T42 Iot Track. Regulatory News (TRAC)

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

PAGE

Independent Auditors' report on review of interim financial information

2

 Interim Condensed Consolidated Statements of Financial Position

3

 Interim Condensed Consolidated Statements of Comprehensive Loss

4

 Interim Condensed Consolidated Statements of Changes in Deficit

5

 Interim Condensed Consolidated Statements of Cash Flows

6

 Notes to the Interim Condensed Consolidated Financial Statements

7-14

Introduction

We have reviewed the accompanying condensed consolidated interim statements of financial position of t42 IoT Tracking Solutions PLC and its consolidated companies (hereinafter - "the Group") as of June 30, 2023 and 2022 and the related condensed consolidated interim statements of comprehensive loss, changes in shareholders' equity and cash flows for the six months then ended. Preparation and presentation of these condensed consolidated financial statements in conformity with International Accounting Standard No. 34 "Interim Financial Reporting" 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 1 (c) in the financial statements regarding the Company's efforts to raise additional funds. 

Barzily & Co.

Certified Public Accountants.

A Member of MSI Worldwide

 June 30

December 31

Note

2023

2022

2022

Unaudited

Unaudited

Audited

ASSETS

NON-CURRENT ASSETS :

Property, plant and equipment, net

503

591

546

Rights of use assets, net

1,004

1,064

981

Intangible assets, net

3

998

1,028

1,021

Income Tax Authorities

57

58

57

Total Non-Current Assets

2,562

2,741

2,605

CURRENT ASSETS :

Cash and cash equivalents

215

311

174

Inventories

1,499

2,234

1,581

Trade receivables (net of allowance for doubtful accounts of $67, $462 and $450 thousand as of June 30, 2023 and 2022 and December 31, 2022)

587

645

488

Other accounts receivable

25

98

71

Short-term deposit

132

131

130

Total Current Assets

2,458

3,419

2,444

6,124

TOTAL ASSETS

5,020

6,160

5,049

LIABILITIES AND EQUITY

EQUITY (DEFICIT)

(1,289)

93

(538)

NON-CURRENT LIABILITIES:

Long-term loans from banks, net of current maturities

103

178

142

Amortized cost of a convertible loan

5

306

824

292

Conversion component of a convertible loan at fair value

5

14

215

27

Long term leasehold liabilities

778

888

790

Warrants at fair value

5

-

87

-

Total Non-Current Liabilities

1,201

2,192

1,251

CURRENT LIABILITIES:

Short-term bank credit

40

61

42

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

620

927

789

Warrants at fair value

5

52

-

77

Trade payables

1,302

1,606

1,144

Related parties

6

772

708

744

Other accounts payable

645

442

260

Leasehold liabilities

Conversion component of a convertible loan at fair value

Amortized cost of a loan and a convertible loan

5

5

119-1,558

131

-

-

112

7

1,161

Total Current Liabilities

5,108

3,875

4,336

TOTAL LIABILITIES AND EQUITY

5,020

6,160

5,049

Six Months Ended June 30

Year Ended December 31

Note

2023

2022

2022

Unaudited

Unaudited

Audited

Revenues

1,707

2,177

4,041

Cost of sales

7

(895)

(1,181)

(2,358)

Gross profit

812

996

1,683

Operating expenses:

Research and development

(52)

(60)

(125)

Selling and marketing

(263)

(323)

(652)

General and administrative

(974)

(1,098)

(2,250)

Other income (expenses)

16

(40)

(29)

(1,273)

(1,521)

(3,056)

Operating loss

(461)

(525)

(1,373)

Finance income

25

413

814

Finance expenses

(318)

(110)

(447)

Net finance Income (expenses)

8

(293)

303

367

Total comprehensive loss for the year

(754)

(222)

(1,006)

Loss per share:

Basic and diluted loss per share (in dollars)

4

(0.014)

(0.004)

(0.019)

Share

Capital *

Premium on Shares

Capital Reserve

Capital Reserve for Share-based payment

Accumulated Loss

Total

(Unaudited)

-

13,531

89

1,246

(15,404)

(538)

Balance- January 1, 2023

Share based payment - Note 4

-

-

4

-

4

Comprehensive loss for the period

-

-

-

(754)

(754)

Balance - June 30, 2023

-

13,531

89

1,250

(16,158)

(1,288)

(Unaudited)

Balance- January 1, 2022

-

13,351

89

1,151

(14,398)

193

Exercise of options (Note 4)

-

74

74

Share based payment

-

48

-

48

Comprehensive loss for the period

-

-

-

-

(222)

(222)

Balance- June 30, 2022

-

13,425

89

1,199

(14,620)

93

(Audited)

Balance- January 1, 2022

-

13,351

89

1,151

(14,398)

193

Issuance of share capital (net of expenses)

-

180

-

-

-

180

Share based payment

-

-

-

95

-

95

Comprehensive loss for the year

-

-

-

-

(1,006)

(1,006)

Balance- December 31, 2022

-

13,531

89

1,246

(15,404)

(538)

Six Months Ended

June 30

Year Ended December 31

2023

2022

2022

CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:

Unaudited

Unaudited

Audited

Comprehensive loss

(754)

(222)

(1,006)

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

Depreciation and amortization

225

211

437

Interest expense and exchange rate differences

55

(221)

(374)

Share-based payment expense

4

48

95

Inventory write down

-

-

-

Intangible assets impairment

-

-

-

Capital gain

-

-

(24)

Changes in assets and liabilities:

 Decrease (Increase) in inventories

82

(444)

209

Decrease in trade receivables, net

(99)

34

191

Decrease (Increase) in other receivables

46

62

89

Increase in Income Tax Authorities

-

(1)

-

Increase (Decrease) in trade payables

158

72

(90)

Increase (Decrease) in other payables

385

(297)

(478)

Net cash provided by (used in) operating activities

102

(758)

(951)

CASH FLOWS FOR INVESTING ACTIVITIES:

Purchases of property and equipment

(8)

(333)

(318)

Decrease (Increase) in short-term deposits

(2)

23

24

Purchase of intangible assets

(72)

(83)

(166)

Net cash used in investing activities

(82)

(393)

(460)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of short-term bank credit, net

(2)

37

(152)

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

(135)

(65)

-

Receipt of long-term loans

-

-

-

Receipt of loans , net

250

-

250

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

28

(4)

28

Repayment of Leasehold liability

(86)

(80)

(174)

Receipt (Repayment) of long-term loans

(34)

(34)

(81)

Proceeds from issue of shares, net

-

74

180

Net cash provided by (used in) financing activities

21

(72)

51

Increase (Decrease) in cash and cash equivalents

41

(1,223)

(1,360)

Cash and cash equivalents at the beginning of the period

174

1,534

1,534

Cash and cash equivalents at the end of the period

215

311

174

Appendix A - Additional Information

Interest paid during the period

189

(73)

251

Appendix B - Non-cash financing activities

Issuance of shares to a related party in payment of debt

103

-

-

Issuance, of a convertible loan note in lieu of settlement of a supplier debt

-

418

319

The Company had non-cash activities in the period of entering into new lease agreements of 103 thousand $.

NOTE 1 -

GENERAL INFORMATION

a. The Reporting Entity

1. t42 IoT Tracking Solutions 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.

See Note 1 (c) regarding the Company's efforts to raise additional funds.

The Company fully owns t42 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 t42 Ltd. is:

96 Derech Ramatayim, Hod-Hasharon, Israel.

Address of the Company's registered office in Jersey of Starcom Systems Limited is:

IFC5, St Helier, Jersey, JE1 1ST

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

3. The subsidiaries - t42 Ltd. and Starcom Systems Limited.

4. Starcom Jersey - Starcom Systems Limited.

5. T42 Israel - t42 Ltd.

6. The Group - t42 IoT Tracking Solutions PLC and the Subsidiaries.

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

c.

Significant event during and after the period:

U.S. Dollars in thousands

The Loan, which carries interest at 10% per annum, payable quarterly on the principal drawn, was drawn down as to $600,000 immediately, $400,000 in three equal tranches during August 2023, and the balance of $300,000 by 30 September 2023.

The Loan, together with accrued interest at the time of conversion, may be converted, at the discretion of the Lender, at any time prior to the Loan repayment date of 20 January 2025, into such number of new t42 ordinary shares as corresponds to 29.5% of the Company's issued ordinary share capital immediately following such conversion. The Loan may be converted in part, on a pro rata basis to the above terms.

In order to meet the cashflow requirements deriving from the growing current and future backlog of orders and managing current and potential activities in the remainder of 2023, the Company will be dependent on the necessary funding being secured.

NOTE 2 -

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

a.

Basis of preparation

b.

c.

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, 2022 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, 2022 are applied consistently in these interim consolidated financial statements.

Revenue from a contract with a customer with a significant finance component

The Group entered a contract with a client that has a significant financing component considering the length of time between the customers' payment and the transfer of the products, as well as the prevailing interest rate in the market. As such, the transaction price for these contracts is discounted, using the interest rate implicit in the contract and finance income is recorded accordingly.

 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.

d.

 Exchange rates:

As of June 30

As of December 31

2023

2022

2022

Exchange rate of NIS in U.S. $

0.27

0.286

0.284

Exchange rate of U.S. $ in GBP

0.79

0.826

0.83

Six Months Ended June 30

Year Ended December 31

2023

2022

2022

Change of NIS in U.S. $

(4.9%)

(11.27%)

(11.6%)

Change of U.S. $ in GBP

(4.6%)

11.68%

12.2%

NOTE 3 -

INTANGIBLE ASSETS, NET

Total

Cost:

Unaudited

Balance as of January 1, 2023

1,884

Additions during the period

72

Balance as of June 30, 2023

1,956

Accumulated Depreciation:

Balance as of January 1, 2023

(863)

Amortization during the period

(95)

Balance as of June 30, 2023

(958)

Impairment of assets

-

Net book value as of June 30, 2023

998

Total

Cost:

Unaudited

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

Cost:

Unaudited

Balance as of January 1, 2022

1,718

Additions during the year

166

Balance as of December 31, 2022

1,884

Accumulated Amortization:

Balance as of January 1, 2022

(684)

Depreciation during the year

(179)

Balance as of December 31, 2022

(863)

Net book value as of December 31, 2022

1,021

NOTE 4 -

SHARE CAPITAL

a.

Composition - ordinary shares of no-par value, issued and outstanding - 54,026,822 shares and 54,026,822 shares as of June 30, 2023, and December 31, 2022, 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

2023

2022

2022

Unaudited

Unaudited

Audited

Number

54,026,822

52,833,452

52,830,858

Six months ended

June 30, 2023

Twelve months ended

December 31, 2022

Unaudited

Audited

Number of options and warrants

Weighted average

exercise price

Number of options

Weighted average

exercise price

£

 £

Share options outstanding at beginning of period

12,545,222

0.177

10,122,112

0.206

Share options granted during the period

-

-

2,976,185

0.07

Shares options exercised during the period

-

-

(500,000)

0.12

Share options expired during the period

1,138,339

0.37

(53,075)

0.12

Share options outstanding at end of period

11,406,883

0.158

12,545,222

0.177

Share options exercisable at end of period

11,243,883

0.152

12,215,555

0.171

NOTE 5 -

FINANCIAL LIABILITIES OF CONVERTIBLE LOANS AND WARRANTS

a.

During December 2021, the Company received, from third parties, loans in the total amount of $1,251,000 (£925,000) in the form of unsecured convertible loans enabling the lenders to convert the loans at an exercise price of £0.15 per share at any time, subject to regulatory provisions, up to December 31, 2023.

The convertible loans attract 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, and 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.

The loan was evaluated and divided into different components by an independent appraiser: Conversion component at fair value, Warrants at fair value and Amortized cost of loan, with Transaction costs allocated according to the component's fair value ratio (please see table in 5(d) below). 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.

b. During December 2022, the Israeli subsidiary entered into a loan agreement with CSS Alpha Global Pte Ltd for the provision of a 12-month secured US$500,000 debt facility. The Agreement provided, inter alia, for interest at 2 per cent per month, with 9 monthly repayments starting 3 months after drawdown. Security is by way of a second charge on assets, a personal, guarantee from the Company's CEO, limited to 20 per cent of the loan and a deposit with CSS of 3,000,000 new t42 shares. In addition, warrants for a total of 2,976,185 shares in t42 were issued to CSS, exercisable at 7p per share over 5 years. The initial drawdown was provided in December 2022, the second and last drawdown was provided in January, 2023. The Company repaid $42,000 during the 6 month reported period, and another $300,000 after the reported period. This loan will shortly be fully repaid.

c. In December 2022, the Company issued a £265,000 convertible loan note (CLN) to a supplier, to be applied in lieu of settlement of a supplier debt, assisting with the Company's cashflow management. The CLN bears interest at 3% per annum, payable quarterly, and is repayable by 31 December 2024. The CLN is convertible at 9p per share at the discretion of the holder. In addition, the Company has the right to enforce conversion of £100,000 of the CLN in the event t42's share price exceeds 12p and the balance if the share price exceeds 15p.

7

d. Total revaluation expenses regarding the loan's components in the statement of comprehensive loss for the reported period are set below:

Loan component

Conversion component

Warrant

Balance as of January 1, 2022

857

279

118

Additions during the year

480

27

77

Finance (income) expenses

131

(272)

(117)

Payments

(15)

-

-

Balance as of December 31, 31, 2022

1,453

34

78

Additions during the year

250

-

-

Finance (income) expenses

274

(20)

(26)

Payments

(113)

Conversion

-

-

-

Balance as of June 30, 2023

1,864

14

52

Period ended

June 30,

2023

Expected term

0.5-4.5 Years

Expected average volatility

40%

Expected dividend yield

-

Risk-free interest rate

5.341%

 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

2023

2022

2022

Unaudited

Unaudited

Audited

Credit balance

Avi Hartmann

Uri Hartmann

(21)(554)

(15)(508)

(20)

(545)

Total Credit balance

(575)

(523)

(565)

Loans

Avi Hartmann

Uri Hartmann

49(246)

53(238)

69

(248)

Total Loans

(197)

(185)

(179)

Total Short-term balances

(772)

(708)

(744)

c.

Transactions:

Six Months Ended

June 30

Year Ended

December 31

2023

2022

2022

Unaudited

Unaudited

Audited

Total salaries, services rendered and related expenses for shareholders

178

195

381

Total share-based payment expenses

2

2

3

Non-executive directors' fees

38