T42 Iot Track. Regulatory News (TRAC)

Introduction

We have reviewed the accompanying condensed consolidated interim statements of financial position of t42 IoT Tracking Solutions PLC (formerly: Starcom PLC) and its consolidated subsidiaries (hereinafter - "the Group") as at June 30, 2022 and the related condensed consolidated interim statements of comprehensive loss, changes in shareholders' equity and cash flows for the six months to June 30, 2022. The preparation and presentation of these condensed consolidated financial statements are in conformity with International Accounting Standard No. 34 "Interim Financial Reporting" and are the responsibility of the Group's board of directors and management. Our responsibility is to express a conclusion on these interim consolidated financial statements based on our review.

Scope of Review

We conducted our review in accordance with Review Standard (Israel) No. 2410 of the Israel Accounting Standards Board, "Review of Interim Financial Information for Interim Periods Performed by the Auditor of an Entity". A review consists principally of inquiries of Company personnel, analytical procedures applied to the financial data and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, we are not aware of any material modifications that should be made to these interim consolidated financial statements in order for them to be in conformity with International Accounting Standard No. 34.

Without qualifying our conclusion, we draw attention to Note 10 in the financial statements regarding the global uncertainties caused by the  COVID-19 pandemic and the invasion of Ukraine by Russia and its material negative impact on the Group's activities.

Barzily & Co.

Certified Public Accountants.

A Member of MSI Worldwide

 June 30

December 31

Note

2022

2021

2021

Unaudited

Unaudited

Audited

ASSETS

NON-CURRENT ASSETS :

Property, plant and equipment, net

591

325

299

Rights of use assets, net

1,064

260

690

Intangible assets, net

3

1,028

1,811

1,034

Income Tax Authorities

58

56

57

Total Non-Current Assets

2,741

2,452

2,080

CURRENT ASSETS :

Inventories

2,234

2,030

1,790

Trade receivables (net of allowance for doubtful accounts of $462, $583 and $497 thousand as of June 30, 2022 and 2021 and December 31,2021)

645

734

679

Other receivables

98

74

160

Short-term deposit

131

148

154

Cash and cash equivalents

311

328

1,534

Total Current Assets

3,419

3,314

4,317

6,124

TOTAL ASSETS

6,160

5,766

6,397

LIABILITIES AND EQUITY

EQUITY

93

1,641

193

NON-CURRENT LIABILITIES:

Long-term loans from banks, net of current maturities

178

265

239

Amortized cost of a convertible loan

5

824

287

857

Conversion component of a convertible loan at fair value

5

215

16

279

Leasehold liabilities

888

170

558

Warrants at fair value

5

87

-

115

Total Non-Current Liabilities

2,192

738

2,048

CURRENT LIABILITIES:

Short-term bank credit

61

1

24

Short-term loans and current maturities of long-term loans

927

958

998

Warrants at fair value

5

-

6

3

Trade payables

1,606

1,373

1,553

Shareholders and related parties

6

708

665

692

Other payables

442

254

738

Leasehold liabilities

131

130

148

Total Current Liabilities

3,875

3,387

4,156

TOTAL LIABILITIES AND EQUITY

6,160

5,766

6,397

Six Months Ended June 30

Year Ended December 31

Note

2022

2021

2021

Unaudited

Unaudited

Audited

Revenues

2,177

2,271

4,214

Cost of sales

7

(1,181)

(1,356)

(2,545)

Inventory write-down

-

-

(381)

Gross profit

996

915

1,288

Operating expenses:

Research and development

(60)

(137)

(223)

Selling and marketing

(323)

(294)

(609)

General and administrative

(1,098)

(978)

(2,388)

Other income (expenses)

(40)

21

(756)

(1,521)

(1,388)

(3,976)

Operating loss

(525)

(473)

(2,688)

Net finance Income (expenses)

8

303

(58)

(271)

Total comprehensive loss for the year

(222)

(531)

(2,959)

Loss per share:

Basic and diluted loss per share (in dollars)

4

(0.004)

(0.012)

(0.064)

Share

Capital *

Premium on Shares

Capital Reserve

Capital Reserve for Share-based payment

Accumulated Loss

Total

(Unaudited)

-

13,351

89

1,151

(14,398)

193

Balance- January 1, 2022

Exercise of options, see Note 4

-

74

-

-

-

74

Share based payment - Note 4

-

-

-

48

-

48

Comprehensive loss for the period

-

-

-

-

(222)

(222)

Balance - June 30, 2022

-

13,425

89

1,199

(14,620)

93

(Unaudited)

Balance- January 1, 2021

-

12,328

89

1,123

(11,439)

2,101

Issuance of share capital, net of expenses

-

109

-

-

-

109

Share based payment

-

-

-

(38)

-

(38)

Comprehensive loss for the period

-

-

-

-

(531)

(531)

Balance- June 30, 2021

-

12,437

89

1, 085

(11,970)

1,641

(Audited)

Balance- January 1, 2021

-

12,328

89

1,123

(11,439)

2,101

Issuance of shares to a related party in payment of a payable

-

107

-

-

-

107

Conversion of a convertible loan

295

-

-

-

295

Proceeds from issued share capital, net of expenses

-

621

-

-

-

621

Share based payment

-

-

-

28

-

28

Comprehensive loss for the year

-

-

-

-

(2,959)

(2,959)

Balance- December 31, 2021

-

13,351

89

1,151

(14,398)

193

Six Months Ended

June 30

Year Ended December 31

2022

2021

2021

CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:

Unaudited

Unaudited

Audited

Comprehensive loss

(222)

(531)

(2,959)

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

Depreciation and amortization

211

366

549

Interest expense and exchange rate differences

(221)

33

(24)

Share-based payment expense

48

(38)

28

Inventory write down

-

-

381

Intangible assets impairment

-

-

801

Changes in assets and liabilities:

 Decrease (Increase) in inventories

(444)

97

(44)

Decrease (Increase) in trade receivables

34

395

450

Decrease (Increase) in other receivables

62

7

(79)

Increase in Income Tax Authorities

(1)

-

(1)

Increase (Decrease) in trade payables

72

(97)

81

Increase (Decrease) in other payables

(297)

(49)

435

Net cash provided by (used in) operating activities

(758)

183

(382)

CASH FLOWS FOR INVESTING ACTIVITIES:

Purchases of property and equipment

(333)

(41)

(49)

Proceeds from sales of property, plant and equipment

-

-

-

Decrease (Increase) in short-term deposits

23

2

(4)

Purchase of intangible assets

(83)

(173)

(283)

Net cash used in investing activities

(393)

(212)

(336)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank credit, net

37

(24)

(1)

Receipt (Repayment) of Short-term loans from banks, net

(65)

176

183

Receipt of long-term loans

-

-

-

Receipt of convertible loans , net

-

-

1,251

Proceeds from (Repayment to) shareholders and related parties, net

(4)

50

77

Repayment of Leasehold liability

(80)

(67)

(137)

Repayment of long-term loans

(34)

(42)

(6)

Proceeds from issue of shares, net

74

-

621

Net cash provided by (used in) financing activities

(72)

93

1,988

Increase (Decrease) in cash and cash equivalents

(1,223)

64

1,270

Cash and cash equivalents at the beginning of the period

1,534

264

264

Cash and cash equivalents at the end of the period

311

328

1,534

Appendix A - Additional Information

Interest paid during the period

(73)

(30)

(49)

Appendix B - Non-cash financing activities

Issuance of shares to a related party in payment of debt

-

109

402

Non-cash additions to right-of-use assets and lease liabilities

418

629

-

NOTE 1 -

GENERAL INFORMATION

a.

The Reporting Entity

1. t42 IoT Tracking Solutions PLC (formerly: Starcom PLC) ("the Company") was incorporated in Jersey on November 28, 2012.

The Group provides real-time tracking, security, and monitoring solutions for the global supply chain, logistics, container and freight market.

The Company fully owns Starcom G.P.S. Systems Ltd., an Israeli company that engages in the same field, and Starcom Systems Limited, a company in Jersey.

The Company's shares are admitted for trading on the London Stock Exchange's AIM market.

Address of the official Company office in Israel of Starcom G.P.S. Systems Ltd. is:

96 Derech Ramataim, 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

b.

Definitions in these financial statements:

1.

International Financial Reporting Standards (hereinafter: "IFRS") - Standards and interpretations adopted by the International Accounting Standards Board (hereafter: "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 - t42 IoT Tracking Solutions PLC (formerly: 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 - t42 IoT Tracking Solutions PLC (formerly: Starcom PLC) and the Subsidiaries.

7.

Related party - As determined by International Accounting Standard No. 24 in regard to related parties.

NOTE 2 -

BASIS OF PREPARATION AND CHANGE IN THE GROUP'S ACCOUNTING POLICIES

a.

Basis of preparation

b.

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2021 and for the year ended on that date and with the notes thereto.

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2021 are applied consistently in these interim consolidated financial statements.

 Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management of the Company 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.

The judgment of management, when implementing the Group accounting policies and the basic assumptions utilized in the estimates that are bound up in uncertainties are consistent with those that were utilized to prepare the annual financial statements.

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 Notes:

Note 5 - financial liabilities of convertible loans and warrants.

c.

 Exchange rates:

Six Months Ended June 30

Year Ended December 31

2022

2021

2021

Exchange rate of NIS in U.S. $

0.286

0.306

0.322

Exchange rate of U.S. $ in GBP

0.83

0.72

0.74

Change of NIS in U.S. $

(11.27%)

(3.53%)

3.4%

Change of U.S. $ in GBP

11.68%

(1.64%)

1.37%

NOTE 3 -

INTANGIBLE ASSETS, NET

Total

Unaudited

Cost:

Balance as of January 1, 2022

1,718

Additions during the period

83

Balance as of June 30, 2022

1,801

Accumulated Depreciation:

Balance as of January 1, 2022

(684)

Amortization during the period

(89)

Balance as of June 30, 2022

(773)

Impairment of assets

-

Net book value as of June 30, 2022

1,028

Total

Unaudited

Cost:

Balance as of January 1, 2021

5,036

Additions during the period

173

Balance as of June 30, 2021

5,209

Accumulated Depreciation:

Balance as of January 1, 2021

(2,934)

Amortization during the period

(262)

Balance as of June 30, 2021

(3,196)

Impairment of assets

(202)

Net book value as of June 30, 2021

1,811

Total

Audited

Cost:

Balance as of January 1, 2021

5,036

Additions during the year

283

Impairment

(3,601)

Balance as of December 31, 2021

1,718

Accumulated Amortization:

Balance as of January 1, 2021

(2,934)

Amortization during the year

(348)

Impairment

2,598

Balance as of December 31, 2021

(684)

Net book value as of December 31, 2021

1,034

NOTE 4 -

SHARE CAPITAL

a.

Composition - ordinary shares of no-par value, issued and outstanding - 53,026,822 shares and 52,526,822 shares as of June 30, 2022, and December 31, 2021, respectively.

b.

A Company share grants to its holder voting rights, rights to receive dividends and rights to net assets upon dissolution.

c.

Weighted average number of shares used for calculation of basic and diluted loss per share:

June 30 June 30*

December 31

2022

2021

2021

Unaudited

Unaudited

Audited

Number

52,833,452

44,030,728

46,294,205

June 30, 2022

December 31, 2021

Unaudited

Audited

Number of options and warrants

Weighted average

exercise price

Number of options and warrants

Weighted average

exercise price

£

 £

Share options and warrants outstanding at beginning of period

10,122,112

0.206

6,244,243

0.22

Share options or warrants granted during the period

-

-

4,322,869

0.17

Warrants exercised during the period

(500,000)

0.12

(445,000)

-

Share options or warrants expired during the period

(53,075(

0.12

-

-

Share options and warrants outstanding at end of period

9,569,037

0.211

10,122,112

0.206

Share options and warrants exercisable at end of period

9,239,370

0.204

9,127,829

0.207

d.

During November 2021 the Company held a general meeting which resulted with a decision to consolidated shares by a ratio of 1:8 ("shares consolidation").

e.

During March 2022 the Company's CEO, CFO, chairman and another employee exercised 500,000 warrants granted to them under a convertible loan they provided in March 2020. The warrants were exercised at a price of 12p per share as set out in the loan agreement, generating proceeds of £60,000.

NOTE 5 -

FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS

a.

During December 2021, The Company received loans from third parties totaling $1,251 thousand (£925 thousand) in the form of convertible loans enabling the lenders to convert the loans at an exercise price of £0.15 per share at any time, under the limitations of the AIM Rules, Takeover Code and MAR regulations, up to December 31, 2023.

The convertible loans bear interest at the rate of 8% per annum calculated by reference to the principal amount of the convertible loans. If not converted, the loans will be repayable on December 31, 2023.

In addition, the lenders received fully vested warrants to subscribe a total of 1,541,667 further shares at an exercise price of £0.17 per share. Any unexercised warrants expire at the end of two-years from grant.

In addition, the lenders received fully vested warrants to subscribe a total of 1,541,667 further shares at an exercise price of £0.19 per share. Any unexercised warrants expire at the end of three-years from grant.

For the period ended June 30, 2022, the estimated fair values of the Warrants and the Convertible component were measured by an independent appraiser as follows,

The level of the fair value hierarchy is level two.

Common Stock Market Value measured in calculation $0.15

The loan was evaluated and divided into different components by an independent appraiser, the amounts as at June 30, 2022 are as follows:

Conversion component at fair value - $215 thousand

Warrants at fair value - $87 thousand

Amortized cost of a loan - $824 thousand

Transaction costs were allocated according to the component's fair value ratio.

The part of the expenses that is attributed to the amortized cost of the loan was reduced from its cost.

An effective interest rate was calculated for the liability of the loan, based on its amortization table. The effective interest rate is 33% per annum.

Total revaluation expenses regarding these components in the statement of comprehensive loss for the reported period are set out below:

Loan component

Conversion component

Warrant

Balance as of January 1, 2021

254

42

10

Additions during the year

857

279

115

Finance (income) expenses

56

(42)

(7)

Payments

(17)

-

-

Conversion

(293)

-

-

Balance as of December 31, 2021

857

279

118

Finance (income) expenses

(33)

(64)

(28)

Payments

-

-

-

Conversion

-

-

(3)

Balance as of June 30, 2022

824

215

87

 NOTE 6 -

 SHAREHOLDERS AND RELATED PARTIES

a.

Related parties that own the controlling shares in the Group are:

Mr. Avraham Hartman (10.53%) and Mr. Uri Hartman (5.56%).

b.

Short-term balances:

June 30

December 31

2022

2021

2021

Unaudited

Unaudited

Audited

Credit balance

Avi Hartmann

Uri Hartmann

Doron Kedem*

(15)(508)-

(47)

(446)

(173)

(38)

(482)

(173)

Total Credit balance

(523)

(666)

(693)

Loans

Avi Hartmann

Uri Hartmann

Doron Kedem*

53(238)-

31

(237)

207

38

(236)

199

Total Loans

(185)

1

1

Total Short-term balances

(708)

(665)

(692)

* As of June 30, 2022, Mr. Doron Kedem is not considered a related party, and his balances are not included for this date.

c.

Transactions:

Six Months Ended

June 30

Year Ended

December 31

2022

2021

2021

Unaudited

Unaudited

Audited

Total salaries, services rendered and related expenses for shareholders

195

192

543

Total share-based payment expenses

2

2

22

Interest to related parties

5

5

10

NOTE 7 -

 COST OF SALES

Six Months Ended

June 30

Year Ended December 31

2022

2021

2021