
|
||
|
Forfeited
|
(1,686,426
|
)
|
||
|
Unvested as of December 31, 2023
|
5,219,101
|
|||
NOTE 19 – MATERIAL COMMITMENTS:
| a. |
The Company’s UK subsidiaries had signed several agreements with the European Space Agency (hereinafter: “ESA” or “The Agency”) as part of the Agency’s ARTES programs. The objectives of ARTES programs are to ensure the readiness of the industry to respond to commercial opportunities by focusing the activities on technological innovation in equipment, systems, and applications for satellite communication, resulting in products ready for future exploitation within either the commercial or institutional market. Accordingly, the Agency had agreed to participate in the funding of the development of an integrated chip sets for several industries, which includes both hardware and software. The Agency’s participation varies between 50%-75% of the cost, depending on the nature of the engagement.
The grants are recognized in the statement of operations as a reduction of research and development expenses and are recognized when the Company is entitled, on the basis of the accumulation of expenses for which the grants are received.
The Agency does not require any future royalties nor any ownership of the Intellectual Property (“IP”) resulting from the development which is owned by the Company’s UK subsidiaries, however, the agreement do stipulates that the IP will be available to the Agency on a free, worldwide license for its own requirements, The Agency can require the Company to license the IP to certain bodies that are part of specified Agency programs, for the Agency’s own requirements on acceptable commercial terms and can also require the Company to license the IP to any other third party for purposes other than the Agency’s requirements subject to the approval of the Company that those other purposes do not contradict its commercial interests. Grants received from ESA are recognized in the statement of operations as a reduction of the research and development expenses and are recognized when the Company is entitled, on the basis of the accumulation of expenses for which the grants are received.
|
F - 69
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 19 - MATERIAL COMMITMENTS (CONT.):
| b. |
The Israeli Subsidiary also participated in programs that were financed by the Government of Israel for supporting research and development activities. As of December 31, 2022, the Israeli Subsidiary had obtained grants from the IIA to finance its research and development programs in the aggregate of $6,334 thousand, of which $3,289 bear royalties.
In return for financing these programs, the Israeli Subsidiary committed to pay the IIA royalties of 3%-4% of total sales of products from revenues related to these programs. The royalties will be paid up to a maximum amount representing 100% of total grants received and are linked to the U.S. dollar exchange rate with the addition of an annual dollar interest rate. As of December 31, 2022, and December 31, 2020 the Israeli Subsidiary has accumulated liability in respect of royalties to the IIA in the amount of $314 and $916 thousand, respectively, representing 3%- 4% of revenues.
As of December 31, 2023, and December 31, 2022, the Israeli Subsidiary has a contingent liability to IIA in the amount of $1,107 and $1,368, respectively, based on discounted future royalties at an interest rate of 20%, respectively.
|
Legal proceedings:
The Company, SatixFy Limited, and certain shareholders and directors of the Company (the “Defendants”) were served with two lawsuits filed in the district court in Tel Aviv on March 22, 2022, by certain plaintiffs purporting to be stockholders of the Company (the “Plaintiffs”). Based on their prior stakes in Satixfy Limited, a company incorporated in Hong Kong, whose business was assigned to the Company in exchange for the issuance of equivalent holdings in the Company, except for certain shares placed in trust for the benefit of certain service providers, the Plaintiffs claim they are entitled to an aggregate of 2,000,000 Ordinary Shares of the Company and that the said trust mechanism does not pertain to them. The Plaintiffs ask for the amendment of the Company’s shareholders register accordingly, (ii) an order enjoining the defendants from executing any transaction or taking any other action that could adversely and disproportionally affect the Plaintiffs’ rights as shareholders, and (iii) the Defendants to notify the relevant regulatory authorities of the plaintiffs’ claim. The Company issued and placed in trust sufficient shares to provide for the Plaintiffs’ alleged stakes in the Company should the Plaintiffs prevail on the merits.
In May 2022, the court rejected Plaintiffs request for specific injunctive relief while ordering the appointment of a former judge, Mr. Yossi Shapira, as the new trustee to exercise fiduciary authority over such shares. The Plaintiffs claim on the merits remains pending, and statements of defense were filed by the respondents in July 2022. After the preliminary stage of the proceeding, the Plaintiffs are expected to file their evidence during April 2024, followed by the respondents’ evidence. The Company believes that these proceedings will not have a material impact on the Company.
NOTE 19 - MATERIAL COMMITMENTS (CONT.):
Legal proceedings (cont.):
On October 27, 2022, Sensegain Prodigy Cayman Fund SP3 (“Sensegain”) defaulted on its commitment to purchase units it had subscribed for in connection with the PIPE financing pursuant to its Subscription Agreement with SatixFy and Endurance. As a result of the default, out of the $29,100,000 previously committed by subscribers pursuant to the Subscription Agreements, SatixFy received $20 million in proceeds from the PIPE financing. On December 12, 2022, we filed a complaint against Sensegain in the New York Supreme Court, County of New York, seeking specific performance by Sensegain under the Subscription Agreement or, in the alternative, damages in the amount Sensegain owes pursuant to the Subscription Agreement (plus applicable interest and fees). We intend to withdraw this matter due to enforceability limitations.
In June 2023, Alta Partners, LLC (“Alta”) filed a complaint against us in the U.S. District Court for the Southern District of New York claiming unspecified damages for an alleged breach by us of the warrant agreement in relation to certain of its public warrants allegedly held by Alta.
In December 2023, the Company and Alta reached a settlement agreement according to which, the Company shall pay to Alta the sum of $2.3 million as follows: (i) $1 million no later than five (5) business days after the Effective Date; and (ii). $1.3 million in thirteen (13) monthly installments of one hundred thousand ($100,000) each with the first instalment no later than March 1, 2024. Upon reception of the first installment Alta had agreed to dismiss all actions in against the Company.
Covenants:
The FP loan has several Covenants- See note 11.
F - 71
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 19 - MATERIAL COMMITMENTS (CONT.):
Royalty commitments:
The Company receives research and development grants from the IIA. In consideration for the research and development grants received from the IIA, the Company has undertaken to pay royalties as a percentage of revenues from products developed from research and development projects financed. If the Company does not generate sales of products developed with funds provided by the IIA, the Company is not obligated to pay royalties or repay the grants.
Royalties are payable at the rate of 3%-4% from the time of commencement of sales of all of the Company’s products until the cumulative amount of the royalties paid equals 100% of the dollar-linked amounts of the grants received, plus interest at LIBOR.
Until October 25, 2023, the interest was calculated at a rate based on 12-month London Interbank Offered Rate, or LIBOR applicable to US Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest will be calculated at a rate based on 12-month Secured Overnight Financing Rate, the SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest will be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.
NOTE 20 - REVENUES:
The Company splits its revenues from contracts with customers in accordance with contracts for provision of R&D services and products as presented in the statement of comprehensive loss.
The Company is organized as one operating segment.
Main customers:
| 1. |
Transactions with main customers:
|
The company has four main customers: MDA, for which revenues were reported as revenues from provision of development services, a confidential customer, for which revenues were reported as revenues from provision of development services, Telesat, for which revenues were reported as revenues from provision of development services and iDirect, for which revenues were reported as revenues from sale of products.
|
For the year ended December 31,
|
||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||
|
|
USD thousands
|
%
|
USD thousands
|
%
|
USD thousands
|
%
|
||||||||||||||||||
|
Jet Talk
|
-
|
-
|
-
|
-
|
3,116
|
14
|
%
|
|||||||||||||||||
|
Airbus
|
188
|
2
|
%
|
318
|
3
|
%
|
3,256
|
15
|
%
|
|||||||||||||||
|
Telesat
|
4,250
|
40
|
%
|
5,326
|
50
|
%
|
8,400
|
39
|
%
|
|||||||||||||||
|
iDirect
|
2,605
|
24
|
%
|
489
|
5
|
%
|
2,074
|
10
|
%
|
|||||||||||||||
|
Trustcom
|
-
|
0
|
%
|
1,108
|
10
|
%
|
-
|
-
|
||||||||||||||||
|
MDA
|
1,497
|
14
|
%
|
1,907
|
18
|
%
|
-
|
-
|
||||||||||||||||
|
Confidential Customer
|
1,309
|
12
|
%
|
1,162
|
11
|
%
|
-
|
-
|
||||||||||||||||
| 2. |
Geographical areas:
|
The following table splits the Company’s revenues by main geographical areas:
|
US & Canada
|
UK
|
Other
|
Consolidated
|
|||||||||||||||||||||||||||||||||||||||||||||
|
2023
|
2022
|
2021
|
2023
|
2022
|
2021
|
2023
|
2022
|
2021
|
2023
|
2022
|
2021
|
|||||||||||||||||||||||||||||||||||||
|
Revenues
|
8,446
|
9,310
|
13,196
|
732
|
1,070
|
7,325
|
1,552
|
246
|
1,199
|
10,730
|
10,626
|
21,720
|
||||||||||||||||||||||||||||||||||||
NOTE 21 - COST OF SALES AND SERVICES:
|
|
December 31, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||||
|
Salaries and related expenses
|
2,861
|
3,556
|
6,764
|
|||||||||
|
Materials and models
|
2,276
|
707
|
1,516
|
|||||||||
|
Depriciation
|
34
|
21
|
56
|
|||||||||
|
Chip Development tools and Subcontractors
|
767
|
214
|
507
|
|||||||||
|
Total
|
5,938
|
4,498
|
8,843
|
|||||||||
NOTE 22 - RESEARCH AND DEVELOPMENT EXPENSES, NET:
|
For the year ended
|
||||||||||||
|
|
December 31, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||||
|
Salaries and related expenses, including Stock Based Compensation
|
23,450
|
21,923
|
18,810
|
|||||||||
|
Chip pre-production and Development tools
|
9,917
|
7,214
|
12,936
|
|||||||||
|
Government support and grants
|
(4,241
|
)
|
(12,295
|
)
|
(13,802
|
)
|
||||||
|
Total
|
29,126
|
16,842
|
17,944
|
|||||||||
F - 73
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 23 - SELLING AND MARKETING EXPENSES:
|
For the year ended
|
||||||||||||
|
|
December 31, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||||
|
Salaries and related expenses
|
2,866
|
2,335
|
1,752
|
|||||||||
|
Total
|
2,866
|
2,335
|
1,752
|
|||||||||
NOTE 24 - ADMINISTRATIVE AND GENERAL EXPENSES:
|
For the year ended
|
||||||||||||
|
|
December 31, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||||
|
Salaries and related expenses
|
5,925
|
8,175
|
3,233
|
|||||||||
|
Depreciation and overheads
|
93
|
132
|
240
|
|||||||||
|
Expected Credit Loss (a)
|
1,876
|
-
|
-
|
|||||||||
|
Other expenses (b)
|
6,667
|
942
|
262
|
|||||||||
|
Total
|
14,561
|
9,249
|
3,735
|
|||||||||
| (a) |
Write off of a contract asset relating to Jet-Talk contract asset balance, as the Company does not believe it can benefit from the remaining asset due to certain disagreement between the parties, which are under discussion and expected to be resolved in the near future.
|
| (b) |
In 2023 expenses occurred following the Alta settlement of $2.3 million (see Note 19) and new D&O Insurance policy expenses.
|
F - 74
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 25 - LISTING EXPENSES:
Share listing expense is a non-recurring expense incurred in connection with the Business Combination of Satixfy and Endurance, which constituted a share-based transaction pursuant to IFRS 2. The share listing expense is determined as the excess of the fair value of the equity instruments issued by Satixfy over the fair value of the identified net assets contributed by Endurance in the Business Combination.
|
Note
|
October 27, 2022
|
||||||
|
Price Adjustment Shares
|
212,675
|
||||||
|
Issuance of shares
|
149,657
|
||||||
|
Private Warrants
|
15
|
1,681
|
|||||
|
Public Warrants
|
15
|
2,203
|
|||||
|
PIPE Warrants
|
15
|
22
|
|||||
|
Net Liability of Business Combination
|
687
|
||||||
|
Forward Purchase Agreement- Liabilities
|
17
|
13,306
|
|||||
|
380,231
|
|||||||
|
Total Cash
|
(7,813
|
)
|
|||||
|
Forward Purchase Agreement- Assets
|
17
|
(42,502
|
)
|
||||
|
(50,315
|
)
|
||||||
|
Other Listing Expenses
|
3,410
|
||||||
|
Total
|
333,326
|
||||||
The Company’s share listing expenses are a non-recurring nature and only impact the 2022 financial statements as the Company listed on NYSE in 2022.
|
Quantity
|
Price
|
Total Amount
|
||||||||||||||
|
Price Adjustment Shares
|
27,500
|
7.73
|
212,575
|
2
|
||||||||||||
|
Premium- SPAC shares
|
14,800
|
10.11
|
149,628
|
3
|
||||||||||||
|
Warrants
|
18,630
|
0.22
|
4,099
|
1
|
||||||||||||
|
Forward Purchase Agreement- Liabilities
|
1,605
|
8.29
|
13,305
|
1
|
||||||||||||
|
Forward Purchase Agreement- Assets
|
42,502
|
4
|
||||||||||||||
F - 75
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 25 - LISTING EXPENSES (Cont.):
| (1) |
Price based on the public price in the closing date.
|
| (2) |
See note 15.
|
| (3) |
Price based on the market price prior to the SPAC transaction.
|
| (4) |
See note 17.
|
NOTE 26 – TAX EXPENSES:
| A. |
Tax base:
|
UK:
The corporate tax rate in the UK was 19% in the years 2023 and 2022.
The tax payable is based on the taxable profit for the year. The taxable profit is different than the net profit as reported in the profit and loss account since it does not include items of income or expense that are taxable or tax deductible carried forward from other years and does not include items that are not taxable or not tax deductible at all. The Group's current tax liability is calculated according to tax rates that have been acted or that their enactment has actually been completed by the end of the reporting period.
Israel:
The Company's Israeli subsidiaries are subject to the tax laws of the State of Israel, whose overall tax rate was 23% in 2023 and in 2022. The company is entitled to various tax benefits in Israel by virtue of its status as a "preferred enterprise" as defined in the tax regulations. The benefits include, among other things, a reduced tax rate.
In December 2010, an amendment was adopted to the Capital Investment Encouragement Law of 1959, or “the Investment Law". This new legislation came into force on 1 January 2011 and applies to preferred income produced or generated by a preferred enterprise from the date of commencement. Under this legislation, a unified corporate tax rate applies to all income that meets the conditions of certain industrial companies, or preferred enterprises (as defined in the Investment Law), in contrary to the previous law incentives, which were limited to income from approved enterprises and licensed enterprises during their benefit period. According to the legislation, the unified tax rates are as follows: 12% or 6% in development areas.
F - 76
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 26 – TAX EXPENSES (CONT.):
| B. |
Uncertain tax position:
|
The Company did not record any liability in respect of income taxes related to deferred tax benefits at the date of adoption and did not record any liability in respect of deferred tax benefits during 2023 and 2022. Accordingly, the Company has not recorded any interest or penalty for any unrecognized benefit. The Company recorded a tax liability following the MDA Agreement (See note 3).
| C. |
Tax losses:
|
As of December 31, 2023, the Company has a carry-forward loss of approximately $86 million, according to the 2023 tax return, which may be utilized to offset taxable income in the future.
The Company did not create deferred taxes due to the uncertainty in their future utilization.
| D. |
Tax assessments:
|
The Company has not yet received final tax assessments in any of its subsidiaries.
NOTE 27 - LOSS PER SHARE:
Below are the net loss data attributed to capital rights owners. The loss per share is calculated according to the weighted average number of the shares issued in the relevant financial periods, the weighted average number of the ordinary shares issued and the loss for the period as follows:
|
For the year ended December 31
|
||||||||||||
|
2023
|
2022
|
2021
|
||||||||||
|
Calculation of basic earnings per share:
|
||||||||||||
|
Net loss
|
(29,715
|
)
|
(397,789
|
)
|
(17,050
|
)
|
||||||
|
Loss attributed to ordinary shareholders in USD
|
(29,715
|
)
|
(397,789
|
)
|
(17,050
|
)
|
||||||
|
Weighted average number of ordinary shares
|
80,974,653
|
30,030,805
|
18,732,473
|
|||||||||
|
Basic and diluted loss per share attributed in USD
|
(0.37
|
)
|
(13.25
|
)
|
(0.91
|
)
|
||||||
F - 77
