Exhibit 99.1
A2Z Cust2Mate Solutions Corp.
(formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
(Unaudited)
(Expressed in US Dollars)
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
A2Z CUST2MATE SOLUTIONS CORP.
(formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
(Unaudited)
(Expressed in US Dollars)
INDEX
| 2 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Expressed in Thousands of US Dollars)
As at June 30, 2024 | As at December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Deposits | ||||||||
| Inventories | ||||||||
| Trade receivables, net | ||||||||
| Other accounts receivable | ||||||||
| Total current assets | ||||||||
| Intangible asset - patent, net | ||||||||
| Long term financial asset at fair value | ||||||||
| Property, plant and equipment, net | ||||||||
| Total non-current assets | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Short term loan and current portion of long-term loans | ||||||||
| Bank overdraft | ||||||||
| Lease liability | ||||||||
| Trade payables | ||||||||
| Other accounts payable | ||||||||
| Total current liabilities | ||||||||
| Lease liability | ||||||||
| Long term loans | ||||||||
| Provisions | ||||||||
| Warrant Liability (note 3) | ||||||||
| Severance payment, net | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ deficit (note 4) | ||||||||
| Share capital and additional paid in capital | ||||||||
| Warrant Reserve | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Transactions with non-controlling interests | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | ||||||||
| August 14, 2024 | “Yonatan De Jongh” | “Gadi Graus” | ||
| Date of approval of the financial statements | Yonatan De Jongh - Director | Gadi Graus Chief Executive Officer |
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 3 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
(Expressed in Thousands of US Dollars, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues (note 6) | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Sales and marketing costs | ||||||||||||||||
| General and administration expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss (gain) on revaluation of warrant Liability (note 3) | ( | ) | ( | ) | ||||||||||||
| Financial (income) expense | ( | ) | ||||||||||||||
| Loss before taxes on income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to controlling shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Item that will not be reclassified to profit or loss: | ||||||||||||||||
| Adjustments arising from translation of financial statements to presentation currency | ( | ) | ||||||||||||||
| Other comprehensive income (loss) | ( | ) | ||||||||||||||
| Total comprehensive loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss attributable to controlling shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per share | ) | ) | ) | ) | ||||||||||||
| Weighted average number of shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 4 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(Expressed in Thousands of US Dollars)
| Ordinary share capital | Accumulated | Transactions | Total | |||||||||||||||||||||||||||||
| Number of shares | Additional paid in capital | Warrant reserve | Other Comprehensive Income | with non-controlling parties | Accumulated deficit | Non-controlling interest | of the Company (Deficit) | |||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Adjustments arising from translating financial statements of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Net comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of shares in January 2024 private placement (note 4(e)) | ||||||||||||||||||||||||||||||||
| Exercise of RSUs (note 4(g)) | ||||||||||||||||||||||||||||||||
| Issuance of shares in April 2024 private placement (note 4(f)) | ||||||||||||||||||||||||||||||||
| Share based compensation (note 5(b)) | ||||||||||||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Ordinary share capital | Accumulated | |||||||||||||||||||||||||||
| Number of shares | Additional paid in capital | Warrant reserve | Other Comprehensive Income | Accumulated deficit | Non-controlling interest | Total Equity | ||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Adjustments arising from translating financial statements of foreign operations | - | |||||||||||||||||||||||||||
| Net comprehensive loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Issuance of shares in respect of private placement | ||||||||||||||||||||||||||||
| Issuance of shares in respect of registered direct offering | ||||||||||||||||||||||||||||
| Exercise of RSUs | ||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 5 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in Thousands of US Dollars)
| Six months ended | ||||||||
| June 30 | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Amortization and depreciation | ||||||||
| Share based compensation | ||||||||
| Loss on revaluation of warrant liability | ( | ) | ||||||
| Loss on revaluation of contingent liability | ( | ) | ||||||
| Change in severance liability | ( | ) | ( | ) | ||||
| Change in inventory | ( | ) | ||||||
| Change in trade receivables | ( | ) | ( | ) | ||||
| Change in other account receivables | ( | ) | ||||||
| Accrued interest on loans and leases | ( | ) | ( | ) | ||||
| Changes in bank overdraft | ||||||||
| Change in accounts payable | ||||||||
| Changes in deferred revenues | ( | ) | ||||||
| Change in other accounts payable | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Cash flows from investing activities | ||||||||
| Restricted deposits | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Cash flows from financing activities | ||||||||
| Issuance of shares and warrants, net | ||||||||
| Changes in other accounts payable | ||||||||
| Exercise of warrants | ||||||||
| Lease payments | ( | ) | ( | ) | ||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Proceeds from receipt of loans | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Effect of changes in foreign exchange rates | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | ||||||||
| Interest paid during the period | ||||||||
| APPENDIX A: NON-CASH ACTIVITIES | ||||||||
| Recognition of right-of-use asset and lease liability | ||||||||
| 6 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 1 – NATURE AND CONTINUANCE OF OPERATIONS
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.) (the “Company” or “A2Z”) was incorporated on January 15, 2018, under the laws of British Columbia. The head office is located at 1600 – 609 Granville Street, Vancouver, British Columbia V7Y 1C3, and the records and registered office is located at 2200 HSBC Building 885 West Georgia Street, British Columbia, V6C 3E8.
The Company was listed on the NASDAQ Stock Market LLC (“Nasdaq”) starting January 22, 2022, and trades under the symbol “AZ”. The Company was listed on the TSX Venture Exchange (“TSX.V”) in Toronto until February 28, 2024. Following approval for a voluntary delisting, the Company no longer trades on the TSX.V but remains a reporting issuer in Canada and its common shares remain listed on Nasdaq.
The
Company owns
The Cust2Mate system offers various features for shoppers and retailers such as product information and location, an on-cart scale to weigh items and automatically calculate costs, bar-code scanner and on-board payment system to bypass checkout lines. In addition, the product includes big data smart algorithms and computer vision capabilities, allowing for customer specific targeted advertising. (“The Cust2Mate Platform”).
The Company’s other activities include the provision of services in the field of services to the military and security markets as well as the development of related products for the civilian markets. Such services include providing maintenance services and container leasing. The Company also provides maintenance services for complex electronic systems and products.
The
Company, through its
The
accompanying condensed interim consolidated financial statements have been prepared assuming that the Company will continue as
a going concern. The Company has incurred recurring losses and negative cash flows from operating activities since inception, such that
as of June 30, 2024, the Company had accumulated losses of $
Considering the above, the Company’s dependency on external funding for its operations raises a substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements for the six months ended June 30, 2024, do not include any adjustments that might result from the outcome of these uncertainties.
On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. The intensity and duration of Israel’s current war is difficult to predict, as are such war’s implications on our business and operations. While none of our supply chains have been impacted since the war broke out on October 7, 2023, the ongoing war may create supply and demand irregularities in Israel’s economy in general or lead to macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on us and our ability to effectively conduct our operations. Moreover, we cannot predict how this war will ultimately affect Israel’s economy in general, which may involve a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative”).
In connection with the Israeli security cabinet’s declaration of war against Hamas and possible or currently occurring hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. A few of our employees, none of whom are members of management, have been called to active military duty since October 7, 2023.
Some of these employees have since returned, but there can be no assurance that they will not be called to military service again. In addition, we rely on service providers located in Israel and our employees or employees of such service providers may be called for service in the current or future wars or other armed conflicts with Hamas and such persons may be absent from their positions for a period of time. As of August 14, 2024, any impact as a result of the number of absences of our personnel and personnel at our service providers or counterparties located in Israel has been manageable. However, military service call ups that result in absences of personnel from our service providers or contractual counterparties in Israel may disrupt our operations and absences for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations.
Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in southern Lebanon. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank or the Houthis in Yemen, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include terror and missile attacks. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damage incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
These Condensed Interim Consolidated financial statements were authorized for issue by the Board of Directors on August 14, 2024.
| 7 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 2 – BASIS OF PREPARATION
| 1. | Significant accounting policy |
Statement of Compliance
These unaudited Condensed Interim Consolidated financial statements of the Company are as of June 30, 2024, and presented in US dollars, which is not the functional currency. The functional currency is the NIS. These unaudited interim condensed consolidated financial statements have been prepared in accordance with the requirements of International Accounting Standard IAS 34 “Interim Financial Reporting” as issued by the IASB. They do not include all the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the financial statements of the Company for the year ended December 31, 2023.
The policies applied in these Condensed Interim Consolidated financial statements are based on IFRS effective as of June 30, 2024, and are consistent with those included in the Company’s annual financial statements for the year ended December 31, 2023.
Basis of Consolidation
The financial results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intercompany balances and transactions and any unrealized income and expenses arising from such transactions are eliminated upon consolidation.
Basis of measurement
These consolidated financial statements have been prepared on a going concern basis, under the historical cost basis, except for financial instruments which have been measured at fair value.
| 2. | Critical Estimates and Assumptions |
The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The Company’s financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the Company’s financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods when the revision affects both current and future periods.
| 8 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the respective entity operates; the Company has determined the functional currency of each entity to be the New Israeli Shekel. Such determination involves certain judgements to identify the primary economic environment. The Company reconsiders the functional currency of its subsidiaries if there is a change in events and/or conditions which determine the primary economic environment. During the three and six months ended June 30, 2024, there have been no such changes. The Company’s presentation currency is the U.S. dollar.
The critical judgments and significant estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are the same as at December 31, 2023:
| a) | The useful life of property and equipment |
Property and equipment are amortized or depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the amounts charged to the consolidated statement of comprehensive income in specific periods.
| b) | Determining the fair value of share-based payment transactions |
The fair value of share-based payment transactions is determined upon initial recognition by the Binomial model. The Binomial model is based on share price and exercise price and assumptions regarding expected volatility, term of share option, dividend yield and risk-free interest rate.
| c) | Intangible assets |
Intangible assets are tested for impairment annually or more frequently if three is an indication of impairment. The carrying value of intangibles with definite lives is reviewed each reporting period to determine whether there is any indication of impairment. If there are indications of impairment the impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and impairment loss is recognized.
| d) | Derivative liability – Warrants |
The Company uses the Black-Scholes option-pricing model to estimate fair value at each reporting date. The key assumptions used in the model are the expected future volatility in the price of the Company’s Common Shares and the expected life of the warrants.
| e) | ECL and their measurement |
ECL are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index) and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario analysis (base case, adverse and optimistic scenarios).
As of June 30, 2024, and December 31, 2023, ECL for trade and other account receivables are not material, and as such are not disclosed, in accordance with IFRS 9.
| 3. | New Accounting Standards |
A number of amended standards became applicable for the current reporting period. The Company and its subsidiaries did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards:
1.Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
2.Definition of Accounting Estimates – Amendments to IAS 8
3.Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
| 9 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 3 – WARRANT LIABILITY
| a) | January 2024 Warrants
On
January 4, 2024, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on June 30, 2024:
| Balance at January 1, 2024 | $ | |||
| Issuance of January 2024 Registered Direct Offerings Warrants | ||||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ |
For
the three- and six-month period ended June 30, 2024, the Company recorded a gain on the revaluation of the January 2024 warrant liability
in the amount of $
| b) | December 2023 Warrants
On
December 13, 2023, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on June 30, 2024:
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ |
For
the three- and six-month period ended June 30, 2024, the Company recorded a gain on the revaluation of the December 2023 warrant liability
in the amount of $
| c) | June 2023 Warrants
On
June 15 and on June 20, 2023, the Company issued an aggregate of |
| 10 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
Level 3 Warrant liability for the period ended on June 30, 2024:
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ |
For
the three- and six-month period ended June 30, 2024, the Company recorded a gain on the revaluation of the June 2023 warrant liability
in the amount of $
| d) | March 2023 Warrants
On
March 20, 2023, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on June 30, 2024:
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ |
For
the three- and six-month period ended June 30, 2024, the Company recorded a gain on the revaluation of the March 2023 warrant liability
in the amount of $
| 11 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 3 – WARRANT LIABILITY (CONTINUED)
| c) | November 2022 Warrants
On
November 2, 2022, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on June 30, 2024:
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ |
For
the three-and six-month period ended June 30, 2024, the Company recorded a loss on the revaluation of the November 2022 warrant liability
in the amount of $
| 12 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
| a) | During
the six months ended June 30, 2023, the Company issued shares in respect of | |
| b) | During the six months ended June 30, 2023, the Company issued shares in respect of RSUs that were exercised (note 5 (c)). | |
| c) | On
March 20, 2023, the Company closed a private placement for gross proceeds of $ | |
| d) | On
June 15 and on June 20, 2023, the Company closed registered direct offerings for gross proceeds of $ | |
| e) | On
January 4, 2024, the Company closed a registered direct offering for gross proceeds of $ | |
| f) | On April 2, 2024, the Company closed a registered direct offering for gross proceeds of approximately $ at a purchase price of $ per share and issued an aggregate of common shares in the registered direct offering.
In
addition, on April 2, 2024 the Company entered into binding agreements with certain investors to issue common shares and pre-funded warrants
to purchase up to common shares in a private placement at a purchase price of $per share and $ per pre-funded warrant,
for gross proceeds of approximately $.
Each pre-funded warrant has an exercise price of $ per share and will expire when exercised in full. The April 2024 Private Placement was expected to close within 60 days of April 2, 2024, subject to satisfaction of closing
conditions, including no material adverse effect with respect to the Company between the dates of signing and closing. The April
2024 Private Placement closed on August 12, 2024, with the Company raising a total of $
In connection with the registered direct offering, the Company has issued certain non-U.S. residents common shares as finders fees. These common shares and the common shares issued in the private placement have been issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering and Rule 506(b) promulgated thereunder, as applicable.
Additionally, certain directors and officers of the Company participated in the registered direct offering and the private placement in an amount of $(the “Insider Participation”). The Insider Participation transaction is considered a “related party transaction” within the meaning of Canadian Securities Administrators Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61- 101”). The Company expects to rely on exemptions from the formal valuation and minority approval requirements in sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of the Insider Participation. | |
| g) | During the six months ended June 30, 2024, the Company issued shares in respect of RSUs that were exercised (note 5 (c)). |
| 13 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS
a) Warrants
| (i) | Warrant transactions for the six months ended June 30, 2024, and for the year ended December 31, 2023 are as follows: |
| Number | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2023 | $ | |||||||
| Warrants issued in the March 2023 Private Placement | ||||||||
| Exercise of warrants | ( | ) | ||||||
| Warrants issued in the June 2023 Registered Direct Offering | ||||||||
| Warrants issued in the December 2023 Registered Direct Offering | ||||||||
| Balance, December 31, 2023 | $ | |||||||
| Warrants issued in the January 2024 Registered Direct Offering | ||||||||
| Balance, June 30, 2024 | $ | |||||||
| 14 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS (CONTINUED)
a) Warrants (continued)
As at June 30, 2024, the Company had outstanding warrants, enabling the holders to acquire common shares as follows:
| June 30, 2024 | Expiry date | Exercise price | Exercise price (USD) | |||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
b) Stock Options
| Number | Weighted Average Exercise Price (CAD) | Weighted Average Exercise Price (USD) | ||||||||||
| Balance January 1, 2023 | $ | $ | ||||||||||
| Options granted (i)(ii) | ||||||||||||
| Exercise of options | ||||||||||||
| Expiry of options | ( | ) | ||||||||||
| Balance December 31, 2023 | $ | $ | ||||||||||
| Options cancelled | ( | ) | ||||||||||
| Balance June 30, 2024 | $ | $ | ||||||||||
| (i) |
| |
| (ii) | ||
| (iii) | On
April 18, 2023, stock options were issued to employees with an exercise price of CAD$. The options expire on April 18,
2033. The fair value of the options granted was estimated at $ | |
| (iii) | On
June 28, 2023, stock options were issued to officers with an exercise price of CAD$. The options expire on June 28, 2033.
The fair value of the options granted was estimated at $ |
| 15 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS (CONTINUED)
b) Stock Options (continued)
| Outstanding as of June 30, 2024 | Exercisable as of June 30, 2024 | Expiry date | Exercise price (CAD) | Exercise price (USD) | ||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
Share-based compensation expense is recognized over the vesting period of options. During the six months ended June 30, 2024, share-based compensation of $ was recognized and charged to the Consolidated Statement of Loss and Comprehensive Loss (June 30, 2023 – $).
c) RSUs
On August 4, 2022, the Company granted RSUs to directors, officers and advisers, of which RSUs are to executives and directors, pursuant to the Company’s RSU Plan and in acknowledgment of the Company’s management recent success and increased future workload.
On January 4, 2023, the Company granted RSUs to directors, officers and advisers, of which RSUs are to executives and directors, pursuant to the Company’s RSU Plan and in acknowledgment of the Company’s management recent success and increased future workload.
On April 18, 2023, the Company granted RSUs to employees, pursuant to the Company’s RSU Plan.
On June 28, 2023, the Company granted Restricted Share Units (“RSUs”) to officers pursuant to the Company’s RSU Plan.
| Number | ||||
| Balance, January 1, 2023 | ||||
| RSUs granted | ||||
| Expiry of RSUs | ( | ) | ||
| Exercise of RSUs | ( | ) | ||
| Balance, December 31, 2023 | ||||
| RSUs canceled | ( | ) | ||
| Exercise of RSUs | ( | ) | ||
| Balance, June 30, 2024 | ||||
Total exercisable RSUs as of June 30, 2024, are (December 31, 2023 – ). During the six months ended June 30, 2024, share-based compensation of $ was recognized and charged to the Consolidated Statement of Loss and Comprehensive Loss (June 30, 2023 – $).
| 16 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 6 - REVENUES:
Revenue streams:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues from services: | ||||||||||||||||
| Revenues from services | ||||||||||||||||
| Revenues from leasing | ||||||||||||||||
| Precision metal parts: | ||||||||||||||||
| Revenues from sales of precision metal parts | ||||||||||||||||
| Smart Carts: | ||||||||||||||||
| Revenues from smart carts project | ||||||||||||||||
| Total | ||||||||||||||||
NOTE 7 – OPERATING SEGMENTS:
The
Company and its subsidiaries are engaged in the following
| a. | Services to the military/security markets as well as development of related products for the civilian and retail markets. (“Services”) | |
| b. | Retail automation solutions – Smart Carts (“Smart Carts”) | |
| c. | Manufacturing and selling of precision metal parts – “Precision Metal Parts” |
| Six Months Ended June 30, 2024 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss | ||||||||||||||||
| Gain on revaluation of warrant liability | ( | ) | ||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| 17 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
| Six Months Ended June 30, 2023 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss (gain) | ( | ) | ||||||||||||||
| Loss on revaluation of warrant liability | ||||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ||||||||||||||||
| Total | ||||||||||||||||
| Segment loss | ||||||||||||||||
| Gain on revaluation of warrant liability | ( | ) | ||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss | ||||||||||||||||
| Loss on revaluation of warrant liability | ||||||||||||||||
| Finance expense, net | ( | ) | ||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| 18 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 8 - FINANCIAL RISK FACTORS:
ECL and their measurement
ECL are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index) and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario analysis (base case, adverse and optimistic scenarios).
As of June 30, 2024, and December 31, 2023, ECL for trade and other account receivables are not material, and as such are not disclosed, in accordance with IFRS 9.
NOTE 9 – SUBSEQUENT EVENTS
| a) | On August 12, 2024, the Company closed its previously announced private placement for gross proceeds of approximately $, at a purchase price of $per common share and $ per pre-funded warrant. The Company issued a total of common shares and pre-funded warrants to purchase up to common shares, with each pre-funded warrant having an exercise price of $ per share. Each pre-funded warrant has an exercise price of $ per share and will expire when exercised in full.
Certain directors and officers of the Company purchased $value of common shares in the private placement. In connection with the closing, the Company will issue certain non-U.S. residents common shares as finders fees. | |
| b) |
The Company must still demonstrate compliance with Listing Rule 5550(a)(2), the Bid Price Rule, by October 21, 2024. In the event the Company does not regain compliance by October 21, 2024, the Company may be eligible for an additional 180 calendar day grace period. The Company intends to monitor its bid price between now and October 21, 2024, and intends to cure the deficiency within the prescribed grace period. During this time, the Company expects that the common shares of the Company will continue to be listed and trade on Nasdaq. The Company’s management is looking into various options available to regain compliance and maintain its continued listing. | |
| c) | On August 12, 2024, the Company announced the appointment of Mr. Alan Rootenberg to the position of Chief Financial Officer, effective immediately. The Company wishes to thank Gadi Levin for his service as Chief Financial Officer and wish him the best as he continues with his other business endeavours, including continued consulting services to the Company. Mr. Rootenberg has over 45 years of accounting and financial services experience, having also served as the chief financial officer of other publicly listed companies. In addition, Mr. Rootenberg has a BCom CPA designation. In connection with his appointment as Chief Financial Officer, Mr. Rootenberg resigned from the audit committee of the board of directors and was replaced by director Adi Vazan. |
| 19 |