Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
1 - Organization and Basis of Presentation
|
A.
|
Description
of business
|
On
Track Innovations Ltd. (the “Company”) was founded in 1990, in Israel. The Company and its subsidiaries (together, the “Group”)
are principally engaged in the field of design and development of cashless payment solutions.
The
Company’s ordinary shares are quoted for trading on the OTCQX market (formerly listed on the Nasdaq Capital Market until October
31, 2019).
At
March 31, 2021, the Company operates in two operating segments: (a) Retail, and (b) Petroleum (see Note 11). The Company completed the
sale of its Mass Transit Ticketing operation in April 2021, subsequent to the balance sheet date (see Note 1C(2)). The Company has determined
that the sale of the Mass Transit Ticketing business qualifies as held for sale and as a discontinued operation as of March 31, 2021
and December 31, 2020. Accordingly, the results and the cash flows of this operation for all reporting periods are presented in the statements
of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations
|
B.
|
Interim
Unaudited Financial Information
|
The
accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and therefore should be read
in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
In
the opinion of management, all adjustments considered necessary for a fair statement, consisting of normal recurring adjustments, have
been included. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2021.
Use
of Estimates:
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the assets,
liabilities, revenue, costs, expenses and accumulated other comprehensive loss that are reported in the Interim Consolidated Financial
Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical
experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable
under the circumstances. As a result, actual results may be different from these estimates.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
1 - Organization and Basis of Presentation (cont’d)
|
C.
|
Divestiture
of operations
|
|
1.
|
In
December 2013, the Company completed the sale of certain assets, subsidiaries and intellectual
property relating to its Smart ID division, for a total purchase price of $10,000 in cash
and an additional $12,500 subject to performance-based milestones. Accordingly, the results
and the cash flows of this operation for all reporting periods are presented in the statements
of operations and in the statements of cash flows, respectively, as discontinued operations
separately from continuing operations.
|
On
April 20, 2016, the purchaser of the Smart ID division, SuperCom Ltd. (“SuperCom”), and the Company entered into a settlement
agreement resolving certain litigation between SuperCom and the Company pursuant to which SuperCom paid the Company $2,050 and agreed
to pay the Company up to $1,500 in accordance with and subject to a certain earn-out mechanism. In November 2017, the Company commenced
an arbitration procedure with SuperCom, in which the Company claims that additional earn-out payments have not been paid to the Company.
SuperCom raised claims against the Company during the arbitration for material damages. An arbitration decision was issued on December
24, 2018 in the Company’s favor and denied SuperCom’s claims. The arbitrator ordered SuperCom to disclose the financial information
regarding the earn-out payments that the Company is entitled to receive, and to pay the Company accordingly, or otherwise pay the Company
approximately $1,300 that reflects the maximum earn-out amount that has not yet been paid to the Company by SuperCom. The arbitration
verdict was approved as a court’s verdict in June 2019, but SuperCom failed to disclose the financial information in the way it
should have done according to the arbitration decision. Therefore, in December 2019 the Company submitted a complementary claim to the
arbitrator, asking for a final award that includes a final payment by SuperCom (as opposed to merely disclosing information). On January
21, 2021, after conclusion of the evidence phase in the arbitration, and after the Company already filed its summaries, SuperCom submitted
new documents claiming that these include the missing financial information. Following the submission of these documents, on February
9, 2021, the Company submitted an application claiming that implementing the contractual sanction mechanism on the amounts presented
in these documents testifies to the Company’s entitlement to the maximum earn-out amount, and, therefore, the arbitrator is requested
to order that the parties will complete their summaries and then a verdict will be given. On March 8, 2021, the arbitrator accepted the
Company’s application and on April 11, 2021, the Company submitted complementary summaries. The Company is now awaiting the submission
of SuperCom’s summaries, following which the Company may submit a response summary.
The
Company records the earn-out payments only when the consideration is determined to be realizable. The Company did not record or receive
any contingent consideration during the three months ended March 31, 2021 and 2020.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
1 - Organization and Basis of Presentation (cont’d)
|
C.
|
Divestiture
of operations (cont’d)
|
|
2.
|
On
March 29, 2021 the Company entered into an agreement (the “Sale Agreement”) for
the sale of 100% of the issued and outstanding share capital of its wholly owned Polish subsidiary,
ASEC S.A. (“ASEC”), with Vector Software SP. Z O.O. (the “Buyer”).
ASEC is headquartered in Krakow, Poland, and has been conducting the Company’s Mass
Transit Ticketing business in Europe.
|
The
sale of ASEC was completed on April 21, 2021. The Company has determined that the sale of the Mass Transit Ticketing business qualifies
as held for sale and as a discontinued operation as of March 31, 2021 and December 31, 2020. Accordingly, the results and the cash flows
of this operation for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively,
as discontinued operations separately from continuing operations. In addition, assets and liabilities of the Polish subsidiary and assets
and liabilities related to the Mass Transit Ticketing operation that have not yet been actually sold as of March 31, 2021, are presented
as assets and liabilities held for sale in the balance sheets as of March 31, 2021 and December 31, 2020.
The
consideration for ASEC after reduction of some working capital adjustments, as agreed in April 2021, is approximately $2,700, out of
which: (I) approximately $2,100 (the “First Installment”), was transferred from the Buyer to ASEC at the end of March 2021
in order to repay Polish bank loans, out of which approximately $1,700 was repaid as of March 31, 2021 and a loan of approximately $400
was repaid at the beginning of April 2021. The First Installment is presented as held for sale in the balance sheet as of March 31, 2021,
and as cash provided by discontinued investing activities in the statements of cash flows for the three months ended March 31, 2021;
and (II) $600 (the “Net Consideration”) was paid by the Buyer to the Company in April 2021 and increased the Company’s
financial resources. As of March 31, 2021, the Company recognized a loss from impairment of assets in amount of $29 that reflects the
difference between the book value of ASEC’s assets, net of liabilities, and the Net Consideration.
The
Sale Agreement contains customary representations and warranties, as well as covenants, including an undertaking the Company provided
not to compete with the business of ASEC for a period of five years after the closing and an undertaking to indemnify ASEC and the Buyer
for certain damages. The Company’s liability is limited to the purchase price actually paid by the Buyer.
|
D.
|
Liquidity
and Capital Resources
|
The
Company has had recurring losses and has an accumulated deficit as of March 31, 2021 of $226,126. The Company also has a payable
balance on its short-term bank loans, that is due within the next 12 months, of $1,109 and a convertible short-term loan from
shareholders of $1,600 (out of which only an amount of $8 is presented as liability), that, if not converted, would mature in
the second quarter of 2021 (see also Note 5) as of March 31, 2021. This amount does not include short-term loans held for sale.
Since
inception, the Company’s principal sources of liquidity have been revenues, proceeds from sales of equity securities (regarding
to the issuance of shares during last two years, see Note 10), borrowings from banks, government and shareholders, including convertible
loans, proceeds from the exercise of options and warrants as well as proceeds from the divestiture of parts of the Company’s businesses.
The Company had cash, cash equivalents and short-term investments representing bank deposits of $1,084 (of which an amount of $105 has
been pledged as security for certain items), excluding cash and cash equivalents held for sale, as of March 31, 2021.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
1 - Organization and Basis of Presentation (cont’d)
|
D.
|
Liquidity
and Capital Resources (cont’d)
|
The
recent deterioration in the coronavirus (“COVID-19”) pandemic situation in Poland led to an almost complete stop to the Company’s
Mass Transit Ticketing sales business, which negatively impacted the Company’s cash flow since March 2020. On April 21, 2021, subsequent
to the balance sheet date, the Company completed the sale of ASEC, including its Mass Transit Ticketing activity - see Note 1C(2). Further,
in December 2020 and January 2021, the Company borrowed a loan, in two tranches aggregating $1,600, from its controlling shareholder
and another shareholder that, if not converted, would mature in the second quarter of 2021.
The Company’s management has taken
cost reduction steps, including material reductions in the salaries of its management and employees, and has been working for the past
few months on updating the Company’s strategy for the coming years in order to realize its potential, resume its growth, and ultimately
create shareholder value. The Company is attempting to raise additional funds and to increase its cash. The Company commenced a rights
offering in April 2021, which expires in May 2021 – See Note 10B. Based on the commitment letter of the Company’s controlling
shareholder pursuant to which it committed to exercise its basic subscription rights as part of the rights offering and its over-subscription
privilege for up to approximately $2,800 in the aggregate, subject, however, to the limitations as mentioned in Note 10B, the Company
believes that the Company has sufficient capital resources to fund its operations for at least the next 12 months. In addition, the Company
engaged an investment bank to explore strategic options and is investing resources in this process.
In
connection with the outbreak of COVID-19, the Company has taken steps to protect its workforce in Israel, the United States, Poland,
South Africa and elsewhere. Such steps include working from home where possible, minimizing face-to-face meetings, utilizing video conference
as much as possible, social distancing at facilities and elimination of all international travel. The Company continues to comply with
all local health directives.
So far, the main direct impact of the
COVID-19 pandemic was a decrease in the Company’s revenues derived from Mass Transit Ticketing activity in the Polish market. The
revenues from this operation, that were relatively stable during the year preceding the COVID-19 outbreak, decreased by $295 in the first
quarter of 2021 compared to the first quarter of 2020, mainly due to lockdowns and other restrictions and consequences of the COVID-19
as started in March 2020. On April 21, 2021, the Company sold ASEC, including its Mass Transit Ticketing activity, as mentioned above.
The results, including the revenues, and the cash flows of the Mass Transit Ticketing operation for all reporting periods are presented
in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing
operations.
Another
impact of COVID-19 has been on product delivery, where components’ procurement lead time is longer and a shortage in components
has grown as the duration of the COVID-19 pandemic has continued. As long as the COVID-19 pandemic continues, the components’ lead
time may be longer than normal and shortage in components may continue or get worse. Therefore, the Company maintains a comprehensive
network of world-wide suppliers.
The
Company has seen a higher interest from a growing number of potential customers and partners as they forecasted that the need for the
Company’s products will grow, yet execution of closing is still slow due to the current business environment.
It
is difficult to predict what other impacts the COVID-19 pandemic may have on the Company.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
2 – Significant Accounting Policies
Except
as described in Note 2A below, these interim unaudited condensed consolidated financial statements
have been prepared according to the same accounting policies as those discussed in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2020.
|
A.
|
Recently
Adopted Accounting Pronouncements
|
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. This ASU, among
other things, removes the exception to the incremental approach for intra-period allocation of tax expense when a company has a loss
from continuing operations and income from other items that are not included in continuing operations, such as income from discontinued
operations, or income recorded in other comprehensive income. The general rule under Accounting Standards Codification (“ASC”)
740-20-45-7 is that the tax effect of pretax income or loss from continuing operations should be determined by a computation that does
not consider the tax effects of items that are not included in continuing operations. Previously, companies could consider the impact
on a loss from continuing operations of items in discontinued operations or other comprehensive income. However, under the amended guidance,
companies should not consider the effect of items outside of continuing operations in calculating the tax effect on continuing operations.
The Company adopted ASU 2019-12 as of January 1, 2021. The adoption of this accounting standard did not have a material effect on our
financial position, results of operations and cash flows.
|
B.
|
Recent
accounting pronouncements
|
|
1.
|
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326).
The main objective of this ASU is to provide financial statement users with more decision-useful
information about the expected credit losses on financial instruments and other commitments
to extend credit held by a reporting entity at each reporting date. To achieve this objective,
the amendments in this ASU replace the incurred loss impairment methodology in current GAAP
with a methodology that reflects expected credit losses and requires consideration of a broader
range of reasonable and supportable information to inform credit loss estimates. The amendments
affect entities holding financial assets and net investment in leases that are not accounted
for at fair value through net income. The amendments affect loans, debt securities, trade
receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables,
and any other financial assets not excluded from the scope that have the contractual right
to receive cash. ASU 2016-13 is effective for the Company for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. Early adoption is
permitted for fiscal years beginning after December 15, 2018. The Company currently does
not expect the adoption of this accounting standard to have a material impact on its consolidated
financial statements.
|
|
2.
|
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40). This pronouncement simplifies the accounting for certain financial instruments
with characteristics of liabilities and equity, including convertible instruments and contracts
on an entity’s own equity. Specifically, the ASU simplifies accounting for convertible
instruments by removing major separation models required under current accounting standard.
In addition, the ASU removes certain settlement conditions that are required for equity contracts
to qualify for it and simplifies the diluted earnings per share calculations in certain areas.
This guidance is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2021. Early adoption is permitted for annual period beginning
after December 15, 2020. The Company is currently evaluating the impact that this new guidance
will have on its consolidated financial statements.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
3 - Other Receivables and Prepaid Expenses
|
|
March 31
|
|
|
December 31
|
|
|
|
2021
|
|
|
2020
|
|
Government institutions
|
|
$
|
43
|
|
|
$
|
104
|
|
Prepaid expenses
|
|
|
252
|
|
|
|
257
|
|
Suppliers advance
|
|
|
293
|
|
|
|
227
|
|
Other receivables
|
|
|
57
|
|
|
|
107
|
|
|
|
$
|
645
|
|
|
$
|
695
|
|
Note
4 - Other Current Liabilities
|
|
March 31
|
|
|
December 31
|
|
|
|
2021
|
|
|
2020
|
|
Employees and related expenses
|
|
$
|
691
|
|
|
$
|
516
|
|
Accrued expenses
|
|
|
882
|
|
|
|
811
|
|
Customer advances
|
|
|
31
|
|
|
|
142
|
|
Short-term liabilities due to operating leases and current maturities
|
|
|
713
|
|
|
|
762
|
|
Other current liabilities
|
|
|
30
|
|
|
|
52
|
|
|
|
$
|
2,347
|
|
|
$
|
2,283
|
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
5 - Convertible short-term loan from shareholders
On
December 9, 2020, the Company entered into a loan financing agreement (the “Loan Agreement”), with Jerry L. Ivy,
Jr., Descendants’ Trust (“Ivy”, or the “Lender”), the Company’s Controlling Shareholder
(as such term is defined under the Israeli Companies Law, 5759-1999, as amended (the “Companies Law”)). The Loan
Agreement provides that the Lender will extend a loan to the Company in the amount of up to $1,500, payable in two tranches:
one of $625 at the initial closing that took place on December 17, 2020, and the other of $875 at the second closing that
took place on January 28, 2021. The amount lent under the Loan Agreement is secured pursuant to a debenture (the
“Debenture”) by a first priority floating charge over all the Company’s tangible or intangible assets and
other property, the Company owns, subject only to certain permitted security interests, as set forth in Loan Agreement. The
amount lent under the Loan Agreement and all accrued interest matures on June 17, 2021 (the “Maturity Date”), and
will be payable in full on the Maturity Date, provided that the maturity date can be extended by six months at the sole
option of Ivy. The amount lent bears interest on all outstanding principal at an interest rate of 8.0% per annum, or the
Interest; provided, however, that upon an extension of the maturity period beyond the Maturity Date, the Interest will
automatically increase, effective as of the Maturity Date, to the rate of 10.0% per annum. Also, in case of an extension of
the Maturity Date, the accrued interest for the first six months for which the Loan Amount has been outstanding will be
payable by the Company to the Lender at the time of the extension, and the accrued Interest for the extension period will be
payable by the Company on the extended maturity date. In addition, the Company may repay the amount lent, in whole and not in
part, and any accrued Interest thereon, at any time prior to the Maturity Date (as it may be extended), in its sole
discretion. On March 2, 2021, the Company obtained shareholders’ approval to the grant of a right to Ivy, pursuant to
which, at any time prior to the repayment in full of the amount lent, together with Interest accrued and all other amounts
outstanding under the Agreement (the “Secured Amount”), Ivy will be entitled, at its sole discretion, to demand
to convert (the “Conversion Right”) the entire Secured Amount into the Company’s Ordinary Shares, at a
price per share equal to the lower of (a) $0.20 per share (subject to adjustment in the event of any bonus shares,
combinations or splits) and (b) a price per share reflecting a discount to the average closing bid price of an Ordinary Share
over the 20 trading days preceding the Initial Closing (the “Benchmark Price”) ($0.248), as follows: (i) if
conversion occurs until March 17, 2021 (no later than three months after the initial closing), the conversion price per share
will be $0.1984 (reflects discount of 20% of the Benchmark Price); (ii) if conversion occurs between March 18, 2021, and June
17, 2021 (more than three months but no later than six months after the initial closing), the conversion price per share will
be $0.1736 (reflects discount of 30% of the Benchmark Price); (iii) if conversion occurs after June 17, 2021 (more than six
months after the initial closing (to the extent extended in accordance with the terms of the Loan Agreement)), the conversion
price per share will be $0.124 (reflects discount of 50% of the Benchmark Price); and (iv) if conversion occurs upon an event
of default, the conversion price per share will be $0.124 (reflects discount of 50% of the Benchmark Price).
Pursuant
to the Loan Agreement, the Conversion Right will become effective only following the approval thereof by the shareholders of the Company
in accordance with the requirements of the Companies Law, which approval applies to a controlling shareholder transaction that includes
a private offering that may increase the holdings of a controlling shareholder to and above 45% of the share capital of the Company,
and will be deemed of no force or effect at any time prior to obtaining such Shareholders’ Approval, if at all. The Company obtained
such shareholders’ approval on March 2, 2021.
The
Loan Agreement includes customary events of default, including, among others, failures to repay any amounts due to the Lender, breaches
or defaults under the terms of the Agreement, etc. If an event of default occurs, the Secured Amount shall immediately become due and
payable, without the need for any notice by the Lender.
The
Loan Agreement was subsequently amended to allow for an additional lender (“the additional lender”) to lend $100 under the
same terms as Ivy. Accordingly, the aggregate gross amount the Company received under the Loan Agreement is $1,600, out of which $975
took place as part of the second closing on January 28, 2021.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
5 - Convertible short-term loan from shareholders (cont’d)
In
accordance with ASC 815-15-25, Derivatives and Hedging, the conversion feature (“the conversion component”) was considered
embedded derivative instrument. Since, as described above, the conversion component was required to be approved by the shareholders of
the Company, the conversion component did not qualify for the scope exception under ASC 815-10-15-74(a). Therefore, the conversion component
is to be recorded separately from the loan component. The conversion component is measured both initially and in subsequent periods until
obtaining the shareholders’ approval of the Conversion Right, at fair value, with changes in fair value charged to finance expenses,
net.
The
fair value of the conversion component at the initial closing, December 17, 2020, was estimated using the Trinomial model based on the
assumptions, as follows:
Expected volatility (%)
|
|
|
125.2
|
%
|
Risk-free interest rate (%)
|
|
|
0.09
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Contractual term (years)
|
|
|
0.500
|
|
Conversion price (US dollars per share)
|
|
|
0.124
|
|
Underlying Share price (US dollars per share)
|
|
|
0.220
|
|
Based
on the Trinomial model, the fair value of the conversion component of the initial closing was $617 as of December 17, 2020. Accordingly,
the loan component at the initial closing was $8 as of December 17, 2020.
There
were no significant changes in the model assumptions as of December 31, 2020, compared to the assumptions as of December 17, 2020, as
mentioned above. Therefore, the conversion component and the loan component were $617 and $8, respectively, as of December 31, 2020.
Both components were presented as Convertible short-term loan from a controlling shareholder within the short-term liabilities as of
December 31, 2020.
The
fair value of the conversion component at the second closing, January 28, 2021, was estimated using the Trinomial model based on the
assumptions, as follows:
Expected volatility (%)
|
|
|
103.23
|
%
|
Risk-free interest rate (%)
|
|
|
0.075
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Contractual term (years)
|
|
|
0.386
|
|
Conversion price (US dollars per share)
|
|
|
0.124
|
|
Underlying Share price (US dollars per share)
|
|
|
0.240
|
|
Based
on the Trinomial model, the entire proceeds of the second closing in amount of $975 were allocated to the conversion component and the
residual balance of the of the loan component of the second closing is zero.
The
table below summarizes the balances of the conversion components and the loan components of the initial closing and the second closing,
as follows:
|
|
Conversion
component
|
|
|
Loan
component
|
|
|
Total
|
|
Initial closing
|
|
$
|
617
|
|
|
$
|
8
|
|
|
$
|
625
|
|
Second closing
|
|
|
975
|
|
|
|
-
|
|
|
|
975
|
|
|
|
$
|
1,592
|
|
|
$
|
8
|
|
|
$
|
1,600
|
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
5 - Convertible short-term loan from shareholders (cont’d)
On
March 2, 2021, the Company obtained shareholders’ approval of the Conversion Right. At this shareholders meeting date, the fair
value of the conversion component of both the initial closing and second closing was estimated using the Trinomial model based on the
assumptions, as follows:
Expected volatility (%)
|
|
|
107.34
|
%
|
Risk-free interest rate (%)
|
|
|
0.044
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
Contractual term (years)
|
|
|
0.296
|
|
Conversion price (US dollars per share)
|
|
|
0.124
|
|
Underlying Share price (US dollars per share)
|
|
|
0.390
|
|
The
change in the fair value of the conversion component is as follows:
|
|
Conversion component
|
|
Fair value before the shareholders’ approval date
|
|
$
|
1,592
|
|
Change in fair value (*)
|
|
|
1,974
|
|
Fair value at the shareholders’ approval date
|
|
$
|
3,566
|
|
|
(*)
|
This
amount is recorded as loss from change in fair value of embedded derivative as part of the
financial expenses in the statements of operations.
|
Following
the shareholders’ approval of the Conversion Right on March 2, 2021, the conversion component is qualifying for the scope exception
under ASC 815-10-15-74(a). In accordance with ASC 815-15-35-4, since the embedded conversion option in the convertible debt no longer
meets the bifurcation criteria, the fair value of the conversion component, in the amount of $3,566, was reclassified from short-term
liability to shareholders equity at this approval date.
Additional
financial expenses derive from the convertible loan are summarized in the table, as follows:
|
|
Three months ended
|
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Transaction expenses
|
|
$
|
10
|
|
|
$
|
90
|
|
Interest expenses (*)
|
|
|
26
|
|
|
|
2
|
|
|
|
$
|
36
|
|
|
$
|
92
|
|
|
(*)
|
Including
interest expenses of $25 and $2 to Ivy, the controlling shareholder, during the three months
ended March 31, 2021, and December 31, 2020, respectively. The accrued interest expenses
are included in ‘other current liabilities’.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
6 - Commitments and Contingencies
|
1.
|
In
June 2013, prior to the Company’s divestiture of its SmartID division, Merwell Inc.
(“Merwell”) filed a claim against the Company before an agreed-upon arbitrator
alleging breach of contract in connection with certain commissions claimed to be owed to
Merwell with respect to the division’s activities in Tanzania. These activities,
along with all other activities of the SmartID division, were later assigned to and assumed
by SuperCom in its purchase of the division. SuperCom undertook to indemnify the Company
and hold it harmless against any liabilities the Company may incur in connection with Merwell’s
consulting agreement and the arbitration. An arbitration decision was issued on February
21, 2016, awarding Merwell approximately $855 for outstanding commissions, plus expenses
and legal fees, as well as a right to receive additional information from the Company regarding
an additional engagement period in Tanzania and a right to possibly receive additional amounts
from the Company, if at all, according to the information that will be provided. The
arbitration decision had been appealed and the appeal was denied on June 17, 2018. In order
to collect the award, Merwell filed a motion against the Company and the Nazareth District
Court issued a judgment requiring the Company to pay Merwell an amount of NIS 5,080
(approximately $1,370) that was paid by the Company on January 8, 2019.
|
As
mentioned above, based on the agreement with SuperCom from April 2016 (which was granted an effect of a court judgment), SuperCom is
liable for all the costs and liabilities arising out of this claim. Since SuperCom failed to pay the Company the amounts due, in February
2019 the Company initiated an arbitration process to collect from SuperCom, the amount paid to Merwell, as well as any complementary
amounts, as may be ordered in the future.
Despite
the fact that, based on the assessment of the Company’s external legal counsel, the likelihood to succeed in the arbitration process
(or other legal procedure in that matter) is high, the Company did not record an indemnification asset as of March 31, 2021, and
December 31, 2020, in accordance with accounting standard ASC 450, “Contingencies”.
|
2.
|
On
June 12, 2019, Merwell submitted a complementary claim against the Company in arbitration,
with respect to the additional financial details that Merwell claims that the Company was
ordered to provide according to the arbitration verdict from February 21, 2016, and additional
payments that Merwell claims that the Company is obligated to pay Merwell. The said financial
details refer to the quantity of smart driving licenses that Merwell claims were issued in
the later period of a project in Tanzania in which Merwell claims to have provided services
to the Company. Merwell claims that despite the Company’s failure to provide the details,
Merwell obtained the details independently from other sources, and they indicate that the
Company is obligated to pay Merwell an additional amount of approximately $1,618, and there
might be additional amounts to be claimed in the future, as additional information might
be found from time to time. On March 4, 2020, the Company submitted a response to this complementary
claim, rejecting Merwell’s claims. On September 16, 2020, Merwell filed a request to
amend the additional amount claimed from approximately $1,618 to approximately $3,012. On
April 8, 2021, the arbitrator ordered the parties to submit their written testimonies –
Merwell by May 8, 2021, and the Company by June 8, 2021. As mentioned above, the Company
is conducting in parallel a separate arbitration process against SuperCom in that matter,
as the Company deems SuperCom to be liable for all the costs and liabilities arising out
of this claim. Based on the assessment of the Company’s external legal counsel, given
the preliminary stage of the procedure, it is difficult, at this point, to estimate the chances
of Merwell’s claims for a complementary arbitration verdict.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
6 - Commitments and Contingencies (cont’d)
|
3.
|
In
October 2013, a financial claim was filed against the Company and its then French subsidiary,
Parx France (in this paragraph, together, the “Defendants”), in the Commercial
Court of Paris, France (in this paragraph, the “Court”). The sum of the claim
is €1,500 (approximately $1,760) and is based on the allegation that the plaintiff sustained
certain losses in connection with Defendants not granting the plaintiff exclusive marketing
rights to distribute and operate the Defendants’ PIAF Parking System in Paris and the
Ile of France. On October 25, 2017, the Court issued its ruling in this matter dismissing
all claims against the Company but ordering Parx France to pay the plaintiff €50 ($59)
plus interest in damages plus another approximately €5 ($6) in other fees and penalties.
As, in accordance with the sale agreement signed between the Company and Parx France, the
Company is liable and shall indemnify Parx France for any amount ruled against it as part
of that claim, the Company offered to pay the amounts mentioned above to the plaintiff in
consideration for not filing future appeals. The Plaintiff rejected this offer and filed
an appeal against Parx France and the Company claiming the sum of €503 ($590) plus interest
and expenses. On November 7, 2019, the Company’s external legal counsel concluded that
the appeal was inadmissible, and that it believed that the opposing claims would be dismissed.
The case was pleaded before the Court and the Court is to provide its decision by July 1,
2021. Based on the assessment of the Company’s external legal counsel, the Company’s
management is of the opinion that the chances of the appeal being approved against the Company
are low.
|
|
4.
|
In
July 2019, the Company received a request (the “Request”), to allow a petitioner
to submit a class action, which concerns the petitioner’s claims that, inter alia,
through the EasyPark card, drivers are permitted to exceed the quota of permitted hours in
accordance with the instructions of various local authorities in Israel. The Request was
submitted against a company incorporated by the buyer of the assets (including the parking
activity) of the Israeli subsidiaries of the Company (the “Company’s Subsidiaries”)
and against two other companies that operate technological means for payment for public parking
spaces scattered throughout the cities. Since the majority of potential claims against the
Company’s Subsidiaries relate to the period following the sale of the Company’s
Subsidiaries’ assets, including the parking activity, it appears that the Company’s
exposure through this channel is limited. Furthermore, even if payment will be required,
the buyer would be liable for the majority of such payment. Therefore, the Company will not
participate in such procedure at this stage. Based on the assessment of the Company’s
external legal counsel, the exposure of the Company is low.
|
|
5.
|
The
Company has been responding to a Subpoena from the Department of Justice and a document request
from the Securities and Exchange Commission relating to an inquiry concerning a press release
the Company issued on December 18, 2017. The Company has produced the requested documents,
participated in voluntary interviews, and is otherwise cooperating with the inquiry. At present, the Company has not been
accused of any wrongdoing and it does not currently view the inquiry as
material.
|
|
6.
|
Regarding
additional legal claims, see Note 1C(1).
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
6 - Commitments and Contingencies (cont’d)
The
Company has entered into several research and development agreements, pursuant to which the Company received grants from the Israel Innovation
Authority (“IIA”), and is therefore obligated to pay royalties to the IIA at a rate of 3%-3.5% of its sales up to the amounts
granted (linked to the U.S. dollar with annual interest at LIBOR as of the date of approval, for programs approved from January 1, 1999
and thereafter). The total amount of grants received as of March 31, 2021, net of royalties paid, was approximately $3,400 (including
accrued interest). No grants from the IIA were received during the three months ended March 31, 2021 and 2020.
There
is a dispute between the Company and the IIA in the amount of approximately NIS 3,571 ($1,071) including accrued interest (while the
current debt to the IIA as presented in the Company’s financial statements amounts to approximately $167) due to a claim of the
IIA about miscalculations in the amount of royalties paid by the Company and the revenues on which the Company must pay royalties. The
Company has not yet completed its discussions with the IIA and intends to exhaust all options in order to resolve this matter in a favorable
manner. Management believes that, at the current stage, it is more likely than not that a positive resolution will be applied to this
dispute. Accordingly, no additional accrual has been recorded in the financial statements in respect of this matter.
During
the three months ended March 31, 2021 and 2020, there were no royalty expenses.
As
of March 31, 2021, the Company granted a guarantee in amount of $105, with an expiration date in May 2024. In addition, as of March 31,
2021, the Company granted performance guarantees in amount of $278 related to the Mass Transit Ticketing activity. The expiration dates
of those guarantees ranged from April 2021 to September 2021. Following the sale of ASEC (see Note 1C(2)), the Company is no longer subject
to these guarantees in an amount of $278.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
7 – Revenues
Disaggregation
of revenue
The
following tables disaggregate the Company’s revenue by major source based on categories that depict its nature and timing
as reviewed by management for the three months ended March 31, 2021 and 2020:
|
|
Three
months ended
March 31 2021
|
|
|
|
Retail
|
|
|
Petroleum
|
|
|
Total
|
|
Cashless payment products (A)
|
|
$
|
1,524
|
|
|
$
|
-
|
|
|
$
|
1,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complete cashless payment solutions (B):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products (B1)
|
|
|
421
|
|
|
|
239
|
|
|
|
660
|
|
SaaS and services (B2)
|
|
|
337
|
|
|
|
248
|
|
|
|
585
|
|
|
|
|
758
|
|
|
|
487
|
|
|
|
1,245
|
|
Total revenues
|
|
$
|
2,282
|
|
|
$
|
487
|
|
|
$
|
2,769
|
|
|
|
Three months ended
March 31 (*) 2020
|
|
|
|
Retail
|
|
|
Petroleum
|
|
|
Total
|
|
Cashless payment products (A)
|
|
$
|
2,391
|
|
|
$
|
-
|
|
|
$
|
2,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complete cashless payment solutions (B):
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of products (B1)
|
|
|
279
|
|
|
|
571
|
|
|
|
850
|
|
SaaS and other services (B2)
|
|
|
199
|
|
|
|
227
|
|
|
|
426
|
|
|
|
|
478
|
|
|
|
798
|
|
|
|
1,276
|
|
Total revenues
|
|
$
|
2,869
|
|
|
$
|
798
|
|
|
$
|
3,667
|
|
|
(*)
|
Reclassified
to conform with the current period presentation, see Note 1C(2).
|
Performance
obligations
Below
is a listing of performance obligations for the Company’s main revenue streams:
|
A.
|
Cashless
payment products –
|
The
performance obligation is the selling of contactless payment products. Most of those products are Near Field Communication (NFC)
readers. For such sales the performance obligation, transfer of control and revenue recognition occur when the products are delivered.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
7 – Revenues (cont’d)
Performance
obligations (cont’d)
|
B.
|
Complete
cashless payment solutions –
|
The
complete solution includes selling of products and complementary services, as follows:
|
●
|
Selling
of contactless payment products (see A above) together with payment gateways and machine-to-machine
controllers.
|
|
●
|
Selling
of petroleum payment solutions including site and vehicle equipment.
|
For
such sales, the performance obligation, transfer of control and revenue recognition occur when the products are delivered.
|
2.
|
SaaS
and other services -
|
The
types of arrangements and their main performance obligations are as follows:
|
●
|
To
provide terminal management system licensing for software that is responsible for remote
terminal management and cloud-based software licensing which provide data insights. For
such services, the revenue recognition occurs as the services are rendered since the
performance obligation is satisfied over time.
|
|
●
|
To
provide technical and customer services for products. For such services, the performance
obligation is satisfied over time and therefore revenue recognition occurs as the services
are rendered.
|
The
Company includes a warranty in connection with certain contracts with customers, which are not considered to be separate performance
obligations. The cost to the Company of this warranty is insignificant.
Contract
balances
|
|
March 31
|
|
|
December 31
|
|
|
|
2021
|
|
|
2020
|
|
Trade receivables, net of allowance for doubtful accounts
|
|
$
|
1,759
|
|
|
$
|
1,148
|
|
Customer advances
|
|
$
|
31
|
|
|
$
|
142
|
|
Accounts
receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules.
Transaction
price and variable consideration
The
transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods
or services to a customer, excluding amounts collected on behalf of third parties. In certain arrangements with variable consideration,
revenue is recognized over time as it is mainly attributed to ongoing services provided.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
8 – Discontinued operations
As
described in Note 1C, the Company divested its interest in the Mass Transit Ticketing activity and the SmartID division and presented
these activities as discontinued operations.
Set forth below are the results of the discontinued operations:
|
|
Three months ended
March 31
|
|
|
|
2021
|
|
|
(*) 2020
|
|
Revenues
|
|
$
|
488
|
|
|
$
|
783
|
|
Expenses
|
|
|
(877
|
)
|
|
|
(876
|
)
|
Other loss, net
|
|
|
(29
|
)
|
|
|
-
|
|
Net loss from discontinued operations
|
|
$
|
(418
|
)
|
|
$
|
(93
|
)
|
|
(*)
|
Reclassified
to conform with the current period presentation, see Note 1C(2).
|
The
following table summarizes information about assets and liabilities from discontinued operations held for sale as of March 31,
2021 and December 31, 2020:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Assets held for sale from discontinued operations:
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,720
|
|
|
$
|
1,017
|
|
Trade receivables, net of allowance for doubtful accounts of $42
|
|
|
348
|
|
|
|
409
|
|
Other receivables and prepaid expenses
|
|
|
544
|
|
|
|
454
|
|
Inventories
|
|
|
384
|
|
|
|
392
|
|
Property, plant and equipment, net of impairment of $29 (see Note 1C(2))
|
|
|
2,738
|
|
|
|
3,136
|
|
Intangible assets, net
|
|
|
326
|
|
|
|
370
|
|
Right-of-use assets due to operating leases
|
|
|
499
|
|
|
|
580
|
|
|
|
|
6,559
|
|
|
|
6,358
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale from discontinued operations:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term bank credit and current maturities of long-term loans
|
|
|
583
|
|
|
|
2,339
|
|
Trade payables
|
|
|
1,846
|
|
|
|
1,832
|
|
Other current liabilities
|
|
|
2,503
|
|
|
|
443
|
|
Long-term loans, net of current maturities (*)
|
|
|
608
|
|
|
|
642
|
|
Long-term liabilities due to operating leases, net of current maturities (*)
|
|
|
341
|
|
|
|
401
|
|
Deferred tax liability
|
|
|
78
|
|
|
|
172
|
|
|
|
|
5,959
|
|
|
|
5,829
|
|
|
(*)
|
Those
liabilities were received for a long-term (more than twelve months) in ASEC, but are presented as held for sale within the current
assets as of March 31, 2021, and December 31, 2020, because the Company has determined that the sale of ASEC qualifies as held
for sale and as a discontinued operation as of those dates.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
9 - Fair Value of Financial Instruments
The
Company’s financial instruments consist mainly of cash and cash equivalents, short-term interest bearing investments, accounts
receivable, restricted deposits for employee benefits, accounts payable and short-term and long-term loans.
Fair
value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value
is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. The Company utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy
prioritizes the inputs into three broad levels as follows:
|
●
|
Level 1
Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity
at the measurement date.
|
|
●
|
Level 2
Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the asset or liability.
|
|
●
|
Level 3
Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are
not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability
at measurement date.
|
By
distinguishing between inputs that are observable in the market place, and therefore more objective, and those that are unobservable
and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that
is significant to the fair value measurement.
The
Company, in estimating fair value for financial instruments, determined that the carrying amounts of cash and cash equivalents,
trade receivables, short-term bank credit and trade payables are equivalent to, or approximate their fair value due to the short-term
maturity of these instruments. The carrying amounts of variable interest rate long-term loans are equivalent or approximate to
their fair value as they bear interest at approximate market rates. The liabilities held for sale include a long-term loan, that
does not bear any interest, but taking into account the schedule of its maturities, its amount and the relatively current low
market rates, the difference between its carrying amount and its fair value is insignificant.
As
of March 31, 2021, the Company held approximately $105 of short-term bank deposits (as of December 31, 2020 - $105). As of March
31, 2021, and December 31, 2020, short-term deposits in the amount of $105 have been pledged as security in respect of guarantees
granted and cannot be pledged to others or withdrawn without the consent of the bank.
Derivatives
Embedded
derivatives are separated from the host contract and carried at fair value when (1) the embedded derivative possesses economic
characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate,
standalone instrument with the same terms would qualify as a derivative instrument. The derivative is measured both initially
and in subsequent periods at fair value, with changes in fair value charged to financial expenses, net. As to embedded derivatives
arising from the issuance of convertible debentures, see Note 5. Transaction expenses related to the embedded derivatives are
recognized as financial expenses at the date of the initial recognition.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
10 – Equity
On
December 23, 2019, the Company entered into a share purchase agreement (the “Agreement”) with Ivy and two other investors
(collectively together with Ivy – “Investors”). The Agreement relates to a private placement of an aggregate
of up to 12,500,000 ordinary shares of the Company for aggregate gross proceeds to the Company of up to $2,500.
As
part of this Agreement, in December 2019 and January 2020, the Company issued 5,460,000 and 1,040,000 ordinary shares, respectively,
for aggregate gross proceeds of $1,092 and $208, respectively. Under the term of the Agreement and following the issuance of those
shares, the Company appointed one representative to its Board of Directors (the “Board”), designated by Ivy. Also,
pursuant to the Agreement, Ivy has a right to purchase any future equity securities offered by the Company, except with respect
to certain exempt issuances as set forth in the Agreement.
The
issuance of the remaining 6,000,000 ordinary shares (the “Subsequent Closing”) for aggregate gross proceeds of $1,200
took place in April 2020, following the approval by the Company’s shareholders on April 14, 2020, of the resolutions detailed
below, that were required for the consummation of the Subsequent Closing under the Agreement and the applicable law: (i) an increase
in the number of the ordinary shares authorized for issuance from 50,000,000 to 100,000,000; (ii) the issuance of the ordinary
shares to Ivy following which Ivy will hold 25% or more of the total voting rights at general meetings of the shareholders of
the Company; and (iii) the election of the representative designated by Ivy to the Board.
The
issuance costs were approximately $39 and $111 during 2020 and 2019, respectively. The issuance costs were approximately $8 during
the first quarter of 2020.
In
addition, pursuant to the terms of the Agreement, on May 5, 2020, after the consummation of the Subsequent Closing, the Board
appointed an additional representative designated by Ivy. The appointment of such designee shall remain valid through the next
general meeting of the Company’s shareholders or as set forth in the Articles of Association of the Company.
Regarding
a convertible loan that the Company received from Ivy in December 2020 and January 2021, see Note 5.
We
are currently conducting a rights offering (the “Rights Offering”), pursuant to a prospectus dated April 20, 2021,
under which we are offering our shareholders the ability to exercise subscription rights and purchase, for every subscription
right held by them as of April 14, 2021 (i.e. the record date), one ordinary share of the Company, at a purchase price of $0.174
per share, before the expiration of the Rights Offering, which is scheduled for May 19, 2021. In the event the Rights Offering
will be fully subscribed for and exercised, the Company shall issue an amount of up to 18,965,517 ordinary shares for an aggregate
amount of up to $3,300.
For
the purpose of securing a full subscription, Ivy, the Company’s controlling shareholder, has provided a commitment letter
pursuant to which it committed to fully exercise its right, while additionally requesting to exercise additional rights un-subscribed
for, for up to approximately $2,825 in the aggregate, subject, however, to the limitation that such holdings, including any of
its affiliates, will not exceed 45% or more of the Company’s issued and outstanding share capital after conclusion of the
Rights Offering (the “Backstop Commitment”). Ivy will not receive any fee in connection with the Backstop Commitment.
As of the date of this Form 10-Q, Ivy and its affiliates own approximately 28.4% of our issued and outstanding shares.
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
10 – Equity (cont’d)
During
each of the three-month periods ended March 31, 2021 and March 31, 2020, 632,500 and 204,000 options were granted, respectively.
The vesting period for the options is three years. The average exercise prices for the options that were granted during the three
months ended March 31, 2021 and March 31, 2020, are $0.23 and $0.28, respectively. Those options expire up to five years after
the date of grant. Any options which are forfeited or cancelled before expiration become available for future grants under the
Company’s option plan. The fair value of each option granted to employees during the three months ended March 31, 2021 and
March 31, 2020 was estimated on the date of grant, using the Black-Scholes model and the following assumptions:
|
|
Three
months ended
March 31
|
|
|
|
2021
|
|
|
2020
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility (average)
|
|
|
113.48
|
%
|
|
|
102.45
|
%
|
Risk-free interest rate (average)
|
|
|
0.17
|
%
|
|
|
0.65
|
%
|
Expected life - in years
|
|
|
2.50
|
|
|
|
2.44
|
|
|
1.
|
Dividend
yield of zero percent for all periods.
|
|
2.
|
Expected
average volatility represents a weighted average standard deviation rate for the price
of the Company’s ordinary shares on Nasdaq and on the OTCQX market, as applicable.
|
|
3.
|
Risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
|
|
4.
|
Estimated
expected lives are based on historical grants data.
|
The
Company’s options activity (including options to non-employees) and options outstanding and options exercisable as of December
31, 2020 and March 31, 2021, are summarized in the following table:
|
|
Number
of
options
outstanding
|
|
|
Weighted
average
exercise
price per share
|
|
Outstanding – December 31, 2020
|
|
|
1,443,333
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
632,500
|
|
|
|
0.23
|
|
Options expired or forfeited
|
|
|
(114,665
|
)
|
|
|
0.72
|
|
Outstanding – March 31, 2021
|
|
|
1,961,168
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of:
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
681,330
|
|
|
$
|
0.83
|
|
March 31, 2021
|
|
|
685,014
|
|
|
$
|
0.76
|
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
10 – Equity (cont’d)
|
C.
|
Stock
option plans (cont’d)
|
The
weighted average fair value of options granted during the three months ended March 31, 2021 and during the three months ended
March 31, 2020 is $0.14 and $0.11, respectively, per option. The aggregate intrinsic value of outstanding options as of March
31, 2021 and December 31, 2020 is $222 and $5, respectively. The aggregate intrinsic value of exercisable options as of March
31, 2021 and December 31, 2020 is $36 and $2, respectively.
The
following table summarizes information about options outstanding and exercisable (including options to non-employees) as of March
31, 2021:
|
|
|
Options
outstanding
|
|
|
Options
Exercisable
|
|
|
|
|
Number
|
|
|
Weighted
|
|
|
|
|
|
Number
|
|
|
Weighted
|
|
|
|
|
|
|
|
outstanding
|
|
|
average
|
|
|
Weighted
|
|
|
Outstanding
|
|
|
average
|
|
|
Weighted
|
|
|
|
|
as of
|
|
|
remaining
|
|
|
Average
|
|
|
as of
|
|
|
remaining
|
|
|
Average
|
|
|
|
|
March 31,
|
|
|
contractual
|
|
|
Exercise
|
|
|
March 31,
|
|
|
contractual
|
|
|
Exercise
|
|
Range of exercise price ($)
|
|
|
2021
|
|
|
life (years)
|
|
|
Price ($)
|
|
|
2021
|
|
|
life (years)
|
|
|
Price ($)
|
|
0.20-0.90
|
|
|
|
1,605,168
|
|
|
|
4.20
|
|
|
|
0.28
|
|
|
|
329,014
|
|
|
|
3.72
|
|
|
|
0.35
|
|
1.07-1.22
|
|
|
|
356,000
|
|
|
|
1.11
|
|
|
|
1.13
|
|
|
|
356,000
|
|
|
|
1.11
|
|
|
|
1.13
|
|
|
|
|
|
1,961,168
|
|
|
|
3.64
|
|
|
|
|
|
|
|
685,014
|
|
|
|
2.36
|
|
|
|
|
|
As
of March 31, 2021, there was approximately $168 of total unrecognized compensation cost related to non-vested stock-based compensation
arrangements. That cost is expected to be recognized over a weighted-average period of approximately 1.53 years.
During
the three months ended March 31, 2021, and March 31, 2020, the Company recorded stock-based compensation expenses in the amount
of $14 and $12, respectively, in accordance with ASC 718, Compensation-Stock Compensation.
|
D.
|
Stock
options and warrants in the amounts of 15,086,837 and 1,008,000 outstanding as of March
31, 2021 and 2020, respectively, have been excluded from the calculation of the diluted
net loss per ordinary share because all such securities have an anti-dilutive effect
for all periods presented.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
11 - Operating segments
For
the purposes of allocating resources and assessing performance in order to improve profitability, the Company’s chief operating
decision maker (“CODM”) examines two segments which are the Company’s strategic business units: (1) Retail,
and (2) Petroleum.
Information
regarding the results of each reportable segment is included below based on the internal management reports that are reviewed
by the CODM.
|
|
Three months ended
March 31, 2021
|
|
|
|
Retail
|
|
|
Petroleum
|
|
|
Total
|
|
Revenues
|
|
$
|
2,282
|
|
|
$
|
487
|
|
|
$
|
2,769
|
|
Reportable segment gross profit (**)
|
|
|
1,179
|
|
|
|
233
|
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reportable
segment gross profit to gross profit for the period Depreciation
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Gross profit for the period in the consolidated financial statement
|
|
|
|
|
|
|
|
|
|
$
|
1,403
|
|
|
|
Three months ended
March 31, 2020 (*)
|
|
|
|
Retail
|
|
|
Petroleum
|
|
|
Total
|
|
Revenues
|
|
$
|
2,869
|
|
|
$
|
798
|
|
|
$
|
3,667
|
|
Reportable segment gross profit (**)
|
|
|
1,333
|
|
|
|
323
|
|
|
|
1,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of reportable
segment gross profit to gross profit for the period Depreciation
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Gross profit for the period in the consolidated financial statement
|
|
|
|
|
|
|
|
|
|
$
|
1,646
|
|
|
(*)
|
Reclassified
to conform with the current period presentation, see Note 1C(2).
|
|
(**)
|
Gross
profit as reviewed by the CODM, represents gross profit, adjusted to exclude depreciation
and stock-based compensation.
|
On
Track Innovations Ltd.
and
Subsidiaries
Notes
to the Interim Unaudited Condensed Consolidated Financial Statements
US
dollars, NIS and Euro in thousands, except share and per share data
Note
12 – Related party
Regarding
transactions and balances with a related party, Ivy, a controlling shareholder, see Notes 5, 10A and 10B.
Note
13 – Subsequent events
|
1.
|
Regarding
to completion of the sale of ASEC, including its Mass Transit Ticketing operation on
April 21, 2021, see Notes 1C(2) and 8.
|
|
2.
|
Regarding
of the Company’s rights offering in April 2021, see Note 10B.
|