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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Star Energy Group Plc | LSE:STAR | London | Ordinary Share | GB00BZ042C28 | ORD 0.002P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 12.075 | 11.75 | 12.45 | 152,491 | 08:00:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computers & Software-whsl | 4.04M | -1.01M | -0.0079 | -4.75 | 4.8M |
From Apr 2019 to Apr 2024
TIDMSTAR
RNS Number : 0520H
Starcom PLC
08 March 2018
8 March 2018
Starcom Plc
("Starcom" or the "Company")
Final Results
Starcom (AIM: STAR), which specialises in the development of wireless solutions for the remote tracking, monitoring and protection of a variety of assets, announces its Final Results for the year ended 31 December 2017.
HIGHLIGHTS
-- Revenues for the year were $5.4m (2016: $5.1m), an increase of 6% -- Gross profits significantly increased by 46% to $2.1m (2016: $1.4m) -- Gross margin rose to 38.2% (2016: 27.7%)
-- EBITDA loss excluding share options provision was $193,000 (2016: loss of $781,000, after also adjusting for inventory writedown)
-- Net loss after taxation reduced to $1.3m (2016: $2.0m) including a charge of $204,000 (2016: $59,000) for exchange rate differences
-- Three major contracts signed in H2 2017, some revenue already recognised in 2017
POST PERIOD HIGHLIGHTS
-- Revenues in first quarter of 2018 expected to be approximately $1m (Q1 2017: $765,000)
Avi Hartmann, CEO of Starcom, commented, "2017 proved to be a turning point in the history of Starcom, with significant progress being made both in the development of our technology and the acceptance of that technology by some major companies and organisations.
"Despite the unfortunate errors made in our announcement in January of our expected results for 2017 we have, most importantly, delivered improvements in both revenues and gross margins, as well as significantly reducing losses.
"2018 has begun strongly, with more visibility than normal at this time of year on future orders, and with a number of new projects under active discussion. Although the current year is at an early stage, the indications we have point to good growth in revenues and a continuing improvement in gross margins."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
For further information, please contact:
Starcom Plc
Michael Rosenberg, Chairman 07785 727 595
Avi Hartmann, CEO +972 5447 35663
Northland Capital Partners Limited (Nominated Adviser and Broker) 020 3861 6625
Edward Hutton / David Hignell (Corporate Finance)
John Howes (Sales and Broking)
Peterhouse Corporate Finance (Joint Broker) 020 7469 0930
Lucy Williams / Charles Goodfellow / Eran Zucker
Leander PR (Financial PR) 07795 168 157
Christian Taylor-Wilkinson
CHAIRMAN'S STATEMENT
2017 marks a major step forward for Starcom becoming profit making, hopefully in 2018, with gross profits up by 46% to $2.1m (2016: $1.4m) and net loss reduced by 33% to $1.3m ($2.0m). After adjusting for a $174,000 provision for share option costs (2016: $21,000), the EBITDA loss reduced significantly to $193,000 (2016: loss $781,000, as also adjusted for inventory writedown). The main underlying drivers of the profitability improvement were an 8% reduction in overheads and increased gross profits thanks to a higher proportion of the more profitable products in the sales mix.
Revenues for the year increased by 6% to $5.4m (2016: $5.1m), representing a positive momentum that is continuing into 2018. Revenue growth was moderated by a delay in delivery of certain 2017 orders into January and February of this year.
The audited results for 2017 reflect a significant reduction in net loss after taxation compared with the previous year and are consistent with the Board's revised indication for the outturn for the year as announced on 22 February 2018. Nevertheless, as stated at the time, these results differ materially from the Board's original expectations for the results for 2017 (which were subject to audit) as announced in January 2018. This is due to the erroneous exclusion of provisions for share option costs, exchange rate differences and certain other overheads which came to light during the audit process. Further details concerning these variances are set out in a separate section below. It is regrettable that inaccurate information was published, which was due in part to the interruption caused by a complete changeover of the finance department in the last few months of the year combined with the appointment of a new CFO. The Board is now satisfied that an extensive evaluation of procedures and systems conducted together with the auditors will prevent non recurrence of such events.
PRODUCT REVIEWS
Helios
Helios has been Starcom's "bread and butter" product for many years now, and the Company has been working hard to change the focus from it being a commodity car tracking product by leveraging its unique inherent technological flexibility in order to meet more specialised needs and markets.
As part of its continuous improvement process in 2017, the Helios has been equipped with a new CAN BUS interface (which interconnects components inside a vehicle), supporting over 1,300 types of vehicles representing over 97% of the target market. The new adapter offers easier installation, with more precise telemetry readings from the vehicle, and a wide range of parameters received directly from the vehicle's computer. These parameters allow even more efficient fleet management for the end client. This integration removes a significant market barrier in the high-end market that can have a significant influence on the Helios sales potential in 2018.
Through a partnership with one of the largest cash security and transport companies in France, the Helios is now successfully embedded in ATMs all over the country. During Q4 2017, over a thousand units were sold and forecasts for 2018 predict that several thousand more units will be sold for this project. As is our usual business practice, we cannot disclose specific unit numbers.
The integration process of the Helios and the approval of Starcom as an OEM supplier for a large electric motorbike manufacturer in the US were successfully completed in 2017. The first motorcycles to be equipped with Starcom's technology are planned to reach the market in Q4 2018. It is anticipated that this will lead to further growth in unit sales during the following three years.
The Company was selected for a pilot stage as one of two shortlisted companies (out of 15 bidders) in one of world's largest tenders for a hybrid (satellite connectivity with cellular) fleet management and security solution issued by the United Nations. The pilot has now been completed successfully and we are waiting for the final results of the tender. While success cannot be guaranteed, it is clear that to reach this stage of the tender is a major endorsement of our technology.
Helios represented approximately 58% of hardware revenues.
Watchlock
With a successful launch of the Watchlock Pro, Starcom sold several thousand units of Watchlock in 2017. In parallel, we are progressing with the development of new variants of this product: Watchlock Cube is planned to be launched in Q3 2018 and the Watchlock III during 2018. which will introduce a true revolution in asset protection and monitoring.
In 2017, Watchlock sales increased by 37% compared to 2016, although this product only accounted for approximately 6% of hardware revenues. Our current pipeline of sales opportunities includes one large potential deal for Watchlock.
Tetis
The final quarter of 2017 marked a breakthrough for the Tetis family of products, with several significant events.
During 2017 Starcom introduced, for the first time, a hybrid container tracking solution called Tetis R hybrid, combining both GSM and Iridium satellite communication. Compared to alternative solutions, the Tetis is unique by offering an easy Plug and Play installation process and a wider range of powerful connectivity options to external sensors and mobile devices. The communication between the connected objects (such as sensors operated by battery) is based on low bit rate. Starcom predicts that this type of communication will have global coverage in the next few years and will offer a more efficient way to communicate with IoT (Internet of Things) products. In addition, it will allow Mesh network communication between Starcom devices in predefined locations such as warehouses or vessels and GEO-location processing without the need of using a GPS module. We have improved battery consumption of the unit and upgraded the main CPU to output a wider range of trip parameters.
A new commercial agreement was signed with a new client specialising in insurance solutions for the maritime industry, for several thousand of Tetis units planned for delivery over the next three years. In addition, an existing, long-term partner of the Company has increased its Tetis unit order by over 400% during 2017 alone.
The Tetis family of products accounted for approximately 20% of hardware revenues. The more profitable Tetis family of products has a direct influence on the positive growth in gross profits.
Kylos
2017 was dramatically important for the Kylos family of products. Leading companies and global organisations have tested, approved and embraced Kylos as their go-to technical solution, including a major European industrial group, whom as previously reported, has purchased 1200 units all of which have been delivered.
Significant amounts of Kylos Air units were sold in Q4 2017 with an expectation of high follow on sales during the next three years.
The Kylos Air is one of only a very small number of products in the world that can meet the tough technical requirements of all aviation and air cargo organisations for monitoring goods in air transit. We have strong hopes of seeing more companies adopt this product, and the significant benefits it brings, over the coming years.
The Kylos family accounted for approximately 16% of revenues and, like Tetis, directly contributed to the increase in gross profits of the Company in 2017.
New product - IoT platform
During the second half of 2017, Starcom developed its new IoT platform in response to productivity and efficiency improvement needs that we identified in the specialised area of agricultural irrigation.
The platform combines all of the most common communication interfaces including, LoRa (Long Range), BLE (Bluetooth Low Energy), Cellular and Iridium (Satellite). The platform allows both digital and analogue interface with external sensors as well as a sophisticated API (interface) with third party platforms for increased efficiency.
Our first client to enjoy the benefits of this platform will be CropX (www.cropx.com). CropX has developed one of the most sophisticated sensors in the world to control humidity levels and fertilizer levels and these will be run over Starcom's new platform to allowing a farmer a more efficient irrigation regime, saving significantly on water and irrigation products. CropX has so far purchased 1,000 units in Q4 of 2017 and has already placed orders in the first quarter of 2018, with the expectation of further orders during the year.
SAS
During 2017 Starcom completed the development of a new control centre for its SAS platform. This new platform allows clients to provide emergency centres and control room services with a very low cost and in this way to expand their activities to new markets and industry segments. During Q4 2017, we accomplished the first commercial setup of the new control centre application with the largest SVR (stolen vehicle recovery) provider in Eastern Europe.
FINANCIAL REVIEW
Group revenue for the year was $5.44m, a 6% improvement (2016 $5.13m). Most of the revenues were achieved in the second half of 2017, being $3.54m, a 35% improvement (H2 2016: $2.62m).
Gross margins were 38.2%, compared with 27.7% in 2016. This improvement was achieved thanks to a higher proportion of the more profitable products in the sales mix.
The Group's R&D expenses increased by 25% compared to 2016, to enable acceleration of the shift towards the newer, higher margin products.
General and Administrative expenses reduced by 8% through headcount cuts and savings in office expenses. These impacted mainly the second half of 2017. These expenses included non-cash provisions such as $174,000 for options granted during 2016-2017.
Operating losses decreased by almost half to $889,000 (2016: $1.7m).
The Group recorded an increase in financing costs, mainly due to the devaluation of the US dollar compared with the Israeli Shekel during the first half of 2017.
The Group balance sheet shows a trade receivables increase of $381,000, generated from aggressive sales activity in the last quarter of 2017. To support the increased sales effort, the Group increased its inventory levels to $1.48m compared to the 2016 level of $1.26m.
The Company improved its outstanding debtor collection processes and noted a higher collections volume during the Q4 2017, particularly in emerging markets. The Company prioritised this important aspect of the collection process to improve its cash flow.
Trade payables at year end were $1.5m, similar to 2016.
Net cash used in operating activities for the period was $1.1m compared with $472,000 in 2016, mainly due to the increase in inventory and trade receivables levels.
The Company used the opportunity of its recent placing in January 2018 to repay all of its $131,000 of unsecured loans including the outstanding balance due to YA II PN Ltd.
Variances from 18 January 2018 Trading Update
The variances between the consolidated net loss after taxation of $1.3m as reported today and the breakeven position anticipated in January 2018 were as follows:
1. With regards to revenues and gross margin, certain deliveries could not be recognised as falling due within the full year 2017 accounts, though they will be recognised this year and, in addition, the cost of goods was increased by additional amortisation of approximately $150,000. Together with certain credit notes issued, this had the effect of reducing gross margin to 38% and reducing operating profit by $246,000.
2. Certain General & Administrative costs relating to the Jersey holding company and other items were omitted in error from total costs. These totaled $618,000 which also included the amount of $174,000 for the share option costs
3. No provision had been made for exchange rate differences amounting to $203,000. 4. The remaining balance included various items that required adjusting during the audit process.
As previously stated, the Board expects that the improvements made to the Group's accounting systems and controls will ensure that no such errors or omissions can occur in the future.
OUTLOOK
Revenues already secured in the first two months of this year coupled with the high levels of activity and enquiries, indicate to the Board that, at this early point in the year, sales in 2018 should comfortably exceed sales of 2017. The level of firm orders for the first quarter of 2018 is very encouraging and the recent placing of shares has enabled production to keep pace with this high level of activity. Starting the year with such levels is unprecedented, compared to previous years, when sales in the first quarter have tended to be slow. Revenues expected for the first quarter of 2018 are estimated at $1m (2017: $765,000).
The Group is now able to use its market-leading technical abilities and advantages to win new clients with higher technological requirements. These clients generally have higher stability and financial strength. This should also help in growing the recurring SAS revenues which, by their very nature, contribute a near 100% gross margin component to the revenue mix. While revenues from this source were static last year it is anticipated that there will be further growth during 2018 as more units are connected.
In a recent industry survey, Starcom was ranked among the top 15 companies in the world (known as the 'A list' in smart tracking) that support the fixed and mobile tracking of assets. This achievement was significant, as Starcom was placed amongst some of the largest telecom and IT brands on the world. The market is expected to grow at 25% per annum over the next few years (Source: Compass Intelligence A List 2018).
Finally, with improved gross margins already achieved and the good sales momentum already experienced, the Group is on target towards becoming EBITDA profitable this year.
Michael Rosenberg
Non Executive Chairman
7 March 2018
STARCOM Plc
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
Hot Features
Premium
December 31,
Note 2017 2016
------ ------------------
ASSETS
NON-CURRENT ASSETS :
Property, plant and equipment, net 6 303 303
Intangible assets, net 7 2,457 2,601
Income Tax Authorities 44 34
Total Non-Current Assets 2,804 2,938
------ ------------------
CURRENT ASSETS:
Cash and cash equivalents 93 35
Short-term bank deposit 5 55 57
Trade receivables, net 3B 1,772 1,391
Other accounts receivable 3A 101 65
Inventories 4 1,485 1,256
Total Current Assets 3,506 2,804
------ ------------------
TOTAL ASSETS 6,310 5,742
====== ==================
EQUITY AND LIABILITIES
EQUITY 12 3,032 2,744
----- -----
NON-CURRENT LIABILITIES:
Long-term loans from banks, net of current
maturities 10 155 372
CURRENT LIABILITIES:
Short term bank credit 227 265
Current maturities of long-term loans
from banks 10 279 314
Convertible unsecured loans 19d 131 -
Trade payables 1,522 1,495
Other accounts payable 9 251 178
Related parties 18 713 374
----- -----
Total Current Liabilities 3,123 2,626
----- -----
TOTAL LIABILITIES AND EQUITY 6,310 5,742
===== =====
The accompanying notes are an integral part of the consolidated financial statements.
STARCOM Plc
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. Dollars in thousands (except shares data)
Year Ended December 31
Note 2017 2016
------------ ------------
Revenues 5,440 5,132
Cost of sales 13 (3,360) (3,712)
------------
Gross profit 2,080 1,420
------------ ------------
Operating expenses:
Research and development (237) (189)
Selling and marketing (558) (606)
General and administrative expenses 14 (2,196) (2,386)
Other income 15 22 24
------------ ------------
Total operating expenses (2,969) (3,157)
------------ ------------
Operating loss (889) (1,737)
Finance income 16A 41 19
Finance costs 16B (502) (227)
------------
Net finance costs (461) (208)
------------ ------------
Loss before taxes on income (1,350) (1,945)
Taxes on income 8 - (67)
------------ ------------
Total comprehensive loss for the
year (1,350) (2,012)
============ ============
Loss per share:
Basic and diluted loss per share 17 (0.007) (0.015)
The accompanying notes are an integral part of the consolidated financial statements.
STARCOM Plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
U.S. Dollars in thousands
Capital Reserve
Premium in Regard
Share on to Share-Based Accumulated
Capital Shares Capital Reserve Payment Transactions Loss Total
-------- ------- -------------------- ------------------------ ------------ ------------
Balance as of January
1, 2016 - 7,094 89 407 (4,093) 3,497
Proceeds from issued
share capital, net of
mobilization costs (see
Note 12) - 1,137 - - - 1,137
Conversion of convertible
unsecured loans (see
Note 19d) - 101 - - - 101
Share based payment (see
Note 12d) - - - 21 - 21
Comprehensive loss for
the year - - - - (2,012) (2,012)
-------- ------- -------------------- ------------------------ ------------ ----------
Balance as of December
31, 2016 - 8,332 89 428 (6,105) 2,744
Proceeds from issued
share capital, net of
mobilization costs (see
Note 1) - 1,464 - - - 1,464
Share based payment (see
Note 12d) - - - 174 - 174
Comprehensive loss for
the year - - - - (1,350) (1,350)
-------- ------- -------------------- ------------------------ ------------ ----------
Balance as of December
31, 2017 - 9,796 89 602 (7,455) 3,032
======== ======= ==================== ======================== ============ ==========
The accompanying notes are an integral part of the consolidated financial statements.
STARCOM Plc
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Year Ended December
31,
2017 2016
---------- ---------
CASH FLOWS FOR OPERATING ACTIVITIES:
Loss for the year (1,350) (2,012)
Adjustments to reconcile net profit
to net cash used in operating activities:
Depreciation and amortization 510 435
Interest expense and exchange rate
differences 92 10
Share-based payment expense 174 21
Capital gain (19) -
Changes in assets and liabilities:
Decrease (Increase) in inventories (229) 946
Increase in trade receivables (381) (48)
Increase in other accounts receivable (36) (21)
Decrease (Increase) in Income Tax
Authorities (10) 33
Increase in trade payables 96 165
Increase (Decrease) in other accounts
payable 73 (1)
Net cash used in operating activities (1,080) (472)
---------- ---------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (144) (19)
Proceeds from sales of property,
plant and equipment 61 -
Decrease in short-term deposits 2 6
Cost of intangible assets (264) (350)
Net cash used in investing activities (345) (363)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term bank credit,
net (38) (5)
Proceeds from convertible unsecured
loans, net 131 -
Repayment from related parties,
net 406 78
Decrease in notes payable - (26)
Receipt of long-term loans 46 104
Repayment of long-term loans (357) (304)
Consideration from issue of shares,
net 1,295 933
---------- ---------
Net cash provided by financing activities 1,483 780
---------- ---------
Decrease in cash and cash equivalents 58 (55)
Cash and cash equivalents at the
beginning of the year 35 90
---------- ---------
Cash and cash equivalents at the
end of the year 93 35
========== =========
Appendix A - Additional Information
Interest paid during the year (101) (48)
========== =========
Appendix B - Non-cash financing
activities
Issuance of share to related parties
(in payment of related parties loans) 100 204
Conversion to shares of convertible
unsecured loans - 101
Conversions to shares of trade payables 69 -
========== =========
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 GENERAL
-
a. The Reporting Entity
Starcom Plc ("the Company") was incorporated in Jersey
on November 28, 2012. The Company and its subsidiaries
("the Group") specializes in easy-to-use practical
wireless solutions that combine advanced technology,
telecommunications and digital data for the protection
and management of people, fleets of vehicles, containers
and assets. The Group engages in production, marketing,
distribution, research and development of G.P.S. systems.
The Company fully owns Starcom G.P.S. Systems Ltd.,
an Israeli company, and Starcom Systems Limited, a
company in Jersey.
In March 2016 Starcom Systems America Inc. was incorporated
in Florida, USA and it is fully owned by the Company.
Starcom America serves as a Sales and Marketing branch
for the Company in North America.
The Company's shares are admitted for trading on London's
Stock Exchange Alternative Investment Market ("AIM").
Address of the official Company office in Israel of
Starcom G.P.S. Systems Ltd. is: 16 Ha'Taas Street
Kfar Saba, Israel.
Address of the Company's registered office in Jersey
of Starcom Systems Limited is: 13-14 Esplanade, St
Helier, Jersey JE1 1BD.
1. During April 2017, the Company issued 5,007,037
Ordinary Shares in respect of the conversion of the
related parties loan of GBP78 ($100) thousands.
2. During May 2017, the Company issued 2,700,000 Ordinary
Shares to one of the Company's long-term component
suppliers in part settlement of its account with the
Company at the sum of GBP54 ($69) thousands.
3. During June 2017, the Company raised GBP650 ($827)
thousands before expenses through a placing of 43,333,336
Ordinary Shares, out of which 333,334 were to related
parties. See also Note 12d (3).
4. During October 2017, the Company raised GBP475
($618) thousands before expenses through a placing
of 36,538,460 Ordinary Shares,
The Group has accumulated operating losses over the
last few years and is dependent on securing financing
or infusion of capital. The Group is convinced that
sufficient loan facilities are available to cover
its cash flow requirements.
b. Definitions in these financial statements:
1. International Financial Reporting Standards ("IFRS")
- Standards and interpretations adopted by the
International Accounting Standards Board ("IASB")
that include international financial reporting
standards (IFRS) and international accounting
standards (IAS), with the addition of interpretations
to these Standards as determined by the International
Financial Reporting Interpretations Committee
(IFRIC) or interpretations determined by the Standards
Interpretation Committee (SIC), respectively.
2. The Company - Starcom Plc.
3. The subsidiaries - Starcom G.P.S. Systems Ltd.
And Starcom Systems Limited.
4. Starcom Jersey - Starcom Systems Limited.
5. Starcom Israel - Starcom G.P.S. Systems Ltd.
6. Starcom America - Starcom Systems America Inc.
7. The Group - Starcom Plc. and the Subsidiaries.
8. Related Party - As determined in International
Accounting Standard No. 24.
NOTE 2A BASIS OF PREPARATION
-
a. Declaration in regard to implementation of International
Financial Reporting Standards (IFRS)
The consolidated financial statements of the Company
have been prepared in accordance with IFRS and
related clarifications published by the IASB.
The Company's Board of Directors authorized the
Consolidated Financial Statements on 7 March,
2018.
b. Basis of Measurement
The consolidated financial statements have been
prepared on the historical cost basis except for
financial instruments at fair value through profit
or loss that are stated at fair value.
c. Operating Turnover Period
The ordinary operating period turnover for the Group
is a year. As a result, the current assets and current
liabilities include items that are expected and intended
to be realized at the end of the ordinary operating
turnover period for the Group.
d. Functional and Presentation Currency
The consolidated financial statements are presented
in U.S. dollars (hereinafter: "dollars") that is the
functional currency of the Group and is rounded to
the nearest thousand, except when otherwise indicated.
The dollar is the currency that represents the economic
environment in which the Group operates.
The Group's transactions and balances denominated in
dollars are presented at their original amounts. Non-dollar
transactions and balances have been remeasured to dollars.
All transaction gains and losses from remeasurement
of monetary assets and liabilities denominated in non-dollar
currencies are reflected in the statements of comprehensive
income as financial income or expenses, as appropriate.
NOTE 2B - USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity
with IFRS requires management to make judgments, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates.
Upon formulation of accounting estimates used in preparation
of the Group financial statements, management is required
to make assumptions in regard to circumstances and
events that are significantly uncertain. Management
arrives at these decisions based on prior experiences,
various facts, external items and reasonable assumptions
in accordance with the circumstances related to each
assumption.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimates
are revised and in any future periods affected.
Information about critical judgment in applying accounting
policies that have a significant effect on the amounts
recognized in the consolidated financial statements
is included in the following Note:
Note 7 - Capitalization of development costs and amortization
of these costs.
Note 12d - Options issued.
Note 19d - Convertible unsecured loans.
Information about assumptions and estimations regarding
depreciation that have significant risk of resulting
in a material adjustment is included in the following
Notes:
Note 3B - Allowance for doubtful accounts.
Note 7 - Calculation of amortization.
Note 8 - Utilization of tax losses.
NOTE 2C - SIGNIFICANT ACCOUNTING POLICIES
a. Basis of consolidation
All intra-Group transactions, balances, income and
expenses of the companies are eliminated on consolidation.
b. Foreign currency and linkage basis
Balances stated in foreign currency or linked to
a foreign currency have been included in the consolidated
financial statements according to the prevailing
representative exchange rates at the balance sheet
date. Balances linked to the Consumer Price Index
in Israel are included in accordance with the Index
published prior to balance sheet date. Linkage and
exchange rate differences are included in the statement
of comprehensive income when incurred.
December 31,
2017 2016
CPI (in points) * 123.3 122.8
Exchange Rate of U.S.
$ in NIS 3.467 3.845
Year Ended December 31,
2017 2016
Change in CPI 0.4% (0.24%)
Change in Exchange Rate
of U.S. $ (9.8%) (1.46%)
* Base Index 2002 = 100.
c. Financial instruments
(i) Non-derivative financial assets
The Group initially recognizes loans and receivables
on the date that they are originated. All other financial
assets (including assets designated as at fair value
through profit or loss) are recognized initially
on the trade date, which is the date that the Group
becomes a party to the contractual provisions of
the instrument.
The Group derecognizes a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which
substantially all the risks and rewards of ownership
of the financial asset are transferred. Any interest
in such transferred financial assets that is created
or retained by the Group is recognized as a separate
asset or liability.
Financial assets and liabilities are offset and the
net amount presented in the statement of financial
position when, and only when, the Group has a legal
right to offset the amounts and intends either to
settle on a net basis or to realize the asset and
settle the liability simultaneously.
The Group classified non-derivative financial assets
into the following categories: Financial assets at
fair value, through profit or loss, held-to-maturity
financial assets, loans and receivables, and available-for-sale
financial assets.
Financial assets at fair value through profit or
loss:
A financial asset is classified as at fair value
through profit or loss if it is classified as held
for trading or is designated as such on initial recognition.
Financial assets are designated as at fair value
through profit or loss if the Group manages such
investments and makes purchase and sale decisions
based on their fair value in accordance with the
Group's documented risk management or investment
strategy. Attributable transaction costs are recognized
in profit or loss as incurred. Financial assets at
fair value through profit or loss are measured at
fair value and changes therein, which take into account
any dividend income, are recognized in profit or
loss.
Financial assets designated as at fair value through
profit or loss comprise equity securities that otherwise
would have been classified as available for sale.
Loans and receivables:
Loans and receivables are financial assets with fixed
or determinable payments that are not quoted in an
active market. Such assets are recognized initially
at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and
receivables are measured at amortized cost using
the effective interest method, less any impairment
losses.
Loans and receivables comprised of trade and other
receivables, excluding short -term trade and other
receivables where the interest amount is immaterial.
(ii) Non-derivative financial liabilities
The Group initially recognizes debt securities issued
and subordinated liabilities on the date that they
originated. All other financial liabilities (including
liabilities designated as at fair value through profit
or loss) are recognized initially on the trade date,
which is the date that the Group becomes a party
to the contractual provisions of the instrument.
The Group derecognizes a financial liability when
its contractual obligations are discharged, cancelled
or expire.
The Group classifies non-derivative financial liabilities
into the other financial liabilities category. Such
financial liabilities are recognized initially at
fair value less any directly attributable transaction
costs. Subsequent to initial recognition, these financial
liabilities are measured at amortized cost using
the effective interest method.
Other financial liabilities comprise loans and borrowings,
bank overdrafts, and trade and other payables.
(iii) Compound financial instruments
Compound financial instruments issued by the Company
comprised: an interest bearing loan with a conversion
option issued to the lender.
The option component was recognized initially at its
fair value using a binomial calculation.
The liability component was recognized initially as
the difference between the loan amount and the option
component
Any directly attributable transaction costs are allocated
to the liability and equity components in proportion
to their initial carrying amounts.
Subsequent to initial recognition, the liability component
of a compound financial instrument is measured at
amortized cost using the effective interest method.
The equity component of a compound financial instrument
is not remeasured subsequent to initial recognition.
Interest related to the financial liability is recognized
in profit or loss.
d. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
call deposits with maturities of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value and are used by
the Group in the management of its short-term commitments.
e. Share capital
Ordinary shares:
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary
shares are recognized as a deduction from equity,
net of any tax effects.
f. Property, plant and equipment
Property, plant and equipment are measured at cost
less accumulated depreciation.
Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets,
at the following annual rates:
Computers and software
Office furniture and equipment %
---------------------------
Vehicles 33
Laboratory equipment 7 - 15
Leasehold improvements 15
Leasehold improvements are depreciated by the straight-line
method over the term of the lease, ten-year period,
(including option terms) or the estimated useful lives
of the improvements, unless it is reasonably certain
that the Group will obtain ownership by the end of
the lease term.
At each balance sheet date, the Group examines the
residual value, the useful life and the depreciation
method it uses. If the Group identifies material changes
in the expected residual value, the useful life or
the future pattern of consumption of future economic
benefits in the asset that may indicate that a change
in the depreciation is required, such changes are
treated as changes in accounting estimates. In the
reported periods, no material changes have taken place
with any material effect on the financial statements
of the Group.
g. Intangible assets: Research and development
Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognized in profit
or loss as incurred.
Development activities involve a plan or design for
the production of new or substantially improved products
and processes. Development expenditure is capitalized
only if development costs can be measured reliably,
the product or process is technically and commercially
feasible, future economic benefits are probable, and
the Group intends and has sufficient resources to
complete development and to use or sell the asset.
The expenditure capitalized includes the cost of materials,
direct labor, overhead costs that are directly attributable
to preparing the asset for its intended use. Other
development expenditure is recognized in profit or
loss as incurred.
Capitalized development expenditure is measured at
cost less accumulated amortization and accumulated
impairment losses. Amortization is calculated using
the straight-line method over the estimated useful
lives of the assets: ten years.
At each balance sheet date, the Group reviews whether
any events have occurred or changes in circumstances
have taken place, which might indicate that there
has been an impairment of the intangible assets. When
such indicators of impairment are present, the Group
evaluates whether the carrying value of the intangible
asset in the Group's accounts can be recovered from
the cash flows anticipated from that asset, and, if
necessary, records an impairment provision up to the
amount needed to adjust the carrying amount to the
recoverable amount.
h. Short-term deposit
Deposits with maturities of more than three months
but less than one year are included in short-term
deposits.
i. Leases
(1) Lease payments
Payments made under operating leases are recognized
in profit or loss on a straight-line basis over
the term of the lease. Lease incentives received
are recognized as an integral part of the total
lease expense, over the term of the lease.
Minimum lease payments made under finance leases
are apportioned between the finance expense and
the reduction of the outstanding liability. The
finance expense is allocated to each period during
the lease term so as to produce a constant periodic
rate of interest on the remaining balance of
the liability.
(2) Determining whether an arrangement contains a
lease
At inception of an arrangement, the Group determines
whether such an arrangement is or contains a
lease. This will be the case if the following
two criteria are met:
* The fulfillment of the arrangement is dependent on
the use of a specific asset or assets; and
-- the arrangement contains a right to use the
asset(s).
At inception or on reassessment of the arrangement,
the Group separates payments and other consideration
required by such an arrangement into those for
the lease and those for other elements on the
basis of their relative fair values. If the Group
concludes for a finance lease that it is impracticable
to separate the payments reliably, then an asset
and a liability are recognized at an amount equal
to the fair value of the underlying asset. Subsequently,
the liability is reduced as payments are made
and an imputed finance cost for the liability
is recognized using the Group's incremental rate.
j. Inventories
Inventories are stated at the lower of cost or net
market value.
Cost is determined using the "first-in, first -out"
method.
Inventory write-downs are provided to cover risks
arising from slow-moving items, technological obsolescence,
excess inventories, and discontinued products and
for market prices lower than cost, if any. At the
point of loss recognition, a new lower cost basis
for that inventory is established.
k. Impairment in value of assets
During every financial period, the Group examines
the book value of its tangible and intangible assets
to determine any signs of loss from impairment in
value of these assets. In the event that there are
signs of impairment, the Group examines the realization
value of the designated asset. In the event that
the realization cannot be measured for an individual
asset, the Group estimates realization value for
the unit where the asset belongs. Joint assets are
assigned to the units yielding cash on the same
basis. Joint assets are designated to the smallest
groups of yielding assets for which one can identify
a reasonable basis that is consistent to the allocation.
The realization value is the higher of net sale price
of the asset as compared with its useful life that
is determined by the present value of projected cash
flows to be realized from this asset and its realization
value at the end of its useful life.
In the event that the book value of the asset or cash-yielding
unit is greater than its realization value, a devaluation
of the asset has occurred in the amount of the difference
between its book value and its realization value.
This amount is recognized immediately in the statements
of comprehensive income.
In the event that prior devaluation of an asset is
nullified, the book value of the asset or of the cash-yielding
unit is increased to the estimated current fair value,
but not in excess of the asset or cash-yielding unit
book value that would have existed had there not been
devaluation. Such nullification is recognized immediately
in the statements of comprehensive income.
l. Revenue recognition
The Group generates revenues from sales of products,
which include hardware and software, software licensing,
professional services and maintenance. Professional
services include mainly installation, project management,
customization, consulting and training. The Group
sells its products indirectly through a global network
of distributors, system integrators and strategic
partners, all of whom are considered end-users, and
through its direct sales force.
Revenue from products and software licensing is recognized
when persuasive evidence of an agreement exists, delivery
of the product has occurred, the fee is fixed or determinable
and collectability is probable.
Revenues from maintenance and professional services
are recognized ratably over the contractual period
or as services are performed, respectively.
m. Allowance for doubtful accounts
The Group evaluates its allowance for doubtful accounts on a regular basis through periodic reviews of the collectability of the receivables in light of historical experience, adverse situations that may affect the repayment abilities of its customers, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.
The Group performs ongoing credit evaluations of its customers and generally does not require collateral because (1) management believes it has certain collection measures in-place to limit the potential for significant losses, and (2) because of the nature of its customers that comprise the Group's customer base. Receivables are written off when the Group abandons its collection efforts. An allowance for doubtful accounts is provided with respect to those amounts that the Group has determined to be doubtful of collection.
n. Concentrations of credit risk
Financial instruments that potentially subject the
Group to concentrations of credit risk consist principally
of cash and cash equivalents, short-term deposits
and trade receivables.
o. Provisions
Provisions are recognized when the Group has a current
obligation (legal or derived) as a result of a past
occurrence that can be reliably measured, that will
in all probability result in the Group being required
to provide additional benefits in order to settle
this obligation. Provisions are determined by capitalization
of projected cash flows at a rate prior to taxes
that reflects the current market preparation for
the money duration and the specific risks for the
liability.
p. Employee benefits
The Group has several benefit plans for its employees:
1. Short-term employee benefits -
Short-term employee benefits include salaries, vacation
days, recreation and deposits to the National Insurance
Institute that are recognized as expenses when rendered.
2. Benefits upon retirement -
Benefits upon retirement generally funded by deposits to
insurance companies and pension funds are classified as
restricted deposit plans or as restricted benefits.
All Group employees have restricted deposit plans, in accordance
with Section 14 of the Severance Pay Law (Israel), whereby
the Group pays fixed amounts without bearing any legal
responsibility to pay additional amounts thereto even if
the fund did not accumulate enough amounts to pay the entire
benefit amount to the employee that relates to the services
he rendered during the current and prior periods. Deposits
to the restricted plan are classified as for benefits or
for compensation and are recognized as an expense upon
deposit to the plan concurrent with receiving services
from the employee and no additional provision is required
in the financial statements.
q. Finance income and expenses
Finance income includes interest in regard to invested
amounts, changes in the fair value of financial assets
presented at fair value in the statements of comprehensive
income and gains from changes in the exchange rates
and interest income that are recognized upon accrual
using the effective interest method.
Finance expenses include interest on loans received,
changes in the time estimate of provisions, changes
in the fair value of financial assets presented at
fair value in the statements of comprehensive loss
and losses from changes in value of financial assets.
Gains and losses from exchange rate differences are
reported net. Exchange rate differences in regard
to issuance of shares are charged to equity.
r. Taxes
Tax expense comprises current and deferred tax. Current
tax and deferred tax are recognized in profit or loss
except to the extent that they relate to a business
combination, or items recognized directly in equity
or in other comprehensive income.
Current tax is the expected tax payable or receivable
on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect
of previous years. Current tax payable also includes
any tax liability arising from the declaration of dividends.
Deferred tax is recognized in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
the amounts used for taxation purposes.
Deferred tax is not recognized for:
-- Temporary differences on the initial recognition
of assets or liabilities in a transaction that is
not a business combination and that affects neither
accounting nor taxable profit or loss;
-- Temporary differences related to investments in
subsidiaries and jointly controlled entities to
the extent that it is probable that they will not
reverse in the foreseeable future; and
-- Taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied
by the same Tax Authority on the same taxable entity,
or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or
their tax assets and liabilities will be realized simultaneously.
Since there is uncertainty in regard to existence of
taxable revenues in the near future, a deferred tax
asset was not recognized.
A deferred tax asset is recognized for unused tax losses,
tax credits and deductible temporary differences to
the extent that it is probable that future taxable
profits will be available against which they can be
utilized. Deferred tax assets and liabilities are reviewed
at each reporting date and are reduced to the extent
that it is no longer probable that the related tax
benefit (taxes on income) will be realized.
s. Basic and Diluted Earnings per Share
Basic earnings per share are computed based on the
weighted average number of common shares outstanding
during each year.
Diluted earnings per share are computed based on the
weighted average number of common shares outstanding
during each year, plus dilutive potential common shares
considered outstanding during the year.
t. Statement of cash flows
The statement of cash flows from current operations
is presented using the indirect method, whereby interest
amounts paid and received by the Group are included
in the cash flows in current operations.
u. Dividend distribution
Dividend distribution to the Company's shareholders
is recognized as a liability in the Group's financial
statements in the period in which the dividends are
approved by the Group's shareholders.
v. Segment reporting
Segment results that are reported to the CEO include
items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
Unallocated items comprise mainly corporate assets,
head office expenses and tax.
w. Standards issued but not yet effective
The Standards and interpretations that are issued,
but not yet effective, up to the date of issuance of
the Group's financial statements are disclosed below.
The Group intends to adopt these Standards, if applicable,
when they become effective.
IFRS 9 Financial Instruments
IFRS 9 (2014) replaces the current guidance in IAS
39, Financial Instruments: Recognition and Measurement.
IFRS 9 (2014) includes revised guidance on the classification
and measurement of financial instruments, a new 'expected
credit loss' model for calculating impairment for most
financial assets, and new guidance and requirements
with respect to hedge accounting.
IFRS 9 is to be applied for annual periods beginning
on January 1, 2018. Early adoption is permitted.
The Group is evaluating the possible impact of IFRS
9 but is presently unable to assess its effect, if
any, on the financial statements.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 replaces the current guidance regarding recognition
of revenues and presents a new model for recognizing
revenue from contracts with customers. IFRS 15 provides
two approaches for recognizing revenue: at a point
in time or over time. The model includes five steps
for analyzing transactions so as to determine when
to recognize revenue and at what amount. Furthermore,
IFRS 15 provides new and more extensive disclosure
requirements than those that exist under current guidance.
IFRS 15 is applicable for annual periods beginning
on or after January 1, 2018 and earlier application
is permitted. IFRS 15 includes various alternative
transitional provisions, so that companies can choose
between one of the following alternatives at initial
application: full retrospective application, full retrospective
application with practical expedients, or application
as from the mandatory effective date, with an adjustment
to the balance of retained earnings at that date in
respect of transactions that are not yet complete.
The impact on the Group's financial statements of the
future Standards, amendments and interpretations is
still under review, but the Group does not currently
expect any of these changes to have a material impact
on the results or the net assets of the Group.
IFRS 16, "Leases"
IFRS 16 replaces IAS 17, Leases and its related interpretations.
The Standard's instructions annul the existing requirement
of lessees to classify leases as operating or finance
leases. Instead of this, for lessees, the new Standard
presents a unified model for the accounting treatment
of all leases according to which the lessee has to
recognize an asset and liability in respect of the
lease in its financial statements.
Similarly, the standard determines new and expanded
disclosure requirements from those required at present.
IFRS 16 is applicable for annual periods as of January
1, 2019, with the possibility of early adoption, so
long as the Company has also early adopted IFRS 15,
Revenue from Contracts with Customers. IFRS 16 includes
various alternative transitional provisions, so that
companies can choose between one of the following alternatives
at initial application: full retrospective application
or application (with the possibility of certain practical
expedients) as from the mandatory effective date, with
an adjustment to the balance of retained earnings at
that date.
The Group does not expect the new Standard to have
a material impact on the financial statements as the
Group currently does not offer its products in the
form of lease.
NOTE 3A - OTHER ACCOUNTS RECEIVABLE
December 31
2017 2016
------------ -----------
Government institutions 101 65
101 65
============ ===========
NOTE 3B TRADE RECEIVABLES, NET
-
December 31
2017 2016
----------- ------------
Group receivables 1,820 1,588
Net of allowance for
doubtful accounts (48) (197)
1,772 1,391
=========== ============
NOTE 4 - INVENTORIES
December 31
2017 2016
------ ------
Raw materials 979 563
Finished goods 506 693
------ ------
1,485 1,256
====== ======
See also Note 13.
NOTE 5 SHORT-TERM BANK DEPOSIT
-
The deposit sums of $55 and $57 for the years ended December
31, 2017 and 2016, respectively, serve as a security
deposit for repayment of long-term bank loans. In accordance
with terms of the loans, the deposit constitutes approximately
10% of the loans original principle. The deposit bears
yearly interest at the rate of 1%.
NOTE 6 PROPERTY, PLANT AND EQUIPMENT, NET
-
Office
Computers Furniture
and Software and Equipment Laboratory Leasehold
Equipment Improvements Vehicles* Total
-------------- -------------- ------------- --------------- ------------ --------
Cost:
Balance as
of January
c 1 2017 168 116 66 80 242 672
Additions
during the
year 8 2 - 49 85 144
Decrease - - - (80) (85) (165)
Balance as
of December
31 2017 176 118 66 49 242 651
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1 2017 125 63 58 42 81 369
Depreciation
during the
year 11 8 4 44 35 102
Decrease - - - (80) (43) (123)
Balance as
of December
31 2017 136 71 62 6 73 348
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31 2017 40 47 4 43 169 303
============== ============== ============= =============== ============ ========
* See also Note 11b.
Office
Computers Furniture
and Software and Equipment Laboratory Leasehold
Equipment Improvements Vehicles* Total
-------------- -------------- ------------- --------------- ------------ --------
Cost:
Balance as
of January
c 1 2016 155 110 66 80 242 653
Additions
during the
year 13 6 - - - 19
Balance as
of December
31 2016 168 116 66 80 242 672
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1 2016 110 54 50 35 45 294
Depreciation
during the
year 15 9 8 7 36 75
Balance as
of December
31 2016 125 63 58 42 81 369
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31 2016 43 53 8 38 161 303
============== ============== ============= =============== ============ ========
* See also Note 11b.
NOTE 7 - INTANGIBLE ASSETS, NET
Total
--------------
Cost:
Balance as of January
1 2017 3,938
Additions during
the year 264
Balance as of December
31 2017 4,202
--------------
Accumulated Amortization:
Balance as of January
1 2017 (1,135)
Amortization during
the year (408)
Balance as of December
31 2017 (1,543)
--------------
Impairment of assets (202)
--------------
Net book value as
of December 31 2017 2,457
==============
Total
--------------
Cost:
Balance as of January
1 2016 3,588
Additions during
the year 350
Balance as of December
31 2016 3,938
--------------
Accumulated Amortization:
Balance as of January
1 2016 (775)
Amortization during
the year (360)
Balance as of December
31 2016 (1,135)
--------------
Impairment of assets (202)
--------------
Net book value as
of December 31 2016 2,601
==============
The expenditure capitalized includes the cost of materials
and direct labor that are directly attributable to preparing
the assets for their intended use. Other development expenditure
is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost
less accumulated amortization and accumulated impairment
losses.
Amortization is calculated using the straight-line method
over the estimated useful lives of the assets: ten years.
See also Note 2C g.
NOTE 8 - TAXES ON INCOME
a. Israeli taxation
1. The Israeli corporate tax rate in 2017 is 24% and
for 2016 was 25%.
On December 22, 2016 the Knesset plenum passed the
Economic Efficiency Law (Legislative Amendments
for Achieving Budget Objectives in the Years 2017
and 2018) - 2016, by which, inter alia, the corporate
tax rate would be reduced from 25% to 23% in two
steps. The first step will be to a rate of 24% as
from January 2017 and the second step will be to
a rate of 23% as from January 2018.
2. Tax Benefits from the Encouragement of Capital Investments
Law, 1959 ("The Encouragement Law")
Starcom Israel presents its financial statements
to the tax authorities as an Approved Enterprise.
In the framework of the Law for Change of Priorities,
as abovementioned, an increase in tax rates was
approved, commencing with 2014 and thereafter, on
revenues from an approved enterprise, as stated
in the Encouragement Law for an approved enterprise.
An eligible company in Development Area A is entitled
to a tax rate of 9% during 2015. In an area that
is not Development Area A, the tax rate will be
16%.
Concurrently, the tax rate on a dividend, for distribution
from January 1, 2014, the source of which is preferred
income as stated in the Encouragement Law, is 20%.
Starcom Israel is subject to a tax rate of 16% for
the year 2017.
3. Income Tax audit
Starcom Israel received the tax authorities' assessments
based on judgement in for the years 2013-2014 amounting
NIS 7,285 thousand. Accordingly, the Company filed
objections to these assessments for the years 2013
- 2014. The Company's management, relying on professional
advice that it received, is reiterating its position
that it adamantly disagree with the Israeli Tax
Authorities assessment. As such no provision was
recorded in the consolidated financial statement
as of December 31, 2017.
4. Starcom Israel has carryforward operating tax losses
of approximately NIS 34 million as of December 31,
2017 (NIS 33 million as of December 31, 2016). As
for deferred tax assets see Note 2C(r).
Starcom Israel has been assessed by the Income Tax
Authorities up to and including the year 2012.
b. Jersey taxation
Taxable income of the Company and Starcom Jersey is
subject to tax at the rate of zero percent for the
years 2017 and 2016.
c. USA taxation
Taxable income of Starcom Inc. is subject to the Corporate
Federal taxes in the United States of America and to
the taxes set in the States in which it sells its products
and services.
d. Detail of tax income:
Since the recording of a deferred tax asset is limited
to the amount of deferred tax liabilities, no deferred
tax income was recorded in 2017.
NOTE 9 OTHER ACCOUNTS PAYABLE
-
December 31
2017 2016
------- ------
Employees and payroll
accruals 242 166
Accrued expenses 9 12
251 178
======= ======
NOTE 10 - LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES
1. Composition: December 31
2017 2016
----------- --------------
Long-term liability 434 686
Less: current maturities (279) (314)
----------- --------------
155 372
=========== ==============
2. Aggregate maturities of long-term loans for years
subsequent to December 31, 2017 are as follows:
Amount
-------------------
First year 279
Second year 81
Third year 49
Fourth and Fifth
years 25
-------------------
434
===================
3. Additional information regarding long-term loans:
Amount Annual
Date Received Interest Loan Terms and Interest Payment
Loan Received NIS (U. Rate Maturity Dates Terms
# S. dollars)
------------- ---------------- ------------ -------------------------------- ---------------------
55 equal monthly Monthly commencing
January 22, 1,900 ($ Prime installments including 22 February
1. 2014 548) + 1.8% principal and interest 2014
60 equal monthly Monthly commencing
January 28, Prime installments including 22 February
2. 2014 675 ($195) + 0.8% principal and interest 2014
60 equal monthly Monthly commencing
September Prime installments including 20 October
3. 20, 950 ($ 279) + 0.9% principal and interest 2013
2013
61 equal monthly
Prime installments including Monthly commencing
4. May 06, 600 ($ 173) + 1.8% principal and interest 25 June 2015
2015
36 equal monthly
installments of Monthly commencing
November Prime principal not including 25 December
5. 11, 100 ($ 29) + 3.5% interest 2015
2015
36 equal monthly Monthly commencing
December Prime installments including 2 January
6. 2, 295 ($ 85) + 0.15% principal and interest 2016
2015
60 equal monthly
Prime installments including Monthly commencing
7. June 6, 2016 400 ($ 115) + 0.9 principal and interest 20 July 2016
60 equal monthly
Match 28, Prime installments including Monthly commencing
8. 2017 168 ($ 48) - 0.5% principal and interest 18 April 2017
NOTE 11 COMMITMENTS AND CHARGES
-
a. Operating lease commitments:
1. Starcom Israel rents offices and signed operating
leases commencing February 2017 for a period of
three years with an option for three additional
years
Rent expenses for the years ended December 31,
2017 and 2016 were in the amounts of $73 thousand
and $137 thousand, respectively.
Total of future minimum lease payments under non-cancellable
operating.
leases for each of the following periods as of
December 31, 2017:
Not later than one year 80
Later than one year and not later
than five years 87
-------
167
=======
2. Starcom Israel signed operating leases for rental
of vehicles for a period of 36 months. Rent expenses
for the vehicles for the years ended December
31, 2017 and 2016 were in the amounts of $43 thousand
and $25 thousand, respectively.
The lease contract might be cancelled at any
time, followed by a fine of one month per each
remaining year according to its contract.
b. Charges:
1. A first class current general charge in favor
of a bank was placed on all Starcom Israel's
assets.
2. A charge in favor of a bank was placed on Starcom
Israel's vehicles.
3. A first class charge in favor of a bank was placed
on Starcom Israel's bank account.
NOTE 12 EQUITY
-
a. Composition - common stock of no par value, issued and
outstanding - 240,409,513 shares and 152,830,680 shares
as of December 31, 2017 and December 31, 2016, respectively.
b. The Company's share grants to its holder voting rights,
rights to receive dividends and rights to net assets
upon dissolution.
c. Issue of Shares and Mobilization of Capital
1. During January and February 2016, the Company issued
a total of 4,564,270 Ordinary Shares in connection with
the company's unsecured convertible Loan Facility (the
"Loan Facility") signed October 2015, with YA Global
Master SPV Ltd ("YA'), on the conversion of $100 thousands
loan principal and accrued interest (amounting in aggregate
to $101,458 (GBP70,401)).
2. During March 2016, the Company raised GBP 450 ($648)
thousands before expenses, of which $204 thousands were
issued to related parties in order to partially set off
their credit balances.
3. During October 2016, The Company raised GBP300 ($369)
thousands before expenses, with new and existing shareholders,
through a placing of 12,000,000 new Ordinary Shares of
no par value at a price of 2.5p per Placing Share.
4. During November 2016, the Company raised GBP150 ($187)
thousand before expenses, with new and existing shareholders
through a placing of 5,000,000 new Ordinary Shares at
a price of 3p per Placing Share.
Regarding issuance of shares during the reported year,
see Note 1.
d. Share-based payment
The following table lists the number of share options,
the exercise prices of share options during the current
year: 2017 2016
--------------------- ----------------------
Weighted Weighted
average average
Number of exercise Number exercise
options price of options price
---------- --------- ----------- ---------
GBP GBP
--------------------- ----------------------
Share options outstanding
at beginning of year 7,574,033 0.092 3,174,033 0.15
Share options granted
during the year 25,155,614 0.025 4,400,000 0.05
Share options outstanding
at end of year 32,729,647 0.041 7,574,033 0.09
========== ========= =========== =========
Share options exercisable
at end of year 15,835,967 0.055 4,974,033 0.11
========== ========= =========== =========
1. During July 2016, the Company issued to its directors
and senior management 4,400,000 Options for purchase
of 4,400,000 of Company shares at exercise price of 0.05GBP
per share. The following table list the inputs to the
Black and Scholes model used for the grants:
Directors Directors
and Senior
Management
--------------------- ----------------------------------
Fair value at the GBP0.0198 GBP0.0198
measurement date
Quantity 2,400,000 2,000,000
Dividend Yield - -
(%)
Expected Volatility 78.6 78.6
(%)
Risk-free interest 1.188 1.188
rate (%)
Share price GBP0.02875 GBP0.02875
Vesting period 1-3 1-2
(years)
Expiration period
(years) 10 10
Total expenses recorded in regard to these Options
in the statement of comprehensive income for the reported
year amounted to $65 thousand.
2. During June 2017, the Company issued to its directors
and senior management 16,093,680 Options for purchase
of 16,093,680 of Company shares at exercise price of
GBP0.025 per share. The following table list the inputs
to the Black and Scholes model used for the grants:
Directors Directors
and Senior
Management
---------------------------- ---------------
Fair value at the GBP0.0171 GBP0.0183
measurement date
Quantity 12,070,260 4,023,420
Dividend Yield (%) - -
Expected Volatility 78.6 78.6
(%)
Risk-free interest 1.188 1.188
rate (%)
Share price GBP0.01625 GBP0.01625
Vesting period (years) 0.5-1.5 0.5-1.5
Total expenses recorded in regard to these Options
in the statement of comprehensive income for the years
2017 and 2016 amounted to $109 thousands and $19 thousands,
respectively.
3. During June 2017, together with the placing of
Ordinary Shares, the Company issued warrants over
new Ordinary Shares on the basis of one warrant
for every 5 placing shares (Total amount of warrants
issued - 8,666,667) exercisable at the price of
GBP0.025, per ordinary share and will expire twelve
month following admission of the placing shares
to trading on the AIM.
4. During June 2017 the Company granted its advisors
Warrants to subscribe for 395,267 new Ordinary Shares
at 1.5p per share. The Warrants are fully vested
upon grant. Any unexercised options expire at the
end of 5 years from grant.
No expenses were recorded in regard to these Options
in the statement of comprehensive income.
NOTE 13 - COST OF SALES
Year Ended December 31,
2017 2016
----------------------- ----------
Purchases and other 3,181 2,406
Amortization 408 360
Decrease (Increase) in
inventory (229) 946
3,360 3,712
======================= ==========
NOTE 14 - GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31,
2017 2016
------------------- ---------------
a. Salaries and related
expenses (see
also Note 18d) 1,082 1,120
Office rent and maintenance 218 *376
Car maintenance 123 *90
Professional services
(1) 340 355
Doubtful accounts and
bad debts 66 170
Depreciation 102 75
Other 264 200
2,196 2,386
=================== ===============
* Reclassified.
(1) Including share based payment to directors and
senior management in the amounts of $174 and $21
thousand for the years ended December 31, 2017 and
2016, respectively. See also Note 12d.
b. Average Number of Staff Members by Category:
Year Ended December
31,
2017 2016
---------- ----------
Sales and marketing 6 9
Research and development 4 4
General and administrative 12 19
---------- ----------
22 32
========== ==========
NOTE 15 - OTHER INCOME
Year Ended December
31,
2017 2016
---------- ----------
Capital gain from sale 19 -
of fixed assets
Other income 3 24
22 24
========== ==========
NOTE 16A - FINANCE INCOME
Year Ended December 31,
2017 2016
------------ ------------
Exchange rate differences 41 19
------------ ------------
41 19
NOTE 16B - FINANCE COSTS
Year Ended December 31,
2017 2016
------ --------------
Exchange rate differences 245 78
Interest to banks and
others 121 45
Interest to related parties 33 13
Bank charges 83 70
Interest to suppliers 20 21
(502) (227)
------ --------------
Net finance costs 461 208
====== ==============
NOTE 17 - EARNINGS PER SHARE
Weighted average number of shares used in computing
basic and diluted earnings per share:
Year Ended December 31,
2017 2016
------------ ------------
Number of shares 187,031,676 131,248,154
============ ============
NOTE 18 - RELATED PARTIES
a. The related parties that own the controlling shares
in the Group are:
Mr. Avraham Hartman (9.2%), Mr. Uri Hartman (9.8%),
Mr. Doron Kedem (9.8%).
b. Short-term balances: December 31
2017 2016
------ ------
Credit balances (525) (82)
Loans (188) (292)
------ ------
(713) (374)
====== ======
c. Shareholders' credit balances are linked to the New
Israel Shekel ("NIS"). Loans from shareholders accrue
8% annual interest.
d. Transactions: Year Ended December 31,
2017 2016
------ --------
Key management compensation:
Total salaries and related
expenses for shareholders 465 496
====== ========
Total share-based payment 174 19
====== ========
e. Directors and the shareholders of the Group are each
entitled to benefits, in addition to salaries, that
include a vehicle, meals, cellular phones and a professional
enrichment fund. Concurrently, the Group deposits
for them amounts in a restricted benefit plan for
implementation upon completion of their employment.
NOTE 19 FINANCIAL INSTRUMENTS AND MANAGEMENT OF FINANCIAL RISKS
-
a. Financial Risk Factors:
The Group's operations expose it to a variety of financial
risks, including: market, currency, credit and liquidity
risks. The comprehensive Group plan for risk management
focuses on the fact that it is not possible to predict
financial market behaviour and an effort to minimize
possible negative effects on Company financial performance.
In this Note, information is stated in regard to Group
exposure to each of the risks abovementioned and the
handling of these risks. Risk management and capital
are handled by the Group management that identifies
and evaluates financial risks.
1) Exchange rate risk
Group operations are exposed to exchange rate
risks arising mainly from exposure of loans that
are linked to the NIS from banks, suppliers and
others.
2) Credit risk
Credit risks are handled at the Group level.
These risks arise from cash and cash equivalents,
bank deposits and unpaid receivable balances.
Cash and cash equivalent balances of the Group
are deposited in an Israeli bank. Group management
is of the opinion that there is insignificant
credit risk regarding these amounts.
3) Liquidity risks
Cautious management of liquidity risks requires
that there will be sufficient amounts of cash
to finance operations. Group management currently
examines projections regarding liquidity surpluses
deriving from cash and cash equivalents. This
examination is based on projected cash flows,
in accordance with procedures and limitations
determined by the Group.
b.
Group exposure to Index and foreign currency risks,
based on par value, except for derivative financial
instruments is as follows:
December 31, 2017
---------------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
--------------------------------- ------- ----- ------- ----------
Variable
Unlinked Interest Unlinked
---------- --------- -------------------------- ----------
Financial Assets:
Cash and cash equivalents 12 - 78 - 3 93
Short-term deposit - 55 - - - 55
Trade receivables.
net 383 - 1,287 13 89 1,772
Other accounts receivable 101 - - - - 101
Financial Liabilities:
Short-term bank credit - (227) - - - (227)
Trade payables (988) - (470) (32) (32) (1,522)
Convertible unsecured
loans - - (131) - - (131)
Other accounts payable (247) - (4) - - (251)
Related parties - (713) - - - (713)
Long-term loans from
banks - (434) - - - (434)
------ ------- ----------
(739) (1,319) 760 (19) 60 (1,257)
==========
December 31, 2016
---------------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
----------------------- --------- ------ --------- ----------
Variable
Unlinked Interest Unlinked
---------- ---------- ---------------------------------
Financial Assets:
Cash and cash equivalents 3 - 21 6 5 35
Short-term deposit - 57 - - - 57
Trade receivables,
net 187 - 1,144 5 55 1,391
Other accounts receivable 65 - - - - 65
Financial Liabilities:
Short-term bank
credit - (265) - - - (265)
Trade payables (267) - (1,201) (18) (9) (1,495)
Other accounts payable (178) - - - - (178)
Related parties - (374) - - - (374)
Long-term loans
from banks - (686) - - - (686)
---------- --------
(190) (1,268) (36) (7) 51 (1,450)
========== ========== ======== ====== ======= ==============
Analysis of Sensitivity to Changes in the Exchange
Rate of the U.S. Dollar Against the NIS:
5% Increase 5% Decrease
in in
Exchange Exchange Rate
Rate
------------ -------------------
For the Year
Ended
December 31
2017 (103) 103
2016 (73) 73
Analysis of Sensitivity to Changes in the Exchange
Rate of the U.S. Dollar Against the Euro:
5% Increase 5% Decrease
in in
Exchange Exchange Rate
Rate
------------ -------------------
For the Year Ended
December 31
2017 (3) 3
2016 (3) 3
Analysis of Sensitivity to Changes in the Exchange
Rate of the U.S. Dollar Against the GBP:
5% Increase 5% Decrease
in in
Exchange Exchange Rate
Rate
------------ -------------------
For the Year
Ended
December 31
2017 (1) 1
2016 - -
c. Fair value
As of December 31, 2017, there was no difference
between the carrying amount and fair value of the
Company's financial instruments that are presented
in the financial statements not at fair value.
d. Convertible unsecured loans
1. In March 2017, the Company drawn tranche of $330
thousands before expenses, from the YA Loan Facility,
repayable within one year from the date of drawdown
and bears annual interest rate of 7%.
During the reported year the Company repaid a total
amount of $269 thousands, of the loan's principal.
See also Note 22.
2. During September 2017, the company signed a convertible
loan agreement with a third party in the amount of
$100 thousands before expenses. The loan bears monthly
interest of 3% and includes an option to convert
the loan to ordinary shares upon the Company's decision.
During the reported year the Company repaid a total
amount of $30 thousands, of the loan's principal
amount. See also Note 22.
NOTE 20 CUSTOMERS AND GEOGRAPHIC INFORMATION
-
a. Major customers' data as a percentage of total sales
to unaffiliated customers:
Year Ended December 31,
2017 2016 2015
-------- -------- -------
Customer A 15% 5% 7%
Customer B 8% 5% 4%
Customer C 7% 5% 4%
b. Breakdown of Consolidated Sales to unaffiliated Customers
according to Geographic Regions:
Year Ended December 31,
2017 2016 2015
-------- -------- -------
Latin America 13% 16% 25%
Europe 19% 17% 11%
Africa 27% 38% 37%
Asia 14% 14% 11%
Middle East 24% 14% 14%
North America 3% 1% 2%
-------- -------- -------
Total 100% 100% 100%
-------- -------- -------
NOTE 21 SEGMENTATION REPORTING
-
The Group has four main reportable segments, as detailed
below:
Reported operating segments include: Hardware and SAS.
For each of the strategic divisions, the Group's CEO
reviews internal management reports on at least a quarterly
basis.
There are no inter-segment sales. Information regarding
the results of each reportable segment is included below.
Performance is measured based on segment gross profit
included in the internal management reports that are
reviewed by the Group's CEO. Segment profit is used
to measure performance as management believes that such
information is the most relevant in evaluating the results
of certain segments.
Segment information regarding the reported segments:
Hardware SAS
--------- ------
Year Ended
31.12.2017:
Segment
revenues 3,715 1,725
Cost of
sales (3,166) (194)
--------- ------
Gross profit 549 1,531
Year Ended
31.12.2016:
Segment
revenues 3,382 1,749
Cost of
sales (3,459) (253)
--------- ------
Gross profit/
(loss) (77) 1,496
NOTE 22 - EVENTS AFTER THE REPORTING DATE
1. All outstanding balance as of 31 December 2017 of convertible unsecured loans, were fully repaid during February 2018.
2. The Company has negotiated additional loan facilities to satisfy working capital requirements but may from time to time decide to make further equity issues if appropriate to assist in the growth of the business.
3. In January 2018, the Company raised an amount of GBP315 thousands before expenses through placing of Ordinary Shares at the price of 2.25p per share.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LFFIVVFIDIIT
(END) Dow Jones Newswires
March 08, 2018 02:01 ET (07:01 GMT)
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