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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.075 | 0.66% | 11.525 | 11.25 | 11.80 | 11.80 | 10.70 | 11.80 | 456,617 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computers & Software-whsl | 4.04M | -1.01M | -0.0079 | -3.80 | 3.84M |
From Apr 2019 to Apr 2024
TIDMSTAR
RNS Number : 0951T
Starcom PLC
18 March 2019
18 March 2019
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 audited results for the year ended 31 December 2018.
HIGHLIGHTS
-- Revenues increased 10% to $6.0m (2017: $5.4m) -- Gross profits increased by 16% to $2.4m (2017: $2.1m) -- Gross margin rose to 40% (2017: 38%) -- EBITDA loss significantly reduced to $8,000 (2017: loss of $193,000) -- Net loss after taxation reduced to ($0.9m) (2017: net loss of $1.4m) -- Strong pipeline for 2019
Avi Hartmann, CEO of Starcom, commented, "I am happy to report that the Company achieved a further reduction in losses in 2018 and that EBITDA was close to breakeven for the year. It is pleasing to see that the higher margin and software service revenues have increased to approximately $2.0m compared with $1.7m for 2018, being an increase of some 18%. We believe that Starcom continues to be acknowledged to be amongst the technological leaders in various fields of tracking, monitoring and IoT technology."
Enquiries:
Hot Features
Premium
Starcom Plc 07785 727
Michael Rosenberg, Chairman 595
+972 5447
Avi Hartmann, CEO 5663
Allenby Capital Limited (Nominated Adviser
and Broker) 020 3328 5656
James Reeve / Jeremy Porter / Asha Chotai
Peterhouse Capital Limited (Joint Broker) 020 7469 0930
Lucy Williams / Charles Goodfellow / Eran
Zucker
07795 168
Leander PR (Financial PR) 157
Christian Taylor-Wilkinson
CHAIRMAN'S STATEMENT
I am pleased to report that the Final Audited Statement for the year ended 31 December 2018 shows further improvement in the Company's financial performance. The main financial achievement of 2018 was that the Company approached EBITDA breakeven, finishing the year with a small EBITDA loss of $8,000 (2017: EBITDA loss of $193,000).
Revenue for the year increased by 10% to $6.0m (2017: $5.4m). Net losses for the year were reduced by 32% to $920,000 (2017: $1.35 million). Gross margin improved to 40% (2017: 38%).
PRODUCT REVIEWS
The revenue mix in 2018 improved on 2017, with the higher margin and recurring Software as a Service (SaaS) revenues increasing by 18% to $2.0m (2017: $1.7m), representing nearly 34% of total revenues (2017: 32%).
In hardware sales, the more profitable products such as the Tetis, Kylos and Watchlock represented over half (52%) of product revenues (2017: 42%), demonstrating that the Company is becoming less reliant on its original, lower margin, Helios products which had dominated the Company's revenues in previous years.
Helios
The Helios product range, designed for vehicles, contributed 48% of hardware revenues (2017: 58%). Whilst the Company's reliance on the product is slowly decreasing, it was still a core area of growth, with a number of long-time customers, as well as some new clients, placing orders. This is trend is expected to continue. New features and adaptations to the Helios have maintained demand in our core markets and now allow the Company to offer a more efficient fleet management solution for its end clients.
Helios successes in 2018 included a contract for $1.1m with the Company's North African distributor, announced in November 2018. The first payment was received at the beginning of 2019 and, whilst some software revenues have been recognised in 2018, the hardware will be shipped in the new financial year with the majority of the revenues recognised accordingly. The agreement also provides for the potential supply of further equipment on similar terms during 2019, but no firm order has yet been received for these.
Kylos
The Company has been working with a number of companies in the agricultural sector to develop a range of products to help improve productivity. One such strategic relationship in this industry which the Company developed further in 2018 is with CropX. A key milestone was achieved during the year when the CropX Kylos gained certification from Verizon which is expected to provide greater traction of sales for the product in the US market. CropX is currently undergoing a fund-raising process and, once this is completed, the Company should have better visibility on how the strong foundation it has established with CropX may be leveraged to yield growing orders.
The Company continues to collaborate with Bosch Connected Devices and Solutions GmBH in the German manufacturer's development of its IoT product range, which it launched during 2018. Whilst no significant orders have been placed to date, the Directors of Starcom believe that this relationship still has the potential to develop and could also provide opportunities with similar companies, leading to new streams of revenue in the future.
Tetis
During the year, the Company succeeded in developing a new and longer life battery pack for Tetis, which is now being actively promoted in the container and cargo delivery sectors. The Company's commercial agreement with WIMC Solutions Inc. ("WIMC"), announced in January 2018, is just one example of Starcom providing a bespoke solution for the issues WIMC needed to overcome.
The Company's relationship with Contguard Ltd, which was established in 2012, remains strong and the board expects to see further orders from the company in 2019. Contguard is one of Starcom's most strategic customers and, through its customer facing relationships, regularly passes on product feedback to the Company, which is crucial in R&D development.
Watchlock
During 2018, the Company launched the Watchlock Cube and succeeded in obtaining several orders for this product. However, the Company is focused now on the more advanced versions of the Watchlock in order to remain ahead of the market, as further informed below.
SaaS
The Company continued to develop its cloud-based software that clients subscribe to and connect with in order to utilise the rich data communicated from the end units - the Helios, the Kylos and the Tetis. One of Starcom's competitive advantages is its ability to offer a comprehensive solution that combines the hardware and the SaaS components. The higher margin SaaS revenues increased by 18% to approximately $2.0m (2017: $1.7m). The Directors anticipate that, as the number of products sold into the market increases, the associated SaaS subscriptions should also increase.
R&D
The Company is working with a number of companies, some not yet customers, to develop products to fit their specific industry needs and thereby creating new solutions as yet not seen in the market.
Examples of this include; an upgraded Helios unit to support the latest cellular networks (4G, LTE) and reducing manufacturing costs, enabling the Helios with Bluetooth Low Energy accessories, designing systems to integrate Helios with mobile printers and cement truck computers. The Tetis Dry is having an upgraded battery to support longer journeys, whilst Kylos Connect is being tested with a variety of new sensors to expand its uses in the IoT sector.
FINANCIAL REVIEW
Group revenues for the year were $6.0m, compared with $5.4m for the year ended 31 December 2017, an increase of 10%.
The gross margin for the year was 40%, compared with 38% for 2017.
Total operating expenditure increased by 9% to $3.27m, mainly due to non-cash expenses such as depreciation and share option provisions.
Net loss after taxation for the reported year reduced to $0.9m compared with the 2017 net loss of $1.4m, while the operating loss in the period was $0.88m, similar to an operating loss of $0.89m for 2017.
The Group benefitted from the strength of the US$, which resulted in a $0.2m exchange rate gain.
The Group balance sheet showed an increase in trade receivables to $1.9m, compared with $1.8m as at 31 December 2017, due to the increase in revenues for the period compared with 2017. However, thanks to effective collection, this was only a 7.1% increase versus a 10% revenue increase.
Group inventories at the period end were $2.0m, compared to $2.3m as at 30 June 2018 and $1.5m at the end of 2017.
Trade payables at the year-end were $1.4m, compared with $1.5m as at 31 December 2017 and $1.8m at 30 June 2018.
Net cash used in operating activities in the period was $0.7m, compared with $1.1m for the year ended 31 December 2017.
POST YEAR EVENTS
The Company announced on 7 February 2019 an update on its agreement with Xplosive Solutions Pty Limited ("Xplosive") in South Africa for the supply of Kylos units in the monitoring of cattle. This agreement succeeded an original agreement from October 2017 that could not be implemented then as planned due to delays caused by the local providers of mobile communication. This problem is resolved now and under the new three-year agreement Xplosive will pay the Company a monthly fee for each Kylos unit to cover the product cost and the ongoing SaaS fees. The initial value of this new agreement for the period is approximately $500,000 over a 36-month period but as Xplosive signs up with more local cellular providers it is possible this figure could increase.
On 26 February 2019, with the Company announced that Zero Motorcycles Inc. ("Zero"), one of the world's leading electric motorcycle manufacturers, had launched a new range of electric motorcycles incorporating Starcom's Helios tracking and monitoring technology. The collaborative agreement was originally announced by Starcom in 2017 and, thanks to the Helios, Zero's new motorbike, the SR/F, is described, in Internet of Things (IoT) terms, as, the 'first connected motorcycle in the world'. Although initial sales are expected to be relatively low in 2019, the Directors of the Company consider that there is a significant growth opportunity in later years as the market for electric motorbikes increases.
The Company has entered into a framework agreement with Israel Chemicals Ltd ("ICL"), a NYSE listed Israeli conglomerate and a global manufacturer of products based on unique minerals for the agriculture, food and engineered materials industries. ICL is utilising Starcom's Kylos Forever technology to track and monitor its sensitive cargo as it is shipped in tanks around the world. The contract is for five-years with an initial contract value of approximately $600,000.
Starcom's new Bluetooth enabled version of its keyless Watchlock, which is to be branded "Lokies" will be launched in 2019. The Company has a number of orders pending in respect of the new Lokies and anticipates that this product will be ready for the market within the next two months. Lokies is an IoT enabled padlock that can be opened remotely and does not require a key. Based on the significant market interest in this new revolutionary lock, the Board anticipates meaningful revenues during 2019.
In February 2019, the Company received an order from Cubemonk, Inc. ("Cubemonk"), a US-based provider of "flying cargo" shipment solutions, which manufactures its own unit load devices ("ULD") specifically designed to load on aircraft. Cubemonk has chosen Starcom as its tracking partner, following a wide range of competitor testing. The Kylos Air was deemed the product which best suits its customers' needs, primarily as it is the only product in the market that can track air freight due to its unique on/off barometric sensors. The Kylos Air is being fitted at the time of build into the ULDs and Starcom has received an initial order of 300 units. The Board considers that there is an opportunity for other container manufacturers to incorporate Kylos to follow this example.
OUTLOOK
Based on the pipeline of new projects the Company has developed in recent months, together with ongoing orders from existing clients and distributors and the recurring SaaS revenues, the Company looks forward to continued progress in 2019.
The growth in SaaS revenues, coupled with higher margin sales from Tetis and Kylos as the revenue mix continues to improve, should contribute towards further improvements in gross margins in 2019. The launch of new innovative products such as Lokies are also hoped to contribute to growth in the current period.
In order to capitalise on the Company's technological strengths with a view to accelerating the growth of the business, the Board recognises the need to intensify the Company's sales and marketing efforts and intends to invest in expanding its business development team.
Michael Rosenberg
Non-Executive Chairman
17 March 2019
STARCOM Plc
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
December 31,
Note 2018 2017
----- --------------
ASSETS
NON-CURRENT ASSETS :
Property, plant and equipment, net 6 521 303
Intangible assets, net 7 2,279 2,457
Income tax authorities 46 44
Total Non-Current Assets 2,846 2,804
----- --------------
CURRENT ASSETS:
Cash and cash equivalents 89 93
Short-term bank deposit 5 60 55
Trade receivables, net 3B 1,897 1,772
Other accounts receivable 3A 87 101
Inventories 4 2,025 1,485
Total Current Assets 4,158 3,506
----- --------------
6
----- --------------
TOTAL ASSETS 7,004 6,310
===== ==============
EQUITY AND LIABILITIES
EQUITY 12 3,861 3,032
----- -----
NON-CURRENT LIABILITIES:
Long-term loans from banks, net of current
maturities 10 50 155
Long term leasehold liabilities 2Cw 70 -
----- -----
Total Non-Current Liabilities 120 155
CURRENT LIABILITIES:
Short term bank credit 28 227
Short term bank loan 20 462 -
Current maturities of long-term loans
from banks 10 44 279
Convertible unsecured loans 19d - 131
Trade payables 1,412 1,522
Other accounts payable 9 372 251
Leasehold liabilities 2Cw 124 -
Related parties 18 581 713
----- -----
Total Current Liabilities 3,023 3,123
----- -----
TOTAL EQUITY AND LIABILITIES 7,004 6,310
===== =====
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 2018 2017
------------ ------------
Revenues 5,994 5,440
Cost of sales 13 (3,576) (3,360)
------------
Gross profit 2,418 2,080
------------ ------------
Operating expenses:
Research and development (224) (237)
Selling and marketing (621) (558)
General and administrative expenses 14 (2,424) (2,196)
Other Income (expenses) 15 (31) 22
------------ ------------
Total operating expenses (3,300) (2,969)
------------ ------------
Operating loss (882) (889)
Finance income 16A 302 41
Finance costs 16B (251) (502)
------------
Net finance Income (costs) 51 (461)
------------ ------------
Loss before taxes on income (831) (1,350)
Taxes on income due to previous
years 8 (89) -
------------ ------------
Total comprehensive loss for the
year (920) (1,350)
============ ============
Loss per share:
Basic and diluted loss per share 17 (0.003) (0.007)
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, 2017 - 8,332 89 428 (6,105) 2,744
Proceeds from issued
share capital, net of
mobilization costs (see
Note 12) - 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
Proceeds from issued
share capital, net of
mobilization costs (see
Note 1) - 1,379 - - - 1,379
Exercise of warrants
(see Note 1) - 150 - - - 150
Share based payment (see
Note 12d) - - - 220 - 220
Share based payment
expiration - 135 - (135) - -
Comprehensive loss for
the year - - - - (920) (920)
Balance as of December
31, 2018 - 11,460 89 687 (8,375) 3,861
======== ======= ==================== ======================== ============ ==========
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,
2018 2017
---------- ---------
CASH FLOWS FOR OPERATING ACTIVITIES:
Loss for the year (920) (1,350)
Adjustments to reconcile loss for
the year to net cash used in operating
activities:
Depreciation and amortization 623 510
Interest expense and exchange rate
differences 23 92
Share-based payment expense 220 174
Capital gain - (19)
Changes in assets and liabilities:
Decrease (Increase) in inventories (540) (229)
Increase in trade receivables (125) (381)
Decrease (Increase) in other accounts
receivable 14 (36)
Increase in Income Tax Authorities (2) (10)
Increase (Decrease) in trade payables (110) 96
Increase in other accounts payable 122 73
Net cash used in operating activities (695) (1,080)
---------- ---------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (109) (144)
Proceeds from sales of property,
plant and equipment - 61
Decrease (Increase) in short-term
deposits (5) 2
Cost of intangible assets (256) (264)
Net cash used in investing activities (370) (345)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term bank credit,
net (199) (38)
Receipt of short term loan, net 462 -
Proceeds from (Repayment of) convertible
unsecured loans, net (131) 131
Proceeds from (Repayment to) related
parties, net (132) 406
Payment for Leasehold liabilities (109) -
Receipt of long-term loans 93 46
Repayment of long-term loans (452) (357)
Proceeds from exercise of warrants 150 -
Consideration from issue of shares,
net 1,379 1,295
---------- ---------
Net cash provided by financing activities 1,061 1,483
---------- ---------
Increase (Decrease) in cash and
cash equivalents (4) 58
Cash and cash equivalents at the
beginning of the year 93 35
---------- ---------
Cash and cash equivalents at the
end of the year 89 93
========== =========
Appendix A - Additional Information
Interest paid during the year (30) (101)
========== =========
Appendix B - Non-cash financing
activities
Issuance of share to related parties
(in payment of related parties loans) - 100
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 incorporated in Jersey.
During the reported year, Starcom Systems America
Inc., a fully owned subsidiary, terminated its activity,
which caused a loss of $38 thousand to the Group results.
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: Forum 4, Grenville
Street, St Helier, Jersey, Channel Islands, JE4 8TQ.
1. During January 2018, the Company raised GBP315
($439) thousand before expenses through a placing
of 14,000,000 Ordinary Shares.
2. During May 2018, the Company raised GBP365 ($486)
thousand before expenses through a placing of 14,600,000
Ordinary Shares,
3. During the reported year, 4,440,000 warrants were
exercised into Ordinary Shares in consideration of
GBP111 ($155) thousand before expenses. See also note
12d(3).
4. During November 2018, the Company raised GBP400
($527) thousand before expenses through a placing
of 20,000,000 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. The Group - Starcom Plc. and the Subsidiaries.
7. 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 March 17,
2019.
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,
2018 2017
CPI (in points) * 124.3 123.3
Exchange Rate of U.S.
$ in NIS 3.748 3.467
Year Ended December 31,
2018 2017
Change in CPI 0.8% 0.4%
Change in Exchange Rate
of U.S. $ 8.1% (9.8%)
* 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 33
Office furniture and equipment 7 - 15
Vehicles 15
Laboratory equipment 15
Leasehold improvements 10
Leasehold improvements are depreciated by the straight-line
method over the term of the lease, ten-year period,
(including option terms) or the estimated useful lives
of the improvements, unless it is reasonably certain
that the Group will obtain ownership by the end of
the lease term.
At each balance sheet date, the Group examines the
residual value, the useful life and the depreciation
method it uses. If the Group identifies material changes
in the expected residual value, the useful life or
the future pattern of consumption of future economic
benefits in the asset that may indicate that a change
in the depreciation is required, such changes are
treated as changes in accounting estimates. In the
reported periods, no material changes have taken place
with any material effect on the financial statements
of the Group.
g. Intangible assets: Research and development
Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognized in profit
or loss as incurred.
Development activities involve a plan or design for
the production of new or substantially improved products
and processes. Development expenditure is capitalized
only if development costs can be measured reliably,
the product or process is technically and commercially
feasible, future economic benefits are probable, and
the Group intends and has sufficient resources to
complete development and to use or sell the asset.
The expenditure capitalized includes the cost of materials,
direct labor, overhead costs that are directly attributable
to preparing the asset for its intended use. Other
development expenditure is recognized in profit or
loss as incurred.
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
See Note 2C(w).
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.
-- 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. New standards, interpretations and amendments adopted
by the Group
The accounting policies adopted in the preparation
of the consolidated financial statements are consistent
with those followed in the preparation of the Group's
annual consolidated financial statements for the year
ended 31 December 2017, except for the adoption of
new standards effective as of 1 January 2018.
The Group has early adopted IFRS 16 as follows:
The Group has applied IFRS 16 using the modified retrospective
approach and therefore the comparative information
has not been restated and continues to be reported
under IAS 17 and IFRIC 4. The details of accounting
policies under IAS 17 and IFRIC 4 are disclosed separately
if they are different from those under IFRS 16 and
the impact of changes is disclosed as follows:
Significant accounting policy
Policy applicable from 1 January 2018:
At inception of a contract, the Group assesses whether
a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right
to control the use of an identified asset for a period
of time in exchange for consideration. To assess whether
a contract conveys the right to control the use of
an identified asset, the Group assesses whether:
* the contract involves the use of an identified asset
- this may be specified explicitly or implicitly and
should be physically distinct or represent
substantially all of the capacity of a physically
distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
* the Group has the right to obtain substantially all
of the economic benefits from use of the asset
throughout the period of use; and
* the Group has the right to direct the use of the
asset. The Group has this right when it has the
decision-making rights that are most relevant to
changing how and for what purpose the asset is used.
In rare cases where the decision about how and for
what purpose the asset is used is predetermined, the
Group has the right to direct the use of the asset if
either:
* the Group has the right to operate the asset; or
* the Group designed the asset in a way that
predetermines how and for what purpose it will be
used.
This policy is applied to contracts entered into, or
changed, on or after 1 January 2018.
At inception or on reassessment of a contract that
contains a lease component, the Group allocates the
consideration in the contract to each lease component
on the basis of their relative stand-alone prices.
However, for the leases of land and buildings in which
it is a lessee, the Group has elected not to separate
non-lease components and account for the lease and
non-lease components as a single lease component.
Policy applicable before 1 January 2018
For contracts entered into before 1 January 2018, the
Group determined whether the arrangement was or contained
a lease based on the assessment of whether:
* fulfilment of the arrangement was dependent on the
use of a specific asset or assets; and
* the arrangement had conveyed a right to use the
asset. An arrangement conveyed the right to use the
asset if one of the following was met:
* the purchaser had the ability or right to operate the
asset while obtaining or controlling more than an
insignificant amount of the output;
* the purchaser had the ability or right to control
physical access to the asset while obtaining or
controlling more than an insignificant amount of the
output; or
* facts and circumstances indicated that it was remote
that other parties would take more than an
insignificant amount of the output, and the price per
unit was neither fixed per unit of output nor equal
to the current market price per unit of output.
As a lessee
The Group recognizes a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises
the initial amount of the lease liability adjusted
for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement
date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term.
The estimated useful lives of right-of-use assets are
determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted
for certain remeasurements of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
Generally, the Group uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease
liability comprise the following:
* fixed payments, including in-substance fixed
payments;
* variable lease payments that depend on an index or a
rate, initially measured using the index or rate as
at the commencement date;
* amounts expected to be payable under a residual value
guarantee; and
* the exercise price under a purchase option that the
Group is reasonably certain to exercise, lease
payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless
the Group is reasonably certain not to terminate
early.
The lease liability is measured at amortized cost using
the effective interest method. It is remeasured when
there is a change in future lease payments arising
from a change in an index or rate, if there is a change
in the Group's estimate of the amount expected to be
payable under a residual value guarantee, or if the
Group changes its assessment of whether it will exercise
a purchase, extension or termination option.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.
The Group presents right-of-use assets that do not
meet the definition of investment property in 'property,
plant and equipment' and lease liabilities in 'loans
and borrowings' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognize right-of-use
assets and lease liabilities for short-term leases
of machinery that have a lease term of 12 months or
less and leases of low-value assets, including IT equipment.
The Group recognizes the lease payments associated
with these leases as an expense on a straight-line
basis over the lease term.
In the comparative period, as a lessee the Group classified
leases that transfer substantially all of the risks
and rewards of ownership as finance leases. When this
was the case, the leased assets were measured initially
at an amount equal to the lower of their fair value
and the present value of the minimum lease payments.
Minimum lease payments were the payments over the lease
term that the lessee was required to make, excluding
any contingent rent.
Subsequently, the assets were accounted for in accordance
with the accounting policy applicable to that asset.
Assets held under other leases were classified as operating
leases and were not recognized in the Group's statement
of financial position. Payments made under operating
leases were recognized in profit or loss on a straight-line
basis over the term of the lease. Lease incentives
received were recognized as an integral part of the
total lease expense, over the term of the lease.
Under IAS 17
In the comparative period, as a lessee the Group classified
leases that transfer substantially all of the risks
and rewards of ownership as finance leases. When this
was the case, the leased assets were measured initially
at an amount equal to the lower of their fair value
and the present value of the minimum lease payments.
Minimum lease payments were the payments over the lease
term that the lessee was required to make, excluding
any contingent rent.
Subsequently, the assets were accounted for in accordance
with the accounting policy applicable to that asset.
Assets held under other leases were classified as operating
leases and were not recognized in the Group's statement
of financial position. Payments made under operating
leases were recognized in profit or loss on a straight-line
basis over the term of the lease. Lease incentives
received were recognized as an integral part of the
total lease expense, over the term of the lease.
As a lessee
'Property, plant and equipment' comprise owned and
leased assets that do not meet the definition of investment
property.
The Group leases assets including buildings and vehicles.
Information about leases for which the Group is a lessee
is presented below.
Right-of-use assets
Property Vehicles Total
--------- --------- ------
Balance at January
1, 2018 159 80 239
Additions during the
year - 58 58
Depreciation charge
for the year (80) (38) (118)
--------- --------- ------
Balance at December
31, 2018 79 100 179
========= ========= ======
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
Less than one year 130
One to five years 72
Total undiscounted lease liabilities
at December 31, 2018 202
====
Lease liabilities included in the statement of financial
position at December 31, 2018
Current 124
Non-current 70
Total lease liabilities at December
31, 2018 194
====
Amounts recognized in profit or loss
Interest on lease liabilities (9)
Amounts recognised in statement of cash flows Total cash outflow for
leases (109)
NOTE 3A - OTHER ACCOUNTS RECEIVABLE
December 31
2018 2017
------------ -----------
Government institutions 76 101
Prepaid expenses 11 -
------------ -----------
87 101
============ ===========
NOTE 3B TRADE RECEIVABLES, NET
-
December 31
2018 2017
------------ -----------
Group receivables 1,945 1,820
Net of allowance for
doubtful accounts (48) (48)
1,897 1,772
============ ===========
NOTE 4 - INVENTORIES
December 31
2018 2017
------ ------
Raw materials 1,492 979
Finished goods 533 506
------ ------
2,025 1,485
====== ======
See also Note 13.
NOTE 5 SHORT-TERM BANK DEPOSIT
-
The deposit sums of $60 and $55 for the years ended December
31, 2018 and 2017, 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 principals. 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 2018 176 118 66 49 242 651
Additions
during the
year 15 - 91 3 - 109
Balance as
of December
31 2018 191 118 157 52 242 760
-------------- -------------- ------------- --------------- ------------ --------
Accumulated
Depreciation:
Balance as
of January
1 2018 136 71 62 6 73 348
Depreciation
during the
year 14 8 7 5 36 70
Balance as
of December
31 2018 150 79 69 11 109 418
-------------- -------------- ------------- --------------- ------------ --------
Net book value
as of December
31 2018 41 39 88 41 133 342
============== ============== ============= =============== ============ ========
Right-of-use assets **
Property Vehicles* Total
--------- ---------- ------
Balance at January 1,
2018 159 80 239
Additions during the
year - 58 58
Depreciation charge
for the year (80) (38) (118)
--------- ---------- ------
Balance at December
31, 2018 79 100 179
========= ========== ======
* See also Note 11.
** See also Note 2Cw
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 11.
NOTE 7 - INTANGIBLE ASSETS, NET
Total
-------------
Cost:
Balance as of January
1 2018 4,202
Additions during the
year 256
Balance as of December
31 2018 4,458
-------------
Accumulated Amortization:
Balance as of January
1 2018 (1,543)
Amortization during
the year (434)
Balance as of December
31 2018 (1,977)
-------------
Accumulated Impairment
of assets (202)
-------------
Net book value as of
December 31 2018 2,279
=============
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)
-------------
Accumulated Impairment
of assets (202)
-------------
Net book value as of
December 31 2017 2,457
=============
The expenditure capitalized includes the cost of materials
and direct labor that are directly attributable to preparing
the assets for their intended use. Other development expenditure
is recognized in profit or loss as incurred.
Capitalized development expenditure is measured at cost less
accumulated amortization and accumulated impairment losses.
Amortization is calculated using the straight-line method over
the estimated useful lives of the assets: ten years.
See also Note 2C g and Note 2C k.
NOTE 8 - TAXES ON INCOME
a. Israeli taxation
1. The Israeli corporate tax rate in 2018 is 23% and
for 2017 was 24%.
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 was to a rate of 24% as of
January 2017 and the second step was to a rate of
23% as of 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,
an increase in tax rates was approved, commencing
with 2014 and thereafter, on revenues from an approved
enterprise, as stated in the Encouragement Law for
an approved enterprise. An eligible company in Development
Area A was entitled to a tax rate of 9% during 2015.
During 2016 an amendment to the law was confirmed
according to which an eligible company in Development
Area A is entitled to a tax rate of 7.5% as of 2017.
In an area that is not Development Area A, the tax
rate will be 16%.
Concurrently, the tax rate on 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 2018.
3. Income Tax audit
The company completed its tax audit process for
the years 2013-2017 and agreed to pay a total amount
of NIS 334 ($89) to the Israeli Tax Authorities.
The initial tax authorities assessments based on
judgement for years 2013-2014 was NIS 7,285.
4. Starcom Israel has carry forward operating tax losses
of approximately NIS 29 million as of December 31,
2018 (NIS 20 million as of December 31, 2017). As
for deferred tax assets see Note 2C(r).
Starcom Israel has been assessed by the Income Tax
Authorities up to and including the year 2017.
b. Jersey taxation
Taxable income of the Company and Starcom Jersey is
subject to tax at the rate of zero percent for the
years 2018 and 2017.
c. Detail of tax income:
Since the recording of a deferred tax asset is limited
to the amount of deferred tax liabilities, no deferred
tax income was recorded in 2018.
NOTE 9 OTHER ACCOUNTS PAYABLE
-
December 31
2018 2017
----- ----------
Employees and payroll
accruals 255 242
Income tax (See also 89 -
note 8a3)
Accrued expenses and
notes payable 28 9
372 251
===== ==========
NOTE 10 - LONG-TERM LOANS FROM BANKS, NET OF CURRENT MATURITIES
1. Composition: December 31
2018 2017
---------- ----------------
Long-term liability 94 434
Less: current maturities (44) (279)
---------- ----------------
50 155
========== ================
2. Aggregate maturities of long-term loans for years
subsequent to December 31, 2018 are as follows:
Amount
---------------
First year 44
Second year 36
Third year 14
Fourth and Fifth -
years
---------------
94
===============
3. Additional information regarding long-term loans:
Amount Annual
Date Received Interest Loan Terms and Interest
Loan Received NIS (U. Rate Maturity Dates Payment
# S. dollars) Terms
------------- ---------------- ------------ ----------------------------- ----------------
Monthly
55 equal monthly commencing
January 22, 1,900 ($ Prime instalments including 22 February
1. 2014 507) + 1.8% principal and interest 2014
60 equal monthly Monthly
Prime instalments including commencing
2. June 6, 2016 400 ($ 107) + 0.9 principal and interest 20 July 2016
36 equal monthly Monthly
Prime instalments including commencing
3. June 3, 2018 150 ($40) + 3.85 principal and interest 20 March 2018
NOTE 11 CHARGES
-
1. A first class current general charge in favour of
a bank was placed on all Starcom Israel's assets.
See also Note 23(2)
2. A charge in favour of a bank was placed on Starcom
Israel's vehicles.
3. A first class charge in favour of a bank was placed
on Starcom Israel's bank account.
4. A first class floating charge in favour of an Israeli
bank was placed on all Starcom Israel's assets along
with negative pledge. See also Note 20.
NOTE 12 EQUITY
-
a. Composition - common stock of no par value, issued and
outstanding 293,449,513 shares and 240,409,513 shares
as of December 31, 2018 and December 31, 2017, respectively.
b. A share from the Company 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
Regarding issuance of shares during the reported year,
see Note 1a.
d. Share-based payment
The following table lists the number of share options
and the exercise prices of share options during the current
year:
2018 2017
---------------------- ----------------------
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
----------- --------- ---------- ---------
GBP GBP
---------------------- ----------------------
Share options outstanding
at beginning of year 32,729,647 0.041 7,574,033 0.092
Share options granted
during the year 10,500,000 0.033 25,155,614 0.025
Options & Warrants Exercised
during the year (4,440,000) 0.025 - -
Options & Warrants Expired
during the year (5,293,167) 0.06 - -
Share options outstanding
at end of year 33,496,480 0.037 32,729,647 0.041
=========== ========= ========== =========
Share options exercisable
at end of year 14,949,640 0.046 15,835,967 0.055
=========== ========= ========== =========
d. 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 years
2018 and 2017 amounted to $7 thousand and $65 thousand,
respectively.
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
2018 and 2017 amounted to $123 thousand and $109 thousand,
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 months following admission of
the placing shares to trading on the AIM, see also note
1a3. The remaining warrants were expired during the
year.
4. During April 2018, the Company granted to its
directors and senior management Options to subscribed
for 10,500,000 shares at an exercise price of GBP0.0325
per share. The following table list the inputs to
the Black and Scholes model used for the grants.
Directors and Directors
Senior Management
------------------- ------------
Fair value at the measurement GBP0.019 GBP0.019
date
Quantity 6,000,000 4,500,000
Dividend Yield (%) - -
Expected Volatility (%) 76.8 76.8
Risk-free interest rate 1.4 1.4
(%)
Share price GBP0.02625 GBP0.02625
Vesting period (years) 1-3 1-2
Expiration period (years) 10 10
Total expenses recorded in regard to these Options
in the statement of comprehensive income for the
reported period amounted $90 thousand.
NOTE 13 - COST OF SALES
Year Ended December 31,
2018 2017
------------------------ -----------
Purchases and other 3,682 3,181
Amortization 434 408
Increase in inventory (540) (229)
3,576 3,360
======================== ===========
NOTE 14 - GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31,
2018 2017
-------------------- ----------------
a. Salaries and related
expenses (see
also Note 18d) 1,163 1,082
Office rent and maintenance 236 218
Car maintenance 139 123
Professional services
(1) 694 340
Doubtful accounts and
bad debts 4 66
Depreciation 188 102
Other - 265
2,424 2,196
==================== ================
(1) Including share based payment to directors and
senior management in the amounts of $220 and $174
thousand for the years ended December 31, 2018 and
2017, respectively. See also Note 12d.
b. Average Number of Staff Members by Category:
Year Ended December
31,
2018 2017
---------- ----------
Sales and marketing 6 6
Research and development 3 4
General and administrative 15 12
---------- ----------
24 22
========== ==========
NOTE 15 - OTHER INCOME (EXPENSES)
Year Ended December
31,
2018 2017
---------- ----------
Capital gain from sale
of fixed assets - 19
Other income 7 3
Termination of Starcom (38) -
America
(31) 22
========== ==========
NOTE 16A - FINANCE INCOME
Year Ended December 31,
2018 2017
------------ ------------
Exchange rate differences 302 41
NOTE 16B - FINANCE COSTS
Year Ended December 31,
2018 2017
------ ----------
Exchange rate differences (80) (245)
Interest to banks and
others (74) (121)
Interest to related parties (15) (33)
Bank charges (80) (83)
Interest to suppliers (2) (20)
(251) (502)
------ ----------
Net finance Income (costs) 51 (461)
====== ==========
NOTE 17 - EARNINGS PER SHARE
Weighted average number of shares used in computing
basic and diluted earnings per share:
Year Ended December 31,
2018 2017
------------ ------------
Number of shares 272,694,684 187,031,676
============ ============
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
2018 2017
------ ------
Credit balances (629) (525)
Loans 48 (188)
------ ------
(581) (713)
====== ======
c. Shareholders' credit balances are linked to the New
Israel Shekel ("NIS"). Loans from shareholders accrue
4% annual interest.
d. Transactions: Year Ended December 31,
2018 2017
-------------- -----------
Key management compensation:
Total salaries and related
expenses for shareholders 353 465
============== ===========
Total share-based payment 127 174
============== ===========
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.
The Group settled a credit insurance with one
of the biggest credit insurance companies worldwide
and manage its credit risk accordingly. Cash
and cash equivalent balances of the Group are
deposited in an Israeli bank. Group management
is of the opinion that there is insignificant
credit risk regarding these amounts.
3) Liquidity risks
Cautious management of liquidity risks requires
that there will be sufficient amounts of cash
to finance operations. Group management currently
examines projections regarding liquidity surpluses
deriving from cash and cash equivalents. This
examination is based on projected cash flows,
in accordance with procedures and limitations
determined by the Group.
Short loan covenants compliance is closely monitored
by the financial department.
b. Linkage terms of financial instruments:
Group exposure to Index and foreign currency risks,
based on par value, except for derivative financial
instruments is as follows:
December 31, 2018
------------------------------------------------------------------------------
NIS U.S. GBP Euro Total
Dollar
--------------------------------- --------- ----- --------- ---------
Variable
Unlinked Interest Unlinked
---------- --------- ------------------------------ ---------
Financial Assets:
Cash and cash equivalents 8 - 55 24 2 89
Short-term deposit - 60 - - - 60
Trade receivables.
net 492 - 1,100 8 297 1,897
Other accounts receivable 87 - - - - 87
Financial Liabilities:
Short-term bank credit - (28) - - - (28)
Short term bank loans - (462) - - - (462)
Trade payables (994) - (360) (52) (6) (1,412)
Other accounts payable (340) - (32) - - (372)
Leasehold liabilities - (194) - - - (194)
Related parties - (581) - - - (581)
Long-term loans from
banks - (94) - - - (94)
------ --------- ---------
(747) (1,299) 763 (20) 293 (1,010)
==========
December 31, 2017
----------------------------------------------------------------------------------------
NIS U.S. Dollar GBP Euro Total
------------------------ ------------ --------- --------- -------------
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)
=========== ========== =========== ========= ======= ============
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
2018 (103) 103
2017 (103) 103
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
2018 15 (15)
2017 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
2018 (1) 1
2017 (1) 1
c. Fair value
As of December 31, 2018, 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
During the reported year, all convertible unsecured
loans were fully repaid.
NOTE 20 SHORT-TERM LOANS
-
During August 2018, Starcom Israel signed a loan agreement
with an Israeli bank in order to receive loans and credits
in an aggregate principal amount that will not exceed
NIS 2.4 million (hereinafter - "the Loan").
The loan will bear annual interest in the amount of Prime
+ 3.4%, calculated and payable on a monthly basis, to
be repaid after a year.
In the framework of the financial agreement that was
signed, the Company obligated to maintain financials
covenants in regard to the Groups' EBITDA and AQR ratio,
as defined in the agreement, that are examined on a monthly
basis.
As of December 31, 2018, the Company complied with the
abovementioned financial covenants.
In regard to charges, see also Note 11(4).
NOTE 21 CUSTOMERS AND GEOGRAPHIC INFORMATION
-
a. Major customers' data as a percentage of total sales
to unaffiliated customers:
Year Ended December 31,
2018 2017 2016
-------- -------- -------
Customer A 12% 15% 5%
Customer B 8% 8% 5%
Customer C 5% 7% 5%
b. Breakdown of Consolidated Sales to unaffiliated Customers
according to Geographic Regions:
Year Ended December 31,
2018 2017 2016
-------- -------- -------
Latin America 11% 13% 16%
Europe 16% 19% 17%
Africa 22% 27% 38%
Asia 8% 14% 14%
Middle East 32% 24% 14%
North America 11% 3% 1%
-------- -------- -------
Total 100% 100% 100%
-------- -------- -------
NOTE 22 SEGMENTATION REPORTING
-
The Group has two 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
31.12.2018:
Segment revenues 3,959 2,035
Cost of sales (3,322) (254)
--------- ------
Gross profit 637 1,781
Year Ended
31.12.2017:
Segment revenues 3,715 1,725
Cost of sales (3,166) (194)
--------- ------
Gross profit 549 1,531
NOTE 23 - EVENTS DURING THE REPORTED PERIOD
1. The company appointed Allenby Capital Limited as the Company's new nominated adviser and joint broker.
2. The company agreed with one of the Israeli's banks to terminate two first class current general charges as provided previously as a part of long term loans.
-ends-
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR LLFFAVFIDLIA
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March 18, 2019 03:01 ET (07:01 GMT)
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