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, 2024
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)
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: 85,672,474 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 ☒ |
Other ☐
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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 ☒
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SatixFy Communications Ltd.
INTRODUCTION
In this Annual Report
on Form 20-F, or this Annual Report, “SatixFy,” “Company,” “we,” “our,” “us,”
and “SATX” refer to SatixFy Communications Ltd. and our consolidated subsidiaries.
We were incorporated
in 2012 as a Hong Kong company. In January 2020, we reorganized and were re-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.
We are a growth company
developing advanced Application-Specific Integrated Circuit, or ASIC, and Radio Frequency Integrated Circuit, or RFIC, chips based on
technology designed to meet the requirements of a variety of satellite communications applications, mainly for Low Earth Orbit, or LEO,
Medium Earth Orbit and geostationary satellite communications systems, Aero or In-Flight-Connectivity, or IFC, systems and certain on
the pause applications. Our chip technology supports electronically steered multibeam antennas, digital beamforming and beam-hopping,
on-board processing for payloads and software defined radio, or SDR, modems – each of which will be critical for providing optimized
access to LEO satellite constellations.
On October 28, 2022,
we became publicly traded after completing a merger with Endurance Acquisition Corp., a special purpose acquisition company, or SPAC,
and listed on the NYSE American under the ticker symbol "SATX".
Our reporting currency
and functional currency is the U.S. dollar. Unless otherwise expressly stated or the context otherwise requires, references in this Annual
Report to “NIS” are to New Israeli Shekels, references to “dollars” or “$” mean U.S. dollars, references
to “GBP” or “£” are to British pounds sterling and references to “Euro”, “EUR” and
“€” are to currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the
Treaty Establishing the European Community, as amended.
This Annual Report
includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry
publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally
state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness
of the information. Although we believe that these sources are reliable, we have not independently verified the information contained
in such publications.
We report under International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB. None of the financial
statements were prepared in accordance with generally accepted accounting principles in the United States.
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 financial statements for the year ended December 31, 2024, contained an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable
terms or at all; |
| • |
Unpredictability in the satellite communications industry; |
| • |
The regulatory environment and changes in laws, regulations or policies in the jurisdictions in which we operate;
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| • |
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 our
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 our products into their product offerings;
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Our dependence on winning selection processes and gaining market acceptance of our technologies and products;
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Even if we succeed in winning selection processes for our technologies and products, we may not generate timely
or sufficient net sales or margins from those wins; |
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Our ability to execute our strategies, manage growth and maintain our corporate culture as we grow;
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Sustained yield problems or other delays in the manufacturing process of products; |
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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 our products and services;
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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;
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Exchange rate fluctuations; |
| • |
Changes in interest rates or rates of inflation; |
| • |
Legal, regulatory and other proceedings; |
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Changes in applicable laws or regulations, or the application thereof on us; |
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The results of future financing efforts; |
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Our ability to maintain compliance with the continued listing standards of the NYSE American; |
| • |
Obtaining requisite approvals related to the Merger, the timing for obtaining such approvals
and consummation of the Merger; |
| • |
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 multi-front war Israel
is facing and geopolitical, trade, tariff and regulatory uncertainties; |
| • |
The other matters referred to in “Item 3.D. Risk Factors,”
“Item 4. Information on the Company,” and “Item
5. Operating and Financial Review and Prospects”, as well as in this Annual Report generally. |
We caution
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. We have 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 we 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 our 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 our management, which in turn are based upon our 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 we
are not aware of any misstatements regarding the industry data presented herein, our 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.
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 Annual Report. These risks include, among others:
| • |
We operate in a highly competitive industry and may be unsuccessful in effectively competing in the future.
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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. |
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We may not be able to generate sufficient cash to service our indebtedness. |
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We estimate, 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 our reputation
and negatively affect our business. |
| • |
Our financial statements for the year ended December 31, 2024 contain an explanatory note regarding substantial
doubt concerning out ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or
at all; |
| • |
Our results of operations may vary significantly from our expectations or guidance. |
| • |
We may not be able to comply with contracts with our customers, and non-compliance may harm our operations
and expose us to potential third-party claims for damages. |
| • |
Loss of key employees and the inability to continuously recruit and retain qualified employees could hurt
our competitive position. |
| • |
We rely on third parties for manufacturing of our products. We do not have long-term supply contracts with
our foundry or most of our third-party manufacturing vendors, and they may not allocate us sufficient capacity at reasonable prices to
meet future demands for our solutions. |
| • |
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 are subject to risks from our international operations. |
| • |
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.
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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.
|
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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
to substantial liability. |
| • |
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. |
| • |
Changes in our effective tax rate may adversely impact our results of operations. |
| • |
Exchange rate fluctuations between the U.S. dollar, the British pound, the Euro and other foreign currencies
may negatively affect our future revenues. |
| • |
Managing a public company and compliance with regulatory requirements may divert the attention of our senior
management from the day-to-day management of our business. |
| • |
Investors’ rights as our shareholders are governed by Israeli law, which differs in some respects from
the rights of shareholders of non-Israeli companies. |
| • |
The market price of our equity securities may be volatile, and your investment could suffer or decline in
value. |
| • |
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 may lose our 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 American LLC’s, or the NYSE American, continued listing requirements could result
in the delisting of our ordinary shares, no par value per share, or Ordinary Shares, negatively impact the price of our Ordinary Shares
and negatively impact our ability to raise additional capital. |
| • |
The Merger may not be completed and such a failure could negatively impact our Ordinary Share price, business,
financial condition, results of operations or prospects. |
| • |
Some of our directors and executive officers have interests that may be different from, or in addition to,
the interests of our shareholders. |
| • |
The fact that there is a Merger pending could materially harm our business and results of operations.
|
| • |
Our obligation to pay a termination fee or a breakup fee under certain circumstances and the restrictions
on our ability to solicit or engage in negotiations with respect to other potential acquisition proposals may discourage other potential
transactions that may be favorable to our shareholders. |
| • |
If the Merger is not consummated by December 31, 2025 under certain circumstances that may be beyond our control,
either we or MDA Space will be entitled to choose not to proceed with the Merger. |
| • |
Our shareholders could file lawsuits in the future challenging the Merger, which may delay or prevent the
Closing, cause the Company to incur substantial defense or settlement costs, or otherwise adversely affect the Company. |
RISK FACTORS
Risks Related to Our Business and Industry
We have limited capital currently available,
and, if the Merger is not completed, we will need to raise additional capital in the future to fund our operations and develop our technology,
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.
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 near-term
operations and continue developing 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 a Credit Agreement, dated February 1, 2022, with Wilmington Savings Fund Society, as administrative
agent and the lenders thereunder, or as amended on September 13, 2022, April 23, 2023, June 2, 2023, October 31, 2023, and April 1, 2025
the Credit Agreement. The Credit Agreement, as amended, places 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 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.
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, nor have we successfully converted 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 of
our current business or future success or viability may be less accurate than it would 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 the assessment of our business and future prospects.
We incurred losses of approximately $45.7 million and $29.7 million for the year ended
December 31, 2024 and the year ended December 31, 2023, 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 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, 2024, our backlog was approximately $88 million, consisting of estimated
revenue pursuant to customer orders and signed contracts. Our backlog includes a pre-payment in the amount of $33 million pursuant to
the Master Purchase Agreement, dated October 31, 2023, between us and Macdonald, Dettwiler and Associates Corporation, or the Master Purchase
Agreement, which is part of the Share Purchase Agreement, or the MDA Agreement, dated August 30, 2023, by and among SatixFy Space Systems
UK Ltd., our wholly-owned subsidiary and MDA Space and Robotics Limited, or MDA Space, an affiliate of MDA Ltd. For a discussion of a
separate agreement, with MDA see “Item 4. Information on the Company – Recent Corporate Developments
– Merger Agreement”. 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 our products, as well as our 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. In addition, 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, no orders were cancelled, should a cancellation
occur, our backlog and anticipated revenue would be reduced unless we are 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 the multi-front war that Israel is facing, 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 our orders
comprise 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 us sufficient
capacity 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 the multi-front war that Israel is facing, 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 multi-front war that Israel is facing.”
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, or 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 Group, a major geostationary, or GEO, satellite provider, in September 2023, which resulted
in further delays and changes in OneWeb’s satellite projects.
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 United States 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 us sufficient capacity 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., or 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 2024 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 it 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 year ended December
31, 2024 and the year ended December 31, 2023, our three largest customers accounted for, in the aggregate, approximately 95% 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 war and the multi-front war that Israel is facing, 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 us 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 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.
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, or R&D, 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 R&D 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 o 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.
We will
be reliant on our joint venture partner, ST Electronics (Satcom & Sensor Systems) Pte Ltd. 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,
ST Electronics (Satcom & Sensor Systems) Pte Ltd., or 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 R&D, the 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 our own competing product, selling or exiting our 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.
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 year ended December 31, 2024 and the year ended December 31, 2023, our three largest customers accounted for, in the aggregate,
approximately 95% and 78% of our revenue, respectively. As of December 31, 2024 and December 31, 2023, accounts receivable with these
customers were approximately $3.9 million and $0.2 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 our 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. 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. Although inflation began to moderate in 2023 and 2024, it remains elevated compared to
pre-2020 levels. The impact of geopolitical developments such as the Russia-Ukraine war and the multi-front war that is Israel is facing,
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 for how long, and at what rate. Increases in inflation raise our costs for commodities, labor, materials
and services, as well as 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 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, or 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. 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 a late comer, 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 it commenced operations. We have invested and continue to invest
significantly in our business, including in technology R&D and the recruitment of quality industry talent. As of December 31, 2024,
we have invested over $271 million in R&D, 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
R&D 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, 2024,
we had debt to financial institutions of $70 million and our liabilities exceeded our assets by $102 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.
Our financial statements for the year ended
December 31, 2024, contained an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. This
going concern opinion could prevent us from obtaining new financing on reasonable terms or at all and risk our ability to continue operating
as a going concern.
In part because we have incurred losses
in each year since our inception and as of the date of this Annual Report we have a short term debt of $70 million, our audited consolidated
financial statements for the period ended December 31, 2024 contain an explanatory paragraph regarding substantial doubt about our ability
to continue as a going concern. These events and conditions, along with other matters, indicated that a material uncertainty existed as
of December 31, 2024, that could cast significant doubt on our ability to continue as a going concern. The financial statements for the
year ended December 31, 2024 have been prepared assuming that we will continue as a going concern. Unless the Merger will take effect,
our management expects us to continue to generate substantial operating losses and to continue to fund our operations primarily through
the utilization of our current financial resources, sales of our products, and through additional raises of capital. As of December 31,
2024, we incurred accumulated losses of approximately $557 million. If the Merger is consummated, we expect that the proceeds and financial
support provided through the transaction will alleviate the substantial doubt about our ability to continue as a going concern. A going
concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise
in the future. Further financial statements may also include an explanatory paragraph with respect to our ability to continue as a going
concern if the Merger is not completed or if alternative funding sources are not secured. Until we can generate significant recurring
revenues, we expect to satisfy our future cash needs through existing cash, debt or equity financing, and proceeds from sales under the
equity line of credit and ATM Agreement (as defined below) and proceeds from the Equity Line of Credit with Cantor Fitzgerald & Co.
We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may
be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to
our products and it risks our ability to continue operating as a going concern.
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 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 we 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, and IFC, 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. Our prior projections should not be viewed
as current and 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 the multi-front war that Israel is
facing, 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 system may span 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
it 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 develop our chip set with the help
of substantial grants from the European Space Agency, or the ESA, sponsored by the UK Space Agency, or the UKSA, through ESA’s Advanced
Research in Telecommunication Systems, or the ARTES, program, which have amounted to over $77.5 million through December 31, 2024. 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 it 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 UK, 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 R&D activities are
conducted from our offices in Israel and the UK and we face significant competition for suitably skilled software engineers, electrical
engineers working in digital signal processing and developers in these regions. The high-tech industry in Israel has 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 very large-scale integration, or VLSI.
Any of our employees and consultants may leave 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 our 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 it 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 it. 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, or IT, 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 R&D 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 R&D 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 our 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 UK, the United States 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 it only operated in one country. Therefore, we are subject to environmental, labor, health, safety and other laws and regulations
in all of the jurisdictions in which it operates 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 authorities.
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 multi-front was that Israel is facing, and social and political instability
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; |
| • |
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 multi-front was that Israel is facing, the tense relations between the
United States 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 United States, European Union, or the EU, the UK, 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 it is subject or that we have obtained or will
obtain the permits and other authorizations or licenses that it needs. If we violate or fails 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 UK, 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 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, exports of these newly controlled technologies from the UK are
required 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, or the Israel Innovation Authority or IIA, under several R&D
programs funded by the IIA, or the Approved Programs, in an aggregate amount of $6.3 million for the financing of our R&D expenditures
in Israel. These Israeli Innovation Authority, or 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 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, or the Innovation Law, up to the aggregate amount of the total grants received by the IIA, plus annual interest.
As of January 1, 2024, the annual interest for IIA grants is calculated based on the 12-month Secured Overnight Financing Rate, or SOFR,
or an alternative rate published by the Bank of Israel, plus 0.71513%, for grants approved before January 1, 2024 but still outstanding.
For grants approved on or after January 1, 2024, this interest is calculated as the higher of the 12-month SOFR rate plus 1% or a fixed
annual rate of 4%. These changes reflect the transition from the London Interbank Offered Rate, or LIBOR, to SOFR as the new benchmark
rate.
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, R&D 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), or 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.
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 it considers 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 our trademark, and cannot ensure that any such trademark registrations for our 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 our 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 using our 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 it will have adequate remedies for any breach. We cannot guarantee that it has 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, 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 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 us.
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 it 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 licenses 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 our 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 our 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 w 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 it relies, could harm our reputation, result in significant
costs to it, impair our ability to sell our systems and subject us to substantial liability.
Our software and hardware, and those
of third parties on which it relies, 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 it 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 rise in online and remote activity has increased cybersecurity risk. 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 IT 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, or GDPR, which requires covered businesses to comply with rules regarding the processing of personal
data, including our 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 (£17.5 million) (whichever is the greater). Additionally, the UK General Data Protection Regulation, or UK GDPR, (i.e., a
version of the GDPR as implemented into UK law) went into effect following Brexit. While the GDPR and the UK 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 UK, which may result in greater operational burdens, costs and compliance risks. Additionally,
the GDPR and the UK GDPR include certain limitations and stringent obligations with respect to the transfer of personal data from the
EU and the UK 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 in 2024, and others
(in Delaware, Iowa, Nebraska, New Hampshire, New Jersey, Tennessee, Minnesota and Maryland), are set to take effect in 2025. 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 are working to establish privacy policies that will be accurate,
comprehensive, and compliant with applicable laws, regulations, rules and industry standards, we cannot ensure that these 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, once established, 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 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 UK, the United States and Bulgaria. our effective tax rate is subject to fluctuations, as it is impacted by a number of factors, including
the following:
| • |
Changes in our overall profitability and the amount of profit determined to be earned and taxed in jurisdictions with differing statutory
tax rates; |
| • |
The resolution of issues arising from tax audits with various tax authorities; |
| • |
The impact of transfer pricing policies; |
| • |
Changes in the valuation of either our gross deferred tax assets or gross deferred tax liabilities; |
| • |
Changes in expenses not deductible for tax purposes; |
| • |
Changes in available tax credits; and |
| • |
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 U.S. dollar, Euro and British pounds. 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. 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 UK, 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 UK 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 UK, changes in tax laws or regulations in Israel or the UK 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, or 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 UK 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 Passive Foreign Investment Company, or 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 Ordinary Shares during 2024, we believe that it was not a PFIC for the taxable year of 2024. 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 2024, the current taxable year or a future taxable year. Even if the value of our goodwill is respected for 2024, 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,
or 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.
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 our 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 it
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
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 require 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
it files with the U.S. Securities and Exchange Commission, or 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 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 American 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 are quoted and traded in the over-the-counter market under the symbol “STXYF”. 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 the warrants to adhere to
more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the 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.
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 our 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 multi-front war that Israel is facing.
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 our 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 our 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. Since
the commencement of these events, there have been additional active hostilities, including with Hezbollah in Lebanon, the Houthis terrorist
group which controls parts of Yemen, and Iran.
The intensity and duration of the current
multi-front war that Israel is facing 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 our credit rating of Israel from A2 to Baa1, maintaining our outlook
rating “negative”).
In connection with the Israeli efforts
in facing a multi-front war and possible or currently occurring hostilities, 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. All 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 and such persons may be absent from their positions for
a period of time. As of the date of this Annual Report, 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.
Any hostilities involving Israel or
the interruption or curtailment of trade between Israel and our 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 Hamas attacks and the
multi-front war that Israel is facing, 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 as our shareholders are
governed by Israeli law, which differs in some respects from the rights of shareholders of non-Israeli companies.
We were incorporated under Israeli
law and the rights of our shareholders are governed by our second amended and restated articles of association,
or the A&R Articles of Association, and Israeli law. These rights differ in some respects from the rights 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 shareholders’ 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 limited case law providing guidance on its interpretation, which
may create legal uncertainties regarding its practical implications. 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 A&R 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 A&R
Articles of Association could delay or prevent a change in control, and may make it more difficult for a third party to acquire us, or
for our shareholders to elect different individuals to our board of directors, even if such actions would be considered beneficial by
some of our shareholders, possibly limiting the price that investors may be willing to pay in the future for our Ordinary Shares. Among
other things:
| • |
The Israeli Companies Law, 5759-1999, as amended, or 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 A&R Articles of Association divide our directors into three classes, each of which is elected once every three years;
|
| • |
An amendment to our A&R 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 us to include a matter on the agenda for a general meeting of the shareholders, the provisions relating to the election 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 the votes cast by shareholders present and entitled to vote at a
general meeting; |
| • |
Our A&R 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 the votes cast by shareholders present and entitled to vote at a general meeting of
shareholders; and |
| • |
Our A&R 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 A&R
Articles of Association provide that unless our consents otherwise, the
competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between us and our shareholders
under the Israeli Companies Law and the Israeli Securities Law 5728-1968, or the Securities Law, which could limit shareholders’
ability to bring claims and proceedings against, as well as obtain favorable judicial forum for disputes with us, our 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 our behalf,
(ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of ours to us or our 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 A&R Articles of Association will not relieve us of our duties to comply with federal securities laws
and the rules and regulations thereunder, and our shareholders will not be deemed to have waived our 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 their
choosing for disputes with us or our directors or other employees which may discourage lawsuits against us, our 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 Securities
Exchange Act of 1934, as amended, or the Exchange Act) or pursuant to our A&R Articles of Association, including claims under
the Securities Act of 1933, as amended, or the Securities Act, for which there is a separate exclusive
forum provision in our A&R 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 A&R Articles of Association. If a court were to find the choice of forum provision contained in our A&R
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 A&R
Articles of Association provide that unless we consents 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 us or our directors, officers
or employees and may impose additional litigation costs on our shareholders.
Our A&R Articles of Association
provide 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 A&R Articles of Association, or 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 us, our directors and our 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 A&R Articles of Association. If a court were to find the choice of forum provision contained in our A&R
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 our securities shall be deemed to have notice of and consented to our Federal Forum
Provision. Notwithstanding the foregoing, our shareholders 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
us, if obtained by us, would require it to continue to meet various conditions and may be terminated or reduced in the future, which could
increase our 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 our 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 2024). 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.
It may be difficult to enforce a U.S. judgment
against us, our officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process
on our officers and directors.
Most of our directors or officers are
not residents of the United States and most of their and our assets are located outside the United States. Service of process upon us
or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S.
directors and executive officers may be difficult to obtain within the United States, although our A&R 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 us or our 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 us or our 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 our 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
Our A&R
Articles of Association and Israeli law could prevent a takeover that
our shareholders may consider favorable and could also reduce the market price of our Ordinary Shares.
Certain provisions of Israeli law and
our A&R 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 for our shareholders to elect different individuals to our board of directors, even if doing so would
be beneficial to our 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 us or to 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.
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. Our board of directors has sole discretion whether
to pay dividends. If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future, operations
and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors
may deem relevant. The Israeli Companies Law imposes restrictions on our ability to declare and pay dividends. Payment of dividends may
also be subject to Israeli withholding taxes.
The market price of our Ordinary Shares may be
volatile, and your investment could suffer or decline in value.
The stock markets, including the NYSE
American, 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 our Ordinary Shares, the market price of our Ordinary
Shares may be volatile and could decline significantly. During 2024, our share price has fluctuated from a high of $2.00 to a low of $0.31.
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
Ordinary Shares are delisted from the NYSE American, the liquidity and price of our Ordinary Shares may be more limited than if our securities
were quoted or listed on the NYSE American or another national securities exchange. In addition, the trading volume in our Ordinary Shares
may fluctuate and cause significant price variations to occur. We cannot assure you that the market price of our Ordinary Shares will
not fluctuate widely or decline significantly in the future. 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 us, our business, or the markets in which we operate, 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 our 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 American could result in a delisting of our securities.
On November 30, 2023, we received written
notice from the NYSE American stating that it was not in compliance with our continued listing standards, as set forth in Sections 1003(a)(i),
1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide. Specifically, these sections require companies to meet certain minimum
stockholders’ equity, market capitalization, or asset and revenue thresholds. we were found to be non-compliant primarily due to
a decline in our market capitalization to below $50 million.
In response, we submitted a plan of
compliance, or the Plan, to the NYSE American on January 5, 2024 outlining the steps we intended to take to regain compliance with the
applicable listing standards. On February 6, 2024, the NYSE American notified us that it had accepted the Plan and granted us a compliance
period through May 30, 2025, during which we would need to meet the continued listing requirements and demonstrate sustained compliance.
The NYSE American also indicated that it would monitor our progress against the Plan on an ongoing basis.
On December
16, 2024, we received written notice from the NYSE American confirming that we had resolved the deficiencies previously identified and
demonstrated compliance with the continued listing standards for two consecutive quarters, as required under Section 1009(f) of the NYSE
American Company Guide.
While we have regained compliance with
the continued listing requirements of the NYSE American, there is no assurance that we will remain in compliance with the NYSE American
listing standards in the future. If we fail to satisfy the NYSE American’s continued listing requirements, the NYSE American 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 it 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 American minimum bid price requirement or prevent future non-compliance with the NYSE American’s listing requirements.
Additionally, if our securities are not listed on, or become delisted from, the NYSE American 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 American 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 Public Company Accounting
Oversight Board, or 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 the International Financial Reporting Standards
as issued by the International Accounting Standards Board and Interpretations, or the 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 American 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 American, 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 American rules. 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 American 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, 2025. 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 if 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 American. 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 Ordinary
Shares could depress the market price for our Ordinary Shares.
Substantial sales of our Ordinary Shares may
cause the market price of our Ordinary Shares to decline. Sales by our security holders of substantial amounts of our Ordinary Shares,
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 Ordinary Shares. We expect to continue to incur R&D 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 our large shareholders or
members of our management were to sell substantial amounts of our 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 our Ordinary Shares. Any such volatility or decrease in the trading price of our Ordinary Shares could also adversely affect
our ability to raise capital through an issue of equity securities in the future.
As of the date of this Annual Report,
there were 14,329,792 warrants outstanding with a weighted average 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 Credit Agreement, during the year ended December 31, 2023, we issued 500,556 Ordinary Shares to the lenders and 1,000,000 Price
Adjustment Shares in a private placement.
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 Equity Line of Credit, we have reserved an initial amount of up to 15,295,125 Ordinary Shares
for issuance under the Facility, which represents approximately 17.8% of our total outstanding shares as of the date of this Annual Report.
Although we have filed a registration statement for the resale of shares under the Equity Line of Credit, it is not currently effective.
Accordingly, we cannot issue shares under the facility until it becomes effective or an exemption from registration is available. 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.
As of December 31, 2024, we have 4,943,452
Ordinary Shares underlying options that would have been vested and exercisable and an additional 582,431 unvested options outstanding,
as well as 4,890,652 Ordinary Shares underlying unvested restricted share units. 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 The Merger
The Merger (as defined below) may not be completed, due to the failure
of the parties to achieve the Closing conditions or otherwise; such a failure could negatively impact our Ordinary Share price, business,
financial condition, results of operations or prospects.
The Merger is subject to the satisfaction or waiver of certain conditions to closing
of the First Merger, or the Closing, including, among others, that:
| • |
the approval of the Merger Agreement (as defined below), the
Merger and the consummation of the transactions contemplated by the Merger Agreement by the Shareholder Approval (as defined below);
|
|
|
| • |
no governmental authority in any jurisdiction has by any law or order, restrained, enjoined or otherwise prohibited
the consummation of the Merger; |
| • |
expiration or termination of the applicable waiting period, or, where applicable, approvals have been obtained,
and all notices to, filings with and consents of the applicable governmental authority have been made or obtained under all required governmental
approvals; |
| • |
at least 50 days will have elapsed after the filing of the merger proposals with the Companies Registrar and
at least 30 days will have elapsed after the approval of the Merger Agreement, the Merger and the consummation of the transactions contemplated
by the Merger Agreement by our shareholders has been received; and |
| • |
no Company Material Adverse Effect (as defined in the Merger
Agreement) (excepting any effects that, individually or in the aggregate, would not prevent or materially impair us from consummating
the Merger or performing any of our material obligations under the Merger Agreement) will have occurred since the execution of the Merger
Agreement, and be continuing. |
No assurance can be given that each of the conditions will be satisfied. In addition,
the Merger Agreement may be terminated under certain circumstances. If the conditions are not satisfied or waived in a timely manner and
the Merger is delayed, payment of the Merger Consideration (as defined below) will also be delayed.
If the Merger
is not completed (including in the case the Merger Agreement is terminated), our ongoing business and our financial position will likely
be adversely affected. Under such a scenario, our directors, senior management and other employees will have expended extensive time and
effort and will have experienced significant distractions from their work, and we will have incurred significant transaction costs, during
the pendency of a failed transaction. In addition, our continuing business relationships with business partners and employees, and the
market’s perceptions of our prospects, could be adversely affected, which could have a material adverse impact on the trading price
of the Ordinary Shares.
We also could be subject
to litigation related to any failure to complete the Merger. If these risks materialize, our financial condition, results of operations
or prospects could be materially adversely affected.
Some of our directors and executive
officers have interests that may be different from, or in addition to, the interests of our shareholders.
Certain of our directors and executive officers may have interests in the transactions
contemplated by the Merger Agreement that may be different from, or in addition to, those of our other shareholders. These interests include,
among other things, the vesting of the Price Adjustment Shares issued pursuant to that certain business combination agreement, dated as
of March 8, 2022, between us, Endurance Acquisition Corp. and SatixFy MS, as amended, or the Business Combination Agreement, and
under the Fifth Amendment to the Credit Agreement, dated as of October 31, 2023; the making of certain payments upon the termination of
certain of our directors; the rights to accelerated vesting of equity awards; the honoring of our indemnification obligations under our
charter documents or any existing indemnification agreement; and the continued coverage under our directors’ and officers’
liability insurance policy for a period of seven years commencing immediately prior to the effective time of the Merger.
The fact that there is a Merger
pending could materially harm our business and results of operations.
While the Merger
is pending, we are subject to a number of risks that may harm our business and results of operations, including:
| • |
the diversion of management and employee attention from implementing our growth strategy in our existing markets
or in new markets that we are targeting; |
| • |
the potential negative effect of the pendency of the Merger on our business, including uncertainty about the
effect of the Merger on our employees, customers, suppliers and other parties, which may impair our ability to attract, retain and motivate
key personnel, and could cause customers, suppliers and others to seek to change existing business relationships with us; |
| • |
the fact that we have and will continue to incur expenses related to the Merger prior to our closing;
|
| • |
our potential inability to respond effectively to competitive pressures, industry developments and future
opportunities, in particular, given the restrictions on the conduct of the our business during the interim period between signing and
closing due to the pre-closing covenants in the Merger Agreement; |
| • |
we could be subject to costly litigation associated with the Merger; and |
| • |
our current and prospective employees may be uncertain about their future roles and relationships with us
following completion of the Merger, which may adversely affect our ability to attract and retain key personnel. |
Our obligation to pay a
termination fee or a breakup fee under certain circumstances and the restrictions on our ability to solicit or engage in negotiations
with respect to other potential acquisition proposals may discourage other potential transactions that may be favorable to our shareholders.
The Merger Agreement provides for a 45 calendar day Go-Shop Period beginning on the
date of the Merger Agreement, during which we may, subject to compliance with the terms of the Merger Agreement, solicit, encourage, entertain,
discuss and negotiate inquiries, proposals or offers in respect of potential alternative transactions. Thereafter and, until the Merger
is consummated or the Merger Agreement is terminated, with limited exceptions, the Merger Agreement prohibits us from soliciting, assisting,
initiating, facilitating or knowingly encouraging or engaging in negotiations with respect to Acquisition Proposals or other business
combinations. The Merger Agreement also provides MDA Space with certain matching rights in respect of certain alternative potential Acquisition
Proposals. If we receive a definitive agreement with respect to a Superior Proposal during the Go-Shop Period and immediately after the
respective Matching Period enters into such definitive agreement, we will be required to pay to MDA Space a termination fee of $5 million.
In all other circumstances described in the Merger Agreement, including if MDA Space terminates the Merger Agreement due to our breach
of our non-solicit obligations or, in certain cases, if we enter into an alternative transaction after termination of the Merger Agreement,
we will be required to pay to MDA Space a termination fee of $10 million. Each of MDA Space and we are also subject to a mutual breakup
fee of $10 million under other circumstances as described in the Merger Agreement.
If the Merger is not consummated
by December 31, 2025 (i.e., the End Date) under certain circumstances that may be beyond our control, either we or MDA Space will be entitled
to choose not to proceed with the Merger.
The Merger is subject to the satisfaction or waiver of certain Closing conditions
described in the Merger Agreement. The fulfillment of certain of these conditions is beyond our control, such as: (1) the receipt of the
Shareholder Approval; (2) no governmental entity having jurisdiction over any party will have enacted any injunctions that prohibit consummation
of the Merger or the other transactions contemplated by the Merger Agreement; and (3) the expiration or termination of the applicable
waiting period, or, where applicable, approvals have been obtained, and all notices to, filings with and consents of the applicable governmental
authority have been made or obtained under all required governmental approvals. If the Merger has not been completed by the End Date,
either we or MDA Space may generally terminate the Merger Agreement, notwithstanding the prior receipt of the approval of the Merger by
our shareholders, except that the right to terminate the Merger Agreement would not be available to a party that is in material breach
of the Merger Agreement or whose actions or omissions, which constitute a breach of the Merger Agreement, are a principal cause of, or
primarily result in, the failure of the Merger to be completed on or before that date.
Our shareholders could file lawsuits
in the future challenging the Merger, which may delay or prevent the Closing, cause us to incur substantial defense or settlement costs,
or otherwise adversely affect us.
As of the date of
this Annual Report, there are no pending lawsuits challenging the Merger. However, potential plaintiffs may file lawsuits challenging
the Merger. The outcome of any future litigation is uncertain. Such litigation, if not resolved, could prevent or delay completion of
the Merger and result in substantial costs to us, including any costs associated with the indemnification of directors and officers. One
of the conditions to the closing of the Merger is the absence of any provision of applicable law or order by any governmental entity that
has the effect of restraining, enjoining or otherwise prohibiting the consummation of the Merger. Therefore, if a plaintiff were successful
in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger
from being completed, or from being completed within the expected timeframe. The defense or settlement of any lawsuit or claim that remains
unresolved at the time the Merger is completed may adversely affect our business, financial conditions, results of operations and cash
flows.
We are subject to covenants in respect of
the operation of our business which may prevent us from pursuing certain opportunities that may arise.
Pursuant to the Merger Agreement,
we have agreed to certain interim operating covenants intended to ensure that our company carries on business in the ordinary course consistent
with past practice, except as required or expressly authorized by the Merger Agreement. These operating covenants cover a broad range
of activities and business practices. Consequently, it is possible that a business opportunity will arise that is out of the ordinary
course or is not consistent with past practices, and that we, subject to the consent of MDA Space, will not be able to pursue or undertake
the opportunity due to our covenants in the Merger Agreement.
We are responsible for our costs related to
the Merger, whether or not the Merger is completed.
Certain costs related to the Merger,
such as legal, accounting and certain financial advisor fees, must be paid by us even if the Merger is not completed. We and MDA Space
are each liable for our own costs incurred in connection with the Merger in accordance with the Merger Agreement.
Upon consummation of the Merger, our shareholders
will no longer be shareholders of our company.
Upon consummation of the Merger, each
shareholder will cease to hold such shareholder’s Ordinary Shares and to have any rights as a holder of such Ordinary Shares other
than the right to be paid the Merger Consideration in accordance with the Merger. If the Merger is successfully completed, our company
will no longer exist as an independent public company, and, as a result of the consummation of the Merger, shareholders will no longer
have the opportunity to participate in the potential long-term benefits of our business, if any, notwithstanding the risks that we face,
to the extent that those potential benefits exceed the benefits reflected in the Merger Consideration to be received pursuant to the Merger.
Risks Related to Our Warrants
We may redeem certain unexpired warrants prior
to their exercise at a time that is disadvantageous to you, thereby making those warrants worthless.
Certain of our outstanding warrants
are redeemable. we may exercise the redemption right even if we are 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.
There can be no assurance that our warrants
will be in the money at the time they become exercisable or otherwise, and they may expire worthless.
As of the date of this Annual Report,
the weighted average exercise price of our outstanding warrants is $11.50 per 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.
Our Amended and Restated 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.
Pursuant to the Amended and Restated
Warrant Agreement, dated as of January 12, 2023, or the A&R Warrant Agreement, by and between us, Endurance and Continental Stock
Transfer & Trust Company, as warrant agent, governing our warrants, subject to applicable law,
(i) any action, proceeding or claim against us 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 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 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,
or 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, or 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 us, which may discourage
such lawsuits. Alternatively, if a court were to find this provision of the A&R Warrant Agreement inapplicable or unenforceable with
respect to one or more actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions,
which could materially and adversely affect our 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 reincorporated
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, 2024, 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 company operating in the satellite communications industry with our own semiconductors, focused on designing chips, sub-systems 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, 2024, it has invested over $271 million in R&D to create what we believe to be a very
advanced solution of satellite communications chipsets and ground terminal chips.
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 or IFC systems and on the pause
applications. Our chip technology supports Electronically Steered Multibeam Antennas, or ESMA, digital beamforming and beam-hopping, on-board
processing for payloads and some SDR modem capabilities — each of which will be critical for providing optimized access to LEO satellite
constellations.
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 landing station baseband,
each built around our advanced ASICs and RFICs.
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 and by direct to device application, which will be propelled by an increasing number of internet users,
broadband connected devices, amount of global data usage and the need for ubiquitous cellular 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
year ended December 31, 2024 and the year ended December 31, 2023 were $20.6 million and $10.7 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, or 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 ESA, sponsored by the UKSA, through ESA’s ARTES program, which have amounted to
over $77.5 million through December 31, 2024.
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 landing station baseband, which
is the digital system that enables the network operator to control and manage our communication network and the interaction between the
satellite payload and the ground terminal. |
We design chips, sub-systems
and systems in each of these three categories, 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 support advanced next generation of digital satellite
payloads. 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 Space. 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 expand into 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 our unique digital multi beam forming and beam-hopping on-board-processing
radiation hardening chipsets.
The MDA Agreement is a combination of $40 million as consideration, or the MDA Consideration,
for 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 a previous $10 million advanced payment made in June 2023 to be applied
to future orders of space grade chips. Out of the MDA Consideration, $37 million was paid in promissory notes issued to us by MDA Space
which was settled as follows: $17 million was repaid at the closing of the MDA Agreement in October 2023, and the remaining $20 million
was repaid over seven monthly instalments during the year 2024 of $2.85 million each, with the last payment made in July 2024.
SatixFy Space Systems
Ltd 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 of digital payloads. We continue to retain all our related ASIC intellectual property and
new chips’ development to support the growing market. Thus, we continue to retain selling rights to chips for digital payloads.
The strategic transaction also establishes 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 was in line
with our strategy to focus on being a top leading technology provider to satellite payload design companies, with our unique offering
of multi-beam forming and beam-hopping, using our 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.
In October 2024, we
entered into a Software Development and License Agreement with MDA, pursuant to which we are to provide the modem and beamforming software
for our chipsets to be used in digital satellite broadband LEO payloads. We are also to provide our software licenses and a development
kit to support MDA’s deliveries to customers. The full contract price is $9 million, comprised of $6 million for delivery of the
software solution with a license to support an existing MDA customer and $3 million for a further license to support future customers.
The contract also provides MDA with an option to be granted access to a part of the code related specifically to the data plane for a
further $4 million.
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, or VSAT, chips, a part of our ASIC technology and one of the base building blocks for
all of 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 275,000 units of our SX-3000 chips on a stand-alone basis and our S-IDU modems based on our SX-3000 chip
| • |
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,
or 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 our compact form factor, the Onyx features our cutting-edge digital beamforming
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 SDR modem and antenna control unit, or ACU.
Onyx is currently in the testing and certification process. We have completed the manufacturing of our first units, which are currently
being tested internally and at customer sites.
Through Jet Talk Limited,
or Jet Talk, we are developing a large Aero/IFC terminal designed for commercial aviation that enables 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.
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 us. Within the broader satellite communications industry, we are positioned to target two markets with our
advanced satellite chips and communications systems: the satellite communications systems market and the Aero/IFC 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.
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.
We expect high growth
of LEO satellites in the next decade, 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 to 10 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 our own estimates
of the projected demand for satellite communications systems and unit pricing, that by the end of the current decade, the total addressable
market, or 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 space and 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 are 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-band 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), including 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.
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 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 “—Operating
and Financial Review and Prospects — Our Revenue Model and Prospects.”
We have continued to
invest in R&D and also believes that circumstances have provided it 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.
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 us over $271 million in R&D investment from the commencement of operations in
June 2012 through December 31, 2024.
| • |
Cutting-Edge Chips. We believe it is 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 it 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 it 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
it is 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 it 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 $271 million we have invested in R&D, 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 it 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 our delivers 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 executive management team has extensive
experience in effectively guiding companies through various industry cycles and technology transitions. Our management team provides it
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 R&D 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 it 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 it has 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 it grows in our market to serve the needs of clients in additional geographies and tap into talent
pools from international markets. |
Our Chips and Satellite Communications
Systems
Modem
Chips — SX-3000/3099/4000
SX-3000/3099
Our SX-3000 is the
first generation of modem chip it 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. 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, 2024, we have sold
approximately an aggregate of 275,000 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 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, it has 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.
In June 2024, we secured
a $20 million order for our PRIME 2.0 Space-Grade chips and software to be delivered over the following five quarters. This was a follow
up order to an earlier $4 million order by the same customer from September 2023.
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 on-board processing, 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.
The MDA Agreement establishes cooperation
between us and MDA 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 our unique digital multi beam forming and beam-hopping on-board-processing radiation hardening 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. Our Onyx 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 our compact form factor, the Onyx Aero
features our cutting-edge digital beamforming technology, along with multi-orbit connectivity capabilities. Onyx is built on our ASIC
technology, incorporating PRIME as the antenna digital beamformer, BEAT as the antenna Ku-band RFIC, and Sx-3099 as the terminal SDR modem
and ACU. Onyx is currently in the certification process and the first manufactured units are currently being
tested internally and at customer sites.
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.
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 reach much
higher performance, providing satellite bandwidth efficiency – a clear advantage over competition, especially in the LEO constellations
market. We believe that the gained experience and lessons learned from Onyx will be helpful 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 is 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.
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.
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.
As of December 31, 2024, we have sold
over approximately an aggregate of 275,000 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
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.
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. See “Risk
Factors— Risks Related to our Business, Operations and Industry — disruptions in relationships
with any one of our third-party manufacturers or suppliers.” 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, or PCB, chips and other electronic components, we have arrangements with third-party manufacturers
to produce our PCBs, and it sources 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 our 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 “Risk Factors— Risks Related
to our 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 our Business, Operations and Industry — We
rely on a third-party vendor to supply chip development software to it 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.
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 $20.6 million, $10.7 million and $10.6 million in revenues during the year ended December 31, 2024, the year ended December
31, 2023 and the year ended December 31, 2022, respectively, of which approximately 79% , 64% and 85%, respectively, was attributable
to UK-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 our 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 us and our 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 it 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
95% and 77% of our total revenue for the year ended December 31, 2024 and the year ended December 31, 2023, respectively. As of December
31, 2024, we had binding contracts with five customers under which it recorded revenues in 2024 or
expects to record future revenues. See “Risk Factors — Risks Related to our 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, 2024, we
had signed revenue contracts representing backlog of approximately $88 million which includes a $33 million prepayment towards future
ASIC orders. 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 it, 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 it does 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.
R&D
As of December 31, 2024, we
had a team of over 144 engineers supporting our mission to innovate the satellite communications industry, including hardware and software
engineers (45), VLSI engineers (36), product and antenna engineers (41) and algorithms and system engineers (23). Continued investment
in R&D 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, our increases our access to highly skilled engineering
talent, which We believe provides it 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.
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 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 R&D expenses were $27.5 million
and $33.4 million for the year ended December 31, 2024 and the year ended December 31, 2023, respectively, before the deduction of R&D
grants. Since it commenced operations in 2012, we have invested over $271 million in R&D. 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 it believes provides it with opportunities for evolution and growth.
We have received significant R&D funding from ESA, with the support of the UKSA,
through our ARTES program since establishing and growing a presence in the UK in 2016. We have won multiple contracts with ESA, including
as a subcontractor to leading satellite communications companies, and through December 31, 2024, we have obtained over $77.5 million in
grants from the ESA and $6.3 million in other forms of funding from the IIA. The ESA development contracts span the full range of our
product portfolio, including our PRIME, BEAT, SX-3099, SX-4000 payload, Ka-band Aero/IFC terminal. In connection with the ESA grants,
which are intended to fund 50% to 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 our
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 it competes 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 “Risk Factors —
Risks Related to our 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 it is considering whether to file a non-provisional patent application.
As of December 31, 2024, we owned 44 issued patents and 16 pending patent applications,
including provisional and Patent Cooperation Treaty applications, across the United States, the United Kingdom, Europe and Israel. Our
issued patents and pending patent applications cover, among other things, 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 and a License Agreement,
or the License Agreement, pursuant to which certain intellectual property with respect to our space grade chips is placed into escrow
for the benefit of MDA and released to MDA for our 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 our 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.
Some 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 it has infringed, misappropriated or otherwise violated their
intellectual property rights, or that our rights will give it 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 “Risk
Factors— Risks Related to Intellectual Property, Information Technology, Data Privacy and Cybersecurity.”
Grants from the Israel Innovation Authority
As of December 31, 2024, 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 R&D 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 U.S. 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 the
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 our company or regarding any change in the holding of our means of control which results
in any non-Israeli citizen or entity becoming an “interested party,” as defined in the Innovation Law, in our 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. We have declared in all of its IIA grant applications its intention to perform between 70% to 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 “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 “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 it 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 it exports 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 us, 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,
it collects, uses, transfers, stores, maintains and otherwise processes 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 our 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 (£17.5 million) (whichever is the greater). Additionally, in the UK, the UK GDPR (i.e., a version
of the GDPR as implemented into UK law) is in effect. The GDPR and the UK GDPR include certain limitations and stringent obligations with
respect to the transfer of personal data from the EU and the UK 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 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 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 it otherwise collects, or may in the future otherwise collect, personal information of
residents have enacted or are considering enacting similar laws. 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
its, and ultimately result in the imposition of liability. For further information, see “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.”
Organizational
Structure
SatixFy Communications Ltd. is the
parent company of our 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 2,246 square meters. We also have one
design center in the United Kingdom, which comprises 826 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 UK 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.
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 our stockholders, that have filed two suits, in an Israeli court in Tel Aviv, or the
Court, against us, Satixfy Limited, Yoel Gat, Doron Rainish, Yair Shamir and Yoav Leibovitch, arguing that the 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 Agreement, 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 us in exchange for the issuance of identical holdings
in us, 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 us. We intend to
vigorously contest the plaintiffs’ claims. We have issued and placed in trust sufficient shares to provide for the plaintiffs’
alleged stakes in us if the plaintiffs prevail on the merits. In May 2022, the Court rejected the 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. In January 2025, the court replaced Mr. Shapira with a new trustee, the former District Court Judge Dr. Adi Zarankin.
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 filed their evidence during the months of April and May 2024, followed by our
evidence, which were filed in September 2024 and December 2024. Evidentiary hearings were held in January and March 2025 and additional
hearing is scheduled to be held in April 2025. We believe that these proceedings will not have a material impact on us.
Recent Corporate Developments – Merger Agreement
On April 1, 2025, we entered into an Agreement and Plan of Merger, with MDA MANTISRAEL
OPERATIONS 1 Ltd. , or Merger Sub 1, an Israeli company and an indirect wholly owned subsidiary of MDA Space, and MANTISRAEL OPERATIONS
2 Ltd., or Merger Sub 2, and collectively with Merger Sub 1, the Merger Subs, an Israeli company wholly owned by Merger Sub 1, or, as
it may be amended from time to time, the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub 2 will merge with and into us,
with our company, as the surviving entity, becoming a wholly owned subsidiary of Merger Sub 1, or the First Merger. We will then immediately
merge with and into Merger Sub 1, with our company again as the surviving entity, becoming an indirect wholly owned subsidiary of MDA
Space, or the Second Merger, and collectively with the First Merger, the Merger.
Subject to the terms and conditions of the Merger Agreement, each Ordinary Share held
immediately prior to the effective time of the First Merger, or the Effective Time, will be cancelled and converted into the right to
receive $2.10 in cash, or the Merger Consideration, without interest and subject to the withholding of any applicable taxes and in accordance
with the terms of the Merger Agreement. In addition, in respect of our outstanding equity awards and warrants to acquire Ordinary Shares:
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each unexercised “in-the-money” option to acquire Ordinary Shares that is outstanding under any of our stock equity plans,
whether or not then vested or exercisable, will, by virtue of the First Merger, be converted into the right to receive a lump sum cash
payment (without interest) equal to the product of (a) the excess of $2.10 over the exercise price per Ordinary Share for
such option, and (b) the total number of Ordinary Shares underlying such option, less applicable withholding taxes. Each unexercised “out-of-the-money”
option to acquire Ordinary Shares, whether or not vested or exercisable, shall, by virtue of the First Merger, be cancelled for no consideration;
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each Ordinary Share that is outstanding under any of our stock equity plans subject to vesting, repurchase, or other lapse of restrictions
(including any restricted stock units) will, by virtue of the First Merger, vest in full and become free of restrictions and will be treated
as an Ordinary Share that will be cancelled and converted into the right to receive $2.10, less applicable withholding taxes; and
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each warrant to acquire Ordinary Shares issued and outstanding immediately prior to the Effective Time will remain outstanding such
that following the Effective Time, in accordance with the terms of such warrant and automatically and without any required action on the
part of the holder thereof, cease to represent an entitlement to receive Ordinary Shares on the exercise thereof and will become a warrant
exercisable for Merger Consideration such that each holder of warrants will have the right, upon exercise thereof, to receive from us,
upon the basis and upon the terms and conditions specified in the applicable warrant and in lieu of the Ordinary Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented thereby, the amount of cash receivable upon the consummation of
the transactions contemplated by the Merger Agreement, including the First Merger, that such holder of the warrant would have received
if such holder had exercised his, her or its warrant immediately prior to the Effective Time. |
Our board of directors, upon the recommendation of a special committee comprised of
independent directors and following approval of the audit committee of our board of directors, has unanimously: (i) determined that the
Merger Agreement, the Merger and all other transactions contemplated by the Merger Agreement are advisable, fair to, and in the best of
our and our shareholders’ interests; (ii) approved the Merger Agreement, the Merger and all other transactions contemplated by the
Merger Agreement; (iii) determined that considering the financial position of the merging companies, and assuming, among other things,
the accuracy of the representations and warranties of MDA Space and the Merger Subs in the Merger Agreement, no reasonable concern exists
that, as a result of the Merger, we, as the surviving company, will be unable to fulfill our obligations to our creditors as a result
of the Merger; and (iv) determined to recommend to the shareholders the approval of the Merger Agreement, the approval of the Merger and
approval of all other transactions contemplated by the Merger Agreement, or together, the Merger Proposal, all upon the terms and subject
to the conditions set forth in the Merger Agreement.
We and MDA Space have made customary
representations and warranties and agreed to customary covenants in the Merger Agreement, including, among others, covenants by us to
conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the closing of the Merger
and not to take certain actions or engage in certain types of transactions during this period unless approved in writing by MDA Space,
in each case subject to certain exceptions.
The Merger Agreement provides for a
45-calendar day go-shop period beginning on the date of the Merger Agreement, or the Go-Shop Period, during which we may, subject to compliance
with the terms of the Merger Agreement, solicit, encourage, entertain, discuss and negotiate inquiries, proposals or offers in respect
of potential alternative transactions. Thereafter and until the Merger is consummated or the Merger Agreement is terminated, with limited
exceptions relating to proposals that constitute or could reasonably be expected to lead to a “Superior Proposal” (as defined
in the Merger Agreement), the Merger Agreement prohibits us from soliciting, assisting, initiating, facilitating or knowingly encouraging
or engaging in negotiations with respect to potential alternative transactions. The Merger Agreement also provides MDA Space with certain
matching rights in respect of certain alternative potential acquisition proposals. Subject to certain exceptions, we have agreed not to
withdraw, amend or modify in a manner adverse to MDA Space in any material respect, or publicly propose to do the same, the recommendation
of our board of directors that our shareholders approve the Merger Proposal.
Under the Merger Agreement, in the
event that we receive a definitive agreement with respect to a “Superior Proposal” during the Go-Shop Period and immediately
after MDA Space’s matching period enters into such definitive agreement, we will be required to pay to MDA Space a termination fee
of $5 million. In all other circumstances described in the Merger Agreement, including if MDA Space terminates the Merger Agreement due
to our breach of the non-solicit obligations or, in certain cases, if we enter into an alternative transaction after termination of the
Merger Agreement, we will be required to pay to MDA Space a termination fee of $10 million. We and MDA Space are also subject to a mutual
breakup fee of $10 million under other circumstances described in the Merger Agreement.
Consummation of the Merger is subject
to the approval of the Merger Proposal by our shareholders at a special general meeting of shareholders, or the Shareholders Meeting,
in addition to customary closing conditions.
In connection with the execution of the Merger Agreement, certain of our shareholders,
holding 57% of the outstanding Ordinary Shares in the aggregate, have entered into voting support agreements with MDA Space, pursuant
to which they have, subject to the terms of each voting support agreement, irrevocably agreed to vote for the Merger Proposal and against
any competing proposal.
We expect to publish notice of the
Shareholders Meeting in the near future, and soon thereafter, will provide to our shareholders a proxy statement describing the Merger,
the Merger Agreement, as well as the procedure for voting in person or by proxy at the Shareholders Meeting and various other details
related to the Shareholders Meeting. If the Merger is approved at the Shareholders Meeting, Israeli law mandates a 30-day waiting period
before the Merger can become effective following such approval (the effectiveness of the Merger also requires a 50-day waiting period
following the filing of a merger proposal with the Israeli Companies Registrar, which we expect to file in the near future). We anticipate
that the Merger will be completed during the third quarter of 2025.
Upon consummation of the Merger, the
Ordinary Shares will be delisted from the NYSE American and deregistered under the Exchange Act.
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 our 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 our plans and strategy for our
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,” our 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, 2023 compared to December 31, 2022 can be found in our annual report on Form 20-F for the fiscal
year ended December 31, 2023, filed with the SEC on March 29, 2024.
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, 2024 we have invested over $271
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, and Aero/IFC systems. 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.
On April 1, 2025, we entered into the Merger Agreement with MDA Space, Merger Sub 1,
and Merger Sub 2, pursuant to which we will undergo a two-step merger transaction. In the First Merger, Merger Sub 2 will merge with and
into us, with our company surviving as a wholly owned subsidiary of Merger Sub 1. Immediately thereafter, in the Second Merger, we will
merge with and into Merger Sub 1, with our company again surviving and becoming an indirect wholly owned subsidiary of MDA Space.
Subject to the terms and conditions of the Merger Agreement, each Ordinary Share held
immediately prior to the effective time of the First Merger, or the Effective Time, will be cancelled and converted into the right to
receive $2.10 in cash, or the Merger Consideration, without interest and subject to the withholding of any applicable taxes and in accordance
with the terms of the Merger Agreement. The Merger Agreement also provides for the treatment of our outstanding equity awards and warrants..
While the Merger is subject to various closing conditions, including regulatory approvals and shareholder
consent, we believe that, if consummated, it will provide enhanced strategic opportunities, strengthen our position in the space communications
market, and offer immediate value to our shareholders. Until the Merger is completed, we will continue to operate as an independent company
and execute our existing business plan. See “Item 4. Information on the Company—B. History and Development of the Company
— Recent Corporate Developments – Merger Agreement” for more information.
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 $20.6 million and $10.7
million in revenues for the years ended December 31, 2024 and 2023, 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 67% and 77% of our total revenues in the years ended December 31, 2024 and 2023, respectively. Our revenues from sales of
products have related mainly to sales of modems and chips, which amounted to $7.5 million and $2.5 million in the years ended December
31, 2024 and 2023, 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 four largest customers accounted
for, in the aggregate, approximately 95% and 77%, of our revenues in the years ended December 31, 2024 and 2023, 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 our 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 2024 and is not expected to generate material revenue until at least 2026. 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 our 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, 2024 and 2023, we had binding contracts with five and eight customers, respectively, under which we recorded 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, 2024, our backlog
was approximately $88 million, consisting of estimated revenue pursuant to customer orders and signed contracts. Our revenue backlog includes
a pre-payment in the amount of $33 million pursuant to the Master Purchase Agreement, which is a part of the MDA Agreement. 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 $271 million in R&D as of December 31, 2024, a portion of which has been defrayed by government
and public entity grants (recognized in our statement of operations as reductions in R&D expenses). As of December 31, 2024, 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 R&D
expenses amounted to $22.8 million and $29.1 million in the years ended December 31, 2024 and 2023, respectively. Our gross R&D spend,
exclusive of the impact of offsetting government and public entity grants, amounted to $27.5 million and $33.4 million in 2024 and 2023,
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 $13.8 million and $8.2 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, 2024 and 2023, 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 $20.6 million
and $10.7 million in the years ended December 31, 2024, and 2023, while our net losses amounted to $45.7 million and $29.7 million in
the years ended December 31, 2024, and 2023. We had an accumulated deficit (i.e., negative retained earnings) of $557 million as
of December 31, 2024. 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 our 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 our current and prospective customers that previously launched
from Russia, increased supply chain difficulties for us and our customers, and recent developments in our discussions with prospective
customers, pose challenges to our 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 our test launch
of satellites equipped with our payload systems if it is unable to transition our expected satellite launches on a timely basis. See “Item
3. Key Information — D. Risk Factors — Risks Related to our 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 our 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 our Business, Operations and Industry — Deterioration of the financial
condition of our customers could adversely affect our operating results.” We believe that recent media and regulatory scrutiny
of SPAC business combinations may lead customers to view us 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 we were discussing prospective new contracts informed us that they selected our 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 our 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 we believe 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 our 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 multi-front war that
Israel is facing 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 our 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 subsidiaries), 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 had, until December 31,
2023, other functional currencies (being the currencies in which their assets, liabilities, revenues and expenses are recorded). Accordingly,
until December 31, 2023, in the preparation of our consolidated financial statements, we were required to translate certain 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 |
||||||||
|
2024 |
2023 |
|||||||
|
(U.S. dollars in thousands, except percentages) |
||||||||
|
Revenues |
$ |
20,648 |
$ |
10,730 |
||||
|
Gross profit |
$ |
12,327 |
$ |
4,792 |
||||
|
Gross margin |
60 |
% |
45 |
% | ||||
|
Net loss |
$ |
45,665 |
$ |
29,715 |
||||
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,
software, modems, 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.
R&D expenses
R&D expenses consist primarily
of salaries (including bonuses, share-based awards, 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 R&D expenses. See Note 22 to our 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 —
R&D Costs.” We expect to continue investing in R&D and, accordingly, expect our R&D 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 R&D 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 our 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 to our results of operations in the future.
See Note 7 to our 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, interest on customer advanced payments, depreciation of our right-of-use assets, amortization of debt and warrant
discounts, fair value adjustments related to financial assets and liabilities 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 our consolidated financial statements included elsewhere in this Annual Report.
| A. |
Results of Operations |
Results of Operations for the Year Ended December
31, 2024 Compared with the Year Ended December 31, 2023
The following table provides our consolidated
statements of operations for the years ended December 31, 2024 and 2023:
|
Year Ended |
||||||||||||||||
|
December 31, |
||||||||||||||||
|
2024 |
2023 |
Change |
% |
|||||||||||||
|
(U.S. dollars in thousands, except percentages) |
||||||||||||||||
|
Revenues: |
||||||||||||||||
|
Development services and preproduction |
$ |
13,107 |
$ |
8,249 |
$ |
4,858 |
59 |
% | ||||||||
|
Sale of products |
7,541 |
2,481 |
5,060 |
204 |
% | |||||||||||
|
Total revenues |
$ |
20,648 |
$ |
10,730 |
$ |
9,918 |
92 |
% | ||||||||
|
Cost of sales and services: |
||||||||||||||||
|
Development services and preproduction |
6,153 |
4,930 |
1,223 |
25 |
% | |||||||||||
|
Sale of products |
2,168 |
1,008 |
1,160 |
115 |
% | |||||||||||
|
Total cost of sales and services |
8,321 |
5,938 |
2,383 |
40 |
% | |||||||||||
|
Gross profit |
$ |
12,327 |
$ |
4,792 |
$ |
7,535 |
157 |
% | ||||||||
|
R&D expenses |
22,221 |
29,126 |
(6,905 |
) |
(24 |
)% | ||||||||||
|
Selling and marketing expenses |
2,070 |
2,866 |
(796 |
) |
(28 |
)% | ||||||||||
|
General and administrative expenses |
10,825 |
14,561 |
(3,736 |
) |
(26 |
)% | ||||||||||
|
Loss from operations
|
$ |
(22,789 |
) |
$ |
(41,761 |
) |
$ |
18,972 |
(45 |
)% | ||||||
|
Finance Income |
266 |
83 |
183 |
220 |
% | |||||||||||
|
Finance Expenses |
(17,504 |
) |
(12,129 |
) |
(5,375 |
) |
44 |
% | ||||||||
|
Derivatives Revaluation |
(5,605 |
) |
(17,217 |
) |
11,612 |
(67 |
)% | |||||||||
|
Other Income (Expense) |
- |
41,657 |
(41,664 |
) |
(100 |
)% | ||||||||||
|
Share in the loss of a company accounted by equity method, net |
(33 |
) |
(226 |
) |
193 |
(85 |
)% | |||||||||
|
Loss before income taxes
|
$ |
(45,665 |
) |
$ |
(29,593 |
) |
$ |
(16,069 |
) |
54 |
% | |||||
|
Tax expenses |
- |
(122 |
) |
122 |
(100 |
)% | ||||||||||
|
Loss for the period
|
$ |
(45,665 |
) |
$ |
(29,715 |
) |
$ |
(15,590 |
) |
54 |
% | |||||
Revenues
Total revenues
Total revenues of $20.6 million increased
by $9.9 million, or 92%, for the year ended December 31, 2024 compared to $10.7 million for the year ended December 31, 2023. See “Item
3. Key Information — D. Risk Factors — Risks Related to our Business, Operations
and Industry.”
Revenue from
development services and preproduction
Revenue from development services and
preproduction of $13.1 million increased by $4.9 million, or 59%, for the year ended December 31, 2024, compared to $8.2 million for the
year ended December 31, 2023. The increase was primarily driven by a completion of major milestone in connection with a purchase order
from a customer in the fourth quarter of 2024.
Revenue from
sale of products
Revenue from sale of products of $7.5
million increased by $5 million, or 204%, for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31,
2023. The increase was primarily driven by a purchase order of our space grade chips under existing agreements.
Cost of sales and services
Costs of development
services and preproduction
Costs of development services and preproduction
of $6.2 million increased by $1.3 million, or 25%, for the year ended December 31, 2024, compared to $4.9 million the year ended December
31, 2023. The increase was primarily driven by completion of major milestone in connection with a purchase order from a customer in the
last quarter of the year.
Cost of
sales of products
Cost of sales of products of $2.1 million
increased by $1.1 million, or $115%, for the year ended December 31, 2024, compared to $1 million for the year ended December 31, 2023.
The increase reflects increase in sale of products.
Gross profit
Gross profit of $12.3 million increased
by $7.5 million, or 157%, for the year ended December 31, 2024, compared to $4.8 million for the year ended December 31, 2023, reflecting
our increase in revenue from the sale of products and increase in provision of development services and preproduction. Our gross margin
in the year ended December 31, 2024 increased due to the increase in sales of space grade chips combined with the engagement in development
services and preproduction resulting in higher gross margin.
R&D expenses
R&D net expenses of $22.2 million
decreased by $6.9 million, or 24 %, for the year ended December 31, 2024, compared to $29.1 million for the year ended December 31, 2023.
Our gross R&D expenditure decreased by $4.7 million, or 13%, for the year ended December 31, 2024, compared to the year ended December
31, 2023. The decrease in gross R&D expenses was mostly driven by the sale of Satixfy Space Systems UK, one of our UK subsidiaries,
in October 2023 combined with a decrease in tape out costs and post silicon costs during the year ended December 31, 2024. Additionally,
our net R&D expenses were affected by an increase in grants from the ESA and tax credits for the year ended December 31, 2024, which
all are recorded as offsets to R&D expenses of $1 million.
Selling and marketing expenses
Selling and marketing expenses of $2
million decreased by $0.8 million, or 28%, for the year ended December 31, 2024, compared to $2.9 million in the year ended December 31,
2023. The decrease was primarily driven by a decrease in headcount and travel costs.
General and administrative expenses
General and administrative expenses
of $10.8 million decreased by $3.7 million, or 26%, for the year ended December 31, 2024, compared to $14.6 million for the year ended
December 31, 2023. The decrease was primarily driven by provisions we set aside in 2023 for expected credit loss of $1.8 million, a decrease
in legal costs of $1.4 million and a decrease of $0.4 million in directors’ and officers’ insurance costs.
Loss from operations
Loss from operations of $22.8 million
decreased by $19 million, or 45%, for the year ended December 31, 2024, compared to $41.8 million in the year ended December 31, 2023,
reflecting the factors discussed above.
Finance Expenses
Finance expenses of $17.5 million increased
by $5.4 million, or 44%, for the year ended December 31, 2024, compared to $12.1 million for the year ended December 31, 2023. This was
primarily driven by an increase in discount expenses of $6 million partially offset by a decrease in interest on debt.
Derivatives revaluation
Derivatives revaluation of $5.6 million
decreased by $11.6 million, or 67%, for the year ended December 31, 2024, compared to $17.2 million for the year ended December 31, 2023.
For the year ended December 31, 2024, the revaluation expense of the Price Adjustment Shares took into account probability of completion
of the Merger during 2025, as opposed to the year ended December 31, 2023, where the revaluation expense derived from a significant decrease
in the price of our Ordinary Shares during 2023, which affected our financial instruments.
Other Income
Other income was $0 for the year ended
December 31, 2024, compared to $41.7 for the year ended December 31, 2023, which was primarily associated with the sale of Satixfy Space
Systems UK in October 2023.
Tax expenses
Tax expenses were $0 for the year ended
December 31, 2024, compared to $0.1 million for the year ended December 31, 2023. The decrease in tax expenses was primarily attributable
to the sale of Satixfy Space Systems UK in October 2023.
Net loss for the period
Net loss for the period was $45.7 million,
representing a decrease of $16 million, or 54%, for the year ended December 31, 2024, compared to $29.7 million for the year ended December
31, 2023, reflecting the factors discussed above.
| B. |
Liquidity and Capital Resources |
If the Merger is not completed, 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, 2024, our cash and
cash equivalents amounted to $14.4 million, and our net financial debt amounted to $70 million.
If the Merger does not take effect,
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. If the Merger is consummated, we expect that the
proceeds and financial support provided through the Merger will alleviate the substantial doubt about our ability to continue as a going
concern and our financial statements for the year ended December 31, 2024, contained an explanatory paragraph regarding substantial doubt
about our ability to continue as a going concern. See ”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.
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, 2024, we had total borrowings (not including lease liabilities) of
approximately $70 million, all of which is long-term debt under the 2023 Credit Agreement entered into in connection with the Debt Financing
(defined below), 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 into the Business Combination Agreement and on October 27, 2022, our subsidiary, SatixFy
MS, a Cayman Islands exempted company and a direct, wholly owned subsidiary of Satixfy, which merged with and into Endurance in connection
with the consummation of the Business Combination, or the 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 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 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 our 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%, provided that the interest rate shall not exceed a rate
per annum equal to 12.50%, and (v) provided for certain additional reporting obligations by us. The Credit Agreement provides that the
term loan matures on February 1, 2026.
The 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
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 Credit Agreement)) greater than or equal to 6.00 to 1.00, we 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 our and our 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 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,
we also entered into an equity grant agreement, dated February 1, 2022, pursuant to which we issued 808,907 Ordinary Shares (before giving
effect to the conversion, by stock split, stock issuance or share consolidation, of each Ordinary Share issued
and outstanding immediately following the Preferred Shared Conversion, but prior to the effective time, into a number of Ordinary Shares
determined by multiplying each such Ordinary Share by the Exchange Ratio as described in the Business Combination Agreement, or the
Pre-Closing Recapitalization) to the lenders under the Credit Agreement in consideration for the funds borrowed.
In June 2023, the parties to the 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 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 Credit Agreement. On October 31, 2023, we entered into the Fourth Amendment and the Fifth Amendment to the 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 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. On April 1, 2025, concurrently and contingent upon the signing
of the Merger Agreement, the parties to the Credit Agreement entered into the Sixth Amendment to the Credit Agreement, or the Sixth Amendment,
under which the lenders provided us with their consent to enter the Merger Agreement. In addition, the Sixth Amendment provides that the
interest payable under the Credit Agreement on March 31, 2025 and June 30, 2025, will be added to the principal of the term loan on a
“pay in kind” basis.
Equity Line of Credit
Concurrently with the execution of
the Business Combination Agreement, We and CF Principal Investments LLC, or Cantor, an affiliate of Cantor
Fitzgerald & Co, or CF Principal Investments, entered into that certain CF Purchase Agreement and that certain that
certain registration rights agreement, dated as of March 8, 2022, by and between SatixFy and CF Principal Investments LLC, and the
CF Registration Rights Agreement, in connection with the Equity Line of Credit. Pursuant to the CF Purchase Agreement, following the Closing,
we have the right to sell to CF Principal Investments up to the lesser of (i) $77,250,000 aggregate principal amount of newly issued us
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 Ordinary Shares issued and outstanding after giving effect to the Business
Combination and other transactions contemplated by the Business Combination Agreement, or 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, or the Commencement, we will have the right,
but not the obligation, from time to time at our 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 our 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 Ordinary Shares on the NYSE American
on any trading day, so long as all of our 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 we 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 Ordinary Shares on the date of purchase, which is when we had timely delivered
written notice to CF Principal Investments directing it to purchase our Ordinary Shares under the CF Purchase Agreement, less a fixed
3.0% discount to such VWAP.
We control the timing and amount of any sales of our Ordinary
Shares to CF Principal Investments. Actual sales of our Ordinary Shares to CF Principal Investments under the CF Purchase Agreement will
depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading
price of our Ordinary Shares and our 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, or the Forward Purchase Transaction, which
was subsequently amended on October 25, 2022, or 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, or together with Vellar,
the Sellers, pursuant to which Vellar assigned our rights and obligations with respect to up to 4,000,000 Ordinary Shares, or the Subject
Shares, under the Forward Purchase Agreement to ACM ARRT G LLC, or 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,
par value $0.0001 per share, of Endurance, the 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, or 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 a resale-registration statement with the SEC. The Sellers paid us approximately $10.0 million.
On October 31, 2023, we entered into
Termination Agreements, or 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. Pursuant to the terms of the Termination Agreement, we paid 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.
PIPE Financing
Concurrently with the execution of
the Business Combination Agreement, Endurance and we entered into Subscription Agreements, each dated as of March 8, 2022, or the Subscription
Agreements, with certain investors, or the PIPE Investors. Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe
for and purchase, and we agreed to issue and sell to the PIPE Investors, immediately prior to the closing of the Business Combination,
an aggregate of 2,910,000 units, or the PIPE Units, each consisting of (i) one Ordinary Share and (ii) one-half of one warrant, or the
PIPE Warrant, each warrant entitling the holder thereof to purchase one Ordinary Share at a price of $11.50
per Ordinary 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, for a purchase price
of $10.00 per PIPE Unit, for gross proceeds of $29,100,000. Affiliates of the Sponsor agreed to purchase $10,000,000 of PIPE Units on
the same terms and conditions as all other PIPE Investors.
Pursuant to the terms of the Subscription
Agreements, concurrently with the Closing, we delivered 1,175,192 Ordinary Shares issuable to certain of our shareholders and 391,731
Ordinary Shares on behalf of the Sponsor into an escrow account, or 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, we 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 our shareholders pursuant to the terms thereof.
In connection with the Subscription
Agreements pursuant to which we have agreed to sell the PIPE Units to the PIPE Investors, we and Continental entered into a warrant agreement,
pursuant to which we issued 1,000,000 warrants, each entitling the warrant holder to purchase one 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. 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 A&R Warrant Agreement. The new PIPE Warrants 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.
ATM Offering
On July 29, 2024, we entered into an
At-The-Market Issuance Sales Agreement, or the ATM Agreement, with A.G.P./Alliance Global Partners, or A.G.P., pursuant to which we may
offer and sell, from time to time, up to an aggregate of $7,145,000 of our Ordinary Shares through A.G.P., acting as our sales agent.
The shares are being offered pursuant to our shelf registration statement on Form F-3 (File No. 333-279869), which was declared effective
by the SEC on June 10, 2024.
Under the terms of the ATM Agreement,
sales of our Ordinary Shares, if any, will be made by means of ordinary brokers’ transactions through the facilities of the NYSE
American or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated
prices. A.G.P. is entitled to receive a commission of up to 3.0% of the gross sales price of the shares sold under the ATM Agreement.
We have also agreed to reimburse certain expenses of A.G.P. and to provide customary indemnification and contribution rights.
The net proceeds from the ATM offering
are intended to be used for working capital and general corporate purposes. As of the date of this Annual Report, we have not issued and
sold any Ordinary Shares under the ATM Agreement.
Cash Flows
The following table summarizes our
cash flows for the periods indicated:
|
For the year ended December 31 (in thousands of U.S. dollars)
|
||||||||
|
2024 |
2023 |
|||||||
|
Net cash used in operating activities
|
$ |
(17,667 |
) |
$ |
(24,635 |
) | ||
|
Net cash provided in investing activities
|
18,765 |
17,341 |
||||||
|
Net cash provided (used) by financing activities
|
(595 |
) |
9,114 |
|||||
|
Increase in cash and cash equivalents
|
503 |
1,820 |
||||||
|
Cash and cash equivalents balance at the beginning of the year |
13,979 |
11,934 |
||||||
|
Effect of changes in foreign exchange rates on cash and cash equivalents |
(49 |
) |
225 |
|||||
|
Cash and cash equivalents balance at the end of the period
|
$ |
14,433 |
$ |
13,979 |
||||
Operating Activities
During the year ended December 31, 2024, net cash used in operating activities was $18 million, compared
to $25 million in the year ended December 31, 2023, reflecting the factors discussed under “— Results
of Operations” above and the evolution of our working capital.Net cash used in operating activities of approximately $18
million during the year ended December 31, 2024 was primarily used for payments of payroll and related expenses, payments for professional
services, subcontracted work, software development tools, directors’ fees, rent and other miscellaneous expenses. The principal
driver for the decrease in the net cash used in operating activities is mainly the decrease in the Company’s operational loss.
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 an increase of $11.8 million in 2022, offset by advances from ESA, which decreased by $1.3 million in 2023, compared to an
increase of $7.6 million 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 an increase of $7 million 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..
Investing Activities
During the year ended December 31,
2024, net cash provided in investing activities was $19 million. Net cash provided in investing activities for the year ended December
31, 2024 is attributable to net cash of $20 million received in the MDA transaction, offset by purchases of equipment in the total amount
of $1 million (see Note 3 to our consolidated financial statements included elsewhere in this Annual Report for additional information).
During the year ended December 31,
2023, net cash provided in investing activities was $17.3 million. Net cash provided in investing activities for year ended December 31,
2023 is attributable to the MDA transaction (see Note 3 to our consolidated financial statements included elsewhere in this Annual Report
for additional information).
Financing Activities
During the year ended December 31,
2024, net cash used in financing activities amounted to $0.6 million, consisting mainly of costs associated with lease liabilities.
During the year ended December 31,
2023, net cash provided by financing activities amounted to $9 million, consisting mainly of issuance of Ordinary Shares in the aggregate
amount of $10 million under the Forward Purchase Agreement.
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 U.S.
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 $0.8 million as of December 31, 2024. represented a contingent liability
(fair value measured based on discounted future royalties and an interest rate of 50%).
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. |
R&D, Patents and Licenses |
For a discussion of our R&D policies,
see “Item 4. – Information on the Company – B. Business Overview – R&D.”
| D. |
Trend Information |
Our financial condition and results
of operations are influenced by a variety of factors, including market demand for our products, competitive dynamics, and the macroeconomic
environment. In addition, the anticipated Merger with MDA Space, if completed, is expected to significantly impact our future operational
and financial profile.
If the Merger is consummated, we anticipate
that our operations will be integrated into MDA Space’s global platform, which may lead to changes in our strategic priorities,
operational structure, and resource allocation. In the short term, we expect to incur transaction-related expenses, including legal, advisory,
and regulatory costs associated with the Merger. These expenses may continue to affect our financial results until the closing or termination
of the Merger Agreement.
Uncertainty regarding the completion
of the Merger may also affect our relationships with customers, suppliers, and employees, which could impact our near-term performance.
Management remains focused on mitigating these potential effects while continuing to pursue growth opportunities in our core markets.
If the Merger is not consummated, we
will evaluate alternative strategic options while continuing to execute our standalone business strategy.
| 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 our 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 and preproduction services and the sale of products, including product prototypes, software, modems and components, including
our proprietary chips.
We recognize revenue from the provision
of development and preproduction 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 our
products, including product prototypes, software, modems, and components 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 development and preproduction 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.
R&D 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 our 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, 2024, our management concluded that we did not meet the aforementioned requirements for capitalization of any R&D
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 (75%-72%),
risk-free interest rate (3.56%-4.12%) and expected life of the instrument (5.35-7 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.
Inventory
Inventories are recognized at the lower
of cost and net realizable value. Cost comprises all costs of purchase and costs of conversion. 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, 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) |
67 |
Executive Chairman of the Board of Directors | ||
|
Nir Barkan |
46 |
Chief Executive Officer | ||
|
Oren Harari |
50 |
Interim Chief Financial Officer | ||
|
Doron Rainish |
69 |
Chief Technology Officer | ||
|
Divaydeep Sikri |
46 |
Vice President and Chief Engineer | ||
|
Stephane Zohar |
58 |
Executive Vice President — VLSI | ||
|
Itzhak Ben Bassat |
56 |
Chief Operating Officer | ||
|
Mary P. Cotton((1)2)((3)(4)((7) |
67 |
Director | ||
|
Yair Shamir(3)(4)(6) |
79 |
Director | ||
|
David L. Willetts(3)(4)(7) |
69 |
Director | ||
|
Richard C. Davis(8) |
59 |
Director | ||
|
Moshe Eisenberg(1)(2)(3)(4)(5) |
58 |
Director | ||
|
Yoram Stettiner(1)(2)((3)(4)(5) |
67 |
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 Israeli 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 2027 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 joining 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., or 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, and became our Chief Executive Officer in June,
2023. Mr. Barkan has previously served as our Chief Commercial Officer from 2014 until 2018. Prior to joining SatixFy, from 2020 to 2023,
Mr. Barkan was a Group Chief Technology Officer and the General Manager as well as a Director of Curvalux UK Limited, or Curvalux, a company
operating in the field of sustainable fixed wireless broadband technology directly or through ARTOM LTD. 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 develo per 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. Mr. Rainish also served
as a member of our board of directors from 2012 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.
Divaydeep
Sikri is a Vice President and the Chief Engineer of SatixFy, positions he has held since joining SatixFy in June 2016. In
this role, Mr. Sikri leads our R&D for Antenna technology, including Digital Beamforming Chip Architecture, RFIC Chip development,
and Antenna system designs and software. Prior to joining SatixFy, Mr. Sikri 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. Sikri 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
R&D 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 solution 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 from 2015 to present. 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 has served as the chair of the UKSA since
2022. 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. From July 2022 until October 2023, 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 November 2022. Dr. Stettiner served as the Chief Scientist Officer
at Arbe Robotics Ltd. from November 2016 to December 31, 2022. Since January 2023, he has been working as a freelance consultant and,
from June 2023 to June 2024, served as the Chief Technology Officer at Anachoic Ltd. 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.
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, 2024 was approximately $4.5 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 2024. It does
not include the grant-date value of share-based compensation awarded in 2024.
As of December 31, 2024, options to
purchase 1,912,953 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 $2.14 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, 2024. The compensation detailed in the table below
refers to actual compensation granted or paid to the director or officer during the year 2024. 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 0.7981 = 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 31, 2024. The compensation
for the remaining individuals in the table below was paid in NIS and converted into U.S. dollars for purposes of the table below at the
exchange rate of NIS 3.647 = 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 31, 2024.
|
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 |
||||||||||||||||||
|
Nir Barkan |
$ |
344,124 |
$ |
111,996 |
$ |
485,447 |
$ |
593,652 |
- |
$ |
1,535,219 |
|||||||||||||
|
Yoav Leibovitch |
$ |
1,200,000 |
- |
$ |
200,000 |
- |
$ |
1,400,000 |
||||||||||||||||
|
Stephane Zohar |
$ |
230,326 |
$ |
54,355 |
$ |
123,159 |
$ |
111,557 |
- |
$ |
519,398 |
|||||||||||||
|
Oren Harari |
$ |
230,326 |
$ |
36,291 |
$ |
76,367 |
$ |
35,149 |
- |
$ |
378,134 |
|||||||||||||
|
Itzik Ben Bassat |
$ |
246,778 |
$ |
42,531 |
$ |
105,103 |
$ |
161,860 |
- |
$ |
556,272 |
|||||||||||||
| (1) |
“Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to our
executive officers and members of the board of directors for the year 2024. |
| (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 our consolidated financial statements for the year ended December 31,
2024, 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. |
Employment and Incentive Arrangements with our Directors
and Executive Officers
We have entered into written employment
agreements with each of our executive officers and services agreements with certain directors. All of these agreements contain customary
provisions regarding noncompetition, confidentiality of information and customary provisions regarding assignment of inventions, as applicable.
However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements
with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the
extent that these liabilities are not covered by directors and officers insurance. Members of our senior management may be eligible for
bonuses in accordance with our compensation policy and as set forth by our board of directors as well as incentive arrangements under
our equity incentive plans.
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. On September 3, 2024, the special general meeting of our shareholders, or the SGM, approved the new terms of compensation
for Mr. Barkan as Chief Executive Officer which will be effective as of June 1, 2023. The compensation to be paid to Mr. Nir Barkan
pursuant to the SGM approval consists of NIS 130,000 monthly gross salary. In addition, the SGM approved an annual bonus based on measurable
targets which will be determined by the Compensation Committee and the Board of Directors, up to a maximum amount of $370,000. As part
of his original agreement, Mr. Barkan was granted 500,000 RSUs, which shall vest quarterly in equal installments over 15 quarters, and
the SGM approved an additional RSUs grant with respect to 1,000,000 Ordinary Shares, subject to the following vesting schedule: the RSUs
shall vest on a quarterly basis over four years as of June 1, 2023, or the Commencement Date, with an initial vesting of 25% of the RSUs
on the first anniversary of the Commencement Date, and thereafter vesting in 12 equal quarterly instalments; the vesting of the RSUs will
accelerate in the event of a ‘change of control’, or a Change of Control, shall mean the acquisition by a person or group
of persons acting together of more than 50% of our issued and outstanding share capital on a fully-diluted basis).
Services Agreement — Mr.
Yoav Leibovitch
SatixFy Israel Ltd. and RaySat Ltd.,
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, our board
approved an amendment, which was approved by our 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 our
consolidated financial statements 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 our consolidated financial statements.
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 our director. With respect to his services as a director, Lord
Willetts shall be entitled to receive annual remuneration and remuneration for participating in meetings at a fixed amount according to
the applicable UK remuneration regulations. Pursuant to this agreement, Lord Willets is entitled to receive 50,000 non-tradable options
exercisable into 50,000 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, our Board approved the appointment of Mr. Yisrael Gewirtz from Fahn Kanne Grant Thornton as our 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 us 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 Israeli 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 |
Introduction
Our board of directors presently consists
of seven (7) members. Our A&R Articles of Association provide that the number of board of directors’ members (including external
directors, if applicable) shall be set by our board of directors provided that it will consist of not less than three and not more than
twelve. Pursuant to the Israeli Companies Law, the management of our business is vested in our board of directors. Our board of directors
may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive
officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our
Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement
that we have entered into with him. All other executive officers are appointed by our Chief Executive Officer. Their terms of employment
are subject to the terms of our compensation policy and any applicable law, and are subject to the approval of the board of directors’
compensation committee, the board of directors, and in some cases of our general meeting of our shareholders, and are subject to the terms
of any applicable employment agreements that we may enter into with them. Our board of directors has established an audit committee and
compensation committee.
Our A&R Articles of Association
provide for a split of the board of directors into three classes with staggered three-year terms (excluding external directors, if applicable).
At each annual general meeting of our shareholders, the election or re-election of directors following the expiration of the term of office
of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such
election or re-election, such that each year the term of office of only one class of directors will expire. The director whom is to be
retired and re-elected shall be the director that served the longest period since its appointment or last re-election or, if more than
one director served the longest time, or if a director who is not to be re-elected agrees to be re-elected, the meeting of the board of
directors which sets the date and agenda for the annual general meeting (acting by a simple majority) will decide which of such directors
will be brought for re-election at the relevant general meeting.
Each director, except external directors (if applicable), will hold office until the
third annual general meeting of our shareholders following his or her appointment (other than in certain cases as described below), or
until he or she resigns or unless he or she is removed by a majority of sixty six and two thirds (66 2/3%) of the votes cast by shareholders
present and entitled to vote at a general meeting or upon the occurrence of certain events, in accordance with the Companies Law and our
A&R Articles of Association.
In addition, under certain circumstances,
our A&R Articles of Association allow our board of directors to appoint directors to fill vacancies on our board of directors, due
to a director no longer serving, or due to the number of directors serving being less than the maximum amount, for the remaining period
of time during which the director whose service has ended was filled would have held office (in case the appointment is due to a director
no longer serving), or for a period in accordance with the class to which he was appointed (in case the appointment is in addition to
the acting directors, subject to the limitation on the number of directors). External directors, if applicable, may be elected for up
to two additional three-year terms after their initial three-year term under certain circumstances, and may be removed from office only
under the limited circumstances set forth in the Israeli Companies Law.
Under the Israeli Companies Law, any
shareholder holding at least one percent of our outstanding voting power may nominate a director at a general meeting of the shareholders.
However, any such shareholder may make such a nomination only if a written and timely notice of such shareholder’s intent to make
such nomination has been given to our board of directors, in accordance with the provisions of our A&R Articles of Association and
the Israeli Companies Law. Any such notice must include certain information, including the consent of the proposed director nominee to
serve as our director if elected, and a declaration that the nominee signed declaring that he or she possesses the requisite skills and
has the availability to carry out his or her duties. Additionally, the nominee must provide details of such skills, and demonstrate an
absence of any limitation under the Israeli Companies Law that may prevent his or her election, and affirm that all of the required election-information
is provided to us, pursuant to the Israeli Companies Law.
However, under exemptions applicable
for Israeli companies whose shares are listed outside of Israel, or the Exemptions Regulations, one of more shareholders may request the
company’s board of directors to include an appointment of a candidate for a position on the board of directors or the termination
of a board member, as an item on the agenda of a future general meeting (if the company sees fit), provided that the shareholder hold
at least five percent (5%) of the voting rights of the company, instead of one percent (1%) required in the past.
Under the Israeli Companies Law, our
board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. In determining
the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of
the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of directors
of our company who are required to have accounting and financial expertise is one.
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 American 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 American 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 American 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 2027 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 Israeli 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 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 American 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.
Alternate Directors
Our amended and restated articles of
association provide, as allowed by the Israeli Companies Law, that any director may, subject to the conditions set thereto including approval
of the nominee by our board of directors, appoint a person as an alternate to act in his place, to remove the alternate and appoint another
in his place and to appoint an alternate in place of an alternate whose office is vacated for any reason whatsoever. Under the Israeli
Companies Law, a person who is not qualified to be appointed as a director, a person who is already serving as a director or a person
who is already serving as an alternate director for another director, may not be appointed as an alternate director.
Nevertheless, a director who is already
serving as a director may be appointed as an alternate director for a member of a committee of the board of directors so long as he or
she is not already serving as a member of such committee, and if the alternate director is to replace an external director, he or she
is required to be an external director and to have either “financial and accounting expertise” or “professional expertise,”
depending on the qualifications of the external director he or she is replacing.
A person who does not have the requisite
“financial and accounting experience” or the “professional expertise,” depending on the qualifications of the
external director he or she is replacing, may not be appointed as an alternate director for an external director. A person who is not
qualified to be appointed as an independent director, pursuant to the Israeli Companies Law, may not be appointed as an alternate director
of an independent director qualified as such under the Israeli Companies Law. Unless the appointing director limits the time or scope
of the appointment, the appointment is effective for all purposes until the appointing director ceases to be a director or terminates
the appointment.
Committees of the Board of Directors
The board of directors has the following two standing statutory committees: an audit
committee and a compensation committee, and a one non-statutory committee: a special committee, tasked with the independent evaluation
and approval of the MDA proposal in light of personal interest of the executive chairman of the Board and the controlling shareholder,
Mr. Yoav Leibovitch, in the MDA proposal.
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 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 American, 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 American rules. The board of directors has determined that each member of the Audit
Committee is “independent” as defined under the NYSE American 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 our 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 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 American,
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 American 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 our company. |
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 Annual Report 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, our 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 our goals) as the basis for compensation variation among our executive officers and considers the internal
ratios between compensation of our 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 our 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 our 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 our 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 our 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 our 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.
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 our controlling shareholder, in connection with the MDA Agreement,
or the MDA Bonus. 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 May 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 our default 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 our certain other potential commercial transactions.
Insurance
Under the Israeli Companies Law, a
company may obtain insurance for any of its office holders against the following liabilities incurred due to acts he or she performed
as an office holder, if and to the extent provided for in the company’s articles of association:
| • |
breach of his or her duty of care to the company or to another person, to the extent such a breach arises
out of the negligent conduct of the office holder; |
| • |
a breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith
and had reasonable cause to assume that his or her act would not prejudice the company’s interests; and |
| • |
a financial liability imposed upon him or her in favor of another person |
We maintain directors’ and officers’
liability insurance currently providing for a total coverage of $30 million for the benefit of all of our directors and officers, with
an annual premium of $0.7 million, which expires in October 2025. The terms for the directors’ and officers’ liability insurance
were approved by our shareholders.
Indemnification
The Israeli Companies Law and the Israeli
Securities Law provide that a company may indemnify an office holder against the following liabilities and expenses incurred for acts
performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided
its articles of association include a provision authorizing such indemnification:
| • |
a financial liability imposed on him or her in favor of another person by any judgment concerning an act performed
in his or her capacity as an office holder, including a settlement or arbitrator’s award approved by a court; |
| • |
reasonable litigation expenses, including attorneys’ fees, expended by the office holder (a) as a result
of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding,
provided that (1) no indictment (as defined in the Israeli Companies Law) was filed against such office holder as a result of such investigation
or proceeding; and (2) no financial liability as a substitute for the criminal proceeding (as defined in the Israeli Companies Law) was
imposed upon him or her as a result of such investigation or proceeding, or, if such financial liability was imposed, it was imposed with
respect to an offense that does not require proof of criminal intent; or (b) in connection with a monetary sanction; |
| • |
reasonable litigation expenses, including attorneys’ fees, expended by the office holder or imposed
on him or her by a court; (1) in proceedings that the company institutes, or that another person institutes on the company’s behalf,
against him or her; (2) in a criminal proceeding of which he or she was acquitted; or (3) as a result of a conviction for a crime that
does not require proof of criminal intent; and |
| • |
expenses incurred by an office holder in connection with an Administrative Procedure under the Securities
Law, including reasonable litigation expenses and reasonable attorneys’ fees. An “Administrative Procedure” is defined
as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures
of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions)
to the Securities Law. |
The Israeli Companies Law also permits
a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability
imposed on him or her, as described above, then the undertaking should be limited and shall detail the following foreseen events and amount
or criterion:
| • |
to events that in the opinion of the board of directors can be foreseen based on the company’s activities
at the time that the undertaking to indemnify is made; and |
| • |
in amount or criterion determined by the board of directors, at the time of the giving of such undertaking
to indemnify, to be reasonable under the circumstances. |
The board of directors has approved
indemnification agreements with all of our directors and with all members of our senior management, which were also approved by our shareholders
at a general meeting. Such indemnification agreements provide 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.
Exemption
Under the Israeli Companies Law, an
Israeli company may not exempt an office holder from liability for a breach of his or her duty of loyalty, but may exempt in advance an
office holder from his or her liability to the company, in whole or in part, for damages caused to the company as a result of a breach
of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exemption is included in
its articles of association. Our amended and restated articles of association provide that we may exempt, in whole or in part, any office
holder from liability to us for damages caused to the company as a result of a breach of his or her duty of care, but prohibit an exemption
from liability arising from a company’s transaction in which our controlling shareholder or officer has a personal interest. Subject
to the aforesaid limitations, under the indemnification agreements, we will exempt and release our office holders from any and all liability
to us related to any breach by them of their duty of care to us to the fullest extent permitted by law.
Limitations
The Israeli Companies Law provides
that we may not exempt or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability
incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity
or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would
not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly
(as opposed to merely negligently); (3) any act or omission committed with the intent to derive an illegal personal benefit; or (4) any
fine, monetary sanction, penalty or forfeit levied against the office holder.
Under the Israeli Companies Law, exemption,
indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors
(and, with respect to directors and the chief executive officer, by the shareholders). However, under regulations promulgated under the
Israeli Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation
committee (and, in case a controlling shareholder is an office holder, the board of directors as well), if the engagement terms are determined
in accordance with the company’s compensation policy that was approved by the shareholders by the same special majority required
to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially
impact the company’s profitability, assets or obligations.
Our amended and restated articles of
association permit us to exempt (subject to the aforesaid limitation), indemnify and insure our office holders to the fullest extent permitted
or to be permitted by the Israeli Companies Law.
The foregoing descriptions summarize
the material aspects and practices of our board of directors. For additional details, we also refer you to the full text of the Israeli
Companies Law, as well as of our amended and restated articles of association, which are exhibits to this Annual Report and are incorporated
herein by reference.
There are no service contracts between
us or our subsidiaries, on the one hand, and our directors in their capacity as directors, on the other hand, providing for benefits upon
termination of service.
| D. |
Employees |
As of December 31, 2024, we had 162
full-time employees, based primarily in Israel, the United Kingdom and Bulgaria, of whom more than 103 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 us and/or our 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 us and our 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, or 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, or 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 us or any of our 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 us or any of our 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 us or any of our 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 us, 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 current executive officers and directors; and |
| • |
All our executive officers and directors, as a group. |
The beneficial ownership of our Ordinary Shares is based on 86,849,556 Ordinary Shares
issued and outstanding as of March 31, 2025.
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.
|
|
|
Number of Ordinary Shares |
|
|
Percentage Owned |
| ||
|
5% Holders (other than executive officers and directors):
|
|
|
|
|
|
| ||
|
Endurance Antarctica Partners, LLC (1)
|
|
|
10,339,439 |
|
|
|
11.4 |
% |
|
FP Credit Partners II, L.P. (2)
|
|
|
5,936,409 |
|
|
|
6.8 |
% |
|
Simona Gat (3) |
17,590,279 |
19.9 |
% | |||||
|
Directors and Executive Officers (4) |
|
|
|
|
|
|
|
|
|
Nir Barkan (11)
|
|
|
896,299 |
|
|
|
* |
|
|
Oren Harari |
|
|
189,971 |
|
|
|
* |
|
|
Itzik Ben Bassat |
|
|
256,250 |
|
|
|
* |
|
|
Mary P. Cotton |
|
|
— |
|
|
|
— |
|
|
Richard C. Davis (1)
|
|
|
— |
|
|
|
— |
|
|
Moshe Eisenberg |
|
|
— |
|
|
|
— |
|
|
Doron Rainish (5) |
|
|
1,032,566 |
|
|
|
1.2 |
% |
|
Yair Shamir (6) |
|
|
— |
|
|
|
— |
|
|
Yoram Stettiner |
|
|
— |
|
|
|
— |
|
|
David L. Willetts (7)
|
|
|
52,798 |
|
|
|
* |
|
|
Yoav Leibovitch (8) |
|
|
23,307,330 |
|
|
|
26.4 |
% |
|
Divaydeep Sikri (9) |
|
|
164,962 |
|
|
|
* |
|
|
Stephane Zohar (10) |
|
|
276,506 |
|
|
|
* |
|
|
All Executive Officers and Directors as a Group (13 individuals)
|
|
|
26,176,682 |
|
|
|
29.1 |
% |
* Less than 1%.
(1) Consists
of 6,574,343 Ordinary Shares, including 500,000 Price Adjustment Shares and 3,765,096 Ordinary Shares underlying the 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) Based
on information contained in the Schedule 13G filed with the SEC on February 13, 2024. The business address for FP
Credit Partners II, L.P. is One Letterman Drive, Building C, Suite 410, San Francisco, California, 94129.
(3) Consists of 16,186,297 Ordinary Shares held directly,
including 9,000,000 Price Adjustment Shares and 1,403,981 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within
60 days of March 31, 2025. The business address for Ms. Gat is 60 Ramat Raziel, Ramat Raziel 90974, Israel.
(4) The business address for each of the directors
and officers of the Company is 12 Hamada St., Rehovot 670315, Israel.
(5) Consists of 883,999 Ordinary Shares held directly and
179,513 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within 60 days of March 31, 2025, and 19,054 RSUs which
will vest within 60 days of March 31, 2025.
(6) Mr. Yair
Shamir is a managing partner and 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 52,798 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within
60 days of March 31, 2025.
(8) Consists of 21,903,349 Ordinary Shares held directly, including 18,000,000 Price Adjustment Shares
and 1,403,981 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within 60 days of March 31, 2025.
(9) Consists of 66,525 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within
60 days of March 31, 2025, and 98,437 RSUs which will vest within 60 days of March 31, 2025.
(10) Consists of 84,740 Ordinary Shares underlying options to acquire Ordinary Shares exercisable within
60 days of March 31, 2025, and 191,766 RSUs which will vest within 60 days of March 31, 2025.
(11) Consists of 208,799 Ordinary Shares held directly which were issued upon exercise of options
and 687,500 RSUs which will vest within 60 days of March 31, 2025.
As of March 17, 2025, we had 33 record
holders of our Ordinary Shares, of which 10 record holders were located in the United States and held approximately 37.5 million Ordinary
Shares. This is not representative of the number of beneficial holders of our Ordinary Shares nor is it representative of where they reside
since many of these shares were held of record by brokers of other nominees.
| B. |
Related Party Transactions |
The following is a description of related
party transactions for the period from January 1, 2024 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, we issued a total of 27,500,000 Price Adjustment Shares with our 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 on Form F-1 (File No. 333-268510), as amended, filed by us and declared effective
by the SEC on January 23, 2023, or the Registration Statement, and within the 10-year period following the closing, the volume
weighted average price, or VWAP, of 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 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 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 Ordinary Shares occurring on or after the Closing. In the event of
a change in control transaction in our company 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 ten (10) years following the date of closing of the Business Combination, then any unvested
Price Adjustment Shares shall automatically be forfeited back to us for no consideration.
A&R Shareholders’
Agreement
Concurrently with the execution of
the Business Combination Agreement, we, the Sponsor and certain shareholders of ours entered into the amended and restated shareholders'
agreement, dated as of March 8, 2022, by and among SatixFy, the Sponsor and certain shareholders of SatixFy, or 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 We 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
amended and restated registration rights agreement, dated as of March 8, 2022, as amended on October 27, 2022 by amendment no.1 to the
Amended and Restated Registration Rights Agreement, or 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
a Warrant Letter Agreement, dated as of January 12, 2023, by and among SatixFy, the Sponsor and Cantor, or
the Warrant Letter Agreement, 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 A&R Warrant Agreement.
ESA Grants
We developed
our chip set with the help of substantial grants from the ESA, sponsored by the UKSA, through ESA’s ARTES program, which have amounted
to over $77.5 million through December 31, 2024. Lord David L. Willetts, a member of our board of
directors, has served as the chair of the UKSA since 2022.
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
ours, that have filed two suits, in an Israeli court in Tel Aviv, against us, 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 us
in exchange for the issuance of identical holdings in us, 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 our company. We intend to vigorously contest the plaintiffs’ claims. We have issued and placed in
trust sufficient shares to provide for the plaintiffs’ alleged stakes in us 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. In January 2025, the court replaced Mr. Shapira with
a new trustee, the former District Court Judge Dr. Adi Zarankin. 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 have filed their
evidence on April and May 2024, followed by the respondents’ evidence, which have been filed on September 2024 and December 2024.
Evidentiary hearings were held in January and March 2025 and additional hearing is scheduled to be held in April 2025. We believe that
these proceedings will not have a material impact on us.
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 us and Endurance. As a result of the default, out of the $29,100,000 previously committed by subscribers pursuant to the Subscription
Agreements, we 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). Due
to lack of ability to locate any U.S. based representative of the plaintiff, we withdrew our compliant in June 2024.
In June 2023, Alta Partners, LLC, or
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.
All settlement payments have been completed.
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 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, 2024.
ITEM 9. THE OFFER AND LISTING
| A. |
Offer and Listing Details |
Our Ordinary Shares are traded on the
NYSE American 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 A&R Articles of Association
is attached as Exhibit 1.1 to this Annual Report. The information called for by this Item is set forth in Exhibit 2.4 to this Annual Report
and is incorporated by reference into this Annual Report.
| 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.C Board Practices – Insurance,”
“Item 6.E Share Ownership,” “Item 7.A. Major
Shareholders,” or “Item 7.B. Related Party Transactions,” above.
| 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 Ordinary Shares
and 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 us, and certain Israeli Government programs that benefit us. This section also contains
a discussion of certain material Israeli tax consequences concerning the ownership and disposition of Ordinary Shares and 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,
we 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.”
We 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 R&D
Israeli tax law allows, under certain
conditions, a tax deduction for expenditures, including capital expenditures related to scientific R&D, for the year in which they
are incurred. Expenditures are deemed related to scientific R&D projects, if:
| • |
The R&D expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
| • |
The R&D must be for the promotion of the company; and |
| • |
The R&D 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 R&D projects. No deduction
under these R&D 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 R&D expenses during the year incurred. There
can be no assurance that such application will be accepted. If we will not be able to deduct R&D expenses during the year of the payment,
we may be able to deduct R&D 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, we are required to comply with the requirements of the Investment Law.
The Investment Law was significantly
amended effective as of April 1, 2005, or the 2005 Amendment, as of January 1, 2011, or the 2011 Amendment and as of January 1, 2017,
or 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.
We currently do 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.
We believe that it may be eligible
to the tax benefits under the 2017 Amendment.
Taxation of our shareholders
Capital Gains Tax on Sales
of Ordinary Shares and 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, or 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, or 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 Ordinary Shares and 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 2024). An Israeli resident individual will generally be subject
to capital gain tax at the rate of 25% (plus surtax of up 5% above certain threshold). 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% (plus surtax of up 5% above certain threshold). 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 2024 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% (plus surtax of up 5% above certain
threshold). 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% (plus surtax of up 5% above certain threshold). 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 5% on annual income (including, but not limited to, dividends, interest and capital
gain) exceeding threshold.
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 Ordinary Shares and Warrants. This discussion
applies only to Ordinary Shares and 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 Ordinary Shares
and 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, or 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. We have 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 Ordinary Shares and/or 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 Ordinary Shares and/or 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 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 Ordinary Shares and/or 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 Ordinary Shares and/or 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 ORDINARY SHARES AND 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
Ordinary Shares and/or 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, Ordinary
Shares and/or Warrants. This discussion does not apply to investors in this special situation.
Ownership and Disposition of Ordinary Shares and
Warrants by U.S. Holders
Distributions on Ordinary Shares
If we make distributions of cash or
property on the Ordinary Shares, such distributions will be treated for U.S. federal income tax purposes first as a dividend to the extent
of our 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. We do not intend to provide calculations of our 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 Ordinary Shares are readily tradable on an established securities market in the United States; |
| • |
We are 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 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 we 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 Ordinary Shares.
Subject to certain exceptions, dividends
on 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 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 Ordinary Shares or 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 Ordinary Shares or 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 Ordinary
Shares or such Warrants, as applicable. Any gain or loss recognized by a U.S. Holder on a taxable disposition of Ordinary Shares or Warrants
generally will be capital gain or loss. A non-corporate U.S. Holder, including an individual, who has held the Ordinary Shares or 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 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 Warrant, a U.S. Holder generally will not recognize gain or loss upon the acquisition
of an Ordinary Share on the exercise of a Warrant for cash. A U.S. Holder’s initial tax basis in our Ordinary Shares received upon
exercise of the Warrant generally should equal the sum of its tax basis in the Warrant exercised therefor and the exercise price. The
U.S. Holder’s holding period for an Ordinary Share received upon exercise of the Warrant will begin on the date following the date
of exercise (or possibly the date of exercise) of the Warrant and will not include the period during which the U.S. Holder held the Warrant.
If a 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 Warrant.
The tax consequences of a cashless
exercise of a 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 Ordinary Shares received generally would equal the U.S. Holder’s basis in the Warrants exercised
therefor. If the cashless exercise is not treated as a gain realization event, a U.S. Holder’s holding period in the Ordinary Shares
would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of the Warrants and will
not include the period during which the U.S. Holder held the Warrants. If the cashless exercise were treated as a recapitalization, the
holding period of the Ordinary Shares would include the holding period of the Warrants exercised therefor.
It is also possible that a cashless
exercise of a 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 Ordinary Shares
or 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 Warrants deemed
surrendered in an amount generally equal to the difference between (i) the fair market value of the Ordinary Shares that would have been
received in a regular exercise of the Warrants deemed surrendered, net of the aggregate exercise price of such Warrants and (ii) the U.S.
Holder’s tax basis in such Warrants. In this case, a U.S. Holder’s aggregate tax basis in the Ordinary Shares received would
equal the sum of (i) U.S. Holder’s tax basis in the Warrants deemed exercised and (ii) the aggregate exercise price of such Warrants.
A U.S. Holder’s holding period for the 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 Warrants and will not include the period during which the U.S. Holder held
the 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 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 Warrants.
Adjustment to Exercise Price
The terms of each Warrant provide for
an adjustment to the number of Ordinary Shares for which the Warrant may be exercised or to the exercise price of the Warrant in certain
events, as discussed under the heading “Description of 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 Warrant or to the
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 Ordinary Shares”).
The rules governing constructive distributions as a result of certain adjustments with respect to a 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 Warrant.
Passive Foreign Investment Company Rules
The treatment of U.S. Holders of the
Ordinary Shares and/or Warrants could be materially different from that described above, if we are 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, we 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 we own, directly or indirectly, 25% or more (by value) of the stock. |
| • |
Whether us or any of our 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 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 we 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 we were considered
a PFIC at any time that a U.S. Holder owns Ordinary Shares and/or Warrants, we 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 our Ordinary Shares and/or Warrants at their fair market value on
the last day of the last taxable year in which we are 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 Ordinary Shares and/or Warrants with respect to which the deemed sale
election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.
For each taxable year that we are treated
as a PFIC with respect to a U.S. Holder’s Ordinary Shares or 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 our Ordinary Shares or Warrants (collectively the “Excess Distribution Rules”), unless the U.S. Holder makes
a valid “qualified electing fund”, or 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 Ordinary Shares or 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 Ordinary Shares and/or
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 we are 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 Ordinary Shares or Warrants cannot be treated as capital
gains, even though the U.S. Holder holds the Ordinary Shares or 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 we may hold, directly or indirectly, that are PFICs
(collectively, “Lower-Tier PFICs”). There can be no assurance, however, that we do 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 our subsidiaries.
If we are a PFIC, a U.S. Holder of
Ordinary Shares (but not Warrants) may avoid taxation under the Excess Distribution Rules described above by making a QEF election. However,
a U.S. Holder may make a QEF election with respect to our Ordinary Shares only if we provide U.S. Holders on an annual basis with certain
financial information specified under applicable U.S. Treasury Regulations. Because we currently do 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 Ordinary
Shares.
A U.S. Holder of Ordinary Shares (but
not 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 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 us.
If a U.S. Holder makes a valid mark-to-market
election with respect to our Ordinary Shares, such U.S. Holder will include in income for each year that we are treated as a PFIC with
respect to such Ordinary Shares an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close
of the U.S. Holder’s taxable year over the adjusted basis in the Ordinary Shares. A U.S. Holder will be allowed a deduction for
the excess, if any, of the adjusted basis of the 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 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 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 Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary Shares,
to the extent the amount of such loss does not exceed the net mark-to-market gains for such Ordinary Shares previously included in income.
A U.S. Holder’s basis in the 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 we make would generally be subject to the rules discussed above under “— Distributions
on 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 our 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 Ordinary Shares and 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 Ordinary Shares or 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 Ordinary Shares and
Warrants by Non-U.S. Holders
Any (i) distributions of cash or property
paid to a Non-U.S. Holders in respect of Ordinary Shares or (ii) gain realized upon the sale or other taxable disposition of Ordinary
Shares or 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 Ordinary Shares” and “— Sale,
Exchange, Redemption or Other Taxable Disposition of Ordinary Shares or 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 Warrant, or the lapse of a 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 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 Ordinary Shares and 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 Ordinary Shares and the proceeds received on sale or other taxable disposition of the Ordinary Shares
or 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 Ordinary Shares or 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 Ordinary Shares and proceeds from the sale of other disposition
of the Ordinary Shares or 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 2024, a hypothetical 10% increase or
decrease in the average value of each of the NIS, GBP and EUR against the U.S. dollar in 2024 would have reduced or increased our operating
loss by approximately $2 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 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.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
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, 2024, 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, 2024, that have materially affected or are
reasonably likely to materially affect our internal control over financial reporting.
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 American 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 |
2024 |
2023 |
||||||
|
(U.S. dollars in thousands) |
||||||||
|
Audit fees (1) |
$ |
294 |
$ |
230 |
||||
|
Audit-related fees (2) |
$ |
108 |
$ |
69 |
||||
|
Tax fees (3) |
- |
$ |
20 |
|||||
|
All Other Fees |
- |
- |
||||||
|
Total |
$ |
403 |
$ |
319 |
||||
| (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-3 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 our accounting, auditing and reporting practices 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 us 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 American, we are permitted to follow certain home country corporate governance practices in lieu of the corporate
governance requirements of the NYSE American. Accordingly, we have elected to comply with the applicable provisions of the Israeli Companies
Law, 5759-1999, or the Israeli Companies Law, with respect to certain corporate governance matters instead of the corresponding NYSE American
corporate governance rules. While we have availed ourselves of this exemption with respect to certain requirements, we intend to comply
with many of the NYSE American corporate governance rules. In accordance with the NYSE American rules, we disclose in this Annual Report
the corporate governance practices we follow under home country practice in lieu of NYSE American requirements and the equivalent provisions
under Israeli law as follows:
| • |
Corporate Governance Guidelines. Unlike the NYSE American corporate governance rules, which
recommend that a listed company implement and publish corporate governance guidelines, we have not adopted or published such guidelines;
|
| • |
Lead Independent Director. While the NYSE American rules encourage the appointment of a lead
independent or non-management director to preside over regularly scheduled board meetings without the participation of management, we
do not have a designated lead independent or non-management director; |
| • |
Compensation Committee. Our compensation committee complies with the requirements of the
Israeli Companies Law but may not meet all of the NYSE American requirements applicable to U.S. domestic public companies. In particular,
under the NYSE American rules, a compensation committee must be composed entirely of directors determined to be independent under the
NYSE American compensation committee standards and must conduct an independence assessment of any compensation consultant, legal counsel,
or other adviser providing services to the committee. In contrast, the Israeli Companies Law imposes different independence criteria for
compensation committee members and does not mandate a similar independence assessment of such advisers; |
| • |
Equity Incentive Plans. We adopt and approve material changes to our equity incentive plans
in accordance with the Israeli Companies Law, which does not require shareholder approval for such actions. This differs from the NYSE
American corporate governance rules, which require shareholder approval before issuing securities in connection with equity-based compensation
of officers, directors, employees, or consultants; |
| • |
Quorum. 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. The Israeli Companies Law provides that a quorum of two or more
shareholders holding at least 25% of the voting rights in person or by proxy is required for the commencement of business at a general
meeting. If a quorum is not present at the general meeting, the meeting is adjourned to the same day in the following week at the same
time and place (unless otherwise specified). At the adjourned meeting, any number of shareholders present in person or by proxy constitutes
a quorum, unless otherwise required by applicable law or our Amended and Restated Articles of Association. |
| • |
Private Placements and Dilutive Events. We follow Israeli corporate governance practices
regarding private placements rather than the NYSE American requirements to obtain shareholder approval for certain dilutive events. Under
NYSE American Sections 711-713, shareholder approval is generally required for issuances that (i) result in a change of control, (ii)
involve the issuance of 20% or more of the company’s outstanding voting power or equity in non-public offerings, or (iii) are related
to certain acquisitions of stock or assets of another company. In contrast, the Israeli Companies Law does not impose equivalent shareholder
approval requirements for such transactions unless they constitute extraordinary transactions with controlling shareholders or other specific
cases as defined under Israeli law. |
| • |
Annual Shareholders Meeting. As opposed to the NYSE American Section 704,
which mandates that a listed company hold its annual shareholders meeting within one year of the company’s fiscal year-end, we are
required, under the Israeli Companies Law, to hold an annual shareholders’ meeting each calendar year and within 15 months
of the last annual shareholders meeting; |
| • |
Director Nominations. As opposed to NYSE American Section 804(a) that mandates
that the board of director nominations must be either selected, or recommended for the board’s selection, by either a Nominating
Committee comprised solely of independent directors or by a majority of the independent directors and that a company must adopt a formal
written charter or board resolution addressing the nominations process and such related matters, we are required, under the Israeli Companies
Law and our A&R Articles of Association, with the exception of directors elected by our board of directors and external directors,
to elect directors in an annual meeting of our shareholders (i) to hold office until the next annual meeting following their election
or (ii) for a three-year term. The nominations for directors, which are presented to our shareholders by our board of directors,
are generally made by the board of directors; and |
| • |
Shareholder approval. We will seek shareholder approval for all corporate
actions requiring such approval under the requirements of the Israeli Companies Law, rather than seeking approval for corporation actions
in accordance with the NYSE American rules. In particular, under NYSE American Sections 711-713, shareholder approval is required
prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based
compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) private placements. In contrast, under
the Israeli Companies Law, shareholder approval is required for, among other things: (i) transactions with directors concerning the terms
of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company),
for which approvals of the compensation committee, board of directors and shareholders are all required, (ii) extraordinary transactions
with controlling shareholders of publicly held companies, which require the special approval, and (iii) terms of employment or other engagement
of the controlling shareholder of us or such controlling shareholder’s relative, which require special approval. In addition, under
the Israeli Companies Law, a merger requires the approval of the shareholders of each of the merging companies. |
Under the Israeli Companies Law, we
will be permitted to create and issue shares having rights different from those attached to the 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.” We 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
We have an insider trading policy governing the purchase, sale and other transactions in our securities that applies to our directors, senior management, employees, and other covered persons, including immediate family members and entities controlled by any of the foregoing persons.
The insider trading policy prohibits, among other things, insider trading and certain speculative transactions in our securities (including short sales, buying put and selling call options and other hedging or derivative transactions in our securities) and establishes a regular blackout period schedule during which directors, senior management, employees, and other covered persons may not trade in our securities, as well as certain pre-clearance procedures that directors and senior management must observe prior to effecting any transaction in our securities.
We believe that the insider trading policy is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and listing standards applicable to us. A copy of the insider trading policy is filed as Exhibit 11 to this Annual Report.
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, or RMT, which regularly interacts with it and with Mr. Assi Levi, our Director of 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.
120
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 our 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
† 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.
% Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. An unredacted copy of the 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:
|
/s/ Nir Barkan | |
|
Name: Nir Barkan
|
||
|
Title: Chief Executive Officer
|
||
|
By:
|
/s/ Oren Harari | |
|
Name: Oren Harari
|
||
|
Title: Interim Chief Financial Officer
|
||
|
Date: April 1 , 2025
|
||
124
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
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-77
|
The amounts are stated in thousands of USD, except for earning per share (“EPS”) data
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, 2024 and 2023, 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, 2024, 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, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and Interpretations (collectively “IFRS”).
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1d to the consolidated financial statements, the Company incurred losses from operations since its inception, and as of December 31, 2024, the Company has an accumulated deficit of $557 million of which $45.7 million was derived during 2024. In addition, a working capital deficit of $32 million, a negative operational cash flow of $17.7 million and have a net debt of $68 million due within twelve months from the date of signing these financial statements which the Company, under current circumstances, does not have the resources to repay. These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1d. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
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 __, 2025
Tel Aviv, Israel
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of USD)
|
March -- 2025
|
||||||
|
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,
|
|||||||||||
|
2024
|
2023
|
||||||||||
|
Note
|
In USD thousands
|
||||||||||
|
LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
|||||||||||
|
CURRENT LIABILITIES:
|
|||||||||||
|
Trade payables
|
3,121
|
1,378
|
|||||||||
|
Contract liabilities
|
9
|
186
|
1,720
|
||||||||
|
European Space Agency (“ESA”) advance payments
|
18(a)
|
|
1,264
|
3,842
|
|||||||
|
Prepayment from Customer
|
8,381
|
3,858
|
|||||||||
|
Advanced payments from MDA Ltd. (“MDA”) against future orders
|
3
|
39,296
|
28,138
|
||||||||
|
Lease liabilities
|
6
|
786
|
639
|
||||||||
|
Other accounts payable and accrued expenses
|
10
|
8,340
|
9,704
|
||||||||
|
Related parties
|
13
|
616
|
740
|
||||||||
|
Total current liabilities
|
61,990
|
50,019
|
|||||||||
|
NON-CURRENT LIABILITIES:
|
|||||||||||
|
Long term loans from financial institutions, net
|
12
|
67,691
|
59,792
|
||||||||
|
Lease liabilities
|
6
|
1,392
|
2,067
|
||||||||
|
Derivatives instruments liabilities
|
14
|
5,719
|
114
|
||||||||
|
Other long-term liabilities
|
15
|
774
|
1,496
|
||||||||
|
Total non-current liabilities
|
75,576
|
63,469
|
|||||||||
|
SHAREHOLDERS’ DEFICIT:
|
17
|
||||||||||
|
Share capital
|
-
|
-
|
|||||||||
|
Share premium
|
453,252
|
451, 093
|
|||||||||
|
Capital reserves
|
1,444
|
1,444
|
|||||||||
|
Accumulated deficit
|
(556,988
|
)
|
(511,323
|
)
|
|||||||
|
Total shareholders’ deficit
|
(102,292
|
)
|
(58,786
|
)
|
|||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
|
35,274
|
54,702
|
|||||||||
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,
|
||||||||||||||
|
|
2024
|
2023
|
2022
|
||||||||||||
|
Note
|
In USD thousands except for EPS data
|
||||||||||||||
|
|
|||||||||||||||
|
Revenues:
|
19
|
||||||||||||||
|
Development services and preproduction
|
13,107
|
8,249
|
10,081
|
||||||||||||
|
Sale of products
|
7,541
|
2,481
|
545
|
||||||||||||
|
Total revenues
|
20,648
|
10,730
|
10,626
|
||||||||||||
|
|
|||||||||||||||
|
Cost of sales and services:
|
20
|
||||||||||||||
|
Development services and preproduction
|
6,153
|
4,930
|
4,166
|
||||||||||||
|
Sale of products
|
2,168
|
1,008
|
332
|
||||||||||||
|
Total cost of sales and services
|
8,321
|
5,938
|
4,498
|
||||||||||||
|
|
|||||||||||||||
|
Gross profit
|
12,327
|
4,792
|
6,128
|
||||||||||||
|
|
|||||||||||||||
|
Research and development expenses, net
|
21
|
22,221
|
29,126
|
16,842
|
|||||||||||
|
Selling and marketing expenses
|
22
|
2,070
|
2,866
|
2,335
|
|||||||||||
|
General and administrative expenses
|
23
|
10,825
|
14,561
|
9,249
|
|||||||||||
|
Loss from operations
|
(22,789
|
)
|
(41,761
|
)
|
(22,298
|
)
|
|||||||||
|
|
|||||||||||||||
|
Finance income
|
266
|
83
|
17
|
||||||||||||
|
Finance expenses
|
(17,504
|
)
|
(12,129
|
)
|
(9,919
|
)
|
|||||||||
|
Derivatives revaluation
|
14
|
(5,605
|
)
|
(17,217
|
)
|
(37,377
|
)
|
||||||||
|
Other income
|
3
|
-
|
41,657
|
5,474
|
|||||||||||
|
Listing expenses
|
-
|
-
|
(333,326
|
)
|
|||||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
7
|
(33
|
)
|
(226
|
)
|
(360
|
)
|
||||||||
|
Loss before income taxes
|
(45,665
|
)
|
(29,593
|
)
|
(397,789
|
)
|
|||||||||
|
Tax expenses
|
24
|
-
|
(122
|
)
|
-
|
||||||||||
|
Loss for the period
|
(45,665
|
)
|
(29,715
|
)
|
(397,789
|
)
|
|||||||||
|
|
|||||||||||||||
|
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
|
|||||||||||
|
Total comprehensive loss for the period
|
(45,665
|
)
|
(30,324
|
)
|
(394,517
|
)
|
|||||||||
|
|
|||||||||||||||
|
Basic and diluted loss per share (in dollars)
|
25
|
(0.54
|
)
|
(0.37
|
)
|
(13.25
|
)
|
||||||||
|
Basic and diluted weighted average common shares outstanding (quantity)
|
83,777
|
80,975
|
30,031
|
||||||||||||
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)
For the year ended December 31, 2024
|
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, 2024
|
83,114,193
|
-
|
-
|
-
|
-
|
451,093
|
(511,323
|
)
|
1,444
|
(58,786
|
)
|
|||||||||||||||||||||||||
|
Shares issued to employees
|
2,558,281
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
Share based payments
|
-
|
-
|
-
|
-
|
-
|
2,159
|
-
|
-
|
2,159
|
|||||||||||||||||||||||||||
|
Comprehensive loss for the year
|
-
|
-
|
-
|
-
|
-
|
-
|
(45,665
|
)
|
-
|
(45,665
|
)
|
|||||||||||||||||||||||||
|
Balance as of December 31, 2024
|
85,672,474
|
-
|
-
|
-
|
-
|
453,252
|
(556,988
|
)
|
1,444
|
(102,292
|
)
|
|||||||||||||||||||||||||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(in thousands of USD)
For the year ended December 31, 2023
|
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 sale of Satixfy Space Systems UK Ltd.
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(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)
For the year ended December 31, 2022
|
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 the OTC Equity Prepaid Forward Transaction (“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 CASH FLOWS
(in thousands of USD)
|
For the year ended December 31
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Loss for the year
|
(45,665
|
)
|
(29,715
|
)
|
(397,789
|
)
|
||||||
|
Adjustments to reconcile net profit to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
1,050
|
1,245
|
1,162
|
|||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
33
|
226
|
360
|
|||||||||
|
Finance expenses on loans
|
7,919
|
6,613
|
5,211
|
|||||||||
|
Change in the fair value of derivatives
|
5,605
|
17,227
|
37,374
|
|||||||||
|
Share based payments
|
2,159
|
2,950
|
570
|
|||||||||
|
Adjustment to Loss due to SPAC transaction
|
-
|
-
|
332,272
|
|||||||||
|
Increase in trade accounts receivable
|
(1,645
|
)
|
(885
|
)
|
(587
|
)
|
||||||
|
Decrease in contract assets
|
2,605
|
1,220
|
537
|
|||||||||
|
Decrease (increase) in inventory
|
196
|
(644
|
)
|
(146
|
)
|
|||||||
|
Decrease (increase) in other current assets
|
(1,025
|
)
|
3,508
|
(7,007
|
)
|
|||||||
|
Increase (decrease) in trade payables
|
1,743
|
(75
|
)
|
(6,236
|
)
|
|||||||
|
Decrease in ESA prepayments
|
(2,578
|
)
|
(1,268
|
)
|
(7,609
|
)
|
||||||
|
Decrease in other accounts payable and accrued expenses
|
(3,023
|
)
|
(2,601
|
)
|
(1,571
|
)
|
||||||
|
Increase in prepayments from customers
|
4,523
|
682
|
2,936
|
|||||||||
|
Increase in prepayments from MDA (see Note 3)
|
11,158
|
18,139
|
8,875
|
|||||||||
|
Increase (Decrease) in liability for royalties payable
|
(722
|
)
|
100
|
168
|
||||||||
|
Agreement with MDA (see Note 3)
|
-
|
(41,657
|
)
|
-
|
||||||||
|
Increase in other long-term liabilities
|
-
|
300
|
-
|
|||||||||
|
Net cash used in operating activities
|
(17,667
|
)
|
(24,635
|
)
|
(31,480
|
)
|
||||||
|
Cash flows from investing activities
|
||||||||||||
|
Decrease (increase) in long-term bank deposit
|
23
|
(7
|
)
|
(11
|
)
|
|||||||
|
Proceeds from selling a subsidiary (see Appendix C)
|
-
|
17,583
|
-
|
|||||||||
|
Proceeds from promissory notes |
20,000
|
-
|
-
|
|||||||||
|
Purchase of property, plant and equipment
|
(1,258
|
)
|
(235
|
)
|
(571
|
)
|
||||||
|
Net cash provided (used in) investing activities
|
18,765
|
17,341
|
(582
|
)
|
||||||||
|
Cash flows from financing activities
|
||||||||||||
|
Receipt of long-term loans from a financial institution
|
-
|
-
|
52,837
|
|||||||||
|
Repayment of loan to shareholder
|
-
|
-
|
(5,000
|
)
|
||||||||
|
Repayment of loans from banks
|
-
|
-
|
(13,818
|
)
|
||||||||
|
Repayment of royalty liability
|
-
|
(11
|
)
|
(429
|
)
|
|||||||
|
Payments of lease liabilities
|
(597
|
)
|
(927
|
)
|
(1,029
|
)
|
||||||
|
Issuance of shares- SPAC transactions
|
-
|
-
|
1,362
|
|||||||||
|
Option exercises to shares by employees
|
2
|
26
|
100
|
|||||||||
|
Exercise of warrants, net
|
-
|
-
|
6,500
|
|||||||||
|
Issuance of shares to FPA (see Note 16)
|
-
|
10,026
|
-
|
|||||||||
|
Net cash provided by financing activities
|
(595
|
)
|
9,114
|
40,523
|
||||||||
|
Increase in cash and cash equivalents
|
503
|
1,820
|
8,461
|
|||||||||
|
Cash and cash equivalents balance at the beginning of the year
|
13,979
|
11,934
|
3,854
|
|||||||||
|
Effect of changes in foreign exchange rates on cash and cash equivalents
|
(49
|
) |
225
|
(381
|
)
|
|||||||
|
Cash and cash equivalents balance at the end of the year
|
14,433
|
13,979
|
11,934
|
|||||||||
SATIXFY COMMUNICATIONS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of USD)
|
For the year ended December 31
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Appendix A – Cash paid and received during the year for:
|
||||||||||||
|
Interest paid
|
2,307
|
1,241
|
921
|
|||||||||
|
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 with registered address at 12 Hamada St. Rehovot, Israel, in accordance with the provisions of the Israeli Companies Law 5759-1999, as amended 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 (New Version), 5721-1961.
|
| b. |
On April 1, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MDA Space and Robotics Limited (“MDA Space”), and its two wholly owned subsidiaries, pursuant to which the company will undergo a two-step merger transaction, which upon completion, the company will be the surviving entity and become an indirect wholly owned subsidiary of MDA Space (the “Merger”). The Merger consideration will consist of cash in the amount of $2.10 representing an equity value of approximately $192 million for each ordinary share, no par value (“Ordinary Shares”) held (see Note 26(a)).
|
| c. |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
|
| d. |
As of December 31, 2024, the Company had accumulated losses of $557 million, of which $45.7 million was derived during 2024, a working capital deficit of $32 million a negative operational cash flow of $17.7 million and has a net debt of $68 million due within 12 months from the date of signing these financial statements which the Company, under current circumstances, does not have the resources to repay, unless restructured, and will require additional funding to maintain the Company’s ongoing operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
|
| e. |
On July 29, 2024, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, Ordinary Shares in an “at-the-market” offering, for an aggregate offering price of up to $7,145. The Company will pay the Sales Agent a commission equal to 3.0% of the gross sales price per share sold pursuant to the terms of the Sales Agreement. The Company is not obligated to sell any Ordinary Shares under the Sales Agreement and no assurance can be given that the Company will sell any Ordinary Shares under such agreement, or, if it does, as to the price or number of such shares that the Company sell or the dates on which any such sales will take place.
|
NOTE 1 - GENERAL (CONT.):
| f. |
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.
|
| g. |
The Business Combination:
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 the Business Combination 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 "Business Combination") 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 Business Combination.
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 the 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 of the 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 the Forward Purchase Transaction ("FPA") with Vellar Opportunity Fund SPV LLC – Series 7 (“Vellar”) and ACM ARRT G LLC (“ACM”), which was terminated on October 31, 2023 (“Vellar”, and together with ACM, the “Seller”) (see Note 16).
As part of the Business Combination Agreement, the Company has also issued different derivatives (see Note 14).
|
NOTE 1 - GENERAL (CONT.):
| h. |
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 and radio frequency integrated circuit) based on technology designed to meet a variety of applications and services, such as broadband aviation, internet of things (IOT), mobility and maritime, and operating on geostationary, low earth orbit and medium earth orbit 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 modem chips. Jet Talk is engaged in the development and marketing of a unique antenna for in-flight-connectivity passenger aircraft and computers that receive broadband video transmissions from satellites.
|
| i. |
The Company operates primarily through four wholly owned subsidiaries: SatixFy Israel Ltd., SatixFy UK Limited (“SatixFy UK”), SatixFy Bulgaria Eood (“SatixFy Bulgaria”) and SatixFy US LLC and until October 2023 SatixFy Space Systems UK Ltd. (hereinafter: “SSS”) (which was sold in October 2023 to MDA, see Note 3) (collectively together with Company, the "Group"), all of which have been consolidated in these consolidated financial statements.
|
NOTE 1 - GENERAL (CONT.):
|
Name
|
Holding percentage as of December 31,
|
Held By
|
Country of incorporation
|
||||||||
|
2024
|
2023
|
||||||||||
|
SatixFy Israel Ltd.
|
100
|
%
|
100
|
%
|
the Company
|
Israel
|
|||||
|
SatixFy UK
|
100
|
%
|
100
|
%
|
the Company
|
England and Wales
|
|||||
|
SatixFy Bulgaria
|
100
|
%
|
100
|
%
|
SatixFy UK
|
Bulgaria
|
|||||
|
SatixFy US LLC
|
100
|
%
|
100
|
%
|
the Company
|
USA
|
|||||
|
Endurance
|
100
|
%
|
100
|
%
|
the Company
|
Cayman Islands
|
|||||
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
|
|||||||
|
2024
|
2023
|
|||||||||
|
Jet Talk
|
51
|
%
|
51
|
%
|
SatixFy UK
|
UK
|
||||
| j. |
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.
|
NOTE 1 - GENERAL (CONT.):
| k. |
Israel - Hamas War:
The Company is incorporated under the laws of the State of Israel, and the principal offices are located in Israel. Accordingly, political, economic, and geo-political instability in Israel may affect the Company’s 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 the Company’s operations. Ongoing and revived hostilities in the Middle East or other Israeli political or economic factors, could harm the Company’s operations and solution development and cause any future sales to decrease.
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. Since the commencement of these events, there have been additional active hostilities, including with Hezbollah in Lebanon, the Houthis terrorist group which controls parts of Yemen, and Iran. While none of the Company’s 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 the Company and its ability to effectively conduct the Company’s operations. Moreover, the Company 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 currently occurring hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. Five of the Company’s 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, the Company relies on service providers located in Israel and its 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.
|
NOTE 1 - GENERAL (CONT.):
| k. |
Israel - Hamas War (cont):
As of April 1, 2025, any impact as a result of the number of absences of the Company’s personnel and personnel at the Company’s service providers or counterparties located in Israel has been manageable. However, military service call ups that result in absences of personnel from the Company’s service providers or contractual counterparties in Israel may disrupt the Company’s operations and absences for an extended period of time may materially and adversely affect the Company’s 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 the Company’s operations and results of operations. The Company’s 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 the Company’s potential damages. Any losses or damages incurred by the Company could have a material adverse effect on its business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm the Company’s results of operations.
|
F - 17
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
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. The financial statements have been prepared under the historical cost convention except for certain financial liabilities which are measured at fair value until 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 - 18
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.
|
F - 19
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| 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:
Revenue recognition from Development of Services – Revenue from development services is recognized using the percentage of completion method by comparing project expenses to its budgeted amounts to determine the percentage of work completed. The progress towards the fulfilment of the Company's performance obligations is calculated using methods based on outputs such as a performance survey completed as of any given date. Revenue is then recognized based on this completion percentage.
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.
|
F - 20
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| 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 U.S. 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 U.S. 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. 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.
|
F - 21
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| D. |
Foreign currency (Cont.):
|
|
Change in Subsidiary’s functional currency
In 2024, the Company noted that following the sale of SSS, the weight of Satixfy UK’s U.S. dollars revenues and expenses is expected to significantly increase. Also, the volume of intra-group transactions with SatixFy UK is expected to increase, and SatixFy UK started retaining most of its cash in U.S. dollars bank accounts. As a result, the Company re-evaluated the functional currency of SatixFy UK and determined that a change in its functional currency from British Pound (“GBP”) to U.S. dollars was appropriate. The change in functional currency for SatixFy UK has been applied prospectively, and exchange differences arising from the translation of a foreign operation in other comprehensive income were not reclassified from equity to profit or loss. From January 1, 2024, the Company ceased translating SatixFy UK’s assets and liabilities to its own functional currency. Accordingly, all transactions in GBP were accounted as foreign currency transactions. There Company examined the impact of that change and found that there was no material impact on both consolidated net loss and other comprehensive income (loss) utilizing U.S. dollars as the functional currency of SatixFy UK as of December 31, 2024, compared to the related impact if the functional currency of SatixFy UK would have remained GBP.
|
| 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.
|
F - 22
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| 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. 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.
|
F - 23
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| H. |
Research and development costs (Cont):
|
|
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).
|
F - 24
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| I. |
Leases (Cont.):
|
|
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. 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 during 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 - 25
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.
|
F - 26
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| K. |
Transactions with related parties (Cont.):
|
|
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. |
Israel Innovation Authority 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.
|
F - 27
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| 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 14).
|
F - 28
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| 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).
|
|
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. 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.
|
F - 30
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Q. |
Financial instruments (Cont.):
|
|
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.
|
| R. |
Financial instruments:
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.
|
|
De-recognition:
|
| ● |
Financial assets - the Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows.
|
| ● |
Financial Liabilities - the Company derecognizes financial liability when its contractual obligations are discharged or cancelled or expire.
|
F - 31
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| R. |
Financial instruments (Cont.):
|
|
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 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 by 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.
|
F - 32
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| U. |
Impairment of non-financial assets (Cont):
|
|
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.
|
| V. |
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).
|
F - 33
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| W. |
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.
|
| X. |
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 the 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.
|
F - 34
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Y. |
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.
|
| Z. |
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 - 35
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Z. |
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 - 36
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| Z. |
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 an 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:
The Business Combination has been accounted for as a capital reorganization. Under this method of accounting, Endurance was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of the Company issuing shares in the Business Combination for the net assets of Endurance as of the Closing, accompanied by a recapitalization. The net assets of Endurance are stated at historical cost, with no goodwill or other intangible assets recorded.
|
F - 37
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| AA. |
Reverse Merger (cont.):
|
|
The Company determined that it was the accounting acquirer based on evaluation of the following facts and circumstances:
|
| • |
the Company’s existing shareholders have the greatest voting interest in the combined entity.
|
| • |
the Company’s directors represent the majority of the board of directors of the combined company following the consummation of the Business Combination.
|
| • |
the Company’s senior management were the senior management of the combined company following the consummation of the Business Combination.
|
| • |
the Company’s 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 the 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 PAS in the scope of IAS 32 will be classified as financial liabilities, as they fail the fixed-for-fixed requirement.
|
F - 38
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.):
| AB. |
Changes in accounting policies:
Several amended standards became applicable for the current reporting period. The Company did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards:
New IFRS adopted in the period
The following amendments are effective for the period beginning January 1, 2024:
|
| a. |
Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7): These amendments have no effect on the measurement or presentation of any items in the Interim Condensed Consolidated Financial Statements of the Company but affect the disclosure of accounting policies of the Company.
|
| b. |
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16): These amendments had no material effect on the Interim Condensed Consolidated Financial Statements of the Company.
|
| c. |
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1): These amendments had no material effect on the Interim Condensed Consolidated Financial Statements of the Company.
|
|
New IFRS not yet effective
On April 9, 2024, the International Accounting Standards Board published IFRS 18, “Presentation and Disclosure in Financial Statements,” which replaces IAS 1, “Presentation of Financial Statements” and is mandatorily effective for annual reporting periods beginning on or after January 1, 2027; the main changes are aggregation and disaggregation of information including the introduction of overall principles for how information should be aggregated and disaggregated in financial statements. Aggregation and disaggregation of information including the introduction of overall principles for how information should be aggregated and disaggregated in financial statements. disclosures related to management defined performance measures.
The Company is currently assessing the impact of IFRS 18 on the financial statements, but at this stage it is unable to estimate such an impact. The effect of the new standard, however it may be, will only affect matters of presentation and disclosure.
|
F - 39
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 3 – MDA AGREEMENT:
In August 2023, the Company announced a $60 million transaction with 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 (see also Note 1(e)).
The MDA Agreement is a combination of a $40 million share purchase agreement selling the Company’s holdings in SSS 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. SSS 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.
In connection with the closing of the MDA Agreement, 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 which were paid to the Company in consideration for the shares of SSS, of which, $1 million was paid at closing while the remaining $2 million to be received after eighteen month from closing upon satisfaction of the provided reps and warranties by the Company.
The Promissory Notes are settled as follows: $17 million were paid at closing in October 2023 and the remaining $20 million were paid over seven monthly instalments during the year 2024 of $2.85 million each, with the last payment made in July 2024.
F - 40
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 3 - MDA AGREEMENT (CONT.):
As part of the MDA Agreements, SatixFy UK 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 the remaining $5 million were paid during 2024 (“Pre-Purchase Amount”).
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 the receipt by the company of each respective installments of funds comprising the refunded amount. 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.
On October 17, 2024, the Master Purchase agreement was amended Amendment No. 1 to add $3 million to the outstanding amount of the advanced payments under the Master Purchase Agreement.
On March 15, 2025 and April 1, 2025 the Master Purchase Agreement was further amended by Amendment No. 2 and Amendment No. 3 respectively (see Note 26)
F - 41
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 4 - CONTRACT ASSETS:
|
December 31, 2024
|
December 31, 2023
|
|||||||
|
Balance at the beginning of the year
|
4,091
|
5,035
|
||||||
|
Revenue recognition in the period, net
|
-
|
643
|
||||||
|
Fulfilment through invoices issuance
|
(2,605
|
)
|
(1,876
|
)
|
||||
|
Currency translation adjustments
|
-
|
289
|
||||||
|
Balance at the end of the year
|
$
|
1,486
|
$
|
4,091
|
||||
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, 2024
|
December 31, 2023
|
||||||
|
Raw materials
|
$
|
675
|
$
|
1,397
|
||||
|
Finished goods inventory
|
604
|
78
|
||||||
|
|
$
|
1,279
|
$
|
1,475
|
||||
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 five years. While the lease agreements of the vehicles are up to three 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 August 2026. The Company also leases an office in Pennsylvania USA that serves as a research and development center. The lease agreement for the office in Pennsylvania expires in September 2025.
F - 42
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
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, 2024
|
|
|
3,839
|
|
|
|
184
|
|
|
|
4,023
|
|
|
Value adjustment
|
|
|
48
|
|
|
|
4
|
|
|
|
52
|
|
|
December 31, 2024
|
|
|
3,887
|
|
|
|
188
|
|
|
|
4,075
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2024
|
|
|
(1,718
|
)
|
|
|
(70
|
)
|
|
|
(1,788
|
)
|
|
Additions
|
|
|
(545
|
)
|
|
|
(63
|
)
|
|
|
(608
|
)
|
|
December 31, 2024
|
|
|
(2,263
|
)
|
|
|
(133
|
)
|
|
|
(2,396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Book value December 31, 2024
|
|
|
1,624
|
|
|
|
55
|
|
|
|
1,679
|
|
F - 43
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 6 - LEASE LIABILITIES AND RIGHT OF USE ASSETS (CONT.):
|
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
|
|||||||||
| c. |
Details regarding lease transactions:
|
|
For the year ended
|
||||||||
|
December 31, 2024
|
December 31, 2023
|
|||||||
|
Interest expenses in respect of lease liabilities
|
282
|
337
|
||||||
|
Lease principal payments during the year
|
597
|
927
|
||||||
NOTE 7 - INVESTMENT IN JET-TALK:
In March 2018 Satixfy UK entered into 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 SatixFy UK had committed to provide to 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, research and development (“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.
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 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 SatixFy UK and 49% held by STE. Jet Talk developed the industry’s first Aero in- flight-connectivity 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 chief executive officer, 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.
|
|
December 31, 2024
|
December 31, 2023
|
December 31, 2022
|
|||||||||
|
Net loss in Company share
|
65
|
442
|
705
|
|||||||||
|
Company's share in the loss of a company accounted by equity method, net
|
33
|
226
|
360
|
|||||||||
F - 45
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment consist of the following as of December 31, 2024, and 2023:
|
Computers
|
Leasehold
improvements
|
Furniture
|
Machinery and
Equipment
|
Total
|
||||||||||||||||
|
Cost
|
||||||||||||||||||||
|
January 1, 2024
|
1,192
|
533
|
352
|
1,055
|
3,132
|
|||||||||||||||
|
Additions
|
1,074
|
106
|
-
|
78
|
1,258
|
|||||||||||||||
|
December 31, 2024
|
2,266
|
639
|
352
|
1,133
|
4,390
|
|||||||||||||||
|
Accumulated Depreciation
|
||||||||||||||||||||
|
January 1, 2024
|
(987
|
)
|
(290
|
)
|
(191
|
)
|
(244
|
)
|
(1,712
|
)
|
||||||||||
|
Additions
|
(141
|
)
|
(95
|
)
|
(35
|
)
|
(123
|
)
|
(394
|
)
|
||||||||||
|
December 31, 2024
|
(1,128
|
)
|
(385
|
)
|
(226
|
)
|
(367
|
)
|
(2,106
|
)
|
||||||||||
|
Net Book value December 31, 2024
|
1,138
|
254
|
126
|
766
|
2,284
|
|||||||||||||||
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET (CONT.):
|
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
|
|||||||||||||||
Depreciation expenses totaled $394 and $308 the year ended December 31, 2024 and December 31, 2023, respectively.
F - 47
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, 2024
|
December 31, 2023
|
|||||||
|
Balance at the beginning of the year
|
1,720
|
622
|
||||||
|
Expenses (revenues) recognition in the period, net
|
(1,534
|
)
|
819
|
|||||
|
Currency translation adjustments
|
-
|
279
|
||||||
|
Balance at the end of the year
|
$
|
186
|
$
|
1,720
|
||||
NOTE 10 - OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
|
|
December 31, 2024
|
December 31, 2023
|
||||||
|
Liabilities in respect of employees, wages and institutions in respect of wages
|
3,846
|
2,584
|
||||||
|
Accrued expenses
|
1,241
|
6,862
|
||||||
|
Accrued interest of long-term bank loans (Note 12)
|
2,823
|
-
|
||||||
|
Liabilities to government institutions due to grants received
|
308
|
136
|
||||||
|
Tax accrual
|
122
|
122
|
||||||
|
8,340
|
9,704
|
|||||||
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 - 48
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET:
On February 1, 2022, the Company entered into a $55 million Credit Agreement (the “2022 Credit Agreement" with affiliates of 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.
As consideration for the loan, the Company also issued to the lenders under the 2022 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%.
F - 49
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET (CONT.):
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 PIK 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 of SOFR + 8.5% provided that the interest rate shall not exceed a rate per annum equal to 12.5%, and the issuance by the Company of 5,100,000 ordinary shares, of which 1,000,000 ordinary shares were issued in a private placement within 30 days, which shares will be subject to substantially the same terms governing the PAS (see Note 14(g)) previously issued in connection with the business combination with Endurance.
On October 31, 2023, the Company entered into another Waiver and Amendment to the 2022 Credit Agreement, whereby the lenders provided their consent to the MDA Agreement 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 PAS 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.
F - 50
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 12 - LONG TERM LOANS FROM FINANCIAL INSTITUTIONS, NET (CONT.):
The finance incomes resulted from the modification amounted to $2.5 million. On April 1, 2025, the Company entered into the Sixth Amendment to the 2022 Credit Agreement (see Note 26 b)
|
|
For the year ended
December 31
|
|||||||
|
|
2024
|
2023
|
||||||
|
Long term loans from financial institutions
|
67,691
|
59,792
|
||||||
|
Accrued interest (see Note 10)
|
2,823
|
-
|
||||||
Financial covenants:
According to the 2022 Credit Agreement, as amended, 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.
As of the date of these audited financial statements, the Company is in compliance with the covenants.
NOTE 13 - 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 April 30, 2023, the Company 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.
NOTE 13 - RELATED PARTIES (CONT.):
The Company and RaySat Ltd. (“RaySat”), an entity organized under the laws of the State of Israel and controlled by Mr. Yoav Leibovitch, the Company’s Chairman of the board of directors and one of the Company’s 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, February 24, 2022, October 27, 2022 and February 25, 2024 ). 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, the Company’s shareholders approved a one-time special success bonus of up to $1 million in the aggregate to the Company’s 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 the Company has 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.
F - 52
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 13 - RELATED PARTIES (CONT.):
For the year ended December 31, 2024:
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
|
Outstanding balances with related parties:
|
|
For the year ended
December 31
|
|||||||
|
|
2024
|
2023
|
||||||
|
Assets
|
||||||||
|
Jet Talk
|
46
|
75
|
||||||
|
Total Assets
|
46
|
75
|
||||||
|
Labilities
|
||||||||
|
Raysat
|
335
|
550
|
||||||
|
Current Chief Executive Officer
|
281
|
190
|
||||||
|
Total Liabilities
|
616
|
740
|
||||||
F - 53
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - 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 Company’s Chief Financial Officer, which includes examining certain exposures to risks, such as exchange rate risk, credit risk. In 2024 and 2023, 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, 2024
|
December 31, 2023
|
|||||||
|
Cash
|
14,433
|
13,979
|
||||||
|
Trade accounts receivables
|
3,905
|
2,260
|
||||||
|
Other accounts receivable
|
2,570
|
2,053
|
||||||
|
Promissory Notes
|
-
|
20,000
|
||||||
|
Other long-term receivables
|
-
|
2,000
|
||||||
|
Contract assets
|
1,486
|
4,091
|
||||||
|
Total
|
22,394
|
44,383
|
||||||
F - 54
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT:
Credit risk (cont.):
| 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.
As of the balance sheet date, the Group’s exposure to currencies as follows:
|
|
December 31, 2024
|
||||||||||||||||||||
|
NIS
|
EUR
|
GBP
|
USD
|
Total
|
||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
1,320
|
401
|
284
|
12,428
|
14,433
|
|||||||||||||||
|
Trade receivables
|
2
|
-
|
13
|
3,890
|
3,905
|
|||||||||||||||
|
Prepaid expenses
and other account receivables
|
145
|
60
|
251
|
2,114
|
2,570
|
|||||||||||||||
|
Contract assets
|
-
|
-
|
20
|
1,466
|
1,486
|
|||||||||||||||
|
1,467
|
461
|
568
|
19,898
|
22,394
|
||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Current maturities long-term loans
|
-
|
-
|
-
|
(2,312
|
)
|
(2,312
|
)
|
|||||||||||||
|
Liabilities in respect of leases- short term
|
(480
|
)
|
(71
|
)
|
(216
|
)
|
(19
|
)
|
(786
|
)
|
||||||||||
|
Advanced payments from MDA against future orders
|
-
|
-
|
-
|
(39,296
|
)
|
(39,296
|
)
|
|||||||||||||
|
Trade payables
|
(976
|
)
|
(339
|
)
|
(459
|
)
|
(1,347
|
)
|
(3,121
|
)
|
||||||||||
|
Payables and credit balances
|
(5,112
|
)
|
(36
|
)
|
(1,061
|
)
|
(2,331
|
)
|
(8,540
|
)
|
||||||||||
|
(6,568
|
)
|
(446
|
)
|
(1,736
|
)
|
(45,305
|
)
|
(54,055
|
)
|
|||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Liability for IIA royalties
|
(774
|
)
|
-
|
-
|
-
|
(774
|
)
|
|||||||||||||
|
Derivatives liabilities |
-
|
-
|
-
|
(5,719
|
)
|
(5,719
|
)
|
|||||||||||||
|
Long term loans from banks
|
-
|
-
|
-
|
(67,691
|
)
|
(67,691
|
)
|
|||||||||||||
|
Liabilities in respect of leases- long term |
(1,165
|
)
|
(51
|
)
|
(176
|
)
|
-
|
(1,392
|
)
|
|||||||||||
|
Net balances
|
(7,040
|
)
|
(36
|
)
|
(1,344
|
)
|
(98,817
|
)
|
(107,237
|
)
|
||||||||||
F - 55
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| a. |
Currency risk (cont.):
|
|
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- short term
|
(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
|
)
|
(34,353
|
)
|
(38,026
|
)
|
|||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Liability for IIA Royalties
|
(1,196
|
)
|
-
|
-
|
-
|
(1,196
|
)
|
|||||||||||||
|
Liabilities in respect of leases- long term
|
(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 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| b. |
Sensitivity analysis:
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, 2024
|
December 31, 2023
|
|||||||
|
Linked to NIS
|
(7,040
|
)
|
(3,478
|
)
|
||||
|
10
|
%
|
10
|
%
|
|||||
|
(704
|
)
|
(348
|
)
|
|||||
|
Linked to EUR
|
(36
|
)
|
2,477
|
|||||
|
10
|
%
|
10
|
%
|
|||||
|
(4
|
)
|
248
|
||||||
|
Linked to GBP
|
(1,344
|
)
|
(975
|
)
|
||||
|
10
|
%
|
10
|
%
|
|||||
|
(134
|
)
|
(97
|
)
|
|||||
| 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 - 57
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - 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, 2024
|
Within 30 days
|
1-12 Months
|
1-3 Years
|
Total
|
||||||||||||
|
Liabilities in respect of leases- short term
|
(164
|
)
|
(622
|
)
|
-
|
(786
|
)
|
|||||||||
|
Trade payables
|
(1,264
|
)
|
(1,857
|
)
|
-
|
(3,121
|
)
|
|||||||||
|
Payables to related parties
|
(100
|
)
|
(516
|
)
|
-
|
(616
|
)
|
|||||||||
|
Other Accounts Payable
|
(2,008
|
)
|
(6,532
|
)
|
-
|
(8,540
|
)
|
|||||||||
|
Long term loans from banks, net
|
-
|
-
|
(67,691
|
)
|
(67,691
|
)
|
||||||||||
|
Liabilities in respect of leases- long term
|
-
|
-
|
(1,392
|
)
|
(1,392
|
)
|
||||||||||
|
Advanced payments from MDA against future orders
|
-
|
(39,296
|
)
|
-
|
(39,296
|
)
|
||||||||||
|
Liability for IIA royalties
|
-
|
-
|
(774
|
)
|
(774
|
)
|
||||||||||
|
Derivatives liabilities
|
-
|
-
|
(5,719
|
)
|
(5,719
|
)
|
||||||||||
|
Total
|
(3,536
|
)
|
(48,823
|
)
|
(75,576
|
)
|
(127,935
|
)
|
||||||||
F - 58
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| c. |
Liquidity risks (cont.):
|
|
|
||||||||||||||||
|
December 31, 2023
|
Within 30 days
|
1-12 Months
|
1-3 Years
|
Total
|
||||||||||||
|
Liabilities in respect of leases- short term
|
(172
|
)
|
(467
|
)
|
-
|
(639
|
)
|
|||||||||
|
Trade payables
|
(258
|
)
|
(1,120
|
)
|
-
|
(1,378
|
)
|
|||||||||
|
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- long term
|
-
|
-
|
(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
|
)
|
(8,617
|
)
|
(99,446
|
)
|
(110,074
|
)
|
||||||||
| d. |
Fair value of financial instruments measured at fair value on a periodic basis:
|
|
Level
|
December 31, 2024
|
December 31, 2023
|
||||||||||
|
Financial Liabilities:
|
||||||||||||
|
Advanced payments from MDA against future orders
|
3
|
39,296
|
28,138
|
|||||||||
|
PAS
|
3
|
5,719
|
114
|
|||||||||
|
Total
|
45,015
|
28,252
|
||||||||||
F - 59
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| 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).
|
| 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 thousand and was divided between equity and liability as follow: $3,490 thousand for equity and $416 thousand 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 of $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 resulting in gross proceeds to the Company of $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
|
-
|
|||
|
Changes in fair value recognized in finance expenses
|
-
|
|||
|
Balance at December 31, 2024
|
-
|
|||
F - 60
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| f. |
Price Adjustment Shares:
Immediately following the closing of the SPAC transaction, the Company issued a total of 27,500,000 PAS with the Company’s founders receiving 27,000,000 PAS (18,000,000 to Yoav Leibovitch and 9,000,000 to Simona Gat) and the Sponsor receiving 500,000 PAS. In November 2023, the Company issued to FP, 1,000,000 PAS as part of an amendment signed between the parties (see Note 12e).
The PAS vest upon three price adjustment achievement dates: (i) one-third of the PAS will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement and within the 10-year period following the closing, the volume weighted average price (“VWAP”) of the Company’s 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 PAS will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement and within the 10-year period following the closing, the VWAP of the Company’s 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 PAS will vest if at any time forty-five (45) days after the date of effectiveness of the applicable registration statement and within the 10-year period following the closing, the VWAP of the 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 Company’s 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 PAS not earlier vested will vest immediately prior to the closing of such change in control. If the PAS 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 PAS shall automatically be forfeited back to the Company’s for no consideration.
|
F - 61
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 14 - FINANCIAL INSTRUMENTS – RISK MANAGEMENT (CONT.):
| f. |
Price Adjustment Shares (cont.):
|
|
The Company allocated the PAS between the identifiable assets received and the listing expense 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.
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%.
For the purpose of measuring the fair value of the PAS derivatives on December 31, 2024 a probability weighted average value was calculated given the Merger Agreement occurs, or does not occur due to the triggered acceleration under a change of control event. The inputs used in determining the fair value are price per share of $1.53, a risk-free interest rate of 4.54% and 4.51% and an expected exercise period of 8.8685 years and 8.0603 years, with an expected volatility of approximately 65%.
|
|
PAS
|
||||
|
Balance on December 31, 2022
|
19,898
|
|||
|
Changes in fair value recognized in finance expenses
|
(19,784
|
)
|
||
|
Balance on December 31, 2023
|
114
|
|||
|
Changes in fair value recognized in finance expenses
|
5,605
|
|||
|
Balance on December 31, 2024
|
5,719
|
|||
NOTE 15 - OTHER LONG-TERM LIABILITIES:
| a. |
Breakdown of other long-term liabilities:
|
|
|
December 31,
2024
|
December 31,
2023
|
||||||
|
Liability for IIA Royalties (see Note 15(b) below)
|
774
|
1,196
|
||||||
|
Alta settlement (see note 18)
|
-
|
300
|
||||||
|
774
|
1,496
|
|||||||
NOTE 15 - OTHER LONG-TERM LIABILITIES (Cont.):
| 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.
In accordance with its commitment, the Company is 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 U.S. 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%. 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,
2024
|
December 31,
2023
|
||||||
|
|
||||||||
|
As of January 1
|
1,196
|
1,107
|
||||||
|
Principal Payments
|
-
|
(11
|
)
|
|||||
|
Amounts recognized as an offset from research and development expenses
|
-
|
(113
|
)
|
|||||
|
Revaluation of the liability
|
(422
|
)
|
213
|
|||||
|
As of December 31,
|
774
|
1,196
|
||||||
F - 63
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 16 - FORWARD PURCHASE AGREEMENT:
On October 24, 2022, 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 Ordinary Shares and will sell the Ordinary Shares under certain conditions. Pursuant to the Forward Purchase Agreement, the Sellar were paid 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. On January 23, 2023, Upon the effective date of the applicable registration statement, the Seller paid to the Company approximately $10.0 million (including $8.4 million with respect to the Ordinary Shares purchased by the Seller prior to the closing of the Business Combination and $1.6 million with respect to the additional Ordinary Shares issued to the Seller 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.
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. Pursuant to the Termination Agreements, the parties agreed (i) to terminate the Forward Purchase Agreement, (ii) that Vellar and ACM relinquish their rights to an aggregate of 3,599,444 Ordinary Shares (which includes all remaining Ordinary 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.
NOTE 16 - FORWARED PURCHASE AGREEMENT (CONT.):
|
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 November 21, 2022
|
(36,692
|
)
|
||
|
Issuance of Ordinary Shares on November 21, 2022
|
49,998
|
|||
|
Revaluation as of December 31, 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
|
-
|
NOTE 17 - EQUITY:
| a. |
Ordinary Share:
Ordinary Share confer 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 addition 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. Following the Business Combination Transaction, all preferred shares were converted into Ordinary Shares and the Company has canceled the par value of the Ordinary Shares. In addition, the Company conducted a forward share split of one-for- 1.046.
|
| c. |
Share Option Plan:
On September 4, 2013, the Company’s board directors adopted time the 2013 Share Incentive Plan pursuant to which the board of directors is authorized to issue share options, restricted shares and other awards to officers, directors, employees, consultants and other service providers of SatixFy Israel Ltd. Each option is exercisable for one Ordinary Share for a period of ten years from the grant date.
|
NOTE 17 - EQUITY (CONT.):
| c. |
Share Option Plan (Cont.):
On May 12, 2020, the Company’s board of directors adopted the 2020 Share Award Plan replacing the 2013 Share Incentive Plan and all the grants to Israeli employees were replaced with grants issued pursuant 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 options granted to a participant or, upon exercise or vesting thereof the underlying Ordinary Shares, are to be held by a 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.
During the year ended December 31, 2024, the Company granted options to purchase up to 377,767 Ordinary Shares to certain employees. The Company didn’t grant options in 2023. In 2024 and 2023, options to purchase 127,596 Ordinary Shares and 229,760 Ordinary Shares, respectively were exercised by employees. As of December 31, 2024 and 2023, options to purchase 5,525,883 Ordinary Shares and 6,214,912 Ordinary Shares, respectively, were outstanding, respectively, of which 4,943,452 Ordinary Shares were exercisable as of December 31, 2024.
In 2023, the Company granted for the first time 7,808,280 Restricted Share Units (“RSUs”) 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 a one year cliff and thereafter vest on a quarterly basis over the remaining three years. The RSUs that were granted to the Israeli employees were granted under Section 102 of the Israeli Tax Ordinance. As of December 31, 2024, and 2023 4,890,652 and 5,219,101 RSUs, respectively were 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 ten years from the grant date.
|
NOTE 17 - EQUITY (CONT.):
| c. |
Share Option Plan (Cont.):
On May 12, 2020 following the board of directors adopted the 2020 EMI Share Option Plan replacing the EMI Share Option Scheme and all of the grants held by the Company’s employees in the UK under the EMI Share Option Scheme were replaced with grants under the 2020 EMI Share Option Plan.
Pursuant to the EMI Share Option Scheme, 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 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. If an employee terminates its employment with the Group, for whatever reason (including death), all options are forfeited immediately. All options granted are non-assignable under the rules of the EMI Share Option Scheme and any Ordinary Shares ultimately acquired upon the exercise of an option are subject to certain restrictions as stipulated in the Company’s articles of association.
|
NOTE 17 - EQUITY (CONT.):
| c. |
Share Option Plan (cont.):
The following table summarizes information about options outstanding and exercisable as of December 31, 2024 and 2023:
|
| 2024 | 2023 | |||||||||||||||
|
Weighted
|
Weighted | |||||||||||||||
| Number | Average |
Number |
Average | |||||||||||||
|
of
|
Exercise |
of
|
Exercise |
|||||||||||||
|
Options
|
Price | Options | Price | |||||||||||||
|
USD
|
USD | |||||||||||||||
|
Options outstanding at the beginning of year:
|
6,215
|
1.67
|
7,297
|
1.76
|
||||||||||||
|
Changes during the year:
|
||||||||||||||||
|
Granted
|
378
|
0.71
|
-
|
-
|
||||||||||||
|
Exercised
|
299
|
-
|
38
|
0.68
|
||||||||||||
|
Forfeited
|
971
|
0.71
|
1,044
|
2.38
|
||||||||||||
|
Options outstanding at end of year
|
5,323
|
1.86
|
6,215
|
1.67
|
||||||||||||
|
Options exercisable at year-end
|
4,808
|
1.93
|
3,171
|
0.9
|
||||||||||||
|
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.
|
NOTE 17 - EQUITY (CONT.):
| d. |
Share Option Plan (cont.):
The RSUs to employees and services providers outstanding as of December 31, 2024 and 2023 as follows:
|
|
|
Number of RSUs
|
|||||||
|
2024
|
2023
|
|||||||
|
Outstanding at beginning of year
|
5,219,101
|
-
|
||||||
|
Granted
|
2,450,583
|
7,808,280
|
||||||
|
Vested
|
(2,466,858
|
)
|
(902,753
|
)
|
||||
|
Forfeited
|
(300,353
|
)
|
(1,686,426
|
)
|
||||
|
Unvested as of December 31
|
4,902,473
|
5,219,101
|
||||||
NOTE 18 - MATERIAL COMMITMENTS:
| a. |
The Company’s UK subsidiaries had signed several agreements with the European Space Agency (the “ESA” or the “Agency”) as part of the Agency’s Advanced Research in Telecommunication Systems (“ARTES”) programs. The objectives of the 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.
|
NOTE 18 - MATERIAL COMMITMENTS (CONT.):
|
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.
SatixFy Israel Ltd. also participated in programs that were financed by the Government of Israel for supporting research and development activities. As of December 31, 2024, SatixFy Israel Ltd. had obtained grants from the IIA to finance its research and development programs in the aggregate amount of $6,334 thousand, of which $3,289 thousand bear royalties.
|
| b. |
In return for financing these programs, SatixFy Israel Ltd.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, 2024, and December 31, 2023 SatixFy Israel Ltd. has accumulated liability in respect of royalties to the IIA in the amount of $169 and $136 thousand, respectively, representing 3%- 4% of revenues.
As of December 31, 2024, and December 31, 2023, SatixFy Israel Ltd. had a contingent liability to IIA in the amount of $774 thousand and $1,197 thousand, respectively, based on discounted future royalties at an interest rate of 20%, respectively.
|
|
|
NOTE 18 - MATERIAL COMMITMENTS (CONT.):
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. In January 2025, the court replaced Mr. Shapira with a new trustee. 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 filed their evidence during the months of April and May 2024, followed by the Company’s evidence, which were filed in September 2024 and December 2024. Evidentiary hearings are scheduled to be held between January and March 2025. The Company believes that these proceedings will not have a material impact on the Company.
On October 27, 2022, Sensegain Prodigy Cayman Fund SP3 (“Sensegain”) defaulted on its commitment to purchase units it had subscribed for in connection with a private placement financing pursuant to its Subscription Agreement with the Company and Endurance. As a result of the default, out of the $29,100 thousand previously committed by subscribers pursuant to the Subscription Agreements, the Company received $20 million in proceeds from the private placement financing. On December 12, 2022, the Company 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). Due to lack of ability to locate any U.S. based representative of the plaintiff, the Company withdrew its complaint in June 2024.
NOTE 18 - MATERIAL COMMITMENTS (CONT.):
Legal proceedings (cont.):
In June 2023, Alta Partners, LLC (“Alta”) filed a complaint against the Company in the U.S. District Court for the Southern District of New York claiming unspecified damages for an alleged breach by the Company 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. Following receipt of the first installment on January 24, 2024, Alta dismissed the matter. All settlement payments have been completed.
Covenants:
The FP loan has several covenants (see Note 12).
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, (“LIBOR”) applicable to U.S. 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 19 - 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,
|
||||||||||||||||||||||||
|
2024
|
2023
|
2022
|
||||||||||||||||||||||
|
USD thousands
|
%
|
USD thousands
|
%
|
USD thousands
|
%
|
|||||||||||||||||||
|
Airbus
|
-
|
0
|
%
|
188
|
2
|
%
|
318
|
3
|
%
|
|||||||||||||||
|
Telesat
|
350
|
2
|
%
|
4,250
|
40
|
%
|
5,326
|
50
|
%
|
|||||||||||||||
|
iDirect
|
4,260
|
21
|
%
|
2,605
|
24
|
%
|
489
|
5
|
%
|
|||||||||||||||
|
Trustcom
|
-
|
0
|
%
|
-
|
0
|
%
|
1,108
|
10
|
%
|
|||||||||||||||
|
MDA
|
4,639
|
22
|
%
|
1,497
|
14
|
%
|
1,907
|
18
|
%
|
|||||||||||||||
|
Confidential Customer
|
10,635
|
52
|
%
|
1,309
|
12
|
%
|
1,162
|
11
|
%
|
|||||||||||||||
F - 73
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 20 - COST OF SALES AND SERVICES:
|
December 31, 2024
|
December 31, 2023
|
December 31, 2022
|
||||||||||
|
Salaries and related expenses
|
4,900
|
2,861
|
3,556
|
|||||||||
|
Materials and models
|
2,701
|
2,276
|
707
|
|||||||||
|
Depriciation
|
31
|
34
|
21
|
|||||||||
|
Chip development tools and subcontractors
|
689
|
767
|
214
|
|||||||||
|
Total
|
8,321
|
5,938
|
4,498
|
|||||||||
NOTE 21 - RESEARCH AND DEVELOPMENT EXPENSES, NET:
|
For the year ended
|
||||||||||||
|
December 31, 2024
|
December 31, 2023
|
December 31, 2022
|
||||||||||
|
Salaries and related expenses, including stock based compensation
|
17,574
|
23,450
|
21,923
|
|||||||||
|
Chip pre-production and development tools
|
9,930
|
9,917
|
7214
|
|||||||||
|
Government support and grants
|
(5,283
|
) |
(4,241
|
) |
(12,295
|
) | ||||||
|
Total
|
22,221
|
29,126
|
16,842
|
|||||||||
NOTE 22 - SELLING AND MARKETING EXPENSES:
|
For the year ended
|
||||||||||||
|
December 31, 2024
|
December 31, 2023
|
December 31, 2022
|
||||||||||
|
Salaries and related expenses
|
2,070
|
2,866
|
2,335
|
|||||||||
|
Total
|
2,070
|
2,866
|
2,335
|
|||||||||
F - 74
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 23 - ADMINISTRATIVE AND GENERAL EXPENSES:
|
For the year ended
|
||||||||||||
|
December 31, 2024
|
December 31, 2023
|
December 31, 2022
|
||||||||||
|
Salaries and related expenses
|
4,928
|
5,925
|
8,175
|
|||||||||
|
Depreciation and overheads
|
160
|
93
|
132
|
|||||||||
|
Expected credit loss (a)
|
-
|
1,876
|
-
|
|||||||||
|
Other expenses (b)
|
5,737
|
6,667
|
942
|
|||||||||
|
Total
|
10,825
|
14,561
|
9,249
|
|||||||||
| (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 18) and expenses associated with a new directors’ and officers’ insurance policy.
|
NOTE 24 - TAX EXPENSES:
| A. |
Tax base:
UK:
The corporate tax rate in the UK was between 19% to 25% depending on total taxable profits in the years 2024 and 2023.
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 2024 and in 2023.
|
F - 75
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 24 - 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 2024 and 2023. 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, 2024, the Company has a carry-forward loss of approximately $103 million, according to the 2024 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 25 - 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
|
||||||||||||
|
2024
|
2023
|
2022
|
||||||||||
|
Calculation of basic earnings per share:
|
||||||||||||
|
Net loss
|
(45,665
|
)
|
(29,715
|
)
|
(397,789
|
)
|
||||||
|
Loss attributed to shareholders in USD
|
(45,665
|
)
|
(29,715
|
)
|
(397,789
|
)
|
||||||
|
Weighted average number of Ordinary Shares
|
83,777,164
|
80,974,653
|
30,030,805
|
|||||||||
|
Basic and diluted loss per share attributed in USD
|
(0.54
|
)
|
(0.37
|
)
|
(13.25
|
)
|
||||||
F - 76
SATIXFY COMMUNICATIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of USD)
NOTE 26 – SUBSEQUENT EVENTS:
| A. |
On April 1, 2025, the Company entered into an Agreement and Plan of Merger with MDA Space, and its two wholly owned subsidiaries, pursuant to which the Company will undergo a two-step merger transaction, which upon completion, the company is the surviving entity and becoming an indirect wholly owned subsidiary of MDA Space (“the Merger”).
Upon completion of the Merger, the Company’s shareholders will be entitled to receive the Merger Consideration consisting of cash in the amount of $2.10 (without interest) for each Ordinary Share held, subject to the withholding of any applicable taxes and the terms of the Merger Agreement. The Merger Agreement also provides for the treatment of the Company’s outstanding equity awards and warrants.
The Merger Agreement provides for a 45-calendar day Go-Shop Period beginning on the date of the Merger Agreement, during which the Company may, subject to compliance with the terms of the Merger Agreement, solicit, encourage, entertain, discuss and negotiate inquiries, proposals or offers in respect of potential alternative transactions.
If the Company receives a definitive agreement with respect to a Superior Proposal during the Go-Shop Period and enters into such definitive agreement, the Company will be required to pay MDA Space a termination fee of $5 million. In all other circumstances described in the Merger Agreement, including if MDA Space terminates the Merger Agreement due to the Company’s breach of its non-solicit obligations or, in certain cases, if the Company enters into an alternative transaction after termination of the Merger Agreement, the Company will be required to pay to MDA Space a termination fee of $10 million.
|
| B. |
On April 1, 2025, concurrently and contingent upon signing on the Merger Agreement, the Company entered into a Sixth Amendment to the 2022 Credit Agreement, whereby the lenders provided their consent to the Merger and provides that the interests payable on March 31, 2025 and on June 30, 2025 will be added to the principal of the term loan on a “pay in kind” basis.
|
| C. |
On March 13, 2025 the Master Purchase Agreement was amended (by Amendment No. 2), to add $1.8 million to the outstanding amount and provided for an additional $2.7 million upon the Company meeting certain milestones
|
| D. |
On April 1, 2025, the Master Purchase Agreement was further amended (by Amendment No. 3) to provide for additional $5.5 million in three installments associated with the completion of the Merger and contingent upon execution of the Merger Agreement.
|
F - 77
