REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
|
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
|
Other ☐
|
Table of Contents |
|||
Part I |
|||
4 | |||
4 | |||
4 | |||
10 | |||
20 | |||
34 | |||
38 | |||
39 | |||
40 | |||
41 | |||
55 | |||
55 | |||
Part II |
|||
55 | |||
56 | |||
56 | |||
56 | |||
56 | |||
56 | |||
57 | |||
57 | |||
57 | |||
57 | |||
Part III |
|||
58 | |||
58 | |||
58 | |||
Exhibits |
|||
(U.S. Dollars in Thousands) |
||||||||||||||||||||
December 31, |
||||||||||||||||||||
2022 |
2021 |
2020 |
2019 |
2018 |
||||||||||||||||
Cash and cash equivalents |
$ |
50,937 |
$ |
88,753 |
$ |
51,602 |
$ |
52,352 |
$ |
12,801 |
||||||||||
Bank deposits |
24,568 |
- |
- |
- |
- |
|||||||||||||||
Total current assets |
155,483 |
174,562 |
116,554 |
103,136 |
67,219 |
|||||||||||||||
Total assets |
184,633 |
195,880 |
140,388 |
123,447 |
75,087 |
|||||||||||||||
Total current liabilities |
68,326 |
60,887 |
59,334 |
75,509 |
75,058 |
|||||||||||||||
Total liabilities |
105,019 |
111,234 |
95,551 |
84,832 |
109,943 |
|||||||||||||||
Redeemable non-controlling interests
|
89,974 |
90,478 |
75,322 |
74,300 |
- |
|||||||||||||||
Shareholders' deficit |
$ |
10,360 |
$ |
5,832 |
$ |
30,485 |
$ |
35,685 |
$ |
34,856 |
U.S. Dollars in Thousands Year ended December 31, |
||||||||||||||||||||
2022 |
2021 |
2020 |
2019 |
2018 |
||||||||||||||||
Revenue
|
$ |
324,977 |
$ |
324,934 |
$ |
248,419 |
$ |
333,307 |
$ |
345,221 |
||||||||||
Cost of revenue
|
261,181 |
209,771 |
196,569 |
290,461 |
311,994 |
|||||||||||||||
GROSS PROFIT
|
63,796 |
115,163 |
51,850 |
42,846 |
33,227 |
|||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development
|
13,601 |
12,114 |
6,541 |
5,060 |
3,657 |
|||||||||||||||
Selling, general and administrative
|
53,799 |
50,882 |
37,239 |
33,063 |
34,924 |
|||||||||||||||
Goodwill impairment
|
- |
139 |
- |
- |
1,563 |
|||||||||||||||
Total operating expenses
|
67,400 |
63,135 |
43,780 |
38,123 |
40,144 |
|||||||||||||||
OPERATING INCOME (LOSS)
|
(3,604 |
) |
52,028 |
8,070 |
4,723 |
(6,917 |
) | |||||||||||||
Equity Income (loss) from investment in affiliates |
(97 |
) |
(983 |
) |
(790 |
) |
91 |
124 |
||||||||||||
Other income (expenses), net
|
113 |
(537 |
) |
(1,288 |
) |
(10,518 |
) |
(3,586 |
) | |||||||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES |
(3,588 |
) |
50,508 |
5,992 |
(5,704 |
) |
(10,379 |
) | ||||||||||||
Income tax expenses
|
1,646 |
9,220 |
590 |
1,549 |
685 |
|||||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS |
(5,234 |
) |
41,288 |
5,402 |
(7,253 |
) |
(11,064 |
) | ||||||||||||
Loss from discontinued operations
|
- |
- |
- |
- |
289 |
|||||||||||||||
NET INCOME (LOSS)
|
$ |
(5,234 |
) |
$ |
41,288 |
$ |
5,402 |
$ |
(7,253 |
) |
$ |
(11,353 |
) | |||||||
Net income (loss) attributable to non-controlling interests
|
(509 |
) |
6,481 |
999 |
789 |
(123 |
) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$ |
(4,725 |
) |
$ |
34,807 |
$ |
4,403 |
$ |
(8,042 |
) |
$ |
(11,230 |
) | |||||||
BASIC NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.PER
SHARE |
||||||||||||||||||||
Income (loss) from continuing operations |
$ |
(0.13 |
) |
$ |
0.66 |
$ |
0.12 |
$ |
(0.26 |
) |
$ |
(0.47 |
) | |||||||
Loss from discontinued operations
|
- |
- |
- |
- |
(0.01 |
) | ||||||||||||||
Net income (loss)
|
$ |
(0.13 |
) |
$ |
0.66 |
$ |
0.12 |
$ |
(0.26 |
) |
$ |
(0.48 |
) | |||||||
Basic weighted average number of shares |
37,433,333 |
37,433,333 |
35,827,854 |
30,524,461 |
23,415,068 |
|||||||||||||||
DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL
N.V. PER SHARE |
||||||||||||||||||||
Income (loss) from continuing operations |
$ |
(0.13 |
) |
$ |
0.61 |
$ |
0.11 |
$ |
(0.26 |
) |
$ |
(0.47 |
) | |||||||
Loss from discontinued operations
|
- |
- |
- |
- |
(0.01 |
) | ||||||||||||||
Net income (loss)
|
$ |
(0.13 |
) |
$ |
0.61 |
$ |
0.11 |
$ |
(0.26 |
) |
$ |
(0.48 |
) | |||||||
Diluted weighted average number of shares |
37,433,333 |
40,237,340 |
38,424,718 |
30,524,461 |
23,415,068 |
• |
Private Charter Flight Screening for Airlines - which includes security check of passengers' body and carry-on items. |
• |
Cargo Security Screening – for some international and domestic carriers. |
• |
Catering Security Screening – for some international and domestic carriers. |
• |
Aircraft Security Screening – for some international and domestic carriers. |
• |
Aircraft Search – search of the entire aircraft to detect dangerous objects. |
• |
Cleaning the aircraft interior |
• |
Conducting cabin searches |
• |
Waxing the aircraft exterior |
Year ended December 31, |
||||
2023 |
$ |
4.4 |
||
2024 |
3.4 |
|||
2025 |
1.6 |
|||
2026 |
1.0 |
|||
2027 |
0.7 |
|||
Thereafter |
0.3 |
|||
$ |
11.4 |
U.S. Dollars in Thousands |
||||||||||||
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
Revenue |
$ |
324,977 |
$ |
324,934 |
$ |
248,419 |
||||||
Cost of revenue |
261,181 |
209,771 |
196,569 |
|||||||||
Gross profit |
63,796 |
115,163 |
51,850 |
|||||||||
Operating expenses: |
||||||||||||
Research and development
|
13,601 |
12,114 |
6,541 |
|||||||||
Selling, general and administrative
|
53,799 |
50,882 |
37,239 |
|||||||||
Goodwill impairment
|
- |
139 |
- |
|||||||||
Total operating expenses
|
67,400 |
63,135 |
43,780 |
|||||||||
OPERATING INCOME (LOSS) |
(3,604 |
) |
52,028 |
8,070 |
||||||||
Equity loss from investment in affiliates
|
97 |
983 |
790 |
|||||||||
Other income (expenses), net |
113 |
(537 |
) |
(1,288 |
) | |||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES
|
(3,588 |
) |
50,508 |
5,992 |
||||||||
Income tax expenses |
1,646 |
9,220 |
590 |
|||||||||
NET INCOME (LOSS) |
(5,234 |
) |
41,288 |
5,402 |
||||||||
Less: Net income (loss) attributable to non-controlling interests
|
(509 |
) |
6,481 |
999 |
||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V |
$ |
(4,725 |
) |
$ |
34,807 |
$ |
4,403 |
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
Revenue |
100.0 |
% |
100.0 |
% |
100.0 |
% | ||||||
Cost of revenue |
80.4 |
% |
64.6 |
% |
79.2 |
% | ||||||
Gross profit |
19.6 |
% |
35.4 |
% |
20.8 |
% | ||||||
Research and development |
4.2 |
% |
3.7 |
% |
2.6 |
% | ||||||
Selling, general and administrative |
16.5 |
% |
15.7 |
% |
15.0 |
% | ||||||
Goodwill impairment |
- |
% |
- |
% |
- |
% | ||||||
Total operating expenses |
20.7 |
% |
19.4 |
% |
17.6 |
% | ||||||
OPERATING INCOME (LOSS) |
(1.1 |
)% |
16.0 |
% |
3.2 |
% | ||||||
Equity loss from investment in affiliates
|
(- |
)% |
(0.3 |
)% |
(0.3 |
)% | ||||||
Other income (expenses ), net |
- |
% |
(0.2 |
)% |
(0.5 |
)% | ||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES
|
(1.1 |
)% |
15.5 |
% |
2.4 |
% | ||||||
Income tax expenses |
0.5 |
% |
2.8 |
% |
0.2 |
% | ||||||
NET INCOME (LOSS) |
(1.6 |
)% |
12.7 |
% |
2.2 |
% | ||||||
Less: Net income (loss) attributable to non-controlling interests
|
0.1 |
% |
2.0 |
% |
0.4 |
% | ||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V |
(1.5 |
)% |
10.7 |
% |
1.8 |
% |
(U.S. Dollars in Thousands) |
||||||||||||
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
Germany |
$ |
111,826 |
$ |
126,367 |
$ |
119,500 |
||||||
United States of America |
88,333 |
94,743 |
45,305 |
|||||||||
The Netherlands |
63,842 |
52,165 |
58,446 |
|||||||||
Spain |
39,448 |
30,946 |
7,465 |
|||||||||
Other |
21,528 |
20,713 |
17,703 |
|||||||||
Total Revenue |
$ |
324,977 |
$ |
324,934 |
$ |
248,419 |
• |
Decrease of travel by flights, reducing the demand for services the Company provide as part of its airport security and other aviation
services. As a result, our cumulative revenues of the airport security and other aviation services in the twelve months ended December
31, 2021 and 2020 were lower than our revenues in previous years. During 2022 we have seen improvement in the aviation industry. However,
in some locations, the industry suffered from a shortage in manpower making it difficult to handle the growing demand. As of December
31, 2022, the Company has overcome the manpower shortage in most of the locations in which it operates. |
• |
Governments, in some of the countries in which we operate, have announced the implementation of government assistance measures which
mitigated the impact of the COVID-19 outbreak on our results and liquidity. During 2022, 2021 and 2020, in the United States of America,
the government has approved a payroll support of $0 million, $15.9 million and $13.7 million to the American subsidiary of the Company.
Out of those amounts the American subsidiary recognized amounts of $0 million, $16.9 million and $12.7 million respectively, as reduction
of labor expenses for the years ended December 31, 2022, 2021 and 2020. In the Netherlands, the government has approved a support of €3.7.
million, €18.1 and €17.6 million ($3.9 million, $22.6 million and $21.6 million as of December 31, 2022, 2021 and 2020, respectively)
for the years ended December 31, 2022, 2021 and 2020. The Dutch government terminated the support program on March, 2022. In Germany,
the employees are eligible for payroll support up to 60% of the employee’s payroll (on an individual basis) where the employees
meet the support plan requirements. Currently, the Company does not expect those governmental measures to be renewed or extended.
|
• |
As the majority of the Company’s operations are in Euros, the yearly results are being affected by the movements in exchange
rates between the Euros and the US Dollars. The yearly average exchange rate for the year 2022 was 1.05 USD to 1.00 Euro compared to 1.18
USD to 1.00 Euro in 2021, representing a decrease of approximately 11%. |
U.S. Dollars in Thousands |
||||||||||||||||||||
Corporate |
Airport Security |
Other Aviation related Services |
Authentication Technology |
Total |
||||||||||||||||
Year ended December 31, 2022: |
||||||||||||||||||||
Revenue |
$ |
- |
$ |
224,037 |
53,954 |
$ |
46,986 |
$ |
324,977 |
|||||||||||
Depreciation and amortization
|
71 |
779 |
286 |
1,318 |
2,454 |
|||||||||||||||
Net income (loss) |
(2,921 |
) |
1,128 |
(2,229 |
) |
(1,212 |
) |
(5,234 |
) | |||||||||||
Goodwill |
- |
646 |
- |
- |
646 |
|||||||||||||||
Total assets |
8,698 |
82,016 |
25,072 |
68,847 |
184,633 |
|||||||||||||||
Year ended December 31, 2021: |
||||||||||||||||||||
Revenue |
$ |
- |
$ |
217,463 |
$ |
36,224 |
$ |
71,247 |
$ |
324,934 |
||||||||||
Depreciation and amortization
|
75 |
939 |
167 |
880 |
2,061 |
|||||||||||||||
Net income (loss) |
(2,020 |
) |
7,202 |
14,710 |
21,396 |
41,288 |
||||||||||||||
Goodwill |
- |
690 |
- |
- |
690 |
|||||||||||||||
Total assets |
10,349 |
84,923 |
27,502 |
73,106 |
195,880 |
|||||||||||||||
Year ended December 31, 2020: |
||||||||||||||||||||
Revenue |
$ |
- |
$ |
194,477 |
$ |
28,177 |
$ |
25,765 |
$ |
248,419 |
||||||||||
Depreciation and amortization
|
72 |
994 |
308 |
716 |
2,090 |
|||||||||||||||
Net income (loss) |
(3,853 |
) |
(2,779 |
) |
8,835 |
3,199 |
5,402 |
|||||||||||||
Goodwill |
- |
746 |
- |
- |
746 |
|||||||||||||||
Total assets |
12,488 |
72,851 |
13,699 |
41,350 |
140,388 |
• |
Decrease of travel by flights, reducing the demand for services the Company provide as part of its airport security and other aviation
related services. Those revenues for the years ended December 31, 2022, 2021 and 2020 were $278.0 million, $253.6 million and $222.7 million,
respectively. |
• |
Governments in some of the countries in which we operate have announced the implementation of government assistance measures, which
mitigated the negative impact of the COVID-19 outbreak on our results and liquidity. In the United States of America, the government has
approved in 2022 and 2021 a payroll support of $0 and $15.9 million respectively, to the American subsidiary of the Company. In the Netherlands,
the government has approved a financial assistance of €3.7 and €18.1 million ($3.9 and $22.6 million as of December 31, 2022
and 2021) for the years ended December 31, 2022 and 2021. In Germany, the Company’s employees are eligible for payroll support up
to 60% of the employee’s payroll (on individual basis) where the employees meet the support plan requirements. The Company pays
to its German employees their full salary and the Company is being reimbursed by the German government for the payroll support amount.
The Company does not expect those measures to be renewed or extended. |
• |
In the Netherlands wage tax, social security and VAT payments for the period March 2020 until September 2021 were postponed and will
be paid in 60 monthly installments, starting October 2022. The debt incurs annual interest starting July 2022 of 1% and increases every
six months to a maximum of 4% starting January 1, 2024 onwards. As of December 31, 2022 and 2021, the Company accumulated debt of €31.8
million and €33.5 million ($33.8 million and $38.0 million as of December 31, 2022 and 2021), respectively, to the Dutch tax authorities.
|
Contractual Obligations |
Payments due by Period (U.S. Dollars in Thousands) |
|||||||||||||||||||
Total |
Less than 1 Year |
1-3 years |
4-5 years |
more than 5 years |
||||||||||||||||
Consulting agreements |
$ |
850 |
$ |
170 |
$ |
510 |
$ |
170 |
$ |
- |
||||||||||
Convertible notes payable - related party |
1,132 |
- |
1,132 |
- |
- |
|||||||||||||||
Operating lease obligations |
11,350 |
4,361 |
6,018 |
971 |
- |
|||||||||||||||
Governmental payments in the Netherlands (VAT, social security and wage tax) |
34,751 |
7,189 |
21,996 |
5,566 |
- |
|||||||||||||||
$ |
48,083 |
$ |
11,720 |
$ |
29,656 |
$ |
6,707 |
$ |
- |
Contractual Obligations |
Payments due by Period (U.S. Dollars in Thousands) |
|||||||||||||||||||
Total |
Less than 1 Year |
1-3 years |
4-5 years |
more than 5 years |
||||||||||||||||
Guarantees and Letters of credit |
$ |
8,250 |
$ |
4,990 |
$ |
1,972 |
$ |
1,288 |
$ |
- |
Age |
|
Position | ||
Menachem Atzmon
|
|
78 |
|
Chairman of the Supervisory Board |
Ron Atzmon |
|
49 |
|
Member of the Supervisory Board and Active Chairman of AU10TIX |
Gil Atzmon |
|
47 |
|
Member of the Supervisory Board |
Philip M. Getter
|
|
86 |
|
Member of the Supervisory Board, Chairman of the Audit Committee |
David W. Sass |
|
87 |
|
Member of the Supervisory Board |
Gail F. Lieberman
|
|
79 |
|
Member of the Supervisory Board, Member of the Audit Committee and Chairman of the
Compensation Committee |
Gordon Hausmann
|
|
77 |
|
Member of the Supervisory Board, Member of the Audit Committee and member of the Compensation
Committee |
Alon Raich |
|
47 |
|
Joint Managing Director and Chief Financial Officer |
Rom Shaked |
|
40 |
|
Joint Managing Director |
Principal Position |
Year |
Salary and Bonus |
Sales Commission |
All Other Compensations |
Non-equity Incentive Plan Compensation |
Nonqualified Deferred Compensation Earnings |
Number of Option Award |
Number of Stock Awards |
Total |
|||||||||||||||||||||||||
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||||||
Active |
2022 |
519 |
1,101 |
163 |
1,783 |
|||||||||||||||||||||||||||||
Chairman of |
2021 |
204 |
1,397 |
109 |
- |
- |
- |
- |
1,700 |
|||||||||||||||||||||||||
a Subsidiary |
2020 |
192 |
459 |
90 |
- |
- |
- |
- |
741 |
Salaries, fees, |
Pension, retirement |
|||||||
commissions |
and other |
|||||||
and bonuses |
similar benefits |
|||||||
(in thousands) |
||||||||
Supervisory Directors as a group (7 persons)
|
$ |
310 |
$ |
- |
||||
Officers as a group (5 persons) |
$ |
2,708 |
$ |
249 |
Percent of |
||||||||
Amount Beneficially |
Common shares |
|||||||
Name Shareholders Holding Five Percent or More |
Owned (a) |
Outstanding (a) |
||||||
MacPherson Trust and its beneficiaries (b)
|
62.6 |
% |
23,418,861 |
|||||
Menachem J. Atzmon |
13.0 |
% |
4,850,000 |
|||||
Igal Tabori |
5.3 |
% |
2,002,483 |
|||||
All officers and directors as a group (9 persons), the MacPherson Trust and its Beneficiaries |
83.6 |
% |
31,280,721 |
Year |
High |
Low |
||||||
2018 |
$ |
1.09 |
$ |
0.40 |
||||
2019 |
$ |
3.00 |
$ |
0.15 |
||||
2020 |
$ |
4.09 |
$ |
1.34 |
||||
2021 |
$ |
10.00 |
$ |
4.00 |
||||
2022 |
$ |
9.79 |
$ |
5.00 |
2022 |
High |
Low |
||||||
First quarter |
$ |
9.79 |
$ |
6.62 |
||||
Second quarter |
$ |
8.72 |
$ |
6.25 |
||||
Third quarter |
$ |
7.98 |
$ |
6.50 |
||||
Fourth quarter |
$ |
7.25 |
$ |
5.00 |
||||
2021 |
High |
Low |
||||||
First quarter |
$ |
6.00 |
$ |
4.00 |
||||
Second quarter |
$ |
10.00 |
$ |
5.00 |
||||
Third quarter |
$ |
10.00 |
$ |
6.00 |
||||
Fourth quarter |
$ |
9.10 |
$ |
6.25 |
||||
2020 |
High |
Low |
||||||
First quarter |
$ |
4.09 |
$ |
2.40 |
||||
Second quarter |
$ |
3.00 |
$ |
1.34 |
||||
Third quarter |
$ |
3.35 |
$ |
2.56 |
||||
Fourth quarter |
$ |
4.00 |
$ |
2.31 |
• |
The excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the shares, |
• |
The amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Company was a
PFIC, will be treated as ordinary income, and |
• |
The amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and an interest charge
generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
(a) |
receives income or realizes capital gains in connection with his or her employment activities or in his/her |
(b) |
capacity as (former) Management Board member and/or (former) Supervisory Board member; or |
(c) |
is a resident of any non-European part of the Netherlands; or |
(d) |
for whom the Shares form part of a “lucrative interest” (see further below). |
(a) |
distributions in cash or in kind, deemed and constructive distributions and repayments of paid-in capital (“gestort kapitaal”)
not recognized for Netherlands dividend withholding tax purposes; |
(b) |
(b) liquidation proceeds, proceeds of redemption of Shares or, as a rule, consideration for the repurchase of Shares by ICTS
in excess of the average paid-in capital recognized for Netherlands dividend withholding tax purposes; |
(c) |
(c) the par value of Shares issued to a holder of Shares or an increase of the par value of Shares, to the extent that it does
not appear that a contribution, recognized for Netherlands dividend withholding tax purposes, has been made or will be made;
and |
(d) |
(d) partial repayment of paid-in capital, recognized for Netherlands dividend withholding tax purposes, if and to the extent
that there are net profits (“zuivere winst”), unless (i) the General Meeting has resolved in advance to make such
repayment and (ii) the par value of the Shares concerned has been reduced by an equal amount by way of an amendment of the Articles
of Association of ICTS. |
2022 |
2021 |
|||||||
Audit fees |
$ |
400 |
$ |
268 |
||||
Audit related fees |
- |
- |
||||||
Tax fees |
- |
- |
||||||
Total fees |
$ |
400 |
$ |
268 |
1. |
The audit report of MHM on the financial statements of the Company as of and for the years ended December 31, 2020 and 2019 did not
contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.
|
2. |
During the years ended December 31, 2020 and 2019 and during the period from January
1, 2021 through April 29, 2022, there were no disagreements with MHM on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures that, if not resolved to MHM satisfaction, would have caused MHM to make reference in connection
with its opinion to the subject matter of the disagreement. |
3. |
No “reportable events”, as that term is described in Item 16F(a)(1)(v)(A)-(D) of this form 20-F, occurred within the
years ended December 31, 2020 and 2019 and subsequently up to date hereof. |
Certification by the registrant’s Managing Director and Principal Executive Officer pursuant to Rule13a-14(a) | |
* |
Incorporated by reference to the Company’s fillings. |
** |
Filed herewith. |
By: |
/s/ Rom Shaked |
|
Name: |
Rom Shaked |
|
Title: |
Managing Director |
|
Date: |
May 10, 2023 |
|
By: |
/s/ Alon Raich |
|
Name: |
Alon Raich |
|
Title: |
Managing Director and Chief Financial Officer |
|
Date: |
May 10, 2023 |
Page
|
|
Consolidated Financial Statements:
|
|
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID
|
F-2
|
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID
|
F-3
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-9
|
|
Financial Statement Schedule:
|
|
F-39
|
/s/
|
|
We have served as the Company’s auditor since 2022.
|
|
|
|
May 10, 2023 |
December 31,
|
||||||||
|
2022
|
2021
|
||||||
ASSETS | ||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
|
|
||||||
Bank deposits
|
|
|
||||||
Accounts receivable, net
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Deferred tax assets, net
|
|
|
||||||
Investments
|
|
|
||||||
Deposits
|
|
|
||||||
Restricted cash
|
|
|
||||||
Property and equipment, net
|
|
|
||||||
Operating lease right of use assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Notes payable-banks
|
$
|
|
$
|
|
||||
Accounts payable
|
|
|
||||||
Accrued expenses and other current liabilities
|
|
|
||||||
Value added tax (VAT) payable
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Operating lease liabilities, current
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Convertible notes payable to a related party
|
|
|
||||||
Operating lease liabilities, non-current
|
|
|
||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES (NOTE 19)
|
||||||||
REDEEMABLE NON-CONTROLLING INTERESTS (NOTE 13)
|
|
|
||||||
SHAREHOLDERS' DEFICIT:
|
||||||||
Common stock, €
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Non-controlling interests in subsidiaries
|
|
(
|
)
|
|||||
Total shareholders' deficit
|
(
|
)
|
(
|
)
|
||||
Total liabilities and shareholders' deficit
|
$
|
|
$
|
|
For the Years Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
||||||
Cost of revenue
|
|
|
|
|||||||||
GROSS PROFIT
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development
|
|
|
|
|||||||||
Selling, general and administrative
|
|
|
|
|||||||||
Goodwill impairment
|
|
|
|
|||||||||
Total operating expenses
|
|
|
|
|||||||||
OPERATING INCOME (LOSS)
|
(
|
)
|
|
|
||||||||
Equity loss from investment in affiliates
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Other income (expenses), net
|
|
(
|
)
|
(
|
)
|
|||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES
|
(
|
)
|
|
|
||||||||
Income tax expenses
|
|
|
|
|||||||||
NET INCOME (LOSS)
|
(
|
)
|
|
|
||||||||
Net income (loss) attributable to non-controlling interests
|
(
|
)
|
|
|
||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
BASIC AND DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. PER SHARE
|
||||||||||||
Net income (loss) attributable to ICTS International N.V.
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
Less deemed dividend attributable to redeemable non-controlling interests
|
|
|
|
|||||||||
Net income (loss) available to ICTS International N.V. shareholders
|
(
|
)
|
|
|
||||||||
Basic weighted average number of shares
|
|
|
|
|||||||||
Net income (loss) per share attributable to ICTS International N.V. - basic
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
Diluted weighted average number of shares
|
|
|
|
|||||||||
Net income (loss) per share attributable to ICTS International N.V. - diluted
|
$
|
(
|
)
|
$
|
|
|
||||||
COMPREHENSIVE INCOME (LOSS)
|
||||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
Other Comprehensive Income (loss) - Translation adjustments
|
(
|
)
|
(
|
)
|
|
|||||||
Unrealized gains (loss) on derivative instruments
|
(
|
)
|
|
|
||||||||
Comprehensive income (loss)
|
(
|
)
|
|
|
||||||||
Comprehensive income (loss) attributable to non-controlling interests
|
(
|
)
|
|
|
||||||||
COMREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$
|
(
|
)
|
$
|
|
$
|
|
Common Stock
|
Additional
Paid-In |
Accumulated
|
Accumulated
Other Comprehensive |
Non-Controlling
|
Total
Shareholders' |
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Interests
|
Deficit
|
||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||
Issuance of common stock
|
|
|
(
|
)
|
|
|
|
|
||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
BALANCE AT DECEMBER 31, 2020
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||
Conversion of preferred shares A and A-1 in AU10TIX Technologies B.V. to new series A
|
|
(
|
)
|
|
|
|
(
|
)
|
||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Stock-based compensation – AU10TIX Technologies B.V.
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Translation adjustment
|
-
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||
Unrealized gains on derivatives instruments
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
BALANCE AT DECEMBER 31, 2021
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||
Stock-based compensation – AU10TIX Technologies B.V.
|
-
|
|
(
|
)
|
|
|
|
|
||||||||||||||||||||
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
Unrealized loss on derivatives instruments
|
-
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
BALANCE AT DECEMBER 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
CASH FLOW FROM OPERATING ACTIVITIES:
|
||||||||||||
Net income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
|
|
|
|||||||||
Goodwill impairment
|
|
|
|
|||||||||
Loss (gain) from sale of investment
|
|
(
|
)
|
|
||||||||
Bad debt expense
|
|
|
|
|||||||||
Deferred income taxes
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Loss on disposal of property and equipment
|
|
|
|
|||||||||
Equity loss from investment in affiliates
|
|
|
|
|||||||||
Stock-based compensation
|
|
|
|
|||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
(
|
)
|
(
|
)
|
|
|||||||
Receivable from related party
|
|
|
(
|
)
|
||||||||
Prepaid expenses and other current assets
|
|
|
(
|
)
|
||||||||
Deposits
|
(
|
)
|
|
|
||||||||
Other assets
|
|
(
|
)
|
|
||||||||
Accounts payable
|
|
|
(
|
)
|
||||||||
Accrued expenses and other current liabilities
|
|
|
(
|
)
|
||||||||
VAT payable
|
|
(
|
)
|
|
||||||||
Income taxes payable
|
|
|
|
|||||||||
Operating lease accounts, net
|
(
|
)
|
(
|
)
|
|
|||||||
Other liabilities
|
(
|
)
|
|
|
||||||||
Net cash provided by (used in) operating activities
|
(
|
)
|
|
|
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Purchase of company in Sweden
|
|
(
|
)
|
|
||||||||
Capitalization of software costs
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Proceeds from sale of property and equipment
|
|
|
|
|||||||||
Proceeds from sale of investment
|
|
|
|
|||||||||
Investments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Deposits (withdraws) regarding Employees severance
|
|
(
|
)
|
(
|
)
|
|||||||
Net cash used in investing activities
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
CASH FLOW FROM FINANCING ACTIVITIES:
|
||||||||||||
Repayments under lines of credit, net
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Repayments of convertible notes payable to a related party
|
(
|
)
|
(
|
)
|
|
|||||||
Repayments of loan payable to a related party
|
|
|
(
|
)
|
||||||||
Repayment of loan payable
|
|
|
(
|
)
|
||||||||
Decrease in bank overdrafts
|
|
|
(
|
)
|
||||||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS
|
(
|
)
|
(
|
)
|
|
|||||||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND DEPOSITS
|
(
|
)
|
|
|
||||||||
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS BEGINNING OF YEAR
|
|
|
|
|||||||||
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS END OF YEAR
|
$
|
|
$
|
|
$
|
|
||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||||
Stock issuance as reduction against convertible notes payable to related party
|
$
|
|
$
|
|
$
|
|
||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest
|
$
|
|
$
|
|
$
|
|
||||||
Income taxes
|
$
|
|
$
|
|
$
|
|
F - 9 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
Restricted cash – short term
|
|
|
|
|||||||||
Bank deposits
|
|
|
|
|||||||||
Restricted cash – long term
|
|
|
|
|||||||||
Total cash, cash equivalents, restricted cash and bank deposits shown in the statement of cash flows
|
$
|
|
$
|
|
$
|
|
Level 1 - |
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Companies have the ability to access at the measurement date.
|
Level 2 - |
Inputs to the valuation methodology include:
|
• |
Quoted prices for similar assets or liabilities in active markets;
|
• |
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
• |
Inputs other than quoted prices that are observable for the asset or liability;
|
• |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3 - |
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
F - 10 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Years
|
||
Equipment and facilities
|
|
|
Internal- use software
|
|
|
Vehicles
|
|
F - 11 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 12 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 13 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Airport Security
|
$
|
|
$
|
|
$
|
|
||||||
Other Aviation Related Services
|
|
|
|
|||||||||
Authentication Technology
|
|
|
|
|||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
Year ended December 31,
|
||||||||||||||||||||||||
2022
|
2021
|
2020
|
||||||||||||||||||||||
Germany
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||
United States
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
The Netherlands
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Spain
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Other countries
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Total revenue
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
F - 14 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 15 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 16 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 17 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 18 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 19 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
SEK
|
U.S.
Dollars |
|||||||
Current assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Total identifiable assets acquired
|
|
|
||||||
Current liabilities
|
|
|
||||||
Total liabilities assumed
|
|
|
||||||
|
|
NOTE 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
December 31,
|
||||||||
2022
|
2021
|
|||||||
Receivable from the Dutch tax authorities (1)
|
$
|
|
$
|
|
||||
Receivable from the German authorities – COVID-19 (2)
|
|
|
||||||
Dutch Governmental support – COVID-19 (3)
|
|
|
||||||
Value Added Tax (VAT) receivable
|
|
|
||||||
Prepaid uniforms
|
|
|
||||||
Prepaid insurance
|
|
|
||||||
Other
|
|
|
||||||
Total prepaid expenses and other current assets
|
$
|
|
$
|
|
(1) |
The Company is obligated to hold restricted cash in the Netherlands, which is restricted for payments to the tax authorities. From time to time the Company is allowed to make a request to release the money from the restricted account into the regular bank account. As part of the process the Company transfers the requested amount to the Dutch tax authorities, who pay it back after a few weeks into the Company’s regular bank account.
|
(2) |
In Germany, the employees are eligible for payroll support. The Company pays to its German employees their full salary and the Company is being reimbursed by the German government for the payroll support amount.
|
(3) |
In the Netherlands, the Company was eligible for support following the COVID-19 crisis.
|
F - 20 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 21 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Office, equipment and facilities
|
$
|
|
$
|
|
||||
Internal-use software
|
|
|
||||||
Vehicles
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Less: accumulated depreciation and amortization
|
|
|
||||||
Total property and equipment, net
|
$
|
|
$
|
|
F - 22 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Operating lease cost
|
$
|
|
$
|
|
$
|
|
||||||
Short-term lease cost
|
|
|
|
|||||||||
Total lease cost
|
$
|
|
$
|
|
$
|
|
Other information:
Cash paid for amounts included in the measurement of Lease liabilities:
|
Year ended December 31, | ||||||||||||
2022
|
2021
|
2020
|
||||||||||
Operating cash flows from operating leases
|
$
|
|
$
|
|
$
|
|
||||||
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
|
|
|||||||||
Weighted-average remaining lease term-operating leases
|
|
|
|
|||||||||
Weighted-average remaining lease term-operating leases
|
|
%
|
|
%
|
|
%
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Operating lease ROU assets
|
$
|
|
$
|
|
||||
Operating lease liabilities - current |
$
|
|
$
|
|
||||
Operating lease liabilities - non current
|
|
|
||||||
Total operating lease liabilities
|
$
|
|
$
|
|
Year ending December 31,
|
||||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total future minimum lease payments
|
|
|||
Less: imputed interest
|
|
|||
Total
|
$
|
|
F - 23 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
2022
|
2021
|
|||||||
Balance as of the beginning of the year
|
$
|
|
$
|
|
||||
Goodwill acquired during the year
|
|
|
||||||
Impairment losses
|
|
(
|
)
|
|||||
Exchange rate effect
|
(
|
)
|
(
|
)
|
||||
Balance as of the end of the year
|
$
|
|
$
|
|
F - 24 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Accrued payroll and related costs
|
$
|
|
$
|
|
||||
Accrued vacation
|
|
|
||||||
Labor union contribution
|
|
|
||||||
Deferred revenue
|
|
|
||||||
Other
|
|
|
||||||
Total accrued expenses and other current liabilities
|
$
|
|
$
|
|
F - 25 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Deferred wage tax and social security (1)
|
$
|
|
$
|
|
||||
Deferred VAT (1)
|
|
|
||||||
Severance pay liability
|
|
|
||||||
Deferred revenue
|
|
|
||||||
Other (2)
|
|
|
||||||
Total other liabilities
|
$
|
|
$
|
|
(1) |
Deferred VAT and deferred wage tax relates to measurements taken by the Dutch government, on which they postponed all VAT payable for the years 2021 and 2020 and all wage tax and social security payable for the months March – December 2021 to be paid in 60 instalments starting October 2022.
|
(2) |
Including a
|
F - 26 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 27 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 28 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 29 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Balance as of the beginning of the year
|
$
|
|
$
|
|
||||
Net Income (loss)
|
(
|
)
|
|
|||||
Other Comprehensive Income - Translation adjustment
|
(
|
)
|
(
|
)
|
||||
Conversion of AU10TIX shares A-1 into new series A
|
|
|
||||||
Other
|
(
|
)
|
|
|||||
Balance as of the end of the year
|
$
|
|
$
|
|
F - 30 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Number of options
|
Weighted average exercise price
|
Weighted average remaining contractual term
|
||||||||||
Options outstanding as of December 31, 2021
|
|
$
|
|
|
||||||||
Options granted
|
|
|
||||||||||
Options exercised
|
|
|
||||||||||
Options transferred to AU10TIX Technologies B.V.
|
|
|
||||||||||
Options outstanding, end of the year
|
|
$
|
|
-
|
||||||||
Options exercisable, as of December 31, 2022
|
|
F - 31 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Number of options
|
Weighted average exercise price
|
Weighted average remaining contractual term
|
||||||||
Options outstanding as of December 31, 2021
|
|
$
|
|
|||||||
Options granted
|
|
|
||||||||
Options exercised
|
|
|||||||||
Options transferred from AU10TIX Limited
|
|
|
||||||||
Forfeited
|
(
|
) |
|
|||||||
Options outstanding, end of the year
|
|
$
|
|
|
||||||
Options exercisable, as of December 31, 2022
|
|
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Interest expense to related parties (see Note 11)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
) | |||
Interest expense and other bank charges
|
(
|
)
|
(
|
)
|
(
|
) | ||||||
Interest income
|
|
|
|
|||||||||
Foreign currency gain (loss)
|
|
|
(
|
) | ||||||||
Gain from sale of Mesh shares (see Note 5)
|
|
|
||||||||||
Loss from investment in I-SEC Korea (see Note 5)
|
(
|
)
|
|
|||||||||
Loss from QDD (see Note 3)
|
(
|
)
|
|
|||||||||
Other income (expense)
|
(
|
)
|
|
(
|
) | |||||||
Total other income (expense), net
|
$
|
|
$
|
(
|
)
|
$
|
(
|
) |
F - 32 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
The Netherlands
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
Germany
|
|
|
(
|
)
|
||||||||
United States of America
|
(
|
)
|
|
|
||||||||
Spain
|
|
(
|
)
|
(
|
)
|
|||||||
Israel
|
|
|
|
|||||||||
Other locations
|
(
|
)
|
(
|
)
|
|
|||||||
Income (loss) before income tax expenses
|
$
|
(
|
)
|
$
|
|
$
|
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Deferred tax assets:
|
||||||||
Operating loss carryforwards
|
$
|
|
$
|
|
||||
Interest loss carry forward
|
|
|
||||||
Capital loss carryforwards
|
|
|
||||||
Allowance for doubtful accounts
|
|
|
||||||
Tax credit carryforwards
|
|
|
||||||
Accrued expenses and other
|
|
|
||||||
Research and development expenses, net
|
|
|
||||||
Total deferred tax assets
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Depreciation of property and equipment
|
(
|
)
|
(
|
)
|
||||
|
|
|||||||
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets, net
|
$
|
|
$
|
|
F - 33 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Effective loss (income) tax benefit at statutory rate
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Rate differential
|
(
|
)
|
|
|
||||||||
Non-deductible expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Adjustments to prior year tax losses
|
|
(
|
)
|
(
|
)
|
|||||||
Changes in valuation allowance
|
(
|
)
|
|
|
||||||||
Other
|
(
|
)
|
(
|
)
|
|
|||||||
Income tax expense
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Balance at beginning of year
|
$
|
|
$
|
|
||||
Additions based on tax positions taken in prior years
|
|
|
||||||
Additions based on tax positions taken in the current year
|
|
|
||||||
Reduction based on tax positions taken in prior years
|
|
|
||||||
Balance at end of year
|
$
|
|
$
|
|
F - 34 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 35 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 36 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Corporate
|
Airport
Security |
Other
Aviation Related Services |
Authentication
Technology |
Total
|
||||||||||||||||
Year ended December 31, 2022:
|
||||||||||||||||||||
Revenue
|
$
|
|
$
|
|
|
$
|
|
$
|
|
|||||||||||
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
Goodwill
|
|
|
|
|
|
|||||||||||||||
Total assets
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2021:
|
||||||||||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
(
|
)
|
|
|
|
|
||||||||||||||
Goodwill
|
|
|
|
|
|
|||||||||||||||
Total assets
|
|
|
|
|
|
|||||||||||||||
Year ended December 31, 2020:
|
||||||||||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
Net income (loss)
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
Goodwill
|
|
|
|
|
|
|||||||||||||||
Total assets
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Germany
|
$
|
|
$
|
|
$
|
|
||||||
United States
|
|
|
|
|||||||||
The Netherlands
|
|
|
|
|||||||||
Spain
|
|
|
|
|||||||||
Other countries
|
|
|
|
|||||||||
Total revenue
|
$
|
|
$
|
|
$
|
|
F - 37 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Germany
|
$
|
|
$
|
|
||||
United States
|
|
|
||||||
The Netherlands
|
|
|
||||||
Spain
|
|
|
||||||
Other countries
|
|
|
||||||
Total property and equipment, net
|
$
|
|
$
|
|
F - 38
Beginning
of year |
Charges
to Costs and Expenses |
Charges
to other accounts |
Deductions
|
End of
Year |
||||||||||||||||
Allowance for doubtful accounts (1):
|
||||||||||||||||||||
Year ended December 31, 2020
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
Year ended December 31, 2021
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
Year ended December 31, 2022
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
Allowance for net deferred tax assets:
|
||||||||||||||||||||
Year ended December 31, 2020
|
$
|
|
|
|
(
|
)
|
$
|
|
||||||||||||
Year ended December 31, 2021
|
$
|
|
|
|
(
|
)
|
$
|
|
||||||||||||
Year ended December 31, 2022
|
$
|
|
|
|
|
$
|
|
1. |
The public limited liability company bears the name:
ICTS International N.V. and has its official seat in Amstelveen, the Netherlands.
|
2. |
The company is established for an indefinite period.
|
1. |
The objects of the company are:
|
a. |
to advise on and provide further services relating to the security of persons and goods and to provide such security (or have it provided) on the instructions of companies, government agencies and individuals; in particular, but not
exclusively: to have them installed, manage and monitor security systems for the purpose of preventing and combating crime and terrorism on and at premises, buildings, installations, vessels and aircrafts (or have them installed);
|
b. |
acquiring and disposing of - either alone or jointly with others - participations or other interests in companies and businesses, cooperating with companies and businesses and managing them;
|
c. |
the acquiring, managing, exploiting, encumbering and disposing of goods - including intellectual and industrial property rights - as well as capital investing;
|
d. |
lending money, or causing money to be lent, in particular - but not exclusively - to legal entities and companies that are subsidiaries and/or group companies of the company or in which the company has a participating interest - all with
due observance of the provisions of the law - as well as borrowing money, or causing money to be borrowed;
|
e. |
concluding agreements whereby the company binds itself as guarantor or as joint and several debtor, warrants performance by or on behalf of others, in particular - but not exclusively - on behalf of legal entities and companies as
referred to above under d, all with due observance of the provisions of paragraph 2 of this article;
|
f. |
performing all activities which are connected with or may be conducive to the above;
|
g. |
engaging in all other factual and legal acts which under Dutch law may be performed by the company.
|
2. |
Unless the provisions of Section 98c of Book 2 of the Dutch Civil Code are applicable, the company may not, in view of others subscribing for or acquiring shares in its capital or depositary receipts thereof, provide security, give a
price guarantee, warrant performance in any other manner or bind itself severally or otherwise beside or on behalf of others.
|
1. |
In the articles of association the following words shall have the following meanings;
|
a. |
management board/management board member(s): the management board/management board member(s) within the meaning of Book 2 of the Dutch Civil Code;
|
b. |
supervisory board/supervisory board member(s): the supervisory board/supervisory board member(s) within the meaning of Book 2 of the Dutch Civil Code;
|
c. |
shares: shares in the capital of the company;
|
d. |
general meeting: the company body formed by shareholders and other persons entitled to vote on shares;
|
e. |
general meeting of shareholders: the meeting of shareholders and other persons with meeting right;
|
f. |
annual meeting: the general meeting of shareholders for the purpose of discussion and adoption of the annual accounts;
|
g. |
annual accounts: the balance sheet and the profit and loss account with the explanatory notes, both prepared as well as adopted, unless the context indicates otherwise;
|
h. |
meeting right: the rights designated by law to holders of depositary receipts for shares issued with the cooperation of the company;
|
i. |
the law: the law of the Netherlands.
|
2. |
In these articles of association, the term "in writing" shall mean by letter, by e-mail, or by any other legible and reproducible message transmitted by electronic means, provided that the identity of the sender can be established with
sufficient certainty.
|
1. |
Shares may not be divided into sub-shares.
|
2. |
Shares shall be registered.
|
3. |
Registered shares are available:
|
- |
in the form of an entry in the share register without the issuance of a share certificate (shares without share certificates);
|
- |
as well as, at the shareholder's option, in the form of an entry in the share register with the issuance of a share certificate (shares with share certificate).
|
4. |
At the request of a shareholder, collective share certificates may be issued to him for any number of shares. Share certificates shall include collective share certificates.
|
5. |
Share certificates shall be signed by or on behalf of the management board by means of an original signature or by means of a facsimile signature.
|
6. |
Subject to the approval of the supervisory board, the management board may determine that share certificates shall be issued for trading on foreign stock exchanges which meet the requirements to be set by the foreign stock exchange or
exchanges concerned and which do not carry a dividend sheet.
|
7. |
One or more share certificates shall be issued to a shareholder for his shares at his request.
|
8. |
The management board may issue duplicates of damaged share certificates which, in the opinion of the management board, are still identifiable; the management board shall then arrange for the destruction of the damaged documents.
|
1.
|
Usufruct may be established on shares.
|
2. |
Shares may be pledged. A pledge may also be established without acknowledgement by or service to the company.
|
3. |
A shareholder without voting rights as a result of a restricted right established on his shares and a usufructuary and a pledgee with voting rights, shall have the rights conferred by law upon the holders of depositary receipts issued
for shares with the cooperation of the company. Usufructuaries and pledgees of shares who do not have voting rights shall not be entitled to such depositary receipt holders rights.
|
1. |
With due observance of the provisions of the law, a register shall be kept by or on behalf of the company with respect to registered shares, which register shall be kept up to date and may (entirely or partly) consist of several copies
and be kept in several places, all as the management board shall decide.
|
2. |
The name and address of each shareholder, as well as such other particulars as the management board, whether at the request of a shareholder or not, may deem desirable, shall be entered in the register.
|
3. |
The management board shall determine the form and content of the share register with due observance of the provisions of the first two paragraphs of this article.
|
4. |
A shareholder who so requests shall be provided free of charge with a statement of the information contained in the register regarding the shares registered in his name, which statement may be signed by a special representative
designated for this purpose by the management board.
|
5. |
The provisions of the foregoing paragraphs shall apply mutatis mutandis to those who have a right of usufruct or a right of pledge on one or more shares, subject to the provision that the other information required by law shall also be
recorded in the register.
|
1. |
The provisions of the law shall apply to the transfer of shares as well as to the creation and transfer of a restricted right thereon.
|
2. |
To any attribution of shares in the division of any community, the transfer requirements prescribed by law shall apply mutatis mutandis.
|
1. |
The general meeting – or as the case may be the supervisory board, if and insofar as it has been designated for that purpose by the general meeting - shall decide to issue shares; if the supervisory board has been designated for that
purpose, the general meeting may not decide to issue shares as long as the designation remains in force.
|
2. |
The general meeting or, as the case may be, the supervisory board shall determine the issue price and the other conditions of issuance, including payment in foreign currency on shares.
|
3. |
If the supervisory board is designated as being authorized to resolve to issue shares, the number of shares that may be issued shall be determined at the time of such designation. When such designation is made, the duration of the
designation, which may not exceed five years, will also be fixed. The designation may each time be extended for a period not exceeding five years. Unless stipulated otherwise in the designation, it cannot be withdrawn.
|
4. |
The provisions of paragraphs 1 through 3 of this article shall apply mutatis mutandis to the granting of rights to subscribe for shares, but shall not apply to the issuance of shares to a person exercising a previously acquired right to
subscribe for shares.
|
5.
|
The company cannot subscribe for shares in its capital.
|
6. |
Shares shall never be issued below par, without prejudice to the provisions of section 80, paragraph 2 of Book 2 of the Dutch Civil Code.
|
7. |
Payment on shares shall be made in cash, insofar as no other contribution has been agreed to, such subject to the relevant provisions of the law. Payment in cash may be made in foreign currency if the company so agrees, again subject to
the provisions of the law.
|
1. |
In the event of an issuance of ordinary shares, the shareholders will have a pre-emptive right in proportion to the total amount of each person's shares, with due observance of the restrictions laid down by the law. Holders of ordinary
shares will have the same pre-emptive right when rights to acquire ordinary shares are granted.
|
2. |
With due observance of the relevant provisions of the law, the pre-emptive right may be restricted or excluded by the general meeting or, if so designated by a resolution of the general meeting for a period not exceeding five years, by
the supervisory board. Such a designation can only be made if the supervisory board is designated, or simultaneously designated, as the company body authorized to resolve to issue shares.
|
1.
|
Acquisition by the company of non-paid-up shares in its capital shall be null and void.
|
2. |
Fully paid-up shares in its own capital may only be acquired by the company for no consideration or if:
|
a. |
the net equity, less the acquisition price, is not less than the paid and called-up part of the capital increased by the reserves that must be maintained by law or by the articles of association;
|
b. |
the nominal amount of the shares to be acquired and the shares already held by the company and its subsidiaries jointly does not exceed two-tenths of the issued capital;
|
3. |
The validity of the acquisition is determined by the amount of the net equity according to the most recently adopted balance sheet, less the acquisition price for shares in the capital of the company and distributions from profits or
reserves to others, which the company and its subsidiaries owed after the balance sheet date. If more than six months of a financial year have elapsed without the annual accounts having been adopted, acquisition, other than for no
consideration, is not permitted in accordance with paragraph 2.
|
4. |
The company may only acquire shares in its capital other than for no consideration after the general meeting has authorized the management board to do so.
|
5.
|
The previous paragraphs shall not apply to shares acquired by the company by universal title.
|
6. |
The term shares in the previous paragraphs of this article shall include depositary receipts thereof.
|
7. |
Acquisition of shares contrary to the provisions of this article shall be null and void. The managing directors shall be jointly and severally liable to the disposer in good faith who suffers loss as a result of the nullity.
|
8. |
The general meeting may, provided it does so on the proposal of the supervisory board, decide to reduce the issued capital by cancellation of shares or by reducing the amount of shares by amending the articles of association. This
resolution must designate the shares to which the resolution relates and provide for the implementation of the resolution. The paid-up and called-in part of the capital must not fall below the minimum capital prescribed at the time of the
resolution.
|
9. |
A resolution to cancel may only relate to shares held by the company itself or for which it holds the depositary receipts.
|
10. |
Partial repayment on shares or exemption from the obligation to pay up shall only be possible in implementation of a resolution to reduce the amount of the shares. The repayment or exemption must take place proportionally on all shares.
|
11. |
The notice convening a meeting at which a resolution as referred to in paragraphs 8 or 10 of this article is to be passed shall state the purpose of the capital reduction and the manner in which it is to be carried out. The provisions of
article 21 of these articles of association shall apply mutatis mutandis.
|
12. |
The company shall file the resolutions referred to in paragraphs 8 or 10 of this article at the office of the commercial register and shall announce the filing in a national newspaper.
|
1. |
The company shall be managed by a management board consisting of one or more management board members. The management board shall be supervised by a supervisory board consisting of one or more members. Only individuals may be supervisory
board members.
|
2. |
The number of management board members and supervisory board members shall be determined by the general meeting.
|
3. |
The supervisory board shall determine the remuneration and other terms of employment of each of the management board members. The supervisory board may fix the joint remuneration of its members up to a maximum amount of two million
American dollars (USD 2,000,000.--) in total or the equivalent in other currencies per year. A combined remuneration of the members of the supervisory board in excess of the aforementioned amount may only be granted by the general meeting.
|
4. |
The management board members and the supervisory board members shall be appointed by the general meeting. Supervisory board members shall be appointed for an indefinite period of time.
|
5. |
Management board members and supervisory board members may be suspended and dismissed at any time by the general meeting.
|
6. |
If, in the case of a suspension of a management board member or supervisory board member, the general meeting has not resolved within three months thereafter to dismiss him, the suspension shall end.
|
1. |
With due observance of the articles of association and the law, the management board shall be charged with the management of the company. In performing their duties the management board members shall act in accordance with the interests
of the company and the business connected with it.
|
2. |
If there is more than one management board member, the management board members may divide their duties by mutual agreement.
|
3. |
The management board decides by direct majority vote.
|
4. |
The management board may also pass resolutions outside of a meeting, provided this is done in writing, all management board members have cast their votes and none of them has objected to this manner of decision-making.
|
5. |
The company shall be represented by the management board. Any two members of the management board acting jointly shall also be authorized to represent the company.
|
6. |
The management board shall be authorized to appoint officers with power of representation with such titles and powers as it may determine.
|
7. |
A management board member shall not participate in deliberations and the decision-making process in the event of a direct or indirect personal conflict of interest between that management board member and the company and the enterprise
connected with it. If there is such personal conflict of interest in respect of all management board members, the decision shall be taken by the supervisory board.
|
8.
|
A management board member shall hold office until he resigns, deceases or is dismissed.
|
9. |
In the event of a vacant seat or upon inability to act of one or more management board members, the remaining management board members or the only remaining management board member shall temporarily be in charge of the entire management.
|
10. |
In the event all seats are vacant or upon inability to act of all management board members, a person to be appointed for that purpose for an indefinite period of time by the supervisory board or otherwise shall temporarily be in charge
of the entire management.
|
1. |
It shall be the duty of the supervisory board to supervise the policy of the management board and the general course of affairs in the company and in the business connected with it. It shall assist the management board with advice.
|
2. |
The management board shall provide the supervisory board in good time with the information required for the performance of its duties and shall furthermore provide each supervisory board member with all information concerning the
company's business that the latter may require.
|
3. |
The supervisory board may have experts assist it in the performance of its duties for the account of the company.
|
4.
|
The supervisory board shall appoint one of its members as chairman.
|
5. |
Each member of the supervisory board as well as the management board shall be authorized to convene a meeting of the supervisory board. A member of the supervisory board may be represented at a meeting of the supervisory board by another
member of the supervisory board holding a written proxy.
|
6.
|
The supervisory board shall adopt resolutions by an absolute majority of votes.
|
7. |
The supervisory board may also adopt resolutions outside a meeting, provided this is done in writing, all supervisory board members have cast their votes and none of them objects to this manner of decision-making.
|
8. |
If there is only one supervisory board member, he shall have all the powers and obligations assigned and imposed by these articles of association to the supervisory board and its chairman.
|
9. |
A supervisory board member shall not participate in the deliberations and decision-making process in the event of a conflict of interest between that supervisory board member and the company and the enterprise connected with it. If there
is such a personal conflict of interest in respect of all supervisory board members, the preceding sentence does not apply and the supervisory board shall maintain its authority.
|
10. |
In the event of a vacant seat or upon inability to act of one or more supervisory board members, the remaining supervisory board members or the only remaining supervisory board member shall temporarily be in charge with the exercise of
the duties and powers of the supervisory board member in question.
|
11. |
In the event all seats are vacant or upon inability to act of all supervisory board members, or the sole supervisory board member, as the case may be, the general meeting shall have the authority to temporarily entrust the exercise of
the duties and powers of the supervisory board members to one or more persons.
|
1. |
General meetings of shareholders shall be held in the place where the company has its official seat or in Amsterdam, Rotterdam or The Hague.
|
2. |
At least one general meeting of shareholders shall be held each year, within six months after the end of the financial year.
|
3. |
The management board and the supervisory board shall be equally authorized to convene a general meeting. The management board and the supervisory board shall be obliged to convene a general meeting if one or more holders of shares who
jointly represent at least one-tenth of the issued capital so request in writing, specifying the subjects to be dealt with.
|
4. |
All convocations for the general meetings of shareholders and all notifications to shareholders shall take place by means of letters sent to the addresses listed in the register of shareholders. Instead of through notice letters, any
shareholder that gives his consent, may be sent notice of the meeting by means of a legible and reproducible message electronically sent to the address stated by him for this purpose to the company.
|
5. |
Notices which by law or in accordance with the articles of association must be given to the general meeting may be given by including them in the notice convening the meeting or in the document deposited at the company's offices in
Amsterdam for information purposes, provided that this is stated in the notice convening the meeting.
|
6. |
If all of the issued capital is represented at the meeting and also all others who must be notified to attend the meeting in accordance with the law or these articles of association, the general meeting of shareholders may pass valid
resolutions on all subjects to be discussed, provided it does so unanimously, even if the provisions of the law or these articles of association regarding convocation of the general meeting of shareholders have not been complied with.
|
7. |
Each shareholder and each person to whom the law grants this right shall be entitled, either in person or by written proxy, to attend the general meeting of shareholders, to address the meeting and, if the voting rights accrue to him, to
exercise his voting rights. Before being admitted to a meeting, a shareholder and the person referred to in the preceding sentence or their proxy shall sign an attendance list, stating his name and, if applicable, the number of votes he may
cast. A proxy shall also state the name of the person for whom he is acting.
|
8. |
The management board may resolve that the powers referred to in the first sentence of article 16.7 may be exercised by means of electronic communication. If a shareholder and any person with
meeting right participates by means of electronic communication, it is required that the electronic communication allows for identification of the shareholder and any person with meeting right, for such person to directly take notice of the
proceedings in the meeting and for the casting of votes (if applicable). Furthermore, it shall be required that the electronic communication allows for the shareholder and any person with meeting
right to participate in discussions in the meeting. The management board may subject the use of the electronic communication to further conditions, provided that these conditions are reasonable and necessary for identification and the
reliability and security of the communication, and are included in the notice of the meeting.
|
9. |
Admission to the general meeting of shareholders shall be granted to the supervisory board members, the management board members and all other persons entitled to admission by law. The general meeting of shareholders may grant access to
the meeting to persons other than those referred to above.
|
10. |
In deviation from the provisions of article 16.7, the management board may determine that such persons shall be deemed to have the right to vote and the right to attend the general meeting of shareholders as at a time to be determined by
the management board are registered as shareholders in one or more registers designated by the management board, regardless of who is entitled to the relevant shares at the time of the general meeting of shareholders.
|
1. |
The general meeting of shareholders shall be chaired by the chairman of the supervisory board or, in his absence, by the person designated for that purpose by the supervisory board, from its midst or otherwise.
|
2. |
Unless a notarial deed of proceedings is drawn up, minutes shall be kept by a person to be designated for this purpose by the chairman - as such he may also designate himself - which minutes shall be adopted by the general meeting in the
same or in the next meeting and in evidence thereof shall be signed by the chairman and the secretary of that meeting. Each management board member, each supervisory board member and one or more holders of shares who jointly represent at
least one-tenth of the issued capital shall be authorized to have a notarial deed of proceedings made.
|
1.
|
Each share entitles the holder to cast one vote.
|
2. |
Resolutions of the general meeting of shareholders are passed by an absolute majority of the votes cast in a meeting where at least half the issued capital is represented. The provisions of Section 120, paragraph 3 of Book 2 of the Dutch
Civil Code shall not apply. Resolutions of the general meeting of shareholders to amend the articles of association, to reduce the capital, to dissolve the company or to merge shall be passed by a majority of at least two-thirds of the
votes cast representing at least half of the issued capital.
|
3. |
If there is a tie in voting in an election of members of the supervisory board, the chairman of the supervisory board shall decide; if there is a tie in voting in another election, the proposal shall be deemed to have been rejected.
|
4. |
Blank votes and invalid votes shall be considered votes not cast. They shall count towards the determination of a quorum.
|
1.
|
The financial year of the company shall be the calendar year.
|
2. |
Annually, within five months after the end of the company's financial year, unless this term is extended by no more than five months by the general meeting on the basis of special circumstances, the management board shall draw up annual
accounts and shall make these available for inspection by the shareholders at the company's offices. Within this period - unless Section 403 of Book 2 of the Dutch Civil Code applies to the company - the management board shall also prepare
the management report and shall make it available for inspection as aforesaid. These documents shall be accompanied by the information as referred to in Section 392, paragraph 1 of Book 2 of the Dutch Civil Code and, if there is such
information, the preliminary advice of the supervisory board. The annual accounts shall be signed by all management board members and supervisory board members; if the signature of one or more of them is missing, this and the reason for it
shall be stated.
|
3. |
Without prejudice to the provisions of the preceding paragraph, the company shall ensure that the documents referred to in that paragraph are available at its offices for inspection as from the date of the notice convening the general
meeting of shareholders for its consideration. Copies of these documents may be obtained by those entitled to inspect them free of charge.
|
4. |
The annual accounts shall be adopted by the general meeting. Without prejudice to the provisions of sections 139 and 150 of Book 2 of the Dutch Civil Code, adoption of the annual accounts without reservation shall discharge the
management board members and supervisory board members.
|
1. |
The profit shall be determined according to standards which are considered generally acceptable.
|
2. |
From the profit as shown in the annual accounts adopted by the general meeting, such amount may be reserved as the supervisory board shall determine.
|
3. |
The profit remaining after application of the provisions of paragraph 2 of this article shall be at the disposal of the general meeting.
|
4. |
The company may only make distributions to the shareholders from the profit to the extent that the net equity exceeds the paid and called-up part of the capital plus the reserves that must be maintained by the law or by the articles of
association.
|
5. |
Distribution of profits shall only take place after the adoption of the annual accounts showing that such distribution is permitted.
|
6. |
Shares or depositary receipts for shares held by the company in its entirety in its capital or on which it has a right of usufruct shall not be taken into account in calculating the profit distribution.
|
7. |
The company may make interim distributions, provided that the provisions of paragraph 4 are observed. The payment of an interim distribution is decided by the management board after obtaining the approval of the supervisory board.
|
8. |
The supervisory board shall determine the day on which distributions on shares are made payable, which shall not be later than three months after the resolution to make the distribution was adopted. Payment will be announced in
accordance with the provisions of article 16 paragraph 4.
|
9. |
Distributions which have not been disposed of within five years after the day on which they were made payable shall revert to the company.
|
1. |
In the event of the dissolution of the company, the liquidation shall be carried out by the management board under the supervision of the supervisory board.
|
2.
|
The general meeting shall determine the remuneration of the liquidators.
|
3.
|
During the liquidation, these articles of association shall remain in force as far as possible.
|
4. |
The balance remaining after all debts of the company have been paid shall be distributed to the shareholders in proportion to the amount paid up on each of their shares.
|
1. |
The company shall, within the limits of the law, indemnify and defray expenses for each present and former member of the supervisory board, member of the management board, officer, employee and authorized representative, if and as soon
as he or she, by reason of his or her relation to the company, becomes involved or is threatened with becoming involved in an impending, pending or completed action or proceeding.
|
2. |
The company is authorized, within the limits of the law, to take out liability insurance for the persons referred to in paragraph 1. of this article.
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting; and
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report
financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.
|
Dated:
|
May 10, 2023
|
|
By:
|
/s/ Rom Shaked
|
|
Rom Shaked, Managing Director
|
Dated: May 10, 2023
|
||
By:
|
/s/ Alon Raich
|
|
Alon Raich, Managing Director and Chief Financial Officer
|
By:
|
/s/ Rom Shaked
|
|
Rom Shaked, Managing Director
|
||
Dated:
|
May 10, 2023
|
By:
|
/s/ Alon Raich
|
|
Alon Raich, Managing Director and Chief Financial Officer
|
||
Dated:
|
May 10, 2023
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) - € / shares |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value per share | € 0.45 | € 0.45 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 37,433,333 | 37,433,333 |
Common stock, shares outstanding | 37,433,333 | 37,433,333 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT - USD ($) $ in Thousands |
Common Stock |
Additional Paid-In Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Non Controlling Interest |
Total |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2019 | $ 18,120 | $ 26,972 | $ (73,006) | $ (6,172) | $ (1,599) | $ (35,685) |
Balance, shares at Dec. 31, 2019 | 35,433,333 | |||||
Issuance of common stock | $ 1,066 | (266) | 0 | 0 | 0 | 800 |
Issuance of common stock, shares | 2,000,000 | |||||
Net income (loss) | $ 0 | 0 | 4,403 | 0 | 74 | 4,477 |
Translation adjustment | 0 | 0 | 0 | (87) | 10 | (77) |
Unrealized gains (loss) on derivative instruments | 0 | |||||
Balance at Dec. 31, 2020 | $ 19,186 | 26,706 | (68,603) | (6,259) | (1,515) | (30,485) |
Balance, shares at Dec. 31, 2020 | 37,433,333 | |||||
Conversion of preferred shares A and A-1 in AU10TIX Technologies B.V. to new series A | $ 0 | (10,102) | 0 | 0 | 1,045 | (9,057) |
Net income (loss) | 0 | 0 | 34,807 | 0 | 281 | 35,088 |
Stock-based compensation – AU10TIX Technologies B.V. | 0 | 240 | 0 | 0 | 0 | 240 |
Translation adjustment | 0 | 0 | 0 | (1,639) | (11) | (1,650) |
Unrealized gains (loss) on derivative instruments | 0 | 0 | 0 | 32 | 0 | 32 |
Balance at Dec. 31, 2021 | $ 19,186 | 16,844 | (33,796) | (7,866) | (200) | $ (5,832) |
Balance, shares at Dec. 31, 2021 | 37,433,333 | 37,433,333 | ||||
Net income (loss) | $ 0 | 0 | (4,725) | 0 | (19) | $ (4,744) |
Stock-based compensation – AU10TIX Technologies B.V. | 0 | (240) | 0 | 0 | 753 | 513 |
Translation adjustment | 0 | 0 | 0 | (285) | 23 | (262) |
Unrealized gains (loss) on derivative instruments | 0 | 0 | 0 | (35) | 0 | (35) |
Balance at Dec. 31, 2022 | $ 19,186 | $ 16,604 | $ (38,521) | $ (8,186) | $ 557 | $ (10,360) |
Balance, shares at Dec. 31, 2022 | 37,433,333 | 37,433,333 |
ORGANIZATION |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION |
NOTE 1 - ORGANIZATION
Description of Business
ICTS International N.V. (“ICTS”) was registered at the Department of Justice in Amstelveen, Netherlands on October 9, 1992. ICTS and subsidiaries (collectively referred to as “ICTS” or the "Company") operate in four reportable segments: (a) corporate (b) airport security (c) other aviation related services and (d) authentication technology. The corporate segment does not generate revenue and contains primarily non-operational expenses. The airport security segment provides security services mostly to airport authorities and airlines predominantly in Europe. The other aviation services segment provides services mostly to airlines and airport authorities in the United States of America. The authentication technology segment provides authentication services to financial and other companies, predominantly in the United States of America.
|
SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The significant accounting policies are as follows:
Functional Currency
The accompanying consolidated financial statements are presented in United States dollars. The Company has determined that the functional currency of its subsidiaries is usually the local currency, AU10TIX functional currency is United States Dollars. For financial reporting purposes, the assets and liabilities of such subsidiaries are translated into United States Dollars using exchange rates in effect at the balance sheet date. The revenue and expenses of such subsidiaries are translated into United States Dollars using average exchange rates in effect during the reporting period. Resulting translation adjustments are presented as a separate category in shareholders' deficit called accumulated other comprehensive loss.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
The most significant estimates and assumptions included in these consolidated financial statements consist of the: (a) valuation allowance of deferred income taxes and (b) determination of the estimated fair value of the AU10TIX preferred shares conversion in 2021.
Principles of Consolidation
The consolidated financial statements include the accounts of ICTS International N.V. and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents.
Restricted Cash and Bank Deposits
Short term restricted cash as of December 31, 2022 consists of: (a) $279 held in bank accounts that serve as cash collateral for outstanding letters of credit and guarantees, (b) $14,459 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities (see note 4) and (c) $1,129 secured for derivative instruments.
Short term restricted cash as of December 31, 2021 consists of: (a) $3,350 held in bank accounts that serve as cash collateral for outstanding letters of credit and guarantees, (b) $10,599 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities (see note 4) and (c) $750 secured for derivative instruments.
Long term restricted cash as of December 31, 2022 consist of $4,590 held in bank accounts that serve as risk collateral for long term outstanding letters of credit and guarantees.
Bank deposits consist of interest bearing deposits held in banks and financial institutions with an original maturity of more than three months and less than a year from the date of deposit and carried at cost.
The following table provides a reconciliation of cash and restricted cash reported on the balance sheet that sum to the total of the same such amounts shown in the statements of cash flows.
Accounts Receivable
Accounts receivable represent amounts due to the Company for services rendered and are recorded net of an allowance for doubtful accounts. The allowance for credit losses is based on historical collection experience, factors related to specific customers and current economic trends. The Company writes off accounts receivable when determined to be uncollectible and are recognized as a reduction to the allowance for credit losses. As of December 31, 2022, and 2021, the allowance for doubtful accounts is $1,208 and $991, respectively.
Fair Value Measurements
The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 820, “Fair Value Measurement”. Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Topic 820 defines fair value 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. The fair value should be based on assumptions that market participants would use.
In determining the fair value, the Company assesses the inputs used to measure fair value using a three-tier hierarchy, as follows:
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Deposits
Deposits consist of long-term cash deposits provided to customers which serve as cash collateral in order to guarantee the performance and quality of services provided to the customers. The deposits are repaid to the Company at the end of the contract or the engagement with the customers.
Investments
The Company accounts for investments in the equity securities of companies which represent an ownership interest of 20% to 50% and the ability to exercise significant influence, provided that ability does not represent control, using the equity method. The equity method requires the Company to recognize its share of the net income (loss) of its investees in the consolidated statement of operations until the carrying value of the investment is zero.
The Company records investments in the equity securities of privately held companies which represent an ownership interest of less than 20% at cost minus impairment.
Derivative Instruments
Derivative instruments are measured at their fair value and recorded as either assets or liabilities. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in other comprehensive income and a corresponding amount is reclassified out of other comprehensive income into earnings when the underlying transactions are recognized in the consolidated statements of operations and comprehensive income.
The Company maintains a risk management strategy that may incorporate the use of put options and forward exchange contracts, to minimize significant fluctuation in cash flows and/or earnings that are caused by exchange rate or interest rate volatility.
Property and Equipment
Equipment and furniture, internal-use software, leasehold improvements and vehicles are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives used in determining depreciation are as follows:
Leasehold improvements are amortized using the straight-line method over the shorter of the total term of the lease or the estimated useful lives of the assets.
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs incurred in developing internal-use software when capitalization requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred. Costs, such as maintenance and training are also expensed as incurred. Capitalized costs are included in property and equipment, and amortized on a straight-lined basis over the estimated useful life of the software. Amortization expense, which is included in depreciation expense, amounted to $742, $374 and $147 during the years ended December 31, 2022, 2021 and 2020, respectively.
Goodwill
Goodwill represents the excess purchase price over the fair value of the net tangible and intangible assets of an acquired business. Goodwill is assessed for impairment by reporting unit on an annual basis or when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company would record a goodwill impairment charge for the difference between the carrying value and the fair value of the goodwill, not to exceed the carrying amount of the goodwill. During the years ended December 31, 2022, 2021 and 2020, the Company recorded goodwill impairment charge of $0, $139 and $0, respectively on its goodwill.
Long-Lived Assets
The Company reviews long-lived assets, other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable, it measures any impairment based on the fair value of the asset as compared to its carrying value. During the years ended December 31, 2022, 2021, and 2020, the Company did not record any impairment charges on its long-lived assets.
Employee Rights Upon Severance
The Company is required to make severance payments to its Israeli employees upon dismissal of an employee or upon a termination of employment in certain circumstances. The Israeli pension and severance pay liability to the employees is covered mainly by deposits made at insurance companies. For its employees who are employed under the Section 14 of the Israeli Severance Pay Law, 1963 (“Section 14”), the Company makes deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employees’ rights upon termination. In addition, the related obligation and amounts deposited on behalf of the applicable employees for such obligations are not presented on the Company’s consolidated balance sheets, as the amounts funded are not under the control of management of the Company and the Company is legally released from the obligation to pay any severance payments to the employees once the required deposits amounts have been paid.
For employees not under Section 14, severance liabilities are recorded based on the length of service and their latest monthly salary. The Company’s liabilities for the Israeli employees amounted to $1,550 and $1,631 as of December 31, 2022 and 2021, respectively and are included in other liabilities in the Company’s consolidated balance sheets. The deposits made at insurance companies to cover these liabilities amounted to $1,048 and $1,346 as of December 31, 2022 and 2021, respectively and are included in other assets in the Company’s consolidated balance sheets.
Leases
The Company follows Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842).
The Company as a lessee
Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. A lease is a finance lease if it meets any one of the criteria below, otherwise the lease is an operating lease:
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
The lease term is for the major part of the remaining economic life of the underlying asset.
The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term.
Based on the criteria above, all of the Company's leases are classified as operating leases.
Operating lease Rights of Use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, while the ROU assets are also adjusted for any prepaid or accrued lease payments. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments. The company does not recognize ROU assets or lease liabilities for leases with a term shorter than 12 months.
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it reasonably certain that the Company will exercise the option.
After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event).
The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if relevant and any unamortized initial direct costs. Lease expenses are recognized on a straight-line basis over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will exercise or not exercise the option to renew or terminate the lease.
Variable lease payments that depend on an index or a rate
On the commencement date, the lease payments shall include variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), initially measured using the index or rate at the commencement date.
The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index or rate unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.
Convertible Debt Instruments
The Company evaluates convertible debt instruments to determine whether the embedded conversion option needs to be bifurcated from the debt instrument and accounted for as a freestanding derivative instrument. An embedded conversion option is considered to be a freestanding derivative when: (a) the economic characteristics and risks of the embedded conversion option are not clearly and closely related to the economic characteristics and risks of the host instrument, (b) the hybrid instrument that embodies both the embedded conversion option and the host instrument is not re-measured at fair value under otherwise applicable US GAAP with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded conversion option would be considered a derivative instrument subject to certain requirements .
Contingent Liabilities
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the normal course of its business activities. Liabilities for such contingencies are recognized when: (a) information available prior to the issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated.
Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The Company's comprehensive income (loss) consists mostly of the Company’s net income (loss), foreign currency translation adjustments and changes in fair value of derivative instruments as cash flow instruments. Accumulated other comprehensive loss consist of the Company’s accumulated foreign exchange currency translation adjustments, and changes in fair value of derivative instruments.
Stock-Based Compensation
Stock-based compensation to employees and non-employees, including stock options, are measured at the fair value of the award on the date of grant based on the estimated number of awards that are ultimately expected to vest. The compensation expense resulting from stock-based compensation to management and administrative employees is recorded over the vesting period of the award in selling, general and administrative expense on the accompanying consolidated statements of operations and comprehensive income (loss). Compensation expense resulting from stock-based compensation to operational employees is recorded over the vesting period of the award in cost of revenue.
Non-Controlling Interests
The Company’s non-controlling interests represent the minority shareholder’s ownership interests related to the Company’s subsidiaries. The Company reports its non-controlling interests in subsidiaries as a separate component of equity in the consolidated balance sheets and reports net income (loss) attributable to the non-controlling interests in the consolidated statements of operations.
Redeemable Non-Controlling Interests
When the Company or its subsidiaries issues preferred shares, it considers the provisions of FASB ASC 480 –"Distinguishing Liabilities from Equity" (Topic 480) in order to determine whether the preferred share should be classified as a liability. If the instrument is not within the scope of Topic 480, the Company or its subsidiaries further analyses the instruments characteristics in order to determine whether it should be classified within temporary equity (mezzanine) or within permanent equity in accordance with the provisions of Topic 480-10-S99. AU10TIX redeemable convertible preferred shares are not mandatorily or currently redeemable. However, it includes a liquidation or deemed liquidation events that would constitute a redemption event that is outside of the Company’s control. As such, all shares of redeemable preferred shares have been presented outside of permanent equity. The Company has not adjusted the carrying values of the redeemable preferred shares to the deemed liquidation values of such shares since a liquidation event was not probable at any of the balance sheet dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
Revenue Recognition
Revenue is recognized when the promised services are performed for our clients, and the amount that reflects the consideration we are entitled to receive in exchange for those services is determined. The Company’s revenues are recorded net of any sales taxes.
In order to determine the revenue, we (1) identify the contract with the client, (2) identify the performance obligations, usually it’s based on the hours spent, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation and (5) we recognize revenue as performance obligation is satisfied.
A performance obligation is a promise in a contract to transfer a distinct service to the client, and it is the unit of account for revenue recognition. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in our contracts and, therefore, is not distinct.
The following table presents the Company’s revenues according to the Company’s segments:
The following table presents the Company’s revenues generated from customers by geographical area based on the geographical location of the customers invoicing address:
Airport Security and Other Aviation Services Segments
In the airport security and other aviation services, for performance obligations that we satisfy over time, revenues are recognized by consistently applying a method of measuring hours spent on that performance obligation. We generally utilize an input measure of time (hours and attendance for specific time framed service like specific flights) of the service provided. Performance obligations are satisfied over the course of each month and continue to be performed until the contract has been terminated or cancelled.
Pricing and Reduction to Revenues
We generally determine standalone selling prices based upon the prices included in the client contracts, using expected costs plus margin, or other observable prices. The price as specified in our client contracts is generally considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar client in similar circumstances. Certain client contracts have variable consideration, including quality thresholds or other similar items that could reduce the transaction price. These amounts may be constrained and revenue is recorded to the extent we do not expect a significant reversal or when the uncertainty associated with the variable consideration is resolved. Our variable consideration amounts, if any, are not material, and we do not expect significant changes to our estimates.
Contracts
Our client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which we operate. The payment terms vary by the type and location of our clients and services offered. Client payments are typically due in 30 to 60 days after invoicing, but may be a shorter or longer term depending on the contract. Our contracts with main customers are generally long-term contracts, between two to five years. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Practical Expedients and Exemptions
Because nearly all our contracts are based on input measure of time of service provided (as hours or attendance) no exemptions need to be made. We have no material contracts with material revenues expected to be recognized subsequent to December 31, 2022 related to remaining performance obligations.
Revenue Service Types
The following is a description of our revenue service types, including Airport Security, Airline Security, Cargo Security, Other Airport Services, General Security Services and Other.
Airport Security
Staffing or manning for specialized airport security are usually based on long term contract issued via a public tender process. We recognize revenue given the unit of measure (hours) provided in the given time period and the specific price for specific hours agreed upon in the contracts. Quality and criteria of staffing are described in the contracts and are measured in the given time period. Deviations, if any, are discussed with the customer before invoicing and will be reflected in the invoice showing the approved hours and other cost elements as agreed upon price.
Most contracts have an hourly rate that reflects an all-in tariff based on a full cost price calculation. In some of the contracts the hourly rates are split between a component based on hours and a component based on specific costs in a specific time period but always linked to the service provided in given time period. Revenue is recognized at the time period set in the contract.
Airline Security
Staffing or manning for airline security are usually based on long term contracts issued via a public tender procedure. We recognize revenue according to the unit of measure provided (usually attendance for specific time framed service like specific flights). The time framed specialized security services in this case the executed number of flights. When the manning for the security of these flights is delivered, the Company invoices the customer according to the agreed flight tariff.
Cargo Security
Staffing or manning for specialized cargo security are usually based on long term contract, sometimes publicly tendered. Contracts are based on hourly planned and executed screening services. Revenue is recognized based on the realized screening hours and contractually agreed upon hourly rate.
Other Airport Services
Airport Services include wheelchair attendants, pre-departure skycaps, bag-runners, agents, guards, charter security screening, janitorial, and cabin cleaning to major U.S. and foreign carriers in airports throughout the United States of America. Our contracts may include either single or multiple performance obligations and vary by airport and airline. We recognize revenue given the unit of measure (usually hours) provided in the given time period and the specific price for specific hours or attendance for specific event, time framed service as agreed upon in the contracts.
General Security Services
Security Services include providing armed and un-armed guards to private schools and places of worship, video surveillance and patrol. Contracts for security services generally include only a single performance obligation. We recognize revenue for security guard services given the unit of measure (hours) provided in the given time period. Revenue from video surveillance and patrol is recognized based upon a fixed monthly rate.
Other Services
Other services include revenues from (incidental) specialized security manning services, training services and ad hoc work performed on and off airports. Revenue is recognized over time as services are being performed, using the input of service delivered during the time period, according to the contractual agreed price.
Authentication Technology Segment
In the authentication technology segment, the Company offers authentication services on a cost per click basis, with a minimum yearly commitment which means the customer pays the Company according to the higher of (a) number of times the customer used the system in order to authenticate IDs or (b) according to the yearly minimum commitment. According to the agreement with the customers, each chargeable click has an agreed price and revenue is being recognized accordingly.
Pricing and Reduction to Revenues
The company determines standalone selling prices based upon the prices included in the client contracts, using expected costs plus margin, or other observable prices. The price as specified in our client contracts is considered the selling price as agreed with the customer. The Company’s variable consideration, if any, amounts are not material, and we do not expect significant changes to our estimates. The Company does not expect a significant reversal or when the uncertainty associated with the variable consideration is resolved. A customer might be offering a tier-based pricing scheme, or not, and in any event of usage above the committed amount, the pricing will remain unchanged.
Contracts
Client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which the company operates, and are typically set to a three-year deal duration. The payment terms vary by the type and location of our clients and services offered. The minimum commitment is usually being paid in advance. Client payments are typically due in 30 days after invoicing, but may be a shorter or longer term depending on the contract. Client contracts are usually range from one to three years, with a convenience exit every twelve months period, and at the end of the contract there is a renewal option. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Deferred Revenues
The Company records deferred revenues when cash payments are received or due in advance of our performance. Deferred revenues at December 31, 2022 and 2021 were $3,570 and $2,239, respectively shown as part of the accrued expenses and other current liabilities and $336 and $1,030 shown as other liabilities. Revenue recognized for the years ended December 31, 2022, 2021 and 2020 that was included in the deferred revenue at the beginning of each year was $2,217, $2,049 and $1,879, respectively.
Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant.
Capitalized Contract Costs
As part of obtaining contracts with certain customers in the authentication technology segment, the Company incurs upfront costs such as sales commissions. The Company capitalizes these costs which are subsequently amortized on a straight-line basis over the estimated life of the relationship with the customer. The Company applies the practical expedient that allows it to determine this estimate for a portfolio of contracts that have similar characteristics in terms of type of service, contract term and pricing. This estimate is reviewed by management at the end of each reporting period as additional information becomes available.
Cost of Revenue
Cost of revenue represents primarily payroll and employee related costs associated with employees who provide services under the terms of the Company’s contractual arrangements, insurance and depreciation and amortization.
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of payroll and related costs, professional services, consulting services and non-capitalized cost associated with the development of technologies.
Advertising Costs
Advertising costs are expensed as incurred and consist of costs associated with promoting the Company, its products and services as participation in conferences and publication costs. Advertising costs during the years ended December 31, 2022, 2021 and 2020 are $3,472, $2,150 and $735, respectively.
Value Added Tax
Certain of the Company’s operations are subject to Value Added Tax (“VAT”) applied on the services sold in those respective countries. The Company is required to remit the VAT collected to the tax authorities, but may deduct the VAT paid on certain eligible purchases.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities resulting from a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established when realization of net deferred tax assets is not considered more likely than not.
Uncertain income tax positions are determined based upon the likelihood of the positions being sustained upon examination by taxing authorities. The benefit of a tax position is recognized in the consolidated financial statements in the period during which management believes it is more likely than not that the position will not be sustained. Income tax positions taken are not offset or aggregated with other positions. Income tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of income tax benefit that is more than 50 percent likely of being realized if challenged by the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured is reflected as income taxes payable.
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is determined in the same manner as basic income (loss) per share, except that the number of shares is increased to include potentially dilutive securities using the treasury stock method.
The Company had a net loss for the year ended December 31, 2022. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common share is anti-dilutive due to the net loss. Potentially dilutive securities were excluded from the computation of diluted loss per share even though the conversion rate of the convertible note payable to related party was lower than the market price of the Company’s common stock as of December 31, 2022, due to the net loss during that year.
The Company had net income for the years ended December 31, 2021 and 2020. For the year ended December 31, 2021 the net income of the Company was adjusted by $10,102 as deemed dividends following the conversion of preferred shares A and A-1 in AU10TIX Technologies B.V. to new Series A. Potentially dilutive securities were included in the computation of diluted income per share as the conversion rate of the convertible note payable to related party was lower than the weighted average computed price of the Company’s stock for the year 2021 and 2020.
The number of shares of common stock attributable to potentially dilutive securities for the years ended December 31, 2022, 2021 and 2020 were 2,760,855, 2,978,843 and 3,000,000 shares of which the December 31, 2022 shares were excluded from the loss per share calculation due to being anti-dilutive. Those shares were issuable upon conversion of convertible notes payable to related party at price of $0.40.
Fair Value of Financial Instruments
The fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities, income taxes payable, VAT payable, notes payable-banks, long-term loan payable and loan payable to related party approximate their carrying values due to the short-term nature of the instruments. The carrying values of the convertible notes payable to a related party and other liabilities are not readily determinable because: (a) these instruments are not traded and, therefore, no quoted market prices exist upon which to base an estimate of fair value and (b) there were no readily determinable similar instruments on which to base an estimate of fair value.
Concentration of Credit Risk
Financial instruments which are subject to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, bank deposits and accounts receivable.
The Company maintains cash, cash equivalents, restricted cash and bank deposits in accounts with financial institutions in the United States of America, Europe, Japan and Israel. As of December 31, 2022 and 2021, accounts at financial institutions located in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 per institution. As of December 31, 2022 and 2021, cash, cash equivalents, restricted cash and bank deposits of $10,613 and $17,522, respectively, are being held in the United States of America, of which $10,613 and $17,063, respectively, are uninsured. Cash, cash equivalents, restricted cash and bank deposits located in Europe, Japan and Israel, totaling $85,349 and $85,930 as of December 31, 2022 and 2021, respectively, are uninsured.
The Company renders services to a limited number of airlines and airports through service contracts and provides credit without collateral. Some of these airlines and airports may have difficulties in meeting their financial obligations, which can have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows. To mitigate this risk, the Company regularly reviews the creditworthiness of its customers through its credit evaluation process.
Revenue from two customers represented 52% of total revenue during the year ended December 31, 2022, of which customer A accounted for 34% and customer B accounted for 18% of total revenue. Accounts receivable from these two customers represented 31% of total accounts receivable as of December 31, 2022.
Revenue from three customers represented 64% of total revenue during the year ended December 31, 2021, of which customer A accounted for 39%, customer B accounted for 14% of total revenue and customer C accounted for 11% of total revenue. Accounts receivable from these three customers represented 39% of total accounts receivable as of December 31, 2021.
Revenue from two customers represented 70% of total revenue during the year ended December 31, 2020, of which customer A accounted for 48% and customer B accounted for 22% of total revenue. Accounts receivable from these two customers represented 47% of total accounts receivable as of December 31, 2020.
Customers A and B mentioned above, have been principal customers in the last three years.
Risks and Uncertainties
The Company is currently engaged in direct operations in numerous countries and is therefore subject to risks associated with international operations (including economic and/or political instability, trade restrictions and strikes). Such risks can cause the Company to have significant difficulties in connection with the sale or provision of its services in international markets and have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
The Company is subject to changes in interest rates based on Central Banks Federal Reserve actions and general market conditions. The Company does not utilize derivative instruments to manage its exposure to interest rate risk.
Furthermore, as a result of its international operations, the Company is subject to market risks associated with foreign currency exchange rate fluctuations. The Company does not utilize derivative instruments to manage its exposure to such market risk except in one of its subsidiaries. As such, significant foreign currency exchange rate fluctuations can have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
Recently Issued Accounting Pronouncements
Accounting Standards Update 2022-01
In March 2022, the FASB issued an update for Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method. The amendment expands the current single layer method to allow multiple hedged layers of a single closed portfolio under the method. The amendment is affective for financial statements issued for annual periods beginning after December 15, 2022. The adoption of this standard does not have a material effect on the Company’s operating results or financial condition.
Accounting Standards Update 2021-08
In October 2021, the FASB issued an update for Business Combinations (Topic 805): Accounting for Contract Assets and Contract liabilities from Contracts with customers. This ASU requires entities to apply Topic 606, Revenue from Contracts with Customers to recognize and measure contract asset and contract liabilities in a business combination. The amendment is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within that fiscal year. The adoption of this standard does not have a material effect on the Company’s operating results or financial condition.
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BUSINESS COMBINATION |
NOTE 3 - BUSINESS COMBINATION
Acquisition in Sweden
In February 2021, the Company acquired 51% of the outstanding shares of Quality Detection Dogs Sweden AB (“QDD”). The purpose of the acquisition was to have a company with experience in training detection dogs in order to train dogs to detect explosive materials. Consideration of the acquisition was 1,250 SEK ($150 as of the purchase date), payment was done at closing.
The acquisition was accounted for as a purchase and accordingly a purchase price was allocated to the assets acquired and liabilities assumed at their fair value.
The following represents the allocation of the purchase price as of the purchase date in SEK and the translation to United States Dollars as of the purchase date:
Goodwill associated with the acquisition of QDD was 1,178 SEK ($139 as of December 31, 2021) and deductible for income tax purposes. The goodwill consists principally of the expectations of future earnings and profits from expanding this business. In December 2021, the Company evaluated the goodwill and concluded the goodwill should be fully impaired (see note 8). Following QDD’s losses, on January 1, 2023, the company sold its shares to the minority shareholder for a minimal amount and recognized in 2022 a loss of $218 regarding this expected sale.
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PREPAID EXPENSES AND OTHER CURRENT ASSETS |
NOTE 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets are as following:
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INVESTMENTS |
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Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENTS |
NOTE 5 - INVESTMENTS
Artemis Therapeutics, Inc.
As of December 31, 2022, the Company owns less than 1% of the issued and outstanding share capital of Artemis Therapeutics, Inc. (“ATMS”). On March 6, 2022, ATMS entered into a Share Exchange Agreement with Manuka Ltd. and the shareholders of Manuka Ltd., a company incorporated in Israel engaged in developing and manufacturing skincare products based on Manuka honey and bee venom. Following those agreements Manuka Ltd. became a wholly owned subsidiary of the ATMS. As the shareholders of Manuka Ltd. received the largest ownership interest in ATMS, Manuka Ltd. was determined to be the “accounting acquirer” in a reverse recapitalization.
The market value of the Company's investment in ATMS as of December 31, 2022 and 2021 is $146 and $120, respectively. The Company evaluated the stock price of ATMS but as ATMS share price is low, the number of shares that are being traded is low, and as ATMS still does not have any material revenue or profitable operations, the Company determined that the value of the investment is impaired and accordingly, valued the investment at zero.
Freezone I-SEC Korea Inc.
In April 2018, the Company signed a Joint Venture Agreement with a South Korean Company in order to establish a Joint Venture Company (“JVC”) and to provide aviation security and non-security services in South Korea. Each one of the parties holds 50% (fifty percent) of the JVC’s equity. The Company uses the equity method for this investment. As of December 31, 2022, the Company’s investment is 33,789KRW ($27). For the years ended December 31, 2022, 2021 and 2020, the Company recognized a loss in its consolidated statements of operations of 125,240 KRW, 10,491 KRW and 17,742 KRW, respectively ($97, $8 and $15 as of December 31, 2022, 2021 and 2020, respectively) from its investment in the JVC. In January 1, 2023, the Company sold its part in the JVC to the South Korean Company for an amount of €25 ($27 as of December 31, 2022). At December 31, 2022 the Company wrote off $131 of the investment to match the balance to the sale price.
Mesh Technologies, Inc.
In January 2019, the Company invested an amount of $50 in Mesh Technologies, Inc. (“Mesh”), a company incorporated in the USA. As of December 31, 2021, the investment represented less than 1% of the issued and outstanding share capital of Mesh. Mesh is a technology company providing cross border payments technology by innovating on the existing payment rails of established card networks available in the market. As Mesh is a private, closely held company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment. In December 2021, the Company sold approximately 25% of its investment for a total amount of $200 and recognized a gain of $186.
Arrow Ecology & Engineering Overseas (1999)
In December 2019, the Company invested an amount of $1,750 in Arrow Ecology & Engineering Overseas (1999) Ltd (“Arrow”), a limited company incorporated in Israel. Arrow develops and operates a sustainable green process to recycle mixed and sorted municipal solid waste. The Company purchased few types of shares representing 22.6% of Arrow’s equity for an amount of $22 and shareholders loans were purchased for a price of $1,728 ($4,146 stated value less $2,418 allowance for credit losses, which have not changed since the acquisition). The Company uses the equity method for this investment. During the years ended December 31, 2022, 2021 and 2020, the Company recognized its share in Arrow losses in the amount of $0, $975 and $775, respectively, from this investment.
The Company suspended its use of the equity method to accounting for this investment in 2023 after its investment balance was reduced to zero.
The Company has an agreement with an entity related to its main shareholder, according to which, if the value of the investment decrease, the related party entity has guaranteed to repurchase this full investment at a minimum amount of $1,750. The guarantee is effective immediately as of the date of purchase and terminates on January 1, 2025. Some Directors, managers and shareholders of Arrow are related parties of the Company.
GreenFox Logistics LLC.
In March 2020, the Company invested an amount of $100 in GreenFox Logistics, LLC. (“GreenFox”), a company incorporated in the USA. The investment was done as SAFE investment (Simple Agreement for Future Equity). GreenFox is an on-demand delivery/moving/transportation company. As GreenFox is a private, closely held company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment.
SardineAI Corp.
In August 2020, the Company invested an amount of $50 in SardineAI Corp (“SardineAI”), a company incorporated in the USA. In return, the Company received preferred shares representing less than 1% of SardineAI equity. SardineAI is a Fraud Prevention-as-a-Service (FaaS) platform for Digital businesses to detect frauds and financial crimes. As SardineAI is a private, closely held company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment. In January 2023, the Company sold approximately 85% of its investment for a total amount of $756.
Silver Circle One
In December 2021, March 2022 and December 2022, the Company invested a total amount of $38 in Silver Circle One, a capital fund which aims to invest in private emerging companies with focus on consumer, commerce and technology companies. The company committed to invest up to $100 on the pool. As Silver Circle One is a private, closely held fund, there is no active market for this investment. Therefore, the company measures the investment at cost minus impairment.
Justt Fintech Ltd (previously Acrocharge Ltd)
In December 2021, the Company invested an amount of $50 in Justt Fintech Ltd (“Justt”), a company incorporated in Israel. As of December 31, 2022, the investment represented less than 1% of the issued and outstanding share capital of Justt Fintech Ltd. Justt is a technology company which fully automated chargeback disputes on behalf of online merchants. As Justt is a private, closely held company, there is not active market for this investment. Therefore, the Company measures the investment at cost minus impairment.
Nilus OS Ltd
In March 2022, the Company invested an amount of $25 in Nilus OS Ltd. (“Nilus”), a company incorporated in Israel. As of December 31, 2022, the investment represented less than 1% of the issued and outstanding share capital of Nilus. Nilus is a company that automates payment and financial workflows for platforms that involve transfers of money. As Nilus is a private, closely held company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment.
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PROPERTY AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT |
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment is as follows:
Depreciation and amortization expenses are $2,454, $2,061 and $2,090 for the years ended December 31, 2022, 2021 and 2020 respectively.
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LEASES |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
NOTE 7 - LEASES
Lessee Arrangements
The Company enters into leases in the normal course of business primarily as part of its operations in the different airports, back office operations, research and development offices and headquarters offices.
The table below presents the effects on the amounts relating to the Company’s total lease cost:
Balance sheet information related to operating leases was as follows:
Future undiscounted lease payments for operation leases with initial terms of more than one year as of December 31, 2022 are as follows:
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GOODWILL |
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL |
NOTE 8 - GOODWILL
All the Company’s goodwill relates to its airport security segment. The change in goodwill during the year is as follows:
At December 31, 2022, the Company performed qualitative assessments to determine if it was more likely than not that the fair value of the reporting units exceeded its carrying values, including goodwill. The qualitative assessments indicated that it was more likely than not that the fair value exceeded the carrying value of the reporting unit.
At December 31, 2021, the qualitative assessment indicated that it was more likely than not that the carrying value of the reporting unit exceeded fair value. The quantitative impairment test includes comparing the carrying value of the reporting unit, including the existing goodwill and intangible assets, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, a goodwill impairment charge is recorded for the amounts in which the carrying value of the reporting unit exceeds the fair value of the reporting unit, up to the amount of goodwill attributed to the reporting unit. After performing the quantitative testing, it was determined that the carrying amount exceeds the reporting unit’s fair value, resulting in an impairment charge of $139 for the year ended December 31, 2021.
The facts and circumstances that led to the impairment of goodwill during the year ended December 31, 2021 are as follows:
In February 2021, the Company acquired 51% of the outstanding shares of Quality Detection Dogs Sweden AB (see note 3) and recorded goodwill of €122 ($146 as of the purchase date). The purpose of the acquisition was to have a company with experience on detection dogs in order to train dogs to detect explosive materials. QDD’s revenue, operating profits and cash flows were lower than expected. The earnings forecast for the next year was revised and an impairment loss of €122 ($139 as of December 31, 2021) was recognized.
During the years ended on December 31, 2022, 2021 and 2020, the Company recognized impairment charges of $0, $139 and $0, respectively.
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NOTES PAYABLE - BANKS |
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Dec. 31, 2022 | |
Notes Payable to Bank [Abstract] | |
NOTES PAYABLE - BANKS |
NOTE 9 - NOTES PAYABLE – BANKS
United States of America
The Company’s U.S. subsidiary was a party to a credit facility with a commercial lender, which provided a maximum borrowing capacity up to $10,000, subject to a borrowing base limitation. The credit facility expired on October 2021.
Borrowings made under the credit facility bore interest, which was payable monthly, at LIBOR plus 3% per annum.
The Company’s weighted average interest rate in the United States of America during the year ended December 31, 2020 was 4.42%.
Europe
The Company had a credit arrangement with a commercial bank, to provide it with up to €12,000 in borrowings which was renewed in May 2020 through March 2021. Borrowings under the line of credit bore interest at one-month EURIBOR plus 4.8% with a minimum of 4.8% per annum. The Company was also subject to unused line fee of 0.75% per annum, which was payable quarterly. The line of credit expired in March 2021.
In addition to the line of credit arrangement, a guarantee facility of €2,500 ($2,841 as of December 31, 2021) was provided to the Company by the same commercial bank, which was renewed until March 2022, with an interest of 2.5% per annum and an unused line fee of 0.75% per annum which was payable quarterly. The guarantee facility expired in March 2022. As of December 31, 2021, the Company had €1,022 ($1,161 as of December 31, 2021) of outstanding guarantees under the guarantee facility, which related to leases and performance guarantees for contracts.
The Company’s weighted average interest rate in Europe during the years ended December 31, 2021 and 2020, was 4.8% and 4.4% respectively.
The Company has an additional credit arrangement in Sweden to provide it with up to 4,000 SEK ($385 as of December 31, 2022) in borrowings. Borrowings under the line of credit bear annual interest of 2.8% and subject to annual extension by the financial institution. The line of credit is secured by accounts receivable of the Swedish subsidiary. As of December 31, 2022 and 2021, the Company had 1,196 SEK and 1,800 SEK ($115 and $199 as of December 31, 2022 and 2021) respectively in outstanding borrowings under the line of credit facility.
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
NOTE 10 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are as follows:
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DEBT TO A RELATED PARTY |
12 Months Ended |
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Dec. 31, 2022 | |
Convertible Notes Payable [Abstract] | |
DEBT TO A RELATED PARTY |
NOTE 11 - DEBT TO A RELATED PARTY
Convertible Notes Payable to a Related Party
The Company has an agreement with an entity related to its main shareholder, to provide it with up to $3,000 in revolving loans through January 2022. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate of LIBOR plus 7% for U.S. dollar-denominated loans and the Company’s European commercial bank interest base rate plus 3% for Euro-denominated loans. In connection with the arrangement, the holder was granted an option to convert the outstanding notes payable under the arrangement into the Company's common stock at a price of $1.50 per share and the unpaid accrued interest at a price of $0.75 per share.
In December 2021, the loan was extended until January 2024, with the ability to draw up to $2,000 and the interest rate was adjusted to 2.5% per annum.
The Company’s weighted average interest during the years ended December 31, 2022, 2021 and 2020 is 2.5%, 7.10% and 7.60%, respectively.
Total interest expense related to the note is $28, $83 and $171 for the years ended December 2022, 2021 and 2020, respectively.
As of December 31, 2022 and 2021, convertible notes payable to this related party consist of $1,104 and $1,192, respectively.
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OTHER LIABILITIES |
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Other Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER LIABILITIES |
NOTE 12 - OTHER LIABILITIES
Other liabilities are as follows:
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REDEEMABLE NON-CONTROLLING INTERESTS |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTERESTS |
NOTE 13 - REDEEMABLE NON-CONTROLLING INTERESTS
On July 3, 2019, AU10TIX entered into a Series A Preferred Subscription Agreement (the "Agreement") with TPG Lux 2018 SC I, S.a.r.l ("TPG"), according to which AU10TIX issued 3,000,000 Series A Preferred Shares ("Series A Shares") to TPG for a subscription price of US$60,000 in cash representing approximately 24% of the outstanding share capital of AU10TIX and 23.077% of the fully-diluted share capital of AU10TIX (see note 15). Transaction costs totaled $4,540 and were deducted from the redeemable non-controlling interests balance.
On November 7, 2019, AU10TIX entered into a Series A and Series A-1 Preferred Subscription Agreement with Oak HC/FT Partners II, L.P. ("Oak"), according to which AU10TIX issued 1,000,000 Series A Preferred Shares and 23,622 Series A-1 Preferred Shares ("Series A-1 Shares" and together with Series A Shares – "the Preferred Shares") to Oak for a subscription price of US$20,000 in cash representing approximately 7.401% of the outstanding share capital of AU10TIX and 7.143% of the fully-diluted share capital of AU10TIX. For accounting purposes, the investment was allocated to the Series A and Series A-1 Preferred Shares on a relative fair value basis: $19,537 and $461, respectively. Transaction costs totaled $1,513 and were deducted from the respective investment amounts.
Following the Oak investment, on November 7, 2019, TPG subscribed for 307,087 Series A-1 Shares at nominal value (US$0.001 per share) (“Bonus Issue Series A-1 Shares”) in order to preserve its 23.077% ownership interest in the fully diluted share capital of AU10TIX.
The Preferred Shares Rights
Liquidation Preference: The holders of Series A Shares (“Series A Holders”) are entitled to a liquidation preference upon the occurrence of a sale, initial public offering (“IPO”), merger, consolidation, reorganization, winding-up, dissolution or liquidation of AU10TIX, pursuant to which the Series A Holders are entitled, on the occurrence of such event and in priority to the ordinary shares, to receive the greater of: (a) an amount equal to the initial subscription price for the Series A Shares, plus all accrued but unpaid dividends in respect of the Series A Shares, less all dividends previously paid on the Series A Shares, and (b) the proceeds distributable in respect of the Series A Shares had they been converted into ordinary shares. The initial subscription price for the Series A Shares (and calculations derived therefrom) are subject to customary adjustments as set forth in the agreements executed in connection with the Sale.
Conversion Rights: The Series A Shares are subject to conversion into ordinary shares of AU10TIX: (a) on the written request by any Series A Shareholder; and (b) immediately prior to a qualifying IPO of AU10TIX (being an IPO where the net aggregate gross proceeds to AU10TIX exceed US$75 million and where the subscription price per share paid by the public is not less than 150% of the initial subscription price paid for the Series A Shares). Pursuant to these conversion arrangements, the Series A Shares will convert into ordinary shares on a 1:1 basis (subject to certain agreed upon adjustments).
Anti-Dilution Protection: The Shareholders Agreements contain customary broad-based weighted average anti-dilution protection whereby, if further shares are issued by AU10TIX at a price per new security that is less than the initial subscription price paid for the Series A Shares, then the Series A Holders shall be entitled to receive additional Series A Shares (at no further cost) on a weighted-average basis, reflecting the value of equity in AU10TIX as determined based on the subscription price paid in the new issue of securities.
Pre-emption Rights: The Shareholders Agreements contain a restriction on issuing any securities ranking senior to or on party with the Series A Shares for as long as TPG and/or any subsequent investor holds at least one third of the overall number of Series A Shares in issue as at the date of completion of the Sale. In addition, each shareholder holding in excess of 3% of the shares of AU10TIX has the right to participate in any new issuance of securities by the AU10TIX, subject to customary exceptions.
Exit Rights: At any time from and after the fifth (5th) anniversary of completion of the issuance, upon written request by TPG, AU10TIX is required to use reasonable endeavors to facilitate the sale by TPG of the Preferred Shares (or, following conversion, ordinary shares) to a third party at a price in excess of 150% of the initial subscription price paid for the Series A Shares and subject to a right of first refusal in favor of AU10TIX. In the event that, three (3) months thereafter, a sale of the Preferred Shares held by TPG has not been consummated, upon written request by TPG, AU10TIX is required to facilitate a sale of AU10TIX within six (6) months after such written request, and thereafter, TPG has the right to require AU10TIX to facilitate a sale or IPO of AU10TIX. On the exercise of such rights, each other shareholder (including AU10TIX) is required to cooperate with TPG regarding such sale or IPO and TPG has the right to exercise drag rights over the shares held by other shareholders in order to facilitate such exit event.
The Exit Right is part of the issuance of the Series A Shares, and was not entered into separately from the transaction that created the non-controlling interests. The Exit Right is not legally detachable from the non-controlling interests because it is non-transferrable (i.e., the instrument cannot be transferred without the underlying preferred shares). Thus, the Exit Right would not be separately exercisable from the non-controlling interests shares because the non-controlling interests shares will be settled when the Exit Right is exercised. As a result, the Exit Right would be considered embedded in the Series A Shares held by TPG.
Shares of redeemable convertible preferred stock are not mandatorily or currently redeemable. However, the Exit Right would constitute a contingent redemption event that is outside of AU10TIX’s control. As such, Series A Shares have been presented outside of permanent equity as redeemable non-controlling interests. AU10TIX has adjusted the carrying value of the redeemable non-controlling interests to adjust for the non-controlling interests share in AU10TIX's profits and Other Comprehensive Income (Loss). AU10TIX has not adjusted the carrying values of the redeemable non-controlling interests to the deemed liquidation values of such shares since a liquidation event was not probable at any of the balance sheet dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
The Series A-1 Preferred Shares do not entitle their holders to any liquidation or exit rights as the Series A Preferred Shares, and therefore are classified within permanent equity, as non-controlling interests.
The anti-dilution provisions cited above have not been bifurcated from the host contract since they are to be settled into AU10TIX's non-traded shares, thus the "net settlement" criteria is not met.
On June 28, 2021, TPG, Oak, GF GW LLC (“GF”) and AU10TIX, entered into a Sale and Purchase Agreement (the “SPA”), pursuant to which Oak and GF purchased preferred shares in AU10TIX from TPG. In connection with the SPA, (i) such parties and ICTS entered into an amended and restated shareholders agreement (the “SHA”) and an amended and restated registration rights agreement (the “RRA”) and (ii) AU10TIX’s Articles of Association (the “Articles”) were amended by a deed of amendment (the “Deed of Amendment”).
Pursuant to the SPA, Oak purchased 755,906 AU10TIX Series A Preferred shares from TPG and GF purchased 1,511,811 AU10TIX Series A Preferred Shares from TPG. In connection with such purchases, all outstanding AU10TIX’s Series A Preferred Shares and Series A-1 Preferred Shares were re-designated as New Series A Preferred Shares and the Ordinary Shares owned by ICTS were re-designated as Class B Ordinary Shares, as described below.
In consideration of the benefits to Oak increasing its shareholding and GF becoming a shareholder, AU10TIX provided certain customary warranties to Oak and GF concerning AU10TIX and its business. In addition, AU10TIX agreed to be primarily liable to Oak and GF for any breaches by TPG of its customary fundamental warranties given to Oak and GF (including that TPG owns AU10TIX Series A Preferred Shares being sold to Oak and GF); provided, that, TPG has agreed to indemnify and hold AU10TIX harmless for any losses incurred by AU10TIX in relation to such fundamental warranties given by TPG.
Following the completion of the sales and purchases contemplated by the SPA on June 28, 2021: (i) ICTS owns 68.69% of the outstanding share capital of AU10TIX in the form of Class B Ordinary Shares; (ii) Oak owns 12.87% of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares; (iii) GF owned 10.93% of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares; and (iv) TPG owns 7.51% of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares. In addition, AU10TIX may issue up to 500,000 Class A Ordinary Shares under its existing employee stock option plan.
The SHA and the Articles (as amended by the Deed of Amendment) provide for the following material matters in respect of the rights attaching to the New Series A Preferred Shares and the Ordinary Shares and the ongoing governance of AU10TIX:
General: The New Series A Preferred Shares are entitled to one vote per share and rank equally with the Ordinary Shares in regards to dividends. The Ordinary Shares are divided into two classes: Class A Ordinary Shares and Class B Ordinary Shares, which rank equally as to dividends. The Class A Ordinary Shares are entitled to one vote per share. The Class B Ordinary Shares are entitled to three votes per share and may only be held by ICTS and its permitted transferees.
Liquidation Preference: the holders of New Series A Preferred Shares (“Series A Holders”) are entitled to a liquidation preference upon the occurrence of a (i) sale, initial public offering, which term includes certain business combinations with a SPAC (an “IPO”), merger, consolidation or reorganization, which results in change of control of AU10TIX, and (ii) winding-up, dissolution or liquidation of AU10TIX, pursuant to which the Series A Holders are entitled, on the occurrence of such event and in priority to the Ordinary Shares, to receive the greater of: (a) US$26.4583 per share, subject to adjustments for certain events affecting the capital of AU10TIX (the “Starting Price”) plus all accrued but unpaid dividends in respect of the New Series A Preferred Shares, less all dividends previously paid on the New Series A Preferred Shares, and (b) the proceeds distributable in respect of the New Series A Preferred Shares had they been converted into Class A Ordinary Shares. The Ordinary Shares rank equally in liquidation.
Conversion Rights: The New Series A Preferred Shares are subject to conversion into Class A Ordinary Shares on a 1:1 basis (subject to adjustments for certain events affecting the capital of AU10TIX): (a) upon the written request by any Series A Holder; and (b) immediately prior to a qualifying IPO of AU10TIX (being an IPO where each Class A Ordinary Share is valued at not less than 150% of the Starting Price at the completion of the IPO, subject to adjustments for certain events affecting the capital of AU10TIX) (a "Qualifying IPO"). The Class B Ordinary Shares are convertible into Class A Ordinary Shares at any time upon the written request of a holder of Class B Ordinary Shares on a 1:1 basis, subject to adjustments for certain events affecting the capital of AU10TIX.
Anti-Dilution Protection: The SHA contains customary broad-based weighted average anti-dilution protection whereby, if further shares are issued by AU10TIX at a price per new security that is less than the Starting Price, then the Series A Holders shall be entitled to receive additional Class A Ordinary Shares (at no further cost) on a weighted-average basis, reflecting the value of the equity in AU10TIX, as determined based on the subscription price paid in the new issue of securities.
Transfers: Subject to certain customary exceptions, including a transfer to a permitted transferee, any shareholder (other than TPG, Oak and GF) wishing to transfer any of the shares held by it shall first offer such shares to each shareholder holding 3% or more of AU10TIX’s outstanding share capital at the same price and on the same terms at which the selling shareholder wishes to transfer such shares.
New Issuances: Subject to certain customary exceptions, each shareholder holding 3% or more of AU10TIX’s outstanding share capital has the right to participate in any new issuance of securities by AU10TIX.
Information Rights: Subject to certain exceptions, each shareholder holding 3% or more of AU10TIX’s outstanding share capital is entitled to receive certain financial information regarding AU10TIX including budgets, annual and quarterly accounts and details of any third party offer for the stock or assets of AU10TIX, as well as certain inspection rights.
Exit Rights: At any time from and after July 3, 2026, upon written request by Series A Holders holding at least 60% of the then outstanding New Series A Preferred Shares (the “Preferred Majority”), AU10TIX is required to use reasonable endeavors to facilitate a sale of AU10TIX within six months after such written request, and, thereafter, the Preferred Majority has the right to step-in and require AU10TIX to facilitate a sale or IPO. On the exercise of such step-in right, each other shareholder (including ICTS) is required to cooperate with the Preferred Majority regarding such sale or IPO and the Preferred Majority has the right to exercise drag rights over the shares held by other shareholders in order to facilitate such exit event.
Board Arrangements: The Shareholders Agreement and Articles provide that the board of directors of AU10TIX shall be constituted by up to six directors: (i) four of whom will be appointed by the holder of a majority of the Class B Ordinary Shares (i.e., currently ICTS); (ii) one of whom will be appointed by Oak (for so long as Oak holds at least 50% of the New Series A Preferred Shares held on the date of the closing of the transactions contemplated by the SPA, subject to adjustments for certain events affecting the capital of AU10TIX); and (iii) one of whom will be appointed by GF (for so long as GF holds at least 50% of the New Series A Preferred Shares held on the date of the closing of the transactions contemplated by the SPA, subject to adjustments for certain events affecting the capital of AU10TIX). As a general matter, the board of AU10TIX is able to pass resolutions by a simple majority, subject to the consent rights of the Preferred Majority set out below.
Preferred Majority Consent Rights: For as long as the Series A Holders hold, in the aggregate, at least 25% of the New Series A Shares Preferred Shares held on the date of the closing of the transactions contemplated by the SPA, subject to adjustments for certain events affecting the capital of AU10TIX, the consent of the Preferred Majority is required for the following actions (i) amending the SHA or the Articles in a manner that would adversely affect the rights, preferences or privileges of the New Series A Preferred Shares; (ii) issuing new securities ranking senior to or pari passu with the New Series A Preferred Shares; (iii) making of any dividend or distribution other than a dividend or distribution that is pro rata to the Series A Holders and the holders of the Ordinary Shares; (iv) redeeming any Ordinary Shares; (v) incurring debt in excess of 4.0x AU10TIX’s consolidated EBITDA in the 12-month period ending on the last day of the month preceding the month in which the debt was incurred; (vi) consummating an IPO other than a Qualifying IPO; (vii) making certain changes to the size of AU10TIX’s board; (viii) making any fundamental change in the nature of the business of AU10TIX and its subsidiaries; (ix) entering into related party transactions, unless such transaction is commercially reasonable and on an arm’s-length basis; and (x) either amending AU10TIX’s existing stock option plan or creating a new stock option plan to allow for the issuance of more than 500,000 additional Class A Common Shares.
Tag Rights: Following completion of the procedures on transfers set out above, each Series A Holder holding 3% or more of AU10TIX’s outstanding shares will have the right to participate proportionately in any third-party share sale by another shareholder other than a Series A Holder (subject to certain customary exceptions).
Drag Rights: AU10TIX has the right to drag other shareholders into an exit event subject to certain requirements being satisfied (including either (i) holders of New Series A Shares receiving the greater of: (a) the Starting Price and (b) the proceeds distributable in respect of the New Series A Preferred Shares had they been converted into Class A Ordinary Shares, in each case with the approval of the Board, the Preferred Majority and the holders of a majority of the shares or (ii) a minimum value per New Series A Share of 150% of the Starting Price approved by the Board and holders of a majority of the shares, in each case subject to adjustments for certain events affecting the capital of AU10TIX) in relation to such exit transaction.
Termination: The SHA terminates upon (i) the agreement of AU10TIX, the Preferred Majority and a majority of the holders of the Ordinary Shares or (ii) the closing of a Qualifying IPO.
Tax Matters: AU10TIX is required to provide the Series A Holders with certain customary information for U.S. federal tax reporting purposes.
Confidentiality and Public Announcements: The SHA provides for customary confidentiality protections and limitations on public announcements without consent.
The RRA provides the Series A Holders (and in certain cases the holders of the Class B Ordinary Shares) with a limited number of customary long-form and short-form demand registration rights, shelf registration rights and the right to participate under certain conditions if AU10TIX determines to register its shares. In addition, AU10TIX has undertaken to (i) take certain actions to facilitate the rights of the parties under the RRA; (ii) provide customary indemnification; (iii) not agree to further registration rights superior to those granted under the RRA; and (iv) limit issuances of its shares under certain circumstances set out in the RRA.
Pre-emption Rights: The Shareholders Agreement contains a restriction on issuing any securities senior to or pari passu with the New Series A Preferred Shares for so long as the holders of the New Series A Preferred Shares on June 28, 2021 (or their transferees in accordance with the terms of the Shareholders Agreement) continue to collectively hold at least 25% of such number (appropriately adjusted for certain corporate events) of New Series A Preferred Shares. In addition, each shareholder holding in excess of 3% of AU10TIX’s outstanding shares has the right to participate in any new issuance of securities by AU10TIX, subject to customary exceptions.
The Company has assessed whether the change in the terms of the Preferred Shares following the closing of the 2021 SPA constituted a modification or extinguishment for accounting purposes, by comparing the fair value of these Preferred Shares immediately before and immediately after the closing of the 2021 SPA. An extinguishment occurs when the difference in fair value exceeds 10%, while a modification occurs when such fair value difference is lower than 10%.
Additionally, the carrying value of the Series A-1 Shares, which were previously presented among non-controlling interests, were reclassified to redeemable non-controlling interests and initially recognized at their fair value, following their re-designation as New Series A Preferred Shares.
Following the modification and extinguishment of the Preferred Shares and the reclassification of the Series A-1 Shares in 2021, the Company adjusted the carrying value of the redeemable non-controlling interests by $9,057, with a corresponding decrease to additional paid-in capital and non-controlling interests in the amounts of $10,102 and $1,045, respectively.
The following table sets forth for the movement in the redeemable non-controlling interests:
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GOVERNMENTAL SUPPORT |
12 Months Ended |
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Dec. 31, 2022 | |
Governmental Support [Abstract] | |
GOVERNMENTAL SUPPORT |
NOTE 14 - GOVERNMENTAL SUPPORT
During 2022, 2021 and 2020, governments in some of the countries in which we operate have announced the implementation of government assistance measures, which mitigated the impact of the COVID-19 outbreak on our results and liquidity. In the United States of America, the government has approved a payroll support of $0, $15,918 and $13,680, for the years ended December 31, 2022, 2021 and 2020 to the American subsidiary of the Company. Out of those amounts, the American subsidiary recognized amounts of $0, $16,925 and $12,672 as reduction of labor expenses for the years ended December 31, 2022, 2021 and 2020, respectively. During the years ended December 31, 2022, 2021 and 2020, the Dutch government has provided financial assistance of €3,671, €18,135 and €17,619 ($3,864, $22,608 and $21,645 as of December 31, 2022 2021 and 2020), respectively for the years ended December 31, 2022, 2021 and 2020. The Dutch government terminated the support program in March, 2022. In Germany, the employees are eligible for payroll support up to 60% of the employee’s payroll (on individual basis) in case the employees meet the support plan requirements. The Company pays to its German employees their full salary and the Company is being reimbursed by the German government for the payroll support amount. The Company applied for this support starting from April 2020 to June 2021. These available governmental support plans might be extended and/or changed according to the future COVID-19 developments, although currently the Company does not expect those measures to be renewed or extended.
In the Netherlands wage tax, social security and VAT payments for the period March 2020 until September 2021 were postponed and will have to be paid in 60 monthly installments, starting October 2022. The debt incurs annual interest starting July 2022 of 1% and increases every six months to a maximum of 4% starting on January 1, 2024 onwards. As of December 31, 2022 and 2021, the Company accumulated debt of €31,796 and €33,456 ($33,826 and $38,011 as of December 31, 2022 and 2021), respectively to the Dutch tax authorities.
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STOCK-BASED COMPENSATION |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION |
NOTE 15 - STOCK-BASED COMPENSATION
AU10TIX’s Limited, AU10TIX’s subsidiary, has a Stock Option Plan which has reserved 500,000 shares of its common stock for its future issuance. As of December 31, 2021, the subsidiary has 13,000,000 authorized shares of which 12,500,000 shares are issued and outstanding. Under the stock option plan, stock options may be granted to employees, officers, directors, consultants and service providers of the subsidiary at an exercise price as determined by the subsidiary’s board of directors with expiration terms of not more than ten years after the date such option is granted. Options granted under the plan generally vest over a period of four years.
The following is a summary of the AU10TIX Limited stock options issued and outstanding:
There are no non-vested options in AU10TIX Limited.
In August 2020, AU10TIX’s board agreed to transfer the option plan from AU10TIX Limited to AU10TIX Technologies B.V. with the same terms and conditions. On June 24, 2022, the board of AU10TIX Technologies B.V. has adopted the “AU10TIX Technologies B.V. 2022 Stock Option Plan” (the “Plan”). The Plan grants rights to subscribe for up to 500,000 class A ordinary shares (“Ordinary Share”) in the capital of AU10TIX Technologies B.V. to employees, directors, consultants and service providers of AU10TIX Technologies B.V. and / or any related entity (as defined in the plan). By resolution of the board of AU10TIX Technologies B.V., on February 12, 2023, the board resolved to increase the number of options that can be exercised under the option plan from 500,000 to 1,000,000 ordinary shares.
The following is a summary of the AU10TIX Technologies B.V. stock options issued and outstanding:
As of December 31,2022 the non-vested options are 86,250.
During the years ended December 31, 2022, 2021 and 2020, there was $513, $350 and $0 compensation expenses.
As of December 31, 2022, the Company has $374 of unrecognized compensation cost related to stock options.
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OTHER INCOME (EXPENSES), NET |
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Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INCOME (EXPENSES), NET |
NOTE 16 - OTHER INCOME (EXPENSES), NET
Other income (expenses) is summarized as follows:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
NOTE 17 - INCOME TAXES
The components of income (loss) before income tax benefit (expense) are as follows:
The current income tax expense from subsidiaries outside of the Netherlands is $1,984, $8,937 and $1,345, for the years ended December 31, 2022, 2021 and 2020, respectively. There was no current income tax expense or benefit for the Netherlands for the years ended December 31, 2022, 2021 and 2020.
The deferred income tax benefit from subsidiaries outside of the Netherlands is $135, $331 and $676, for the years ended December 31, 2022, 2021 and 2020, respectively. There was no deferred income tax expense for the Netherlands for the years ended December 31, 2022, 2021 and 2020.
Additionally, tax benefits (expenses) from subsidiaries outside the Netherlands include $203, $(614) and $79, for the years ended December 31, 2022, 2021 and 2020, respectively, of tax related to previous years. There were no tax expenses related to previous years in the Netherlands for the years ended December 31, 2022, 2021 and 2020.
The components of deferred tax assets and liabilities are as follows:
The ultimate realization of the net deferred tax assets in each jurisdiction the Company does business in is dependent upon the generation of future taxable income in that jurisdiction during the periods in which net operating loss carry forwards are available and items that gave rise to the net deferred tax assets become deductible. At present, the Company does not have a sufficient history of generating taxable income in the various jurisdictions it does business in, or positive expected core earnings to conclude that it is more likely than not that the Company will be able to realize its net deferred tax assets in the near future and, therefore, a valuation allowance was established for the carrying value of the net deferred tax assets, with the exception of few locations, which are currently generating taxable income. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion of the valuation allowance in other jurisdictions.
As of December 31, 2022, the Company has net operating losses carry forwards of $24,116 and carry forward interest of $5,982 in the Netherlands. These losses and interest can be carried forward and do not expire but starting 2022 the yearly utilization is limited to one million Euro per year, plus 50% of the excess taxable income. As of December 31, 2022, the Company has net operating loss carry forwards of $10,399 in the United States of America, which will expire in 2031 through 2037 except $3,059 which do not expire but can offset up to 80% of taxable income every year. In Israel, the Company has net carry forward losses of $1,910 which do not expire. The ultimate utilization of such net operating loss carry forwards is limited in certain situations.
As of December 31, 2022, the Company has capital loss carry forwards of $495 in Israel. Such capital loss carry forwards do not expire and can be offset against future capital gains generated in Israel.
As of December 31, 2022, the Company has $560 in tax credits for the welfare to work and work opportunity programs in the United States of America that expire in 2024 through 2029.
During the years ended December 31, 2022 and 2021 the valuation allowance increased (decreased) by $1,872 and $(5,815), respectively.
The Company’s effective income tax rate differs from the Netherlands’ statutory rate of 25.8%, 25.0% and 25.0% for the years 2022, 2021 and 2020, respectively, as follows:
Uncertain tax positions
The Company is subject to income taxes in the Netherlands, and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determine its provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax related uncertainties based on estimates of whether and the extent to which additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged despite evidence supporting the position. The Company adjust this reserve in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered probable.
As of December 31, 2022 and 2021, there are $688 and $688 of unrecognized tax benefits, respectively, that if recognized would reduce the effective tax rate. Interest and penalties assessed by taxing authorities on an underpayment of income taxes are included as components of income tax provision in the consolidated statements of operations and comprehensive income.
A reconciliation of the Company’s unrecognized tax benefits is as follows:
The Company files income tax returns in the Netherlands and other foreign jurisdictions. Income tax returns for the years since 2016 are subject to examination in the Netherlands. In the United States of America, income tax returns for the years since 2019 are subject to examination. Income tax returns for the tax years since 2017 are subject to examination in foreign jurisdictions.
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RELATED PARTY TRANSACTIONS |
12 Months Ended |
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Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS |
NOTE 18 - RELATED PARTY TRANSACTIONS
An entity related to one of the Company’s Supervisory Board members provide legal services to the Company. Legal expense related to these services is $54, $59 and $46 for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company engages the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling and management services to the authentication technology segment. The Company incurred expenses of $1,887, $1,710 and $741 for such services for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, and 2021 the outstanding balances due for these services were $605 and $311, respectively, included in accrued expenses and other current liabilities. In addition, the individual serves as a board member of the Company and was paid an amount of $36, $38 and $38 as board fees, for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company engages the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling services to its authentication technology segment. The Company incurred expenses of $155, $148 and $87 for such services for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company engages the services of an individual which is a family member of the Chairman of the Board, to provide services as a Managing Director of the Company. The Company incurred expenses of $386, $286 and $182 for such services for the years ended December 31, 2022, 2021 and 2020, respectively.
The Chairman of the board, who is related to a trust which is an indirect main shareholder of the Company, receives annual compensation of $50 for his services as chairman. In addition, in 2022, 2021 and 2020, the Company incurred salary expenses of $112, $117 and $125, respectively for the services he provides to AU10TIX.
The Company engaged the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling and administrative services to its authentication technology segment. The Company incurred expenses of $340, $0 and $0 for such services for the years ended December 31, 2022, 2021 and 2020, respectively. In addition, the individual serves as a board member of the Company, and was paid an amount of $36, $38 and $38 as board fees, for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company engages the services of an individual who is a family member of a beneficiary of a trust which is an indirect main shareholder of the Company, to provide certain administration services. The Company incurred expenses of $139, $141 and $118 for such services for the years ended December 31, 2022, 2021 and 2020, respectively.
In May 2019, the Company engaged the services of Arrow (see note 5) to provide some administrative services. The Company incurred expenses of $119, $286 and $115 for such services for the years ended December 31, 2022, 2021 and 2020, respectively.
The Company has debt to an entity which is a main shareholder of the Company (see note 11).
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COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
NOTE 19 - COMMITMENTS AND CONTINGENCIES
Letters of Credit and Guarantees
As of December 31, 2022, the Company has $8,249 in outstanding letters of credit and guarantees. Letters of credit and guarantees are being secured either by the same amounts in restricted cash with commercial banks (see note 2) or with deposits provided to customers which serve as cash collateral in order to guarantee the performance and quality of services provided to the customers.
Legal Proceedings
General
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. These claims are primarily related to grievances filed by current and former employees for unfair labor practices or discrimination, and for passenger aviation claims. Management recognizes a liability for any matter when the likelihood of an unfavorable outcome is deemed to be probable and the amount is able to be reasonably estimated. Management has concluded that such claims, in the aggregate, would not have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
Legal Proceedings (continued)
Inquiry Proceedings
On June 24, 2021, a minority shareholder of the Company initiated inquiry proceedings before the Enterprise Chamber of the Amsterdam Court of Appeal (the “Court”) which is a specialized court dedicated to resolving corporate disputes. The shareholder has requested the Court to appoint an investigator on behalf of the Court in accordance with Dutch law, to investigate certain activities of the Company that have been previously disclosed by the Company in its periodic filings with the SEC for the fiscal years ended December 31, 2020 and 2019. The shareholder has not requested the Court to order preliminary relief, but has requested the Court to order the registrant to pay the costs of the proceedings. On June 2022, the Court rendered its judgement after reviewing all filings and a court hearing. The Court accepted ICTS’s defense on all items except two and appointed an investigator to examine those two items. The two items are: The conversion of loans in 2019 from a related party at a share price of $0.40 and the issuance of shares to directors and certain employees in 2019 at a share price of $0.40. The Company expects the investigator to provide his report to the court during 2023.
White Line
In 2017, the company invested $3,500 in White Line B.V., a limited Company incorporated in the Netherlands, representing 10% of the issued and outstanding share capital of White Line B.V.
The Company had an agreement with an entity related to its main shareholder, according to which, if the value of this investment decreased, the related party entity has guaranteed to repurchase this full investment in minimum amount of $3,500. In December 2018, the related party entity purchased the full investment from the Company for $3,500. In 2021, the Company has a dispute with White Line B.V. as certain items disclosed in White Line B.V. financials appeared questionable. ICTS requested the Court to instruct White Line to disclose certain documents. As the economical ownership is not within the Company anymore, the Company has no financial exposure on this dispute. On November 2022, the Appeal Court of Amsterdam rendered its judgement after reviewing all filings and a court hearing. The Court rejected the Company’s request for disclosure of documents.
Agency Agreements
In April 2013, prior to the purchase of one of the current subsidiaries in Europe, the Company entered into an agency agreement with a third party to assist it with this transaction. According to the agreement, in the event that the operations in that country are sold in the future, the third-party agent is entitled to a payment of €3,000 ($3,191 as of December 31, 2022).
In March 2016, the Company entered into an agreement with a third party to assist the Company with the possible sale of one of the Company’s subsidiaries (see note 13). The fees depend on the outcome of the assignment and are between 2%-5% of the sale consideration but not less than $4,000. In February 2019, the agreement was amended. According to the amendment, in case that less than 50% of the voting stock or majority of the subsidiary assets are being sold, the transaction fee will be 5% of the sale consideration but not lower than $3,000. In January 2022, the agreement was amended so that the fees will be 2%-3% of the sale consideration but not less than $4,000 and with a cap of $20,000. In case that less than 50% of the voting stock or majority of the subsidiary assets are being sold the transaction fee will be 5% of the sale consideration but not lower than $4,000.
Employment Agreements
In December 2022, the Company entered into an employment agreement with a third party to serve as the CEO of one of the Company’s subsidiaries. According to the agreement the employee is entitled to annual target bonus. The annual target bonus is based on achievement of targets as should be defined by the subsidiary’s board of directors. The bonus shall be equal to 10% of the EBIDA (excluding the applicable taxes).
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SEGMENT AND GEOGRAPHICAL INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT AND GEOGRAPHICAL INFORMATION |
NOTE 20 - SEGMENT AND GEOGRAPHICAL INFORMATION
The Company operates in four reportable segments: (a) corporate (b) airport security (c) other aviation related services and (d) authentication technology. The corporate segment does not generate revenue and contains primarily non-operational expenses. The airport security segment provides security services mostly to airlines and airport authorities mostly in Europe. The other aviation related services segment provides various services to airlines within airports in the United States of America. The authentication technology segment provides authentication services to financial and other companies, predominantly in the United States of America. All inter-segment transactions are eliminated in consolidation. The accounting policies of the segments are the same as the accounting policies of the Company as a whole.
The operating results of these reportable segments are regularly reviewed by the chief operating decision.
The following table sets forth, for the periods indicated, revenue generated from customers by geographical area based on the geographical location of the customer’s invoicing address:
The following table sets forth, for the periods indicated, property and equipment, net of accumulated depreciation and amortization, by country:
Property and equipment, net, in other countries include $4,216 and $3,956 property and equipment in Israel, as of December 31, 2022 and 2021, respectively.
Valuation and Qualifying Accounts
(1) Write-off net of recoveries for the allowance for doubtful accounts.
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Functional Currency |
Functional Currency
The accompanying consolidated financial statements are presented in United States dollars. The Company has determined that the functional currency of its subsidiaries is usually the local currency, AU10TIX functional currency is United States Dollars. For financial reporting purposes, the assets and liabilities of such subsidiaries are translated into United States Dollars using exchange rates in effect at the balance sheet date. The revenue and expenses of such subsidiaries are translated into United States Dollars using average exchange rates in effect during the reporting period. Resulting translation adjustments are presented as a separate category in shareholders' deficit called accumulated other comprehensive loss.
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Use of Estimates |
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
The most significant estimates and assumptions included in these consolidated financial statements consist of the: (a) valuation allowance of deferred income taxes and (b) determination of the estimated fair value of the AU10TIX preferred shares conversion in 2021.
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Principles of Consolidation |
Principles of Consolidation
The consolidated financial statements include the accounts of ICTS International N.V. and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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Cash and Cash Equivalents |
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents.
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Restricted Cash and Bank Deposits |
Restricted Cash and Bank Deposits
Short term restricted cash as of December 31, 2022 consists of: (a) $279 held in bank accounts that serve as cash collateral for outstanding letters of credit and guarantees, (b) $14,459 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities (see note 4) and (c) $1,129 secured for derivative instruments.
Short term restricted cash as of December 31, 2021 consists of: (a) $3,350 held in bank accounts that serve as cash collateral for outstanding letters of credit and guarantees, (b) $10,599 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities (see note 4) and (c) $750 secured for derivative instruments.
Long term restricted cash as of December 31, 2022 consist of $4,590 held in bank accounts that serve as risk collateral for long term outstanding letters of credit and guarantees.
Bank deposits consist of interest bearing deposits held in banks and financial institutions with an original maturity of more than three months and less than a year from the date of deposit and carried at cost.
The following table provides a reconciliation of cash and restricted cash reported on the balance sheet that sum to the total of the same such amounts shown in the statements of cash flows.
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Accounts Receivable |
Accounts Receivable
Accounts receivable represent amounts due to the Company for services rendered and are recorded net of an allowance for doubtful accounts. The allowance for credit losses is based on historical collection experience, factors related to specific customers and current economic trends. The Company writes off accounts receivable when determined to be uncollectible and are recognized as a reduction to the allowance for credit losses. As of December 31, 2022, and 2021, the allowance for doubtful accounts is $1,208 and $991, respectively.
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Fair Value Measurements |
Fair Value Measurements
The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 820, “Fair Value Measurement”. Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Topic 820 defines fair value 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. The fair value should be based on assumptions that market participants would use.
In determining the fair value, the Company assesses the inputs used to measure fair value using a three-tier hierarchy, as follows:
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
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Deposits |
Deposits
Deposits consist of long-term cash deposits provided to customers which serve as cash collateral in order to guarantee the performance and quality of services provided to the customers. The deposits are repaid to the Company at the end of the contract or the engagement with the customers.
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Investments |
Investments
The Company accounts for investments in the equity securities of companies which represent an ownership interest of 20% to 50% and the ability to exercise significant influence, provided that ability does not represent control, using the equity method. The equity method requires the Company to recognize its share of the net income (loss) of its investees in the consolidated statement of operations until the carrying value of the investment is zero.
The Company records investments in the equity securities of privately held companies which represent an ownership interest of less than 20% at cost minus impairment.
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Derivative Instruments |
Derivative Instruments
Derivative instruments are measured at their fair value and recorded as either assets or liabilities. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in other comprehensive income and a corresponding amount is reclassified out of other comprehensive income into earnings when the underlying transactions are recognized in the consolidated statements of operations and comprehensive income.
The Company maintains a risk management strategy that may incorporate the use of put options and forward exchange contracts, to minimize significant fluctuation in cash flows and/or earnings that are caused by exchange rate or interest rate volatility.
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Property and Equipment |
Property and Equipment
Equipment and furniture, internal-use software, leasehold improvements and vehicles are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives used in determining depreciation are as follows:
Leasehold improvements are amortized using the straight-line method over the shorter of the total term of the lease or the estimated useful lives of the assets.
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Capitalized Internal-Use Software Costs |
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs incurred in developing internal-use software when capitalization requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred. Costs, such as maintenance and training are also expensed as incurred. Capitalized costs are included in property and equipment, and amortized on a straight-lined basis over the estimated useful life of the software. Amortization expense, which is included in depreciation expense, amounted to $742, $374 and $147 during the years ended December 31, 2022, 2021 and 2020, respectively.
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Goodwill |
Goodwill
Goodwill represents the excess purchase price over the fair value of the net tangible and intangible assets of an acquired business. Goodwill is assessed for impairment by reporting unit on an annual basis or when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company would record a goodwill impairment charge for the difference between the carrying value and the fair value of the goodwill, not to exceed the carrying amount of the goodwill. During the years ended December 31, 2022, 2021 and 2020, the Company recorded goodwill impairment charge of $0, $139 and $0, respectively on its goodwill.
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Long-Lived Assets |
Long-Lived Assets
The Company reviews long-lived assets, other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable, it measures any impairment based on the fair value of the asset as compared to its carrying value. During the years ended December 31, 2022, 2021, and 2020, the Company did not record any impairment charges on its long-lived assets.
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Employee Rights Upon Retirement |
Employee Rights Upon Severance
The Company is required to make severance payments to its Israeli employees upon dismissal of an employee or upon a termination of employment in certain circumstances. The Israeli pension and severance pay liability to the employees is covered mainly by deposits made at insurance companies. For its employees who are employed under the Section 14 of the Israeli Severance Pay Law, 1963 (“Section 14”), the Company makes deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employees’ rights upon termination. In addition, the related obligation and amounts deposited on behalf of the applicable employees for such obligations are not presented on the Company’s consolidated balance sheets, as the amounts funded are not under the control of management of the Company and the Company is legally released from the obligation to pay any severance payments to the employees once the required deposits amounts have been paid.
For employees not under Section 14, severance liabilities are recorded based on the length of service and their latest monthly salary. The Company’s liabilities for the Israeli employees amounted to $1,550 and $1,631 as of December 31, 2022 and 2021, respectively and are included in other liabilities in the Company’s consolidated balance sheets. The deposits made at insurance companies to cover these liabilities amounted to $1,048 and $1,346 as of December 31, 2022 and 2021, respectively and are included in other assets in the Company’s consolidated balance sheets.
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Leases |
Leases
The Company follows Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842).
The Company as a lessee
Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. A lease is a finance lease if it meets any one of the criteria below, otherwise the lease is an operating lease:
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
The lease term is for the major part of the remaining economic life of the underlying asset.
The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term.
Based on the criteria above, all of the Company's leases are classified as operating leases.
Operating lease Rights of Use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, while the ROU assets are also adjusted for any prepaid or accrued lease payments. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments. The company does not recognize ROU assets or lease liabilities for leases with a term shorter than 12 months.
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it reasonably certain that the Company will exercise the option.
After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event).
The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if relevant and any unamortized initial direct costs. Lease expenses are recognized on a straight-line basis over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will exercise or not exercise the option to renew or terminate the lease.
Variable lease payments that depend on an index or a rate
On the commencement date, the lease payments shall include variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), initially measured using the index or rate at the commencement date.
The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index or rate unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.
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Convertible Debt Instruments |
Convertible Debt Instruments
The Company evaluates convertible debt instruments to determine whether the embedded conversion option needs to be bifurcated from the debt instrument and accounted for as a freestanding derivative instrument. An embedded conversion option is considered to be a freestanding derivative when: (a) the economic characteristics and risks of the embedded conversion option are not clearly and closely related to the economic characteristics and risks of the host instrument, (b) the hybrid instrument that embodies both the embedded conversion option and the host instrument is not re-measured at fair value under otherwise applicable US GAAP with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded conversion option would be considered a derivative instrument subject to certain requirements .
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Contingent Liabilities |
Contingent Liabilities
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the normal course of its business activities. Liabilities for such contingencies are recognized when: (a) information available prior to the issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated.
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Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss |
Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The Company's comprehensive income (loss) consists mostly of the Company’s net income (loss), foreign currency translation adjustments and changes in fair value of derivative instruments as cash flow instruments. Accumulated other comprehensive loss consist of the Company’s accumulated foreign exchange currency translation adjustments, and changes in fair value of derivative instruments.
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Stock-Based Compensation |
Stock-Based Compensation
Stock-based compensation to employees and non-employees, including stock options, are measured at the fair value of the award on the date of grant based on the estimated number of awards that are ultimately expected to vest. The compensation expense resulting from stock-based compensation to management and administrative employees is recorded over the vesting period of the award in selling, general and administrative expense on the accompanying consolidated statements of operations and comprehensive income (loss). Compensation expense resulting from stock-based compensation to operational employees is recorded over the vesting period of the award in cost of revenue.
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Non-Controlling Interests |
Non-Controlling Interests
The Company’s non-controlling interests represent the minority shareholder’s ownership interests related to the Company’s subsidiaries. The Company reports its non-controlling interests in subsidiaries as a separate component of equity in the consolidated balance sheets and reports net income (loss) attributable to the non-controlling interests in the consolidated statements of operations.
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Redeemable Non-Controlling Interests |
Redeemable Non-Controlling Interests
When the Company or its subsidiaries issues preferred shares, it considers the provisions of FASB ASC 480 –"Distinguishing Liabilities from Equity" (Topic 480) in order to determine whether the preferred share should be classified as a liability. If the instrument is not within the scope of Topic 480, the Company or its subsidiaries further analyses the instruments characteristics in order to determine whether it should be classified within temporary equity (mezzanine) or within permanent equity in accordance with the provisions of Topic 480-10-S99. AU10TIX redeemable convertible preferred shares are not mandatorily or currently redeemable. However, it includes a liquidation or deemed liquidation events that would constitute a redemption event that is outside of the Company’s control. As such, all shares of redeemable preferred shares have been presented outside of permanent equity. The Company has not adjusted the carrying values of the redeemable preferred shares to the deemed liquidation values of such shares since a liquidation event was not probable at any of the balance sheet dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
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Revenue Recognition |
Revenue Recognition
Revenue is recognized when the promised services are performed for our clients, and the amount that reflects the consideration we are entitled to receive in exchange for those services is determined. The Company’s revenues are recorded net of any sales taxes.
In order to determine the revenue, we (1) identify the contract with the client, (2) identify the performance obligations, usually it’s based on the hours spent, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligation and (5) we recognize revenue as performance obligation is satisfied.
A performance obligation is a promise in a contract to transfer a distinct service to the client, and it is the unit of account for revenue recognition. The majority of our contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in our contracts and, therefore, is not distinct.
The following table presents the Company’s revenues according to the Company’s segments:
The following table presents the Company’s revenues generated from customers by geographical area based on the geographical location of the customers invoicing address:
Airport Security and Other Aviation Services Segments
In the airport security and other aviation services, for performance obligations that we satisfy over time, revenues are recognized by consistently applying a method of measuring hours spent on that performance obligation. We generally utilize an input measure of time (hours and attendance for specific time framed service like specific flights) of the service provided. Performance obligations are satisfied over the course of each month and continue to be performed until the contract has been terminated or cancelled.
Pricing and Reduction to Revenues
We generally determine standalone selling prices based upon the prices included in the client contracts, using expected costs plus margin, or other observable prices. The price as specified in our client contracts is generally considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar client in similar circumstances. Certain client contracts have variable consideration, including quality thresholds or other similar items that could reduce the transaction price. These amounts may be constrained and revenue is recorded to the extent we do not expect a significant reversal or when the uncertainty associated with the variable consideration is resolved. Our variable consideration amounts, if any, are not material, and we do not expect significant changes to our estimates.
Contracts
Our client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which we operate. The payment terms vary by the type and location of our clients and services offered. Client payments are typically due in 30 to 60 days after invoicing, but may be a shorter or longer term depending on the contract. Our contracts with main customers are generally long-term contracts, between two to five years. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Practical Expedients and Exemptions
Because nearly all our contracts are based on input measure of time of service provided (as hours or attendance) no exemptions need to be made. We have no material contracts with material revenues expected to be recognized subsequent to December 31, 2022 related to remaining performance obligations.
Revenue Service Types
The following is a description of our revenue service types, including Airport Security, Airline Security, Cargo Security, Other Airport Services, General Security Services and Other.
Airport Security
Staffing or manning for specialized airport security are usually based on long term contract issued via a public tender process. We recognize revenue given the unit of measure (hours) provided in the given time period and the specific price for specific hours agreed upon in the contracts. Quality and criteria of staffing are described in the contracts and are measured in the given time period. Deviations, if any, are discussed with the customer before invoicing and will be reflected in the invoice showing the approved hours and other cost elements as agreed upon price.
Most contracts have an hourly rate that reflects an all-in tariff based on a full cost price calculation. In some of the contracts the hourly rates are split between a component based on hours and a component based on specific costs in a specific time period but always linked to the service provided in given time period. Revenue is recognized at the time period set in the contract.
Airline Security
Staffing or manning for airline security are usually based on long term contracts issued via a public tender procedure. We recognize revenue according to the unit of measure provided (usually attendance for specific time framed service like specific flights). The time framed specialized security services in this case the executed number of flights. When the manning for the security of these flights is delivered, the Company invoices the customer according to the agreed flight tariff.
Cargo Security
Staffing or manning for specialized cargo security are usually based on long term contract, sometimes publicly tendered. Contracts are based on hourly planned and executed screening services. Revenue is recognized based on the realized screening hours and contractually agreed upon hourly rate.
Other Airport Services
Airport Services include wheelchair attendants, pre-departure skycaps, bag-runners, agents, guards, charter security screening, janitorial, and cabin cleaning to major U.S. and foreign carriers in airports throughout the United States of America. Our contracts may include either single or multiple performance obligations and vary by airport and airline. We recognize revenue given the unit of measure (usually hours) provided in the given time period and the specific price for specific hours or attendance for specific event, time framed service as agreed upon in the contracts.
General Security Services
Security Services include providing armed and un-armed guards to private schools and places of worship, video surveillance and patrol. Contracts for security services generally include only a single performance obligation. We recognize revenue for security guard services given the unit of measure (hours) provided in the given time period. Revenue from video surveillance and patrol is recognized based upon a fixed monthly rate.
Other Services
Other services include revenues from (incidental) specialized security manning services, training services and ad hoc work performed on and off airports. Revenue is recognized over time as services are being performed, using the input of service delivered during the time period, according to the contractual agreed price.
Authentication Technology Segment
In the authentication technology segment, the Company offers authentication services on a cost per click basis, with a minimum yearly commitment which means the customer pays the Company according to the higher of (a) number of times the customer used the system in order to authenticate IDs or (b) according to the yearly minimum commitment. According to the agreement with the customers, each chargeable click has an agreed price and revenue is being recognized accordingly.
Pricing and Reduction to Revenues
The company determines standalone selling prices based upon the prices included in the client contracts, using expected costs plus margin, or other observable prices. The price as specified in our client contracts is considered the selling price as agreed with the customer. The Company’s variable consideration, if any, amounts are not material, and we do not expect significant changes to our estimates. The Company does not expect a significant reversal or when the uncertainty associated with the variable consideration is resolved. A customer might be offering a tier-based pricing scheme, or not, and in any event of usage above the committed amount, the pricing will remain unchanged.
Contracts
Client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which the company operates, and are typically set to a three-year deal duration. The payment terms vary by the type and location of our clients and services offered. The minimum commitment is usually being paid in advance. Client payments are typically due in 30 days after invoicing, but may be a shorter or longer term depending on the contract. Client contracts are usually range from one to three years, with a convenience exit every twelve months period, and at the end of the contract there is a renewal option. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Deferred Revenues
The Company records deferred revenues when cash payments are received or due in advance of our performance. Deferred revenues at December 31, 2022 and 2021 were $3,570 and $2,239, respectively shown as part of the accrued expenses and other current liabilities and $336 and $1,030 shown as other liabilities. Revenue recognized for the years ended December 31, 2022, 2021 and 2020 that was included in the deferred revenue at the beginning of each year was $2,217, $2,049 and $1,879, respectively.
Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant.
Capitalized Contract Costs
As part of obtaining contracts with certain customers in the authentication technology segment, the Company incurs upfront costs such as sales commissions. The Company capitalizes these costs which are subsequently amortized on a straight-line basis over the estimated life of the relationship with the customer. The Company applies the practical expedient that allows it to determine this estimate for a portfolio of contracts that have similar characteristics in terms of type of service, contract term and pricing. This estimate is reviewed by management at the end of each reporting period as additional information becomes available.
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Cost of Revenue |
Cost of Revenue
Cost of revenue represents primarily payroll and employee related costs associated with employees who provide services under the terms of the Company’s contractual arrangements, insurance and depreciation and amortization.
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Research and Development Costs |
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of payroll and related costs, professional services, consulting services and non-capitalized cost associated with the development of technologies.
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Advertising Costs |
Advertising Costs
Advertising costs are expensed as incurred and consist of costs associated with promoting the Company, its products and services as participation in conferences and publication costs. Advertising costs during the years ended December 31, 2022, 2021 and 2020 are $3,472, $2,150 and $735, respectively.
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Value Added Tax |
Value Added Tax
Certain of the Company’s operations are subject to Value Added Tax (“VAT”) applied on the services sold in those respective countries. The Company is required to remit the VAT collected to the tax authorities, but may deduct the VAT paid on certain eligible purchases.
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Income Taxes |
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities resulting from a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established when realization of net deferred tax assets is not considered more likely than not.
Uncertain income tax positions are determined based upon the likelihood of the positions being sustained upon examination by taxing authorities. The benefit of a tax position is recognized in the consolidated financial statements in the period during which management believes it is more likely than not that the position will not be sustained. Income tax positions taken are not offset or aggregated with other positions. Income tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of income tax benefit that is more than 50 percent likely of being realized if challenged by the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured is reflected as income taxes payable.
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Income (Loss) Per Share |
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is determined in the same manner as basic income (loss) per share, except that the number of shares is increased to include potentially dilutive securities using the treasury stock method.
The Company had a net loss for the year ended December 31, 2022. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common share is anti-dilutive due to the net loss. Potentially dilutive securities were excluded from the computation of diluted loss per share even though the conversion rate of the convertible note payable to related party was lower than the market price of the Company’s common stock as of December 31, 2022, due to the net loss during that year.
The Company had net income for the years ended December 31, 2021 and 2020. For the year ended December 31, 2021 the net income of the Company was adjusted by $10,102 as deemed dividends following the conversion of preferred shares A and A-1 in AU10TIX Technologies B.V. to new Series A. Potentially dilutive securities were included in the computation of diluted income per share as the conversion rate of the convertible note payable to related party was lower than the weighted average computed price of the Company’s stock for the year 2021 and 2020.
The number of shares of common stock attributable to potentially dilutive securities for the years ended December 31, 2022, 2021 and 2020 were 2,760,855, 2,978,843 and 3,000,000 shares of which the December 31, 2022 shares were excluded from the loss per share calculation due to being anti-dilutive. Those shares were issuable upon conversion of convertible notes payable to related party at price of $0.40.
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Fair Value of Financial Instruments |
Fair Value of Financial Instruments
The fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities, income taxes payable, VAT payable, notes payable-banks, long-term loan payable and loan payable to related party approximate their carrying values due to the short-term nature of the instruments. The carrying values of the convertible notes payable to a related party and other liabilities are not readily determinable because: (a) these instruments are not traded and, therefore, no quoted market prices exist upon which to base an estimate of fair value and (b) there were no readily determinable similar instruments on which to base an estimate of fair value.
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Concentration of Credit Risk |
Concentration of Credit Risk
Financial instruments which are subject to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, bank deposits and accounts receivable.
The Company maintains cash, cash equivalents, restricted cash and bank deposits in accounts with financial institutions in the United States of America, Europe, Japan and Israel. As of December 31, 2022 and 2021, accounts at financial institutions located in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 per institution. As of December 31, 2022 and 2021, cash, cash equivalents, restricted cash and bank deposits of $10,613 and $17,522, respectively, are being held in the United States of America, of which $10,613 and $17,063, respectively, are uninsured. Cash, cash equivalents, restricted cash and bank deposits located in Europe, Japan and Israel, totaling $85,349 and $85,930 as of December 31, 2022 and 2021, respectively, are uninsured.
The Company renders services to a limited number of airlines and airports through service contracts and provides credit without collateral. Some of these airlines and airports may have difficulties in meeting their financial obligations, which can have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows. To mitigate this risk, the Company regularly reviews the creditworthiness of its customers through its credit evaluation process.
Revenue from two customers represented 52% of total revenue during the year ended December 31, 2022, of which customer A accounted for 34% and customer B accounted for 18% of total revenue. Accounts receivable from these two customers represented 31% of total accounts receivable as of December 31, 2022.
Revenue from three customers represented 64% of total revenue during the year ended December 31, 2021, of which customer A accounted for 39%, customer B accounted for 14% of total revenue and customer C accounted for 11% of total revenue. Accounts receivable from these three customers represented 39% of total accounts receivable as of December 31, 2021.
Revenue from two customers represented 70% of total revenue during the year ended December 31, 2020, of which customer A accounted for 48% and customer B accounted for 22% of total revenue. Accounts receivable from these two customers represented 47% of total accounts receivable as of December 31, 2020.
Customers A and B mentioned above, have been principal customers in the last three years.
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Risks and Uncertainties |
Risks and Uncertainties
The Company is currently engaged in direct operations in numerous countries and is therefore subject to risks associated with international operations (including economic and/or political instability, trade restrictions and strikes). Such risks can cause the Company to have significant difficulties in connection with the sale or provision of its services in international markets and have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
The Company is subject to changes in interest rates based on Central Banks Federal Reserve actions and general market conditions. The Company does not utilize derivative instruments to manage its exposure to interest rate risk.
Furthermore, as a result of its international operations, the Company is subject to market risks associated with foreign currency exchange rate fluctuations. The Company does not utilize derivative instruments to manage its exposure to such market risk except in one of its subsidiaries. As such, significant foreign currency exchange rate fluctuations can have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
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Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements
Accounting Standards Update 2022-01
In March 2022, the FASB issued an update for Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method. The amendment expands the current single layer method to allow multiple hedged layers of a single closed portfolio under the method. The amendment is affective for financial statements issued for annual periods beginning after December 15, 2022. The adoption of this standard does not have a material effect on the Company’s operating results or financial condition.
Accounting Standards Update 2021-08
In October 2021, the FASB issued an update for Business Combinations (Topic 805): Accounting for Contract Assets and Contract liabilities from Contracts with customers. This ASU requires entities to apply Topic 606, Revenue from Contracts with Customers to recognize and measure contract asset and contract liabilities in a business combination. The amendment is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within that fiscal year. The adoption of this standard does not have a material effect on the Company’s operating results or financial condition.
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Schedule of Reconciliation of Cash and Restricted Cash |
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Schedule of Property and Equipment Estimated Useful Lives |
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Schedule of Revenues Segments |
|
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Schedule of Disaggregated by Geography and Percentage of Revenues |
|
BUSINESS COMBINATION (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quality Detection Dogs Sweden AB [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of allocation of purchase price as of purchase date |
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expense, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses And Other Current Assets |
Prepaid expenses and other current assets are as following:
|
PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property And Equipment |
|
LEASES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Lease Cost |
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Schedule of Supplemental Cash Flow Information Related to Leases |
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Schedule of Future Minimum Lease Payment |
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GOODWILL (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill |
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities are as follows:
|
OTHER LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Liabilities |
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REDEEMABLE NON-CONTROLLING INTERESTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Redeemable Non-controlling Interests |
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STOCK-BASED COMPENSATION (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Au10tix Limited [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity |
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AU10TIX Technologies B.V [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity |
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OTHER INCOME (EXPENSES), NET (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Income (Expenses), Net |
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INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income (loss) before income tax benefit (expense) |
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Schedule of Deferred Tax Assets and Liabilities |
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Schedule of Effective Income Tax Rate |
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Schedule of Reconciliation of Unrecognized Tax Benefits |
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SEGMENT AND GEOGRAPHICAL INFORMATION (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Results by Segment |
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Schedule of Revenues by Geographic Area |
|
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Schedule of Property and Equipment, Net by Geographic Regions |
|
SIGNIFICANT ACCOUNTING POLICIES (Schedule of Reconciliation of Cash and Restricted Cash) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 50,937 | $ 88,753 | $ 51,602 | |
Restricted cash – short term | 15,867 | 14,699 | 9,472 | |
Bank deposits | 24,568 | 0 | 0 | |
Restricted cash – long term | 4,590 | 0 | 0 | |
Total cash, cash equivalents, restricted cash and bank deposits shown in the statement of cash flows | $ 95,962 | $ 103,452 | $ 61,074 | $ 54,845 |
SIGNIFICANT ACCOUNTING POLICIES (Schedule of Property and Equipment Estimated Useful Lives) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Equipment and facilities [Member] | Minimum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 3 years |
Equipment and facilities [Member] | Maximum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 7 years |
Internal-use software [Member] | Minimum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 3 years |
Internal-use software [Member] | Maximum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 7 years |
Vehicles [Member] | Minimum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 3 years |
Vehicles [Member] | Maximum [Member] | |
Accounting Policies Line Items | |
Estimated useful life | 7 years |
SIGNIFICANT ACCOUNTING POLICIES (Schedule of Revenues Segments) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Accounting Policies Line Items | |||
Total revenues | $ 324,977 | $ 324,934 | $ 248,419 |
Airport Security [Member] | |||
Accounting Policies Line Items | |||
Total revenues | 224,037 | 217,463 | 194,477 |
Other Aviation Related Services [Member] | |||
Accounting Policies Line Items | |||
Total revenues | 53,954 | 36,224 | 28,177 |
Authentication Technology [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 46,986 | $ 71,247 | $ 25,765 |
SIGNIFICANT ACCOUNTING POLICIES (Schedule of Disaggregated by Geography and Percentage of Revenues) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Accounting Policies Line Items | |||
Total revenues | $ 324,977 | $ 324,934 | $ 248,419 |
Percentage of Revenues | 100.00% | 100.00% | 100.00% |
Germany [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 111,826 | $ 126,367 | $ 119,500 |
Percentage of Revenues | 34.00% | 39.00% | 48.00% |
United States [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 88,333 | $ 94,743 | $ 45,305 |
Percentage of Revenues | 27.00% | 29.00% | 18.00% |
The Netherlands [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 63,842 | $ 52,165 | $ 58,446 |
Percentage of Revenues | 20.00% | 16.00% | 24.00% |
Spain [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 39,448 | $ 30,946 | $ 7,465 |
Percentage of Revenues | 12.00% | 10.00% | 3.00% |
Other countries [Member] | |||
Accounting Policies Line Items | |||
Total revenues | $ 21,528 | $ 20,713 | $ 17,703 |
Percentage of Revenues | 7.00% | 6.00% | 7.00% |
BUSINESS COMBINATION (Narrative) (Details) kr in Thousands, $ in Thousands |
1 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Feb. 28, 2021
SEK (kr)
|
Feb. 28, 2021
USD ($)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2021
SEK (kr)
|
Dec. 31, 2021
USD ($)
|
Feb. 28, 2021
USD ($)
|
|
Loss from expected sale | $ 218 | $ (0) | $ 0 | |||||
Quality Detection Dogs Sweden AB [Member] | ||||||||
Percentage of acquistion of outstanding shares | 51.00% | 51.00% | ||||||
Consideration | kr 1,250 | $ 150 | ||||||
Goodwill | kr 1,178 | kr 1,178 | $ 139 | $ 146 | ||||
Loss from expected sale | $ 218 |
BUSINESS COMBINATION (Schedule of Purchase Price Allocation) (Details) - Quality Detection Dogs Sweden AB [Member] kr in Thousands, $ in Thousands |
Dec. 31, 2021
SEK (kr)
|
Dec. 31, 2021
USD ($)
|
Feb. 28, 2021
SEK (kr)
|
Feb. 28, 2021
USD ($)
|
---|---|---|---|---|
Current assets | kr 140 | $ 17 | ||
Goodwill | kr 1,178 | $ 139 | 1,178 | 146 |
Total identifiable assets acquired | 1,318 | 163 | ||
Current liabilities | 68 | 13 | ||
Total liabilities assumed | 68 | 13 | ||
Total identifiable assets acquired and liabilities assumed | kr 1,250 | $ 150 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Schedule of Prepaid expenses and other current assets consist) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
||||||
---|---|---|---|---|---|---|---|---|
Prepaid Expense, Current [Abstract] | ||||||||
Receivable from the Dutch tax authorities | [1] | $ 0 | $ 9,091 | |||||
Receivable from the German authorities – COVID-19 | [2] | 483 | 527 | |||||
Dutch Governmental support – COVID-19 | [3] | 4,302 | 2,614 | |||||
Value Added Tax (VAT) receivable | 1,759 | 691 | ||||||
Prepaid uniforms | 811 | 435 | ||||||
Prepaid insurance | 536 | 380 | ||||||
Other | 1,914 | 2,283 | ||||||
Total prepaid expenses and other current assets | $ 9,805 | $ 16,021 | ||||||
|
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 16,591 | $ 15,222 | |
Less: accumulated depreciation and amortization | 10,315 | 9,512 | |
Total property and equipment, net | 6,276 | 5,710 | |
Depreciation expense | 2,454 | 2,061 | $ 2,090 |
Office, equipment and facilities [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | 8,885 | 9,222 | |
Internal-use software [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | 2,845 | 1,490 | |
Vehicles [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | 1,990 | 1,617 | |
Leasehold Improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 2,871 | $ 2,893 |
LEASE (Schedule of Components of Lease Expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Lease Cost | |||
Operating lease cost | $ 4,617 | $ 4,422 | $ 3,914 |
Short-term lease cost | 1,614 | 1,542 | 1,580 |
Total lease cost | 6,231 | 5,964 | 5,494 |
Cash paid for amounts included in the measurement of Lease liabilities: | |||
Operating cash flows from operating leases | 4,625 | 4,465 | 3,962 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 3,885 | $ 3,164 | $ 4,941 |
Weighted-average remaining lease term - operating leases | 3 years 3 months 18 days | 4 years | 4 years 6 months |
Weighted-average discount rate - operating leases | 5.34% | 5.12% | 4.80% |
LEASES (Schedule of Supplemental Balance Sheet Information Related to Leases) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Lessee Disclosure [Abstract] | ||
Operating lease ROU assets | $ 10,201 | $ 10,938 |
Operating lease liabilities - current | 3,969 | 3,317 |
Operating lease liabilities - non current | 6,375 | 8,298 |
Total operating lease liabilities | $ 10,344 | $ 11,615 |
LEASES (Schedule of Future Minimum Lease Payments) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Operating leases | ||
2023 | $ 4,361 | |
2024 | 3,398 | |
2025 | 1,570 | |
2026 | 1,050 | |
2027 | 720 | |
Thereafter | 251 | |
Total future minimum lease payments | 11,350 | |
Less: imputed interest | 1,006 | |
Total | $ 10,344 | $ 11,615 |
GOODWILL (Schedule of Goodwill) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Balance As Of Beginning Of Year Abstract | |||
Goodwill, net | $ 690 | $ 746 | |
Goodwill acquired during the year | 0 | 146 | |
Impairment losses | 0 | (139) | $ 0 |
Exchange rate effect | (44) | (63) | |
Balance as of the end of the year: | |||
Balance as of the end of the year | $ 646 | $ 690 | $ 746 |
GOODWILL (Narrative) (Details) € in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
EUR (€)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Feb. 28, 2021
EUR (€)
|
Feb. 28, 2021
USD ($)
|
|
Goodwill | $ 646 | $ 690 | $ 746 | |||
Goodwill impairment loss | $ 0 | 139 | $ 0 | |||
Quality Detection Dogs Sweden Ab [Member] | ||||||
Ownership percentage | 51.00% | 51.00% | ||||
Goodwill | € 122 | $ 146 | ||||
Goodwill impairment loss | € 122 | $ 139 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued payroll and related costs | $ 26,774 | $ 26,511 |
Accrued vacation | 8,080 | 7,152 |
Labor union contribution | 333 | 925 |
Deferred revenue | 3,570 | 2,239 |
Other | 2,950 | 3,007 |
Total accrued expenses and other current liabilities | $ 41,707 | $ 39,834 |
OTHER LIABILITIES (Narrative) (Details) $ in Thousands, ¥ in Millions |
1 Months Ended | ||
---|---|---|---|
Jul. 31, 2020
JPY (¥)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
|
Other Liabilities [Line Items] | |||
Long term loan balances | $ | $ 134 | $ 280 | |
Loan from financial institution | ¥ | ¥ 50 | ||
Term of loan | 5 years | ||
Minimum [Member] | |||
Other Liabilities [Line Items] | |||
Minimum interest rate on loan from financial institution | 0.21% | ||
Maximum [Member] | |||
Other Liabilities [Line Items] | |||
Maximum interest rate on loan from financial institution | 1.10% |
OTHER LIABILITIES (Schedule of Other Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
||||
---|---|---|---|---|---|---|
Other Liabilities [Abstract] | ||||||
Deferred wage tax and social security | [1] | $ 15,824 | $ 22,534 | |||
Deferred VAT | 10,882 | 14,703 | ||||
Severance pay liability | 1,893 | 1,631 | ||||
Deferred revenue | 336 | 1,030 | ||||
Other | [2] | 279 | 969 | |||
Total other liabilities | $ 29,214 | $ 40,867 | ||||
|
REDEEMABLE NON-CONTROLLING INTERESTS (Schedule of Redeemable Non-controlling Interests) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Noncontrolling Interest [Abstract] | ||
Balance as of the beginning of the year | $ 90,478 | $ 75,322 |
Net Income | (379) | 6,200 |
Other Comprehensive Income - Translation adjustment | (15) | (211) |
Conversion of AU10TIX shares A-1 into new series A | 0 | 9,057 |
Other | (110) | 110 |
Balance as of the end of the year | $ 89,974 | $ 90,478 |
GOVERNMENTAL SUPPORT (Narrative) (Details) € in Thousands, $ in Thousands |
12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2022
EUR (€)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
EUR (€)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
EUR (€)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
|
The Netherlands [Member] | ||||||||
Payroll support amount | € 3,671 | $ 3,864 | € 18,135 | $ 22,608 | € 17,619 | $ 21,645 | ||
Accumulated debt to tax authorities | € 31,796 | € 33,456 | $ 33,826 | $ 38,011 | ||||
Germany [Member] | ||||||||
Payroll support, percentage | 60.00% | 60.00% | ||||||
American subsidiary [Member] | ||||||||
Payroll support amount | $ 0 | 15,918 | 13,680 | |||||
Reduction of labor expenses | $ 0 | $ 16,925 | $ 12,672 |
OTHER INCOME (EXPENSES), NET (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Other Income and Expenses [Abstract] | |||
Interest expense to related parties | $ (28) | $ (83) | $ (171) |
Interest expense and other bank charges | (350) | (801) | (901) |
Interest income | 121 | 24 | 178 |
Foreign currency gain (loss) | 723 | 60 | (254) |
Gain from sale of Mesh shares | 0 | 186 | 0 |
Loss from investment in I-SEC Korea | (131) | 0 | 0 |
Loss from QDD | (218) | 0 | 0 |
Other income (expense) | (4) | 77 | (140) |
Total other income (expense), net | $ 113 | $ (537) | $ (1,288) |
INCOME TAXES (Components of income (loss) before income tax benefit (expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | $ (3,588) | $ 50,508 | $ 5,992 |
Netherlands [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | (11,419) | (3,070) | 469 |
Germany [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | 4,317 | 11,658 | (4,141) |
United States [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | (3,621) | 14,968 | 8,817 |
Spain [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | 552 | (2,052) | (1,406) |
Israel [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | 7,298 | 29,964 | 2,178 |
Other locations [Member] | |||
Income Taxes [Line Items] | |||
Income (loss) before income tax expenses | $ (715) | $ (960) | $ 75 |
INCOME TAXES (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Deferred tax assets: | ||
Operating loss carryforwards | $ 10,895 | $ 10,547 |
Interest loss carry forward | 1,543 | 0 |
Capital loss carryforwards | 114 | 165 |
Allowance for doubtful accounts | 193 | 150 |
Tax credit carryforwards | 560 | 560 |
Accrued expenses and other | 585 | 536 |
Research and development expenses, net | 1,340 | 1,183 |
Total deferred tax assets | 15,230 | 13,141 |
Deferred tax liabilities: | ||
Depreciation of property and equipment | (210) | (108) |
Deferred tax assets net of deferred tax liabilities before valuation allowance | 15,020 | 13,033 |
Valuation allowance | (13,502) | (11,630) |
Deferred tax assets, net | $ 1,518 | $ 1,403 |
INCOME TAXES (Effective Income Tax Rate Reconciliation) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Abstract] | |||
The Netherlands' statutory rate | 25.80% | 25.00% | 25.00% |
Effective loss (income) tax benefit at statutory rate | $ 926 | $ (12,627) | $ (1,498) |
Rate differential | (136) | 2,915 | 610 |
Non-deductible expenses | (342) | (1,643) | (857) |
Adjustments to prior year tax losses | 0 | (2,599) | (3,604) |
Changes in valuation allowance | (1,872) | 5,815 | 3,601 |
Other | (222) | (1,081) | 1,158 |
Income tax expense | $ (1,646) | $ (9,220) | $ (590) |
INCOME TAXES (Reconciliation of unrecognized tax benefits) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Income Tax Disclosure [Abstract] | ||
Balance at beginning of year | $ 688 | $ 0 |
Additions based on tax positions taken in prior years | 0 | 546 |
Additions based on tax positions taken in the current year | 0 | 142 |
Reduction based on tax positions taken in prior years | 0 | 0 |
Balance at end of year | $ 688 | $ 688 |
INCOME TAXES (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income tax benefit (expense) | |||
Current: Subsidiaries outside of The Netherlands | $ (1,984) | $ (8,937) | $ (1,345) |
Deferred: Subsidiaries outside of the Netherlands | 135 | 331 | 676 |
Previous: Subsidiaries outside of The Netherlands | $ 203 | $ (614) | $ 79 |
INCOME TAXES (Narrative) (Details 1) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Operating Loss Carryforwards [Line Items] | |||
Deferred tax assets. capital loss carryforwards | $ 114 | $ 165 | |
Change in valuation allowance | 1,872 | (5,815) | |
Unrecognized Tax Benefits | 688 | $ 688 | $ 0 |
Netherlands [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating loss carry forward | 24,116 | ||
Amount of carry forward interest | 5,982 | ||
United States [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Net operating loss carry forward | 10,399 | ||
Amount of non expirable operating loss carry forward | 3,059 | ||
Tax credit carryforwards | 560 | ||
ISRAEL | |||
Operating Loss Carryforwards [Line Items] | |||
Deferred tax assets. capital loss carryforwards | 495 | ||
Net operating loss carry forward | $ 1,910 |
SEGMENT AND GEOGRAPHICAL INFORMATION (Narrative) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 6,276 | $ 5,710 |
Israel [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 4,216 | $ 3,956 |
SEGMENT AND GEOGRAPHICAL INFORMATION (Revenue by Country) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Segment Reporting Information [Line Items] | |||
Revenues | $ 324,977 | $ 324,934 | $ 248,419 |
GERMANY | |||
Segment Reporting Information [Line Items] | |||
Revenues | 111,826 | 126,367 | 119,500 |
United States [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues | 88,333 | 94,743 | 45,305 |
The Netherlands [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues | 63,842 | 52,165 | 58,446 |
Spain [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues | 39,448 | 30,946 | 7,465 |
Other countries [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 21,528 | $ 20,713 | $ 17,703 |
SEGMENT AND GEOGRAPHICAL INFORMATION (Property and Equipment by Country) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 6,276 | $ 5,710 |
GERMANY | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 384 | 361 |
United States [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 683 | 422 |
The Netherlands [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 488 | 624 |
Spain [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 135 | 118 |
Other countries [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 4,586 | 4,185 |
Israel [Member] | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 4,216 | $ 3,956 |
Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|||
Allowance for Doubtful Accounts [Member] | |||||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | |||||
Beginning of year | [1] | $ 991 | $ 690 | $ 418 | |
Charges to Costs and Expenses | [1] | 409 | 864 | 710 | |
Charges to other accounts | [1] | (192) | (563) | (438) | |
Deductions | [1] | 0 | 0 | 0 | |
End of Year | [1] | 1,208 | 991 | 690 | |
Allowance for Net Deferred Tax Assets [Member] | |||||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | |||||
Beginning of year | 11,630 | 17,445 | 21,046 | ||
Charges to Costs and Expenses | 0 | 0 | 0 | ||
Charges to other accounts | 1,872 | 0 | 0 | ||
Deductions | 0 | (5,815) | (3,601) | ||
End of Year | $ 13,502 | $ 11,630 | $ 17,445 | ||
|
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