Our marketing strategy is focused on promoting brand awareness through differentiated positioning, messaging and pronounced leadership. We achieve this by communicating our product advantages and business benefits and promoting our brand.
Our marketing team focuses on increasing the awareness of the SatixFy brand through public relations, advertising, trade show participation and conference speaking engagements that inform the market on our current systems. Our marketing efforts include identifying and sizing new market opportunities for our systems, creating awareness of our company and systems, and generating contacts and leads within these targeted markets.
In addition, in connection with our Jet Talk joint venture, which has the exclusive right to sell our Aero/ IFC terminals to the commercial aviation market, we expect to benefit from STE’s marketing resources and experience in the aerospace industry.
We design, develop, produce and market our modem and antenna chips and our systems to leading international companies such as operators of LEO, MEO and GEO communication satellites, manufacturers in the fields of Aero/ IFC systems and satellite communications systems’ manufacturers.
The structure of our contracts with customers varies based on the needs and preferences of our individual customers. For example, while we may enter into agreements with some customers that cover the whole life cycle of a project, from the definition of requirements to the development and delivery of a system, at the outset of the engagement, other customers may prefer a phased approach, placing a contract with us for an initial product demonstration, followed by a second phase for the delivery of a commercial- ready product. Accordingly, the length and nature of our contracts vary across our customer base.
We are focused on attracting new customers and expanding our relationships and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and systems that make our offerings compatible with the latest advances in satellite-enabled communication. We actively track our customer relationships, including by monitoring progress under our committed contracts and our prospective customer relationships. While our contracts are typically terminable by us or our customers upon prior notice, once our tailor-made systems are embedded in a customer’s satellite constellation or communication infrastructure, the costs of switching to a different provider could often be substantial.
Additionally, we previously reported estimates of our potential future revenue pipeline, however, due to the cessation or narrowing of negotiations of new contracts with existing and prospective customers, our potential revenue pipeline is uncertain and we do not plan to report this metric in future periods unless and until these circumstances change, as such pipeline information would be of limited utility to investors.
Our R&D efforts focus primarily on developing new chips, systems and technologies, as well as improving our existing systems with additional innovative features and functionality. For example, based on our SX-3099 chip, we developed the SX-4000 chip to be used in space by applying a radiation hardening process. The development of modem and antenna chips requires us to improve the performance, size, power consumption, product roadmap, resilience and cost of our chips. We combine technologies, such as beamforming, beam-hopping and silicon development processes with our proprietary design methods, intellectual property and our expertise to develop new technologies and advanced systems. To date, our R&D efforts have yielded, in addition to our proprietary chips, satellite-capable modems that are in production and several products, including satellite payloads, Aero/IFC terminals and ground terminals and hubs, that are in late stage development or nearing the prototype phase.
The satellite communications industry is competitive and characterized by rapid advances in technology, new product introductions, high levels of investment in R&D and high costs associated with generating marketable systems. Our competitiveness depends on our ability to develop and launch systems superior in performance and SWaP-C than our competitors and our ability to anticipate and adjust to changes in our customers’ requirements. The competition in the satellite communications market focuses primarily on performance, size, power consumption, product roadmap resilience and cost. We believe that we compete favorably as measured against these criteria. Our customers’ selection process is highly competitive, and there are no guarantees that our systems will be included in the next generation of our customers’ systems.
We compete with many major chip and satellite communications system manufacturers that currently, or may in the future, develop satellite-specific communication technology, as well as smaller niche companies that produce systems or chips that compete with our individual offerings on a product-by-product basis. Additionally, in the future we may compete with telecommunication-based connectivity providers as 5G broadband coverage increases. We compete in different product lines to various degrees on the basis of price, technical performance, product features, product system compatibility, customized design, availability, quality, and sales and technical support. In particular, standard systems may involve greater risk of competitive pricing, inventory imbalances and severe market fluctuations than differentiated systems.
We seek to establish and maintain our intellectual property and proprietary rights in our technology and systems through a combination of patent, trademark, copyright and trade secret laws, as well as contractual rights and confidentiality obligations. We seek to maintain the confidentiality of our trade secrets and confidential information through nondisclosure policies, the use of appropriate confidentiality agreements and other security measures. We have registered a number of patents worldwide and have a number of patent applications pending determination, including provisional patent applications for which we are considering whether to file a non-provisional patent application.
There can be no assurance that our patent rights can be successfully enforced against competitive systems in any particular jurisdiction. Although we believe the protection afforded by our intellectual property portfolio (including our patents and trade secrets) and confidentiality agreements has value, the rapidly changing technology in the satellite communications industry and uncertainties in the legal process make our future success dependent primarily on the innovative skills, technological expertise and management abilities of our personnel, rather than on the protections afforded by our intellectual property portfolio and contractual rights. Accordingly, while these legal protections are important, they must be supported by other factors, such as the expanding knowledge, ability and experience of our personnel and the continued development of new systems and product enhancements.
Certain of our systems include software or other intellectual property licensed from third parties.
While it may be necessary in the future to seek new licenses or to renew existing licenses relating to various elements of the technology we use to develop these systems or our future systems, we believe, based upon past experience and standard industry practice, that such licenses generally could be obtained on commercially reasonable terms. Nonetheless, there can be no assurance that such licenses would be available on commercially reasonable terms, if at all.
The industries in which we compete are characterized by rapidly changing technologies, a large number ofpatents, and claims and related litigation regarding patent and other intellectual property rights. We cannot ensure that our patents and other intellectual property and proprietary rights will not be challenged, invalidated or circumvented, that others will not assert that we have infringed, misappropriated or otherwise violated their intellectual property rights, or that our rights will give us a competitive advantage. In addition, the laws of some foreign countries may not adequately protect our systems or intellectual property or proprietary rights.
Certain equipment and systems manufactured by our customers must comply with applicable technical requirements intended to minimize radio interference to other communication services and ensure product safety. In the United States, the Federal Communications Commission is responsible for ensuring that communication devices comply with technical requirements for minimizing radio interference and human exposure to radio emissions. Other regulators, mainly in our European markets, perform similar functions of publishing and enforcing their own requirements. These requirements flow down as technical requirements from our customers to the technical specifications of our systems with which we must comply. The systems we deliver to our customers are tested either by us or by a private testing organization to ensure compliance with all applicable technical requirements, and such testing is backed up with a compliance certification as part of the delivery process.
Due to the nature and classification of our communications systems, we must comply with applicable export control regulations in the countries from which we export our systems. These regulations often require obtaining export licenses from local governments for the export of our systems, which could increase our costs. Failure to comply with these regulations could result in substantial harm to the company, including fines, penalties and the forfeiture of future rights to sell or export these systems.
In the ordinary course of our business, we collect, use, transfer, store, maintain and otherwise process certain sensitive and other personal information regarding our employees, customers and service providers that is subject to complex and evolving laws, regulations, rules, and standards regarding data privacy and cybersecurity. Internationally, many jurisdictions have established their own data privacy and cybersecurity legal frameworks with which we may need to comply. For example, in the European Union has adopted the General Data Protection Regulation (“GDPR”), whichGDPR requires covered businesses to comply with rules regarding the processing of personal data, including its use, protection and the ability of persons whose personal data is processed to access, to correct or delete personal data about themselves. Failure to meet GDPR requirements could result in penalties of up to 4% of annual worldwide turnover or EUR 20 million (UK£17.5 million) (whichever is the greater). Additionally, in the U.K., the U.K. General Data Protection Regulation (“U.K. GDPR”)GDPR (i.e., a version of the GDPR as implemented into U.K. law) went into effect following Brexit. Further, theis in effect. The GDPR and the U.K. GDPR include certain limitations and stringent obligations with respect to the transfer of personal data from the EU and the U.K. to certain third countries (including the United States).
At the U.S. federal level, we are subject to the rules and regulations promulgated under the authority of the Federal Trade Commission, which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity. Moreover, the United States Congress has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed. Data privacy and cybersecurity are also areas of increasing state legislative focus and we are, or may in the future become, subject to various state laws and regulations regarding data privacy and cybersecurity. For example, the CCPA applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.
Other states where we do business, or may in the future do business, or from which we otherwise collect, or may in the future otherwise collect, personal information of residents have enacted or are considering enacting similar laws, with laws in four such states (Virginia, Colorado, Connecticut and Utah) having taken effect or scheduled to take effect in 2023.2024. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach.
We lease all of our facilities. Our headquarters facility lease was scheduled to expirecurrently expires in May 2023 and we exercised the option to extend the lease until May 2028. We believe our facilities are sufficient to meet our current needs and anticipate that suitable additional space will be readily available to accommodate any foreseeable expansion of our operations.
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 4A. UNRESOLVED STAFF COMMENTSNot applicable.
ITEM 5.5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations together with SatixFy’s consolidated financial statements and the related notes thereto appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis, including information with respect to SatixFy’s plans and strategy for SatixFy’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in “Item 3. Key Information – D. Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” SatixFy’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our discussion and analysis for the year ended December 31, 2022 compared to December 31, 2021 can be found in our annual report on Form 20-F for the fiscal year ended December 31, 2022, filed with the SEC on May 1, 2023.
Overview
We are a vertically integrated satellite communications systems provider using our own semiconductors, focused on designing chips and systems that serve the entire satellite communications value chain — from the satellite payload to user terminals. We create chip technologies capable of enabling satellite-based broadband delivery to markets around the world. Since we commenced operations in June 2012, through December 31, 20222023 we have invested over $209$243 million in R&D to create what we believe are the most advanced satellite communications and ground terminal chips in the world.
We develop advanced ASICs and RFICs based on technology designed to meet the requirements of a variety of satellite communications applications, mainly for LEO, MEO and GEO satellite communications systems, Aero/IFC systems and certain COTM applications. Our chip technology supports ESMA, digital beamforming and beam-hopping, on-board processing for payloads and SDR modems — each of which will be critical for providing optimized access to LEO satellite constellations.
We believe we are the only vertically integrated maker of satellite communications systems selling products across the entire satellite communications value chain. All of our systems integrate our proprietary semiconductor chips, of which we are a fabless manufacturer. We design our chips, code our software and design end-to-end communications systems for use in various satellite communications applications.
Our end-to-end solutions for the satellite communications industry include satellite payloads, user terminals (ground and Aero/IFC) and hubs, each built around our advanced ASICs and RFICs. We have a diverse customer base in terms of types of customers, including satellite operators, airlines, manufacturers of satellite communications systems, and other connectivity service providers that integrate our chips and systems in their satellite communications infrastructure. We believe that our modular, scalable and software controllable technology, our focus on producing products for the entire satellite communications value chain and our ability and experience in designing our systems to meet our customers’ specifications, differentiate us from our competitors.
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Our Revenue Model and Prospects
We seek to provide end-to-end solutions for the satellite communications industry, driven by our proprietary chip technology, which we believe allow us to develop and provide satellite communications systems that have higher system processing capacities and throughputs and that are lighter in weight, consume less power and are lower in cost than competing systems. In most cases, our systems must be tailored to our customers’ specifications. A typical system development life cycle starts with an assessment of the customer’s needs and specifications, is followed by the design of a communications system based on those specifications and the integration of our proprietary chips, and culminates in the delivery of the final product to the customer.
The structure of our contracts with customers varies based on the needs and preferences of our individual customers. For example, while we may enter into agreements with some customers that cover the whole life cycle of a project from the definition of requirements to the development and delivery of a system, at the outset of the engagement, other customers may prefer a phased approach, placing a contract with us for an initial product demonstration, followed by a second phase for the delivery of a commercial-ready product. Accordingly, the length and nature of our contracts vary across our customer base. We are an early-stage company and, to date, a substantial portion of our revenues has been derived from relatively few customers.
We recorded $10.7 million and $10.6 million in revenues for the years ended December 31, 2023 and 2022, respectively. To date, most of our customer contracts have covered the early phases of satellite communications system development, typically requiring our R&D personnel to team with our customers on the development of system specifications. Accordingly, over the last three years, most of our customer revenues have related to these phases of product development, and have been recorded under “development services and preproduction,” which accounted for approximately 77% and 95% of our total revenues in the years ended December 31, 2023 and 2022, respectively. Our revenues from sales of products have related mainly to sales of modems and chips, which amounted to $2.5 million and $0.5 million in the years ended December 31, 2023 and 2022, respectively. Ongoing macro-level events and supply-chain constraints across the satellite industry have resulted in order delays and project cancellations by certain of our current and prospective customers, which we expect will continue to impact our business in the near term.
Our three largest customers accounted for, in the aggregate, approximately 77% and 78%, of our revenues in the years ended December 31, 2023 and 2022, respectively . See “— Principal Components of Our Results of Operations — Share in the loss of a company accounted by equity method, net” below.
We have two commercial contracts with Jet Talk, both related to the development of an Aero/IFC satellite communications terminal for commercial aircraft, which under our joint venture agreement Jet Talk will have the exclusive right to commercialize and sell. Jet Talk pays for the development services associated with these contracts with the proceeds of a $20.0 million investment by our joint venture partner, STE. We believe our partnership with STE, which under our joint venture contributes to Jet Talk’s funding and its marketing and other activities, will allow us to benefit from STE’s resources, commercial aviation industry expertise and strong presence in East Asia, thus providing us with an added advantage in commercializing our Aero/IFC satellite communications terminals, once their development is complete.
Jet Talk did not generate any revenue in 2023 and is not expected to generate material revenue until at least 2024. Once we complete the development of and are able to commercialize our Aero/IFC satellite communications terminal product, the revenues and margins attributable to such sales will not be fully reflected in our consolidated financial statements, which will instead reflect revenue from our sales of products and services to Jet Talk on a contract basis (which we expect Jet Talk to sell to end-users in the commercial aviation market) and our equity in Jet Talk’s net income or loss for each reporting period. Accordingly, our consolidated statements of operations for future periods may not fully reflect the underlying revenues and margins of our future IFC/Aero terminals business. See Note 7 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Our mix of revenue has begun to gradually shift to sales of products since the end of 2023 and we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products and begin to deliver satellite communications systems at scale. Our ability to generate revenue and profits is subject to numerous contingencies and uncertainties, including those discussed below under “— Key Factors and Trends Affecting our Performance” and “Item 5. Operating and Financial Review and Prospects Liquidity and Capital Resources” and in “Item 3. – D. Risk Factors.”
Key Factors and Trends Affecting our Performance
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Item 3.D.—Risk Factors.”
Expanding our Customer Base and Relationships
We are focused on attracting new customers and expanding our relationships and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and products that make our offerings compatible with the latest advances in satellite-enabled communications. As of December 31, 2023, we had binding contracts with our 12 customers under which we recorded revenues in the 2023 or in 2022, or expect to record future revenues. Ongoing business developments discussed elsewhere in this Annual Report continue to impact our customer base and plans for expansion.
Backlog
As of December 31, 2023, we had signed contracts representing revenue backlog of approximately $59 million. Our backlog consists of estimated revenue pursuant to customer orders and signed contracts. Our customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach our contracts and most of our customer contracts are terminable upon prior notice to us, without penalty. There is no assurance that we will be able to expand our customer relationships with existing customers, and therefore our backlog, or that our backlog will translate into revenue or cash flows. See “Item 3.D. Risk Factors – Amounts included in backlog may not result in actual revenue and are an uncertain indicator of our future earnings.
Development of New Products
Since commencing operations in 2012, we have invested a total of approximately $243 million in R&D as of December 31, 2023, a portion of which has been defrayed by government and public entity grants (recognized in our statement of operations as reductions in research and development expenses). To date, we have received over $77.5 million in grants from the ESA, sponsored by the UKSA, and over $6.3 million in grants from the IIA. Our net research and development expenses amounted to $29.1 million and $16.8 million in the years ended December 31, 2023 and 2022, respectively. Our gross R&D spend, exclusive of the impact of offsetting government and public entity grants, amounted to $33.4 million and $29.1 million in 2023 and 2022, respectively. In some cases, such as with grants from the IIA, we are required to repay a portion of the grants at a future date in the form of a royalty on the sales of products developed with the assistance of such grants. See “Item 5. Operating and Financial Review and Prospects Liquidity and Capital Resources—Commitments." Our R&D efforts also benefit from our experience on customer projects, including collaborations with leading companies in the satellite communications industry. We have generated $8.2 million and $10.1 million in revenues from the provision of R&D services (recorded under “Development services and preproduction” in our statements of income) in the years ended December 31, 2023 and 2022, respectively, while maintaining ownership of our intellectual property developed in connection with such projects and licensing such intellectual property to our customers.
Market Trends and Uncertainties
The markets in which our customers operate, including the satellite payloads, ground terminals and IFC markets, are characterized by increasingly rapid technological changes, product obsolescence, competitive pricing pressures, evolving standards and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform changes that may render our products obsolete and require us to devote significant additional R&D resources to compete effectively. We believe we have a significant opportunity ahead of us, with an aggregate TAM across our key markets that is expected to reach approximately $18 to $22 billion by the end of the current decade (see “Item 4. Information on the Company — B. Business — Market Opportunity”). However, we have no control over market demand and there is no assurance that we will be successful in capturing a substantial portion of the TAM, and our ability to do so will be contingent on numerous factors, including developments in the satellite communications industry and geopolitical and macroeconomic conditions and our ability to meet demand, to overcome chip supply shortages and other supply chain capacity challenges, among others. See “Item 3. Key Information - D. Risk Factors — Our estimates, including market opportunity estimates and market growth forecasts, are subject to inherent challenges in measurement and significant uncertainty, and real or perceived inaccuracies in those metrics and estimates may harm our reputation and negatively affect our business..”
Our revenues amounted to $10.7 million and $10.6 million in the years ended December 31, 2023, and 2022, while our net losses amounted to $29.7 million. We had an accumulated deficit (i.e., negative retained earnings) of $511 million as of December 31, 2023 (mostly derived from $333 million non-recurring listing expenses in 2022) . There is no assurance that we will achieve profitability in the near future, if at all, and may require additional funding to support our continuing operations, fund our R&D and capital expenditure requirements and service our debt obligations. See “— Liquidity and Capital Resources” below for more information.
We currently rely on third parties for a substantial amount of our chip manufacturing and system assembly operations, and for assemblies and chip development software. The majority of our chips are supplied by a single foundry, GlobalFoundries, and we purchase chip development software and software libraries from a limited number of providers, such as Cadence Design Systems, Inc. and Siemens. The majority of our chips are designed to be compatible with the manufacturing processes and equipment employed by GlobalFoundries and switching to a new foundry vendor for these chips may require significant cost and time. The current global shortage in semiconductor and related electronic components and assemblies, resulting mainly from macro trends such as strong demand for 5G devices and high-performance computing has resulted in increases in the prices we pay for the manufacturing of our chips and assemblies, disruptions in our supply chain and disruptions in the operations of our suppliers and customers. If one or more of our vendors terminates its relationship with us, or if they fail to produce and deliver our products or provide services according to our requested demands in specification, quantity, cost and time, our ability to ship our chips or satellite communications systems to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales and damage our customer relationships. While in some cases we may be able to leverage our relationships with certain large, well-known customers to secure contract manufacturing capacity on better price and delivery terms, this cannot be assured and our ability to mitigate potential adverse impacts of supply chain constraints is limited at this time.
Additionally, we may experience supply chain and other disruptions to our business that may be caused by a range of factors beyond our control, including, but not limited to, geopolitical uncertainty, international trade disputes, armed conflicts and sanctions, such as the ongoing Israel-Hamas and Russia-Ukraine wars and the related sanctions, or economic and political instability in Asia, such as the military threat posed by China against Taiwan, climate change, increased costs of labor, freight cost and raw material price fluctuations, a shortage of qualified workers or material changes in macroeconomic conditions.
The effects of the ongoing Russia-Ukraine war, including the changes for the timing of new satellite launches by SatixFy’s current and prospective customers that previously launched from Russia, increased supply chain difficulties for SatixFy and its customers, and recent developments in SatixFy’s discussions with prospective customers, pose challenges to SatixFy’s business and future financial results, particularly in the near-term. For example, in March 2022, OneWeb, one of our significant customers, announced that it was suspending all satellite launches from Russia’s Baikonur Cosmodrome and recently announced that it would partner with companies in other countries, which may result in a significant delay of its test launch of satellites equipped with our payload systems if it is unable to transition its expected satellite launches on a timely basis. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations.” Industry supply chain challenges may be exacerbated and the demand for our products may be adversely affected as a result of the indirect effects of the Russia-Ukraine war, related sanctions or their impacts on global and regional economies. Recent global inflationary trends, higher interest rates and financial markets volatility have also resulted in funding constraints that have affected and created more uncertainty about the timing and scale of investments in new communications satellite constellations, new aircraft fleets and updated IFC solutions and related infrastructure by some of our existing and prospective customers. For example, the scale and timing of Telesat’s plans to launch a new LEO communications satellite constellation will depend on its ability to obtain the necessary funding for this project. The effects of recent macroeconomic uncertainties on our customers have also resulted in delays to contract negotiations or customer orders, and may result in further delays. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — Deterioration of the financial condition of our customers could adversely affect our operating results.” SatixFy believes that recent media and regulatory scrutiny of SPAC business combinations may lead customers to view SatixFy as a riskier or undercapitalized partner. Prior to the consummation of the Business Combination, two customers (including a significant customer that recently announced an agreement to enter into a merger of equals with another major satellite operator) with whom SatixFy was discussing prospective new contracts informed SatixFy that they selected SatixFy’s larger competitors with longer track records of providing space-based and aircraft-based satellite communications solutions as principal contractors for their satellite communications needs. While SatixFy’s management believes that these developments are unlikely to materially impact the long-term demand for our products or our long-term customer relationships (including with the two customers that terminated new contract discussions, for whom SatixFy believes it may be selected as the provider of satellite communication chips in connection with these ongoing projects in the future), they make it more difficult for us to budget for expected customer demand and therefore may adversely impact our results of operations and financial condition, especially in the near-term. Our ability to mitigate these supply chain and other disruptions, including the potential adverse impacts of the Russia-Ukraine conflict on our supply chain or the supply chains of our customers, is limited, as the impacts are largely indirect and it is difficult for us to predict at this time how our suppliers and customers will adjust to the new challenges or how these challenges will impact our costs or demand for our products and services. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations,” “ — We rely on third parties for manufacturing of our chips and other satellite communications system components. We do not have long-term supply contracts with our foundry or most of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions” and “— Deterioration of the financial condition of our customers could adversely affect our operating results.”
In addition, the recent escalation of the Israel-Hamas conflict could cause disruptions to our operations, and a delay in the development, production and shipment of our products and the heightened tension in our relations with various Middle Eastern countries could adversely affect our customer relationships as well as our sales and performance of existing or future contracts, which in turn could adversely affect our operating results, financial conditions and the expansion of our business. Furthermore, the latest Israel-Hamas war and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of this ongoing conflict are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices and supply chain disruptions. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Operations in Israel — Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them.”
Basis of Presentation
We currently conduct our business through one reportable operating segment. We prepare our consolidated financial statements under IFRS as issued by the International Accounting Standards Board.
Our functional and reporting currency is the U.S. dollar (which is also the functional currency of our Israeli subsidiary), as the demand for satellite communications chips and systems, and many of the development costs with respect thereto, are priced in U.S. dollars. Certain of our subsidiaries, on the other hand, have other functional currencies (being the currencies in which their assets, liabilities, revenues and expenses are recorded). The functional currency of our U.K. subsidiary is the GBP and the functional currency of our Bulgarian subsidiary is the EUR. Accordingly, in the preparation of our consolidated financial statements, we are required to translate these subsidiaries’ GBP and EUR balances to U.S. dollars. Assets and liabilities are generally translated at year-end exchange rates, while revenues and expenses are generally translated at the average exchange rates for the period presented. The differences resulting from currency translations are presented in our consolidated statements of comprehensive loss under Exchange gain (loss) arising on translation of foreign operations, but are not reflected in our loss for the period. As a result of our foreign currency translation exposure, certain amounts in our consolidated financial statements may not be comparable between periods. Additionally, subsidiary cash and financial asset and liability balances that are denominated in currencies other than the functional currency of the subsidiary are remeasured into the functional currency, with the resulting gain or loss recorded in the financial income or financial expenses line-items in our statements of income. For more information about the comparability impact of our foreign currency translation exposure, see below under “Item 11 — Quantitative and Qualitative Disclosure About Market Risk — Foreign Currency Exchange Risk.”
Key Financial and Operating Metrics
We monitor several financial and operating metrics in order to measure our current performance and project our future performance. These metrics are presented in the following table.
| | Year Ended December 31 | |
| | 2023 | | | 2022 | |
| | (U.S.$ in thousands, except percentages) | |
Revenues | | $ | 10,730 | | | $ | 10,626 | |
Gross profit | | $ | | | | $ | 6,128 | |
Gross margin | | | 45 | % | | | 58 | % |
Net loss | | $ | (29,715
| ) | | $ | (397,789 | )(*) |
(*) Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and a $37 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the afore-mentioned non-cash expenses had any impact on our income tax expense or benefit for the year ended December 31, 2022 or on our deferred tax assets or liabilities as of that date.
Principal Components of Our Results of Operations
Revenues
In the periods discussed in this Annual Report, we have generated substantial revenues from development services and preproduction provided to our customers in connection with projects on which we are engaged (although we maintain ownership of the intellectual property developed in connection with such projects). Our revenue from sales of products consisted mostly of revenue from contracts for the provision of products, including product prototypes, and components, including our proprietary chips.
Our mix of revenue has begun to gradually shift to sales of products since the end of 2023 and we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products and begin to deliver satellite communications systems at scale.
Cost of sales and services
Our cost of sales and services includes mainly salaries (including bonuses, share-based awards, benefits and related expenses) of our service personnel and the costs of our chip manufacturing subcontractors, chip manufacturing tools and materials and models, shipping cost, and related depreciation and amortization, including amortization of intangible assets, if any.
Research and development expenses
Research and development expenses consist primarily of salaries (including bonuses, benefits and related expenses) of personnel involved in R&D and the cost of development tools, third- party intellectual property licenses, and subcontractors, net of public sector grants, including from ESA, which offset some of our research and development expenses. See Note 22 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
To date, we have expensed all of our R&D costs as incurred. See “— Critical Accounting Policies and Estimates — Research and Development Costs.” We expect to continue investing in R&D and, accordingly, expect our research and development expenses to increase. We also expect to benefit from additional funding from the ESA and other government and public sector entities, which, if obtained, would offset a portion of our research and development expenses.
Selling and marketing expenses
Selling and marketing expenses consist mainly of salaries (including bonuses, share-based awards, benefits and related expenses) of our personnel involved in the sales and marketing of our products, as well as advertising, exhibition and related expenses (including related travel).
We expect our sales and marketing costs to increase as we bring more products to market, the demand for our products increases and we hire more sales and marketing personnel.
General and administrative expenses
General and administrative expenses consist mainly of salaries (including bonuses, share-based awards, benefits and related expenses) of management and administrative personnel, overhead costs (including facilities rent and utilities), legal expenses, depreciation and amortization of property and equipment not used in the manufacturing of our products or provisions of our services and costs associated with being a public company, such as costs related to director and officer liability insurance, director fees and public company-related auditing and compliance costs.
Share in the loss of a company accounted by equity method, net
This represents our share in the loss of a company accounted by equity method, net, which reflects our proportionate share of the loss of Jet Talk, a joint venture with STE. We own 51% of Jet Talk’s equity, but do not control the company, as STE controls the company’s financing, participates substantially in directing its marketing and R&D activities (the latter generally being contracted to us) and also participates in the appointment of the chief executive officer, among other senior management personnel. We are committed to provide Jet Talk with future development services for a large Aero/IFC terminal, exclusive marketing rights for the commercial aviation market, technical skills, staff expertise, R&D facilities and an exclusive, royalty-free, world-wide, perpetual, non-transferable, irrevocable license to use and commercially exploit our intellectual property for the development, production, sales and marketing of satellite antenna systems for the commercial aviation market. While Jet Talk has generated losses to date, we expect Jet Talk to contribute significantly to our results of operations in the future. See Note 7 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Finance Income and Expenses
Finance income includes mainly the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities (see “— Basis of Presentation”), fair value adjustments related to financial assets and liabilities and interest on bank deposits.
Finance expenses include mainly interest on loans and bank fees, depreciation of our right-of-use assets, amortization of debt and warrant discounts, fair value adjustments related to financial assets and liabilities (including, in 2022, our outstanding warrants and repayable grants from the IIA) and the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities.
Income taxes
To date, we have not been subject to income taxes associated with our operating activity, due to the fact that we have incurred losses in every year since commencing operations, and we have not recorded any income tax benefits since there is uncertainty as to our ability to utilize our tax loss carryforwards in future periods. As part of the MDA Agreement, we recorded a tax liability associated with the sale of SatixFy Space Systems UK Ltd. as a potential capital gain. See Note 26 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Results of Operations for the Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022
The following table provides our consolidated statements of operations for the years ended December 31, 2023 and 2022:
| | Year Ended December 31, | |
| | 2023 | | | 2022 | | | Change | | | % | |
| | (U.S.$ in thousands, except percentages) | |
Revenues: | | | | | | | | | | | | |
Development services and preproduction | | $ | 8,249 | | | $ | 10,081 | | | $ | (1,832 | ) | | | (18 | )% |
Sale of products | | | 2,481 | | | | 545 | | | | 1,936 | | | | 355 | % |
Total revenues | | $ | 10,730 | | | $ | 10,626 | | | $ | 104 | | | | 1 | % |
Cost of sales and services: | | | | | | | | | | | | | | | | |
Development services and preproduction | | | 4,930 | | | | 4,166 | | | | 764 | | | | 18 | % |
Sale of products | | | 1,008 | | | | 332 | | | | 676 | | | | 204 | % |
Total cost of sales and services | | | 5,938 | | | | 4,498 | | | | 1,440 | | | | 32 | % |
| | | | | | | | | | | | | | | | |
Gross profit | | $ | 4,792 | | | $ | 6,128 | | | $ | (1,336 | ) | | | (22 | )% |
Research and development expenses | | | 29,126 | | | | 16,842 | | | | 12,284 | | | | 73 | % |
Selling and marketing expenses | | | 2,866 | | | | 2,335 | | | | 531 | | | | 23 | % |
General and administrative expenses | | | 14,561 | | | | 9,249 | | | | 5,312 | | | | 57 | % |
Loss from operations | | $ | (41,761 | ) | | $ | (22,298 | ) | | $ | 19,463 | | | | 87 | % |
Finance Income | | | 83 | | | | 17 | | | | 66 | | | | 388 | % |
Finance Expenses | | | (12,129 | ) | | | (9,919 | ) | | | 2,210 | | | | 22 | % |
Derivatives Revaluation | | | (17,217 | ) | | | (37,377 | ) | | | (20,160 | ) | | | (54 | %) |
Other Income | | | 41,657 | | | | 5,474 | | | | 36,183 | | | | 661 | % |
Listing Expenses | | | - | | | | (333,326 | ) | | | (333,326 | ) | | | (100 | )% |
Share in the loss of a company accounted by equity method, net | | | (226 | ) | | | (360 | ) | | | (134 | ) | | | (37 | )% |
| | | | | | | | | | | | | | | | |
Loss before income taxes | | $ | (29,593 | ) | | $ | (397,789 | ) | | $ | (368,196 | ) | | | (93 | )% |
Tax expenses | | | (122 | ) | | | - | | | | 122 | | | | 100 | % |
Loss for the period (1) | | $ | (29,715 | ) | | $ | (397,789 | ) | | $ | (368,074 | ) | | | (93 | )% |
| (1) | Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring, listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and a $37.4 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the aforementioned non-cash expenses had any impact on our income tax expense or benefit for the year ended December 31, 2022 or on our deferred tax assets or liabilities as of that date. See 25 to our consolidated financial statements included elsewhere in this Annual Report for more information. |
Revenues
Total Revenues
Total revenues of $10.7 million increased by $0.1 million, or 1%, for the year ended December 31, 2023 compared to $10.6 million for the year ended December 31, 2022. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry.”
Development services and preproduction
Development services and preproduction of $8.2 million decreased by $1.8 million, or 18%, for the year ended December 31, 2023 compared to $10.1 million for the year ended December 31, 2022. The decrease was primarily driven by a delay in progress in one of our projects in 2023 due to a customer request and completion of one of our projects which in 2022.
Sale of products
Sale of products of $2.48 million increased by $1.9 million, or 355%, for the year ended December 31, 2023 compared to 545,000 for the year ended December 31, 2022. The increase was primarily driven by deliveries of an order that was received during 2022.
Cost of sales and services of Development services and preproduction
Total cost of sales and services of $4.9 million increased by $0.8 million, or 18%, for the year ended December 31, 2023 compared to $4.1 million for the year ended December 31, 2022. The increase is associated with the Company’s engagement in 2023 in projects which carry lower gross margins compared to 2022.
Cost of sales and services of Sale of Products
Total cost of sales and services of $1 million increased by $0.7 million, or 204%, for the year ended December 31, 2023 compared to $0.3 million the year ended December 31, 2022. The increase reflects increased revenues from sale of products as described above.
Gross profit
Gross profit of $4.8 million decreased by $1.3 million, or 22%, for the year ended December 31, 2023, compared to $6.1 million for the year ended December 31, 2022, reflecting our decrease in revenue from the sale of development services and preproduction, which bears a higher gross margin. Our gross margin in the year ended December 31, 2023 decreased due to the higher revenue from sale of products, which bears a lower gross margin.
Research and development expenses
Research and development net expenses of $29.1 million increased by $12.3 million, or 73%, for the year ended December 31, 2023 compared to $16.8 million the year ended December 31, 2022. Our gross R&D expenditure increased by $4.2 million, or 14%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was mostly driven by an increase in production cost associated with our space grades ASICs of approximately $2 million, combined with an increase of approximately $2 million in payroll and related expenses and RSU grants that were granted during the year. Research and development expenses were affected mostly by a net decrease in ESA grants and tax credits for the year ended December 31, 2023, and a decline in contributions from government support and grants, which all are recorded as offsets to R&D expenses, by $8.1 million, to $4.2 million in the year ended December 31, 2023 from $12.3 million in the year ended December 31, 2022.
Selling and marketing expenses
Selling and marketing expenses of 2.9 million increased by $0.5 million, or 23%, for the year ended December 31, 2023 compared to $2.3 million in the year ended December 31, 2022. The increase was primarily driven by our increased participation in trade shows, related travel costs and a slight increase in payroll and RSU grants.
General and administrative expenses
General and administrative expenses of $14.6 million increased by $5.3 million, or 57%, for the year ended December 31, 2023 compared to $9.2 million for the year ended December 31, 2022. The increase was primarily driven by the settlement of a legal proceeding with Alta of $2.3 million , as well as an increase in legal costs of $2 million, an increase of director and officer insurance expenses of $1 million, a provision for expected credit loss of $1.8 million, offset by a decrease of $2 million in bonuses to the chairman of our board of directors. See “Item 8.A. Financial Information—Legal Proceedings” for additional information.
Loss from operations
Loss from regular operations of $41.8 million increased by $19.5 million, or 87%, for the year ended December 31, 2023 compared to $22.3 million in the year ended December 31, 2022, reflecting the factors discussed above.
Finance Expenses
Finance expenses of $12.1 million increased by $2.2 million, or 22%, for the year ended December 31, 2023 compared to $9.9 million for the year ended December 31, 2022. The increase was primarily driven by a $3 million expense of interest recorded on the advanced payments from MDA (See Note 3 to our audited consolidated financial statements for the fiscal year ended December 31, 2023) offset by $1 million in currency fluctuation affects. The increase in interest expenses associated with the amendments of the 2022 Credit Agreement were offset almost entirely by the finance income associated with the economical effects of the modified loan terms (See Note 12 to our consolidated financial statements included elsewhere in this Annual Report).
Derivatives revaluation
Derivatives revaluation of $17.2 million decreased by $20.2 million, or 54%, for the year ended December 31, 2023 compared to $37 million for the year ended December 31, 2022. The decrease was primarily driven by a decrease in our stock price, which effected our financial instruments (PAS and Warrants).
Other Income
Other income of $41.7 million increased by $36.2, or 661%, for the year ended December 31, 2023, compared to $5.5 million for the year ended December 31, 2022, which was primarily due to the MDA Agreement See “Item 4 Information on the Company — B. Business Overview” andNote 3 to our consolidated financial statements, included elsewhere in this Annual Report, for further information.
Listing Expenses
We had no listing expenses for the year ended December 31, 2023, compared to listing expenses of $333 million for the year ended December 31, 2022. For further information regarding listing expense, see Note 25 to our audited consolidated financial statements for the fiscal year ended December 31, 2023, included elsewhere in this Annual Report.
Share in the loss of a company accounted by equity method, net
Share in the loss of a company accounted by equity method, net, decreased by $0.1 million, or 37%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease reflects a decrease in R&D expenses by Jet Talk due to the substantial completion of its development project and lower activity levels at Jet Talk in the absence of commercial production of IFC terminals.
Tax expenses
Tax expenses were $0.1 million for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022. The tax expenses were primarily attributable to the MDA Agreement with respect to the sale of Satixfy Space Systems UK Ltd (See Note 3 to our consolidated financial statements included elsewhere in this Annual Report).
Net loss for the period
Net loss for the period decreased by $368.2 million, or 93%, for the year ended December 31, 2023 compared to $397.8 million for the year ended December 31, 2022, reflecting the factors discussed above.
B. | Liquidity and Capital Resources |
Our primary cash needs are for working capital, including funding our R&D and meeting our contractual obligations and other commitments, and payment of principal and interest on our outstanding debt. To date, we have funded these working capital requirements and other expenses mainly through issuances of equity capital and borrowings, as further discussed below, as well as grants and other funds received from the ESA and the IIA. Our ability to expand our business and become cash flow positive will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate positive cash flows from operations, all of which depend on our ability to attract and retain customers, develop new products and compete effectively, as well as certain factors outside of our control. See “— Key Factors and Trends Affecting our Performance.”
As of December 31, 2023, our cash and cash equivalents amounted to $14 million and our financial debt amounted to $59.8 million.
Accordingly, we plan to try to raise additional capital, whether in the public or private markets, and are currently examining different alternatives. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have a material adverse impact on our business and financial prospects, seek protection under insolvency laws or cease our operations altogether. “Item 3. Key Information—D. Risk Factors—We are an early stage company with a history of losses, have generated less revenues than our prior projections, and have not demonstrated a sustained ability to generate predictable revenues or cash flows. If we do not generate revenue as expected, our financial condition will be materially and adversely affected.”
As discussed above under “Item 3. Key Information—D. Risk Factors—Risks Related to Ownership of Our Securities —The market price of our equity securities may be volatile, and your investment could suffer or decline in value” and elsewhere in this Annual Report, the sales and further issuances of our ordinary shares could materially adversely affect the market price for our securities, which could, in turn, materially adversely affect our ability to raise additional capital in the public or private markets or the terms on which such capital could be raised. Further, recent declines in our share price mean that our ability to raise new capital under the Equity Line of Credit Facility, which limits the number of shares we can sell based on their daily average trading volume, could be substantially less than we initially expected.
We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Changing circumstances could also cause us to consume capital faster than we currently anticipate, and we may need to spend more than currently expected.
If we are successful in overcoming our short-term funding challenges, over the long term we may decide to develop new products, enter new markets or build additional or expand current manufacturing facilities, any of which would require substantial additional capital. The timing of the completion of the development and engineering, and commercial launch of our satellite communications systems that are expected to drive our future results is uncertain. The commercialization of these products may also entail unpredictable costs and delays and is subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Certain of these risks and uncertainties are described in more detail in this Annual Report under “Item 3. Key Information – D. Risk Factors” and include, but are not limited to, changed business conditions, continued supply chain challenges, and governmental responses thereto, geopolitical uncertainty, competitive pressures, regulatory developments or the cessation of public sector R&D funding, among other potential developments.
Debt and other financing arrangements
As of December 31, 2023, we had total borrowings (not including lease liabilities) of approximately $59.8 million, all of which is long-term debt under the 2022 Credit Agreement entered into in connection with the Debt Financing, a portion of the proceeds from which we used to repay our prior borrowings.
Business Combination Agreement and 2022 Debt Financing
On March 8, 2022, we and one of our subsidiaries entered the Business Combination Agreement and on October 27, 2022, our subsidiary, Merger Sub, merged with and into Endurance, with Endurance continuing as the surviving company and becoming our direct, wholly owned subsidiary.
In anticipation of the Business Combination, on February 1, 2022, we entered into the 2022 Credit Agreement with FP pursuant to which we borrowed an aggregate principal amount of $55.0 million in the form of a term loan, which is guaranteed by certain of our subsidiaries. The obligations under the 2022 Credit Agreement, as amended, are secured by a lien and security interest over substantially all of our and the guarantors’ assets. In order to preserve liquidity and allow us more time to evaluate our financing and strategic alternatives, on April 23, 2023, we entered into the Waiver and Second Amendment to the Credit Agreement, which, among other things, (i) provided a waiver of certain defaults or potential defaults, (ii) permitted us to make our interest payments for 2023 on a pay-in-kind basis if its cash balance is less than $12.5 million, (iii) temporarily reduced our minimum cash requirement from $10 million to $8 million and $7 million for the months of April and May 2023, respectively, and thereafter to $10 million, in each case plus an amount sufficient to cover our and our subsidiaries’ accounts payable that are past 60 days due, (iv) increased the interest rate of the loan to SOFR + 8.50% (with a 3% SOFR floor) and (v) provided for certain additional reporting obligations by us. The 2022 Credit Agreement provides that the term loan matures on February 1, 2026.
The 2022 Credit Agreement contains customary covenants that restrict the way in which we may conduct our business and our ability to take certain actions. In particular, it limits our ability to incur additional indebtedness or liens, dispose of assets to third parties, repurchase our shares and pay dividends. The 2022 Credit Agreement also imposed a financial maintenance covenant, requiring that, for so long as we have a leverage ratio (debt to Consolidated Adjusted EBITDA (as defined in the 2022 Credit Agreement)) greater than or equal to 6.00 to 1.00, SatixFy must maintain a minimum cash balance of $8 million and $7 million for the months of April and May 2023, respectively, and thereafter of $10 million, in each case plus an amount sufficient to cover its and its subsidiaries’ accounts payable that are past 60 days due, which cash is held in deposit accounts subject to a security interest in favor of the Agent. The 2022 Credit Agreement also contains customary events of default, which provide that the lenders are entitled to automatically accelerate payment of the loans upon the occurrence of an event of default.
In connection with the Debt Financing, SatixFy also entered into an equity grant agreement, dated February 1, 2022, pursuant to which it issued 808,907 SatixFy Ordinary Shares (before giving effect to the Pre-Closing Recapitalization) to the lenders under the 2022 Credit Agreement in consideration for the funds borrowed.
In June 2023 , the parties to the 2022 Credit Agreement entered into the Third Amendment. The Third Amendment provides that, among other things, upon our receipt of such prepayment, interest payable thereunder will be added to the principal of the term loan on a “pay in kind” basis through June 28, 2024, the payments made in connection with the pre-purchase agreement will not be applied to repay debt under the 2022 Credit Agreement, a limited waiver, subject to certain conditions, of the liquidity covenant therein, and following closing of the MDA Agreement, a reduced interest rate and the grant of the 4.1 million ordinary shares under the 2022 Credit Agreement. On October 31, 2023, we entered into the Fourth Amendment and the Fifth Amendment to the 2022 Credit Agreement, whereby the lenders provided their consent to those certain agreements entered into by us. Further, the Fifth Amendment extended the period of time by which we must issue or cause the transfer the 4.1 million ordinary shares pursuant to the Third Amendment to the Credit Agreement from four business days to 90 days following the date the Fifth Amendment became effective; and reduced the 4.1 million ordinary shares which we must issue or cause the transfer of pursuant to the Third Amendment to the 2022 Credit Agreement, by the amount of shares transferred pursuant to the Vellar Termination Agreement and the ACM Termination Agreement, and, subject to the timely transfers of shares as contemplated in the Vellar Termination Agreement and ACM Termination Agreement, we will also issue 500,556 new ordinary shares to the lenders(which is the difference between 4.1 million ordinary shares and the shares to be transferred to the lenders from Vellar and ACM). In addition, we agreed to issue the lenders 1,000,000 Price Adjustment Shares in a private placement within 30 days, which shares will be subject to substantially the same terms governing the Price Adjustment Shares previously issued in connection with our business combination with Endurance and as further described in the Fifth Amendment.
Equity Line of Credit
Concurrently with the execution of the Business Combination Agreement, SatixFy and CF Principal Investments entered into that certain CF Purchase Agreement and that certain CF Registration Rights Agreement in connection with the Equity Line of Credit. Pursuant to the CF Purchase Agreement, following the Closing, the Company has the right to sell to CF Principal Investments up to the lesser of (i) $77,250,000 aggregate principal amount of newly issued SatixFy Ordinary Shares (before the 3.0% purchase price discount on sales under the Equity Line of Credit discussed below) and (ii) the number of shares equal to 19.99% of the voting power or number of SatixFy Ordinary Shares issued and outstanding after giving effect to the Business Combination and other transactions contemplated by the Business Combination Agreement (the “Exchange Cap”), subject to certain exceptions as provided in the CF Purchase Agreement.
Upon the satisfaction of the conditions to CF Principal Investments’ purchase obligation set forth in the CF Purchase Agreement (the “Commencement”), SatixFy will have the right, but not the obligation, from time to time at its sole discretion over the 36-month period from and after the Commencement, to direct CF Principal Investments to purchase up to a specified maximum amount of its ordinary shares as set forth in the CF Purchase Agreement by delivering written notice to CF Principal Investments prior to the commencement of trading of the SatixFy Ordinary Shares on the NYSE on any trading day, so long as all of its ordinary shares subject to all prior purchases by CF Principal Investments under the CF Purchase Agreement have theretofore been received by CF Principal Investments electronically as set forth in the CF Purchase Agreement. The purchase price of the ordinary shares that SatixFy may elect to sell to CF Principal Investments pursuant to the CF Purchase Agreement will be determined by reference to the VWAP defined for this agreement of the SatixFy Ordinary Shares on the date of purchase, which is when SatixFy has timely delivered written notice to CF Principal Investments directing it to purchase its ordinary shares under the CF Purchase Agreement, less a fixed 3.0% discount to such VWAP.
SatixFy controls the timing and amount of any sales of its ordinary shares to CF Principal Investments. Actual sales of its ordinary shares to CF Principal Investments under the CF Purchase Agreement will depend on a variety of factors to be determined by SatixFy from time to time, including, among other things, market conditions, the trading price of its ordinary shares and SatixFy’s needs for financing resources.
Forward Purchase Agreement
On October 24, 2022, Endurance, SatixFy, Merger Sub and Vellar entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”), which was subsequently amended on October 25, 2022 (as amended, the “Forward Purchase Agreement”). Subsequent to entering into the Amendment, Endurance, SatixFy, Merger Sub and Vellar entered into an Assignment and Novation Agreement with ACM ARRT G LLC (together with Vellar, the “Sellers”), pursuant to which Vellar assigned its rights and obligations with respect to up to 4,000,000 ordinary shares (the “Subject Shares”) under the Forward Purchase Agreement to ACM ARRT G LLC (the “Assignment and Novation Agreement”),
Pursuant to the terms of the Forward Purchase Agreement, the Sellers thereunder purchased, through a broker in the open market, (i) 8,544,284 Endurance Class A ordinary shares. Following the closing of the Business Combination, we issued to Vellar, in a private placement pursuant to the Forward Purchase Agreement, 1,605,100 additional ordinary shares (the “Additional Shares”). Pursuant to the Forward Purchase Agreement, the Sellers were paid directly, out of the funds held in Endurance’s trust account, approximately $86.5 million.
Pursuant to the Forward Purchase Agreement, we filed the Registration Statement with the SEC. The Sellers paid to SatixFy approximately $10.0 million.
On October 31, 2023, we entered into termination agreements (the “Termination Agreements”) with the Sellers, dated October 31, 2023. Pursuant to the Termination Agreements, the parties agreed (i) terminating Forward Purchase Agreement, (ii) terminating the Assignment and Novation Agreement, and (iii) that Vellar and ACM relinquish their rights to an aggregate of 3,599,444 ordinary shares (which includes all remaining Subject Shares held by ACM and Vellar), which are to be transferred to the lenders in connection with their consent to the transactions contemplated by the MDA Agreement. Further, we will pay Vellar and ACM an aggregate amount of approximately $6.5 million in installments until May 31, 2024, in the case of Vellar, and March 31, 2024, in the case of ACM. The Termination Agreements further provide that if we fail to make the required payments to ACM on time (subject to certain conditions as described therein), the total amount payable by us to ACM will increase by $3.7 million (which amount will be payable on the final installment date).
PIPE Financing
Concurrently with the execution of the Business Combination Agreement, Endurance and SatixFy entered into Subscription Agreements with certain investors. Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe for and purchase, and SatixFy agreed to issue and sell to the PIPE Investors, immediately prior to the closing of the Business Combination, an aggregate of 2,910,000 PIPE Units consisting of (i) one PIPE Share and (ii) one-half of one PIPE Warrant exercisable for one SatixFy Ordinary Share at a price of $11.50 per share for a purchase price of $10.00 per PIPE Unit, for gross proceeds of $29,100,000, on the terms and subject to the conditions set forth in the applicable Subscription Agreement. Affiliates of the Sponsor agreed to purchase $10,000,000 of PIPE Units on the same terms and conditions as all other PIPE Investors. Each PIPE Warrant will entitle the holder to one SatixFy Ordinary Share at an exercise price $11.50 per share. The terms of the PIPE Warrants are substantially the same as the existing Endurance warrants.
Pursuant to the terms of the Subscription Agreements, concurrently with the Closing, SatixFy delivered 1,175,192 ordinary shares issuable to certain SatixFy shareholders and 391,731 ordinary shares on behalf of the Sponsor into an escrow account (collectively, the “Escrow Shares”). In March 2023, we instructed our transfer agent to release from escrow the 1,163,077 Escrow Shares held by the Sponsor and shareholders.
As described above, pursuant to the terms of the Subscription Agreements, SatixFy delivered the Escrow Shares into the escrow account, and on or about March 31, 2023, subsequently released the Escrow Shares to the PIPE Investors and SatixFy shareholders pursuant to the terms thereof.
In connection with the Subscription Agreements pursuant to which SatixFy has agreed to sell the PIPE Units to the PIPE Investors, SatixFy and Continental entered into a warrant agreement, pursuant to which SatixFy issued 1,000,000 warrants, each entitling the warrant holder to purchase one (1) SatixFy Ordinary Share at an exercise price of $11.50 per share, subject to adjustment and on the terms and subject to the limitations described therein. The original PIPE Warrants were issued on terms identical to the Endurance Public Warrants (and, accordingly, the SatixFy Public Warrants) in all material respects, except for a distinct CUSIP, certain resale restrictions and registration rights set forth in the Subscription Agreements, and a book entry restrictive legend. On January 12, 2023, we exchanged, on a one-for-one and cashless basis, the 1,000,000 original PIPE Warrants previously issued to the Sponsor and Cantor in connection with the PIPE Financing for new PIPE Warrants under the terms of the SatixFy A&R Warrant Agreement. The new PIPE Warrants have the same terms as the Public Warrants and are identical to the Public Warrants, except that they will bear restrictive legends until they are resold by the applicable PIPE Investors pursuant to an effective registration statement or Rule 144 under the Securities Act.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| | For the year ended December 31 (in thousands of USD) | |
| | 2023 | | | 2022 | |
Cash Flow Data: | | | |
Net cash used in operating activities | | | (24,635 | ) | | | (31,480 | ) |
Net cash used in investing activities | | | 17,341 | | | | (582 | ) |
Net cash provided by financing activities | | | 9,114 | | | | 40,523 | |
Increase (decrease) in cash and cash equivalents | | | 1,820 | | | | 8,461 | |
Cash and cash equivalents balance at the beginning of the year | | | 11,934 | | | | 3,854 | |
Effect of changes in foreign exchange rates on cash and cash equivalents | | | 225 | | | | (381 | ) |
| | | | | | | | |
Cash and cash equivalents balance at the end of the period | | | 13,979 | | | | 11,934 | |
Operating Activities
During the year ended December 31, 2023, net cash used in operating activities was $25 million, compared to $31 million in the year ended December 31, 2022, reflecting the factors discussed under “— Results of Operations” above and the evolution of our working capital. The principal drivers of working capital were prepayment from customers, which increased by $15.6 million in 2023 compared to a $ 11.8 million increase in 2022, offset by advances from ESA, which decreased by $1.3 million in 2023 compared to a $7.6 million increase in 2022, other current assets (comprised mainly of prepaid expenses and accruals for tax credits), which decreased by $3.5 million in 2022 compared to a $7 million increase in 2022, and trade account payables, accounts payable and accrued expenses, which together increased by $5.2 million in 2023 compared to a decrease of $7.8 million in 2022.
During the year ended December 31, 2022, net cash used in operating activities was $31 million, compared to $5.8 million in the year ended December 31, 2021, reflecting the factors discussed under “— Results of Operations” above and the evolution of our working capital. The principal drivers of working capital were prepayments from customers, which increased by $11.8 million in 2022 compared to a $ 1.5 million increase in 2021, offset by advances from ESA, which decreased by $7.6 million in 2022 compared to a $1.9 million increase in 2021, other current assets (comprised mainly of prepaid expenses and accruals for tax credits), which increased by $7.0 million in 2022 compared to a $3.3 million decrease in 2021, and trade account payables, accounts payable and accrued expenses, which together decreased by $7.8 million in 2022 compared to an increase of $4.7 million in 2021.
Investing Activities
During the year ended December 31, 2023, net cash received in investing activities was $17 million. Net cash used in investing activities for year ended December 31, 2023 is attributable to the MDA transaction (see Note 3 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report).
During the year ended December 31, 2022, net cash used in investing activities was $0.6 million.
Financing Activities
During the year ended December 31, 2023, net cash from financing activities amounted to $9 million, consisting mainly of issuance of shares of $10 million as part of the Forward Purchase Agreement.
During the year ended December 31, 2022, net cash from financing activities amounted to $41 million, consisting mainly of proceeds under our 2022 Credit Agreement and issuance of shares due to conversion of warrants of $6.5 million net of repayment of existing loans in the sum of $18.8 million.
Commitments
As of the date of this Annual Report, our material financial commitments were comprised of the amounts outstanding under the Debt Facility, as described above, and the lease liabilities described in Note 6 to our consolidated financial statements included elsewhere in this Annual Report.
In connection with the ESA grants described above, which are intended to fund 50%-75% of the cost of development of integrated chip sets for several industries (depending on the nature of the engagement), including both hardware and software, our agreement stipulates that the resulting intellectual property will be available to ESA on a free, worldwide license for its own requirements. In addition, ESA can require us to license the intellectual property to certain bodies that are part of specified ESA programs, for ESA’s own requirements on acceptable commercial terms, and can also require us to license the intellectual property to any other third party for purposes other than ESA’s requirements, subject to our approval that such other purposes do not contradict our commercial interests.
Additionally, approximately $3.3 million of the $6.3 million in R&D grants we obtained from the IIA is subject to repayment through royalties. We are required to pay the IIA royalties of 3% to 4% of total sales of products resulting from R&D funded by such grants, up to a maximum amount of 100% of total grants received, plus interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to US Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. We record the royalty liability once the repayment obligation is deemed probable. Our royalty liability to the IIA amounted to $1.3 million as of December 31, 2023. Of the $1.3 million subject to repayment through royalties, approximately $1.2 million represented a contingent liability (fair value measured based on discounted future royalties and an interest rate of 20%).
Other than the commitments and contingencies disclosed in this discussion and analysis and our consolidated financial statements included elsewhere in this Annual Report, we did not have material contractual commitments or contingencies for payments of cash as of the date of this Annual Report.
Off-balance Sheet Arrangements
Other than the contingencies described above, we did not have any off-balance sheet arrangements as of the date of this Annual Report.
Seasonality
We do not believe that demand for our products and services is seasonal. As an early-stage company, most of our revenue to date has been project-based. Accordingly, our revenue and results of operations may fluctuate from period to period based on the number of customer projects or the achievement of key milestones under our customer contracts.
C. | Research and Development, Patents and Licenses |
For a discussion of our research and development policies, see “Item 4. – Information on the Company – B. Business Overview – Research and Development.”
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income, profitability, liquidity or capital resources, or that caused that disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. | Critical Accounting Policies and Estimates |
Our discussion and analysis of financial condition results of operations are based upon our consolidated financial statements included elsewhere in this Annual Report. The preparation of our consolidated financial statements in accordance with IFRS requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.
Our critical accounting policies are those that materially affect our consolidated financial statements and involve difficult, subjective or complex judgments by management. A thorough understanding of these critical accounting policies is essential when reviewing our consolidated financial statements. We believe that the critical accounting policies listed below involve the most difficult management decisions because they require the use of significant estimates and assumptions as described above. See Note 2 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report for a summary of our significant accounting policies. Our critical accounting policies are the following.
Revenue Recognition
We recognize revenue using the five-step model set forth in IFRS 15, Revenue from Contracts with Customers. To date, we have earned revenue mainly from providing customers with development services and the sale of ground-based modems for satellite communications and related products.
We recognize revenue from the provision of NRE services at the time the service is transferred to the customer and measure the revenue in an amount that represents the consideration that we expect to be entitled to for the same goods or services, while revenue from the sale of satellite communications modems and related products is recognized when control of the products is transferred to our customers, both as described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report. In connection with the recognition of revenue from NRE services, we measure the progress of our performance commitments based on the portion of completion of each project or project deliverable. Changes in these estimates could have a material impact on the amount of revenue recognized for a given period.
Research and Development Costs
To date, we have recognized all expenditures on R&D activities in our statement of operations as they were incurred. Going forward, we may elect to capitalize expenditures incurred on development activities where the expenditure will lead to new or substantially improved products and only if all the following can be demonstrated:
the product is technically and commercially feasible;
we intend to complete the product so that it will be available for use or sale;
we have the ability to use or sell the product;
we have the technical, financial and other resources to complete the development and to use or sell the product;
we can demonstrate the probability that the product will generate future economic benefits; and
we are able to reliably measure the expenditure attributable to the product during its development.
Capitalized development costs are included in the carrying amount of an intangible asset, and the capitalization of costs ceases when the asset is in the condition necessary for it to be capable of operating in the manner intended by management. Capitalized development costs are amortized on a straight-line basis over their estimated useful lives once the development is completed and the assets are in use. Subsequent expenditure on capitalized intangible assets is capitalized only where it clearly increases the economic benefits to be derived from the asset to which it relates. All other expenditure, including that incurred in order to maintain an intangible asset’s current level of performance, is expensed as incurred. As of December 31, 2022, our management concluded that we did not meet the aforementioned requirements for capitalization of any research and development expenses. Management’s conclusions may change in future periods, which could have a material impact on the comparability of our financial results for future periods with the results presented in this Annual Report.
Share-based payments
We record share-based payments to employees, which are measured at the value of the equity instrument at the time of grant, and record a corresponding expense.
As our ordinary shares are not listed on a public market, the calculation of the fair value of our ordinary shares is subject to a greater degree of estimation in determining the basis for share- based grants. Accordingly, we are required to estimate the fair value of both the instrument entitling the recipient to purchase shares, as well as the shares themselves, at the time of each grant. We consider objective and subjective factors in determining the estimated fair value of our shares, with input from management and an independent valuation firm. We determined the value of our shares based on interpolating from the valuations in our most recent external equity financing rounds and, when applicable, an expected valuation for a public offering, subject to discounts for the probability and timing of an exit event and lack of marketability, among other factors.
In turn, we measure the value of options or warrants to purchase our shares based on the value of the shares and an option pricing or hybrid model. We used the Black-Scholes model to determine the fair value of options to buy our shares, based on assumptions as to dividend yield (0%), expected volatility (56.43%), risk-free interest rate (1.6%) and expected life of the instrument (3 years). We used a hybrid of the Black-Scholes and Merton (Structural Model) models for the purpose of determining the fair value of our warrants, based on assumptions as to risk- free interest rate (0.59%), expected exercise period (between 5 and 8 years) and expected volatility (approximately 40%).
The assumptions underlying the valuations represent our best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if we used significantly different assumptions or estimates, our share-based compensation expense for prior periods could have been materially different.
We expect to use the market price of our ordinary shares as the basis for the valuation of future grants, based on the reported closing price of such shares on the date of grant. We expect to record a substantial expense in our future financial statements for periods that include the date of consummation of the Business Combination as a result of the issuance of the Price Adjustment Shares and IFRS accounting for Founder Shares.
Inventory
Inventories are recognized at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. We measure the cost of raw materials on a first-in, first-out basis and finished goods according to costs based on direct costs of materials and labor. We review the net realizable value of our inventory at the end of each reporting period. Factors that may affect inventory selling prices include the existing market demand, competition, the availability of superior technology in the market, the prices of raw materials and the solvency of customers and suppliers. Write-downs in the value of inventory are also expensed on our statement of operations. While we have not historically held significant inventory on hand, and have not experienced inventory write-downs, we expect this to change over time as develop more customer relationships and commercialize more products.
Quantitative and Qualitative Disclosures about Market Risk
For a discussion of our quantitative and qualitative disclosures about market risk, please see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Emerging Growth Company Status
We are an emerging growth company, as defined in Section 102(b)(1) of the JOBS Act. The JOBS Act exempts emerging growth companies from certain SEC disclosure requirements and standard and we intend to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company, including, but not limited to, (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and (2) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or current or future PCAOB rules requiring supplements to the auditor’s report providing additional information about the audit and the consolidated financial statements (critical audit matters or auditor discussion and analysis). Although under the JOBS Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies, this exemption does not apply to companies, such as us, reporting under IFRS since IFRS does not provide for different transition periods for public and private companies.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | Directors and Senior Management |
The following table sets forth the name, age and position of each of our executive officers and directors as of the date of this Annual Report. For biographical information concerning the executive officers and directors, see below.
Name | | Age | | Position |
Yoav Leibovitch(8) | | 66 | | Executive Chairman of the Board of Directors |
Nir Barkan | | 45 | | Acting Chief Executive Officer |
Oren Harari | | 49 | | Interim Chief Financial Officer |
Doron Rainish | | 68 | | Chief Technology Officer |
Divaydeep Sikri | | 45 | | Vice President and Chief Engineer |
Stephane Zohar | | 57 | | Executive Vice President — VLSI |
Itzik Ben Bassat | | 55 | | Chief Operating Officer |
Mary P. Cotton((1)2)((3)(4)( (7) | | 66 | | Director |
Yair Shamir(6) | | 78 | | Director |
David L. Willetts(7) | | 68 | | Director |
Richard C. Davis(8) | | 58 | | Director |
Moshe Eisenberg(1)(2)(3)(4)(5) | | 57 | | Director |
Yoram Stettiner(1)(2)((3)(4)(5) | | 66 | | Director |
(1) | Member of the Compensation Committee |
(2) | Member of the Audit Committee |
(3) | Independent Director (as defined under Israeli law) |
(4) | Independent Director (as defined under NYSE American LLC Company Guide Manual Section 803(A)(2), or NYSE American Section 803(A)(2)) |
(5) | External director, if required under the Companies law |
(6) | Class I directors hold office until the annual general meeting to be held in 2026 and until their successors shall have been elected and qualified |
(7) | Class II directors hold office until the annual general meeting to be held in 2024 and until their successors shall have been elected and qualified |
(8) | Class III directors hold office until the annual general meeting to be held in 2025 and until their successors shall have been elected and qualified |
Yoav Leibovitch is a member of our board of directors, , and was appointed as our Executive Chairman of the board of directors in March 2022 and served as our interim Chief Executive Officer from April 2022 to June 2022, following the passing of our co-founder and Chief Executive Officer, Mr. Yoel Gat. Mr. Leibovitch also served as our Chief Financial Officer from 2012 until the closing of the Business Combination in October 2022. Prior to SatixFy, Mr. Leibovitch was the Chief Executive Officer of Raysat, Inc. from 2009 to 2012, a leading developer of Communication-On-The-Move antennas. Additionally, Mr. Leibovitch was the Vice President of Business Development at Gilat Satellite Networks Ltd. (“Gilat”), a company founded by our late co-founder and Chief Executive Officer, Mr. Yoel Gat, from 2005 to 2008, and the Chief Financial Officer of Gilat from 1991 to 2003. Mr. Leibovitch holds an M.B.A. from the Hebrew University of Jerusalem. Mr. Leibovitch is a Certified Public Accountant in Israel.
Nir Barkan has served as our Acting Chief Executive Officer since June 1, 2023. Mr. Barkan has previously served as our Chief Commercial Officer from 2014 until 2018. Prior to joining SatixFy, from 2018 to 2023, Mr. Barkan was a Co-Founder, Group Chief Technology Officer and the General Manager as well as a Director of Curvalux UK Limited (“Curvalux”), a company operating in the field of sustainable fixed wireless broadband technology. Prior to Curvalux, Mr. Barkan served as a Satcom Product Marketing Manager at Orbit Technologies Ltd. from 2013 to 2014 , as a Director of Marketing, Pre-Sale and Support at Novelsat from 2011 to 2013, as a Product Marketing Manager in SanDisk from 2010 to 2011 and also served as a Strategic Marketing Manager, a Customer Programs Manager and an application engineer at Texas Instruments from 2004 to 2009. Mr. Barkan also served as an R&D Engineer and a Captain in Reserve in the IDF. Mr. Barkan holds an MBA in Strategy and Entrepreneurship University and a B.SC in Electronics and Electricity from Tel-Aviv University.
Oren Harari has served as our Interim Chief Financial Officer since October 2022. Prior to that, Mr. Harari was our Vice President of Finance, a position he has held since joining SatixFy in 2018. Prior to joining SatixFy, Mr. Harari was the Chief Financial Officer of MICT Inc. (NASDAQ:MICT) from 2016 to 2018, a holding company operating in the field of telematics and commercial MRM. Prior to MICT, Mr. Harari served as a VP Finance at AGT international SpA, a global homeland security company, from 2012 until 2015. Prior to that, he served as a VP Finance at Raysat Antenna Systems LLC, a leading developer of Communication-On-The-Move antennas. Additionally, Mr. Harari was a Finance Director at Telrad Connegy, Inc. (a subsidiary of Telrad Networks Ltd. (TASE:TLRD)). Mr. Harari holds an M.B.A. from the College of Management Academic Studies and is a Certified Public Accountant in Israel.
Doron Rainish is our Chief Technology Officer, a position he has held since co-founding SatixFy in 2012, and served as a director for the same period until October 2022. Mr. Rainish has over 40 years of experience in algorithm research and management of large teams of researchers in the field of advanced wireless communications. Mr. Rainish is an expert in information theory and digital signal processing and has over 30 patents issued and many publications on the field of digital communications. Prior to SatixFy, from 2006 to 2011, Mr. Rainish served as the Communication Director for RaySat Broadcasting Corporation Israel Ltd. and served as a research group leader for Intel Mobile Communication from 1999 to 2006. Mr. Rainish holds a M.Sc. in Electrical Engineering from Tel Aviv University and a B.Sc. in Electrical Engineering from the Technion, Israel Institute of Technology. He is not director anymore.
Divaydeep Sikri is a Vice President and the Chief Engineer of SatixFy, positions he has held since joining SatixFy in August 2016. In this role, Mr. Sikri leads SatixFy’s R&D for Antenna technology, including Digital Beamforming Chip Architecture, RFIC Chip development, and Antenna system designs and software. Prior to SatixFy, Mr. Sikry held various Staff Systems Engineer roles with Qualcomm (Nasdaq:QCOM) between 2004 and 2016, where he led various aspects of Qualcomm’s 2G/2.5G/3G/4G modem technology development. Mr. Sikry holds a M.S. in Electrical and Electronics Engineering from the New Jersey Institute of Technology and a Bachelors in Engineering from the Netaji Subhas Institute of Technology.
Stephane Zohar is our Executive Vice President of VLSI, a position he has held since February 2019. Mr. Zohar has over 25 years of research and development experience in executive and VLSI expert roles. Prior to joining SatixFy, from 2011 to 2019, Mr. Zohar served as a Director of VLSI at Multiphy, a complex signal processing and mixed signal VLSI solution company. Prior to this, from 2005 to 2011, Mr. Zohar served as a Director of VLSI at Ethernity Networks, a leading provider of networking and security software solutions on Field Programmable Gate Arrays (FPGAs) company, and from 1997 to 2005 he was the VLSI Manager at Metalink, a silicon solutions for wireless and wireline broadband communications company. Mr. Zohar holds a B.Sc. in Computer Engineering from the Technion, Israel Institute of Technology with specialization in digital communication, signal processing and VLSI.
Itzik Ben Bassat has been our Chief Operating Officer since December 2023, prior to which he was our Executive Vice President of Product Development and Operation since February 12, 2023. Prior to joining Satixfy, Mr. Ben Bassat served as a Chief Operating Officer of Nexite from 2019 until 2023. Mr. Ben Bassat also served as VP Business Development and Strategic Partnership in Flex from 2017-2019. Prior to this, between 2008 until 2016, Mr. Ben Bassat served as Chief Executive Officer of Siklu, he also served as Chief Operating Officer of Metalnik between the years 2006 until 2008. From 2002 until 2004, Mr. Ben Bassat served as the VP of R&D and Chief Technology Officer of Scopus Video Networks Ltd. In the years 1996 until 2002, he worked in Gilat Satellite Networks Ltd. and served as a Marketing Senior Director and Satellite IP product line as well as a R&D Director. Mr. Ben Bassat served in the IDF – Intelligence Technical Research Department, as the head of the R&D Group, Project Leader and R&D engineer. Mr. Ben Bassat holds a B.Sc. degree in Electrical Engineering from the Technion - Israel Institute of Technology.
Directors
Mary P. Cotton has served as a member of our board of directors since 2014. Ms. Cotton previously served at ST Engineering iDirect as Chief Executive Officer from 2007 to 2017, as a director from 2007 to 2018, and as a Senior Advisor until 2022. Ms. Cotton previously served on the board of Seachange International from 2004 to 2019 and as the chair of Seachange’s audit and compensation and governance committees. Ms. Cotton holds a B.Sc. in accounting from Boston College.
Yair Shamir has served as a member of our board of directors since 2016. . Mr. Shamir co-founded Catalyst Investments L.P. in 1993 and served as a Managing Partner from 1993 to 2013 and has served in this role since 2015. Mr. Shamir was elected as a member of the Israeli Parliament (Knesset) and served as Minister of Agriculture of the State of Israel from 2013 to 2015. Mr. Shamir served as the Chairman of the Board of the N.T.A. Metropolitan Mass Transit System from 2017 to August 2018 and as the Chairman of the Israeli Road Safety Authorities from September 2018 until November 2020. Mr. Shamir served as the Chairman of Israel’s National Roads Company from 2011 to 2012 and Chairman of Israel Aerospace Industries Ltd. from 2005 until 2011. Mr. Shamir also served as the Chairman and Chief Executive Officer of VCON Telecommunications Ltd. from 1997 to 2010 and Chairman of El Al (Israeli Airlines), where he led El Al’s privatization from 2004 to 2005. Mr. Shamir holds a B.Sc. in Electronics Engineering from the Technion, Israel Institute of Technology.
Lord David L. Willetts has served as a member of our board of directors since 2020. The Rt. Hon. Lord Willetts served as a British Member of Parliament from 1992 to 2015 and since 2015 has been a member of the House of Lords. Lord Willetts served as Minister for Universities and Science in the British Government from 2010 to 2014 and oversaw space policy issues. He served as an Adviser to Dresdner Kleinwort Bank from 1997 to 2008. Lord Willetts has served on the boards of several public companies, including Surrey Satellites Technology Ltd., a subsidiary of Airbus PLC (since 2015), Biotech Growth Trust PLC (since 2015), Verditek Ltd., a solar cell company (since 2018), Tekcapital PLC (since 2020), and Darktrace PLC (since its initial public offering in 2021). Lord Willetts holds a first class honors degree in politics, philosophy and economics from Christ Church, Oxford, a constituent college of the University of Oxford, and is a visiting Professor at King’s College, London.
Richard C. Davis has been a member of our board of directors since October 2022, and was the Chief Executive Officer and a director of Endurance from April 2021 until the consummation of the Business Combination in October 2022. Mr. Davis is a highly experienced executive with over 25 years of experience in corporate finance, private equity and the space industry. Since July of 2022, he has served as Chief Executive Officer of Descartes Labs, Inc., a leading provider of geospatial intelligence products. Since March 2021, he has served as a Managing Director of ADP. He is also a founder and Managing Member of ArgoSat Advisors LLC, a premier global advisory firm focused on the space industry that was founded in 2009. Mr. Davis has been a director of EarthDaily Analytics Corporation since February 2021, a director of Descartes Labs since July 2022, and a Director of AscendArc, Inc. since July 2023. Mr. Davis was formerly an instructor pilot in the United States Air Force. He received his B.S. in Astrophysics (cum laude) from the University of Minnesota, and his MBA from the University of Virginia.
Moshe Eisenberg has been a member of our board of directors since October 2022. Mr. Eisenberg currently serves as the Chief Financial Officer of Camtek Ltd., a position he has held since 2011. Prior to Camtek, Mr. Eisenberg served as the Chief Financial Officer of Ex Libris Group, a global provider of library automation solution for the academic market, from 2010 to 2011, and as the Chief Financial Officer of Scopus Video Networks Ltd., a leading provider of digital compression, decoding & video processing equipment, from 2005 to 2009. Mr. Eisenberg holds an MBA from Tel Aviv University and a B.Sc. in Agricultural Economics from the Hebrew University of Jerusalem.
Yoram Stettiner has been a member of our board of directors since October 2022. Dr. Stettiner currently serves as the Chief Scientist Officer at Arbe Robotics, Ltd., a position he has held since 2016. Dr. Stettiner is a Signal Processing Ph.D. with 35 years of R&D experience. Dr. Stettiner specializes in RTLS Radio Location and Tracking Systems, Array Processing, Sensor Fusion, Speech Signal Processing and VoIP. Dr. Stettiner has held various leadership positions at eight startups from foundation or early stage, with five of them having gone public or acquired. Dr. Stettiner holds a B.Sc. in Electrical Engineering, a M.Sc. and Ph.D. in Speech Signal Processing all from the Tel Aviv University.
CEO Succession
On June 1, 2023, Nir Barkan became our acting Chief Executive Officer. He succeeded Ido Gur, who had served as our Chief Executive Officer since January 15, 2023. Mr. Gur succeeded David Ripstein, who had served as our Chief Executive Officer since June 26, 2022 after succeeding our late co-founder and Chief Executive Officer, Mr. Yoel Gat.
CFO Succession
Mr. Yoav Leibovitch was required to step down as Chief Financial Officer in connection with the consummation of the Business Combination pursuant to Israeli law, which stipulates that a chairman of the board of directors of a public company should not also serve as its chief financial officer.
Notwithstanding his resignation as Chief Financial Officer, Mr. Leibovitch remains actively involved in our strategy, governance and oversight as Chairman of the board of directors and will continue to contribute to our day-to-day operations as a consultant under his existing services agreement.
In the interim, Mr. Oren Harari has been appointed as SatixFy’s Interim Chief Financial Officer.
Arrangements for Election of Directors and Members of Management
There are no arrangements or understandings with major shareholders or others pursuant to which any of our executive officers or directors are selected.
Aggregate Compensation of Directors and Executive Officers
The aggregate compensation (not including share-based compensation) paid by us and our subsidiaries to our executive officers and directors as a group for the year ended December 31, 2023 was approximately $5.6 million (including amounts set aside or accrued to provide pension, severance, retirement or similar benefits), and does not include business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefits commonly reimbursed or paid by companies in Israel. This amount includes bonuses earned with respect to 2023. It does not include the grant-date value of share-based compensation awarded in 2023.
As of December 31, 2023, options to purchase 3,316,936 of our ordinary shares granted to our executive officers and directors as a group were outstanding under our equity incentive plans at a weighted average exercise price of $2.24 per ordinary share, and 1,508,874 RSUs were outstanding.
The table and summary below outline the compensation paid and/or accrued to our five highest compensated directors and executive officers during the year ended December 31, 2023. The compensation detailed in the table below refers to actual compensation granted or paid to the director or officer during the year 2023. The compensation paid to Mr. Nir Barkan was in GBP and converted into U.S. dollars for the purposes of the table below at the exchange rate of GBP 1.2747 = U.S. $1.00, based on the rate of exchange between the GBP and the U.S. dollar as reported by the Bank of England on December 29, 2023. The compensation for the remaining individuals in the table below was paid in New Israel Shekels and converted into U.S. dollars for purposes of the table below at the exchange rate of NIS 3.627 = U.S.$1.00, based on the rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel on December 29, 2023.
Name and Position of Director or Officer | | Base Salary or Other Payment (1) | | | Value of Social Benefits (2) | | | Bonuses | | | Value of Equity- Based Compensation Granted (3) | | | All Other Compensation (4) | | | Total | |
Yoav Leibovitch | | | 1,200,000 | | | | 0 | | | | 1,000,000 | | | | 38,309 | | | | 0 | | | | 2,238,309 | |
Nir Barkan | | | 207,356 | | | | 60,073 | | | | 195,768 | | | | 128,875 | | | | 0 | | | | 592,072 | |
Oren Harari | | | 229,942 | | | | 64,384 | | | | 191,538 | | | | 73,590 | | | | 0 | | | | 559,454 | |
Itzik Ben Bassat | | | 220,223 | | | | 61,663 | | | | 110,284 | | | | 279,516 | | | | 0 | | | | 671,686 | |
Simona Gat (5) | | | 605,000 | | | | 0 | | | | 38,309 | | | | 38,309 | | | | 0 | | | | 643,309 | |
| (1) | “Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to the Company’s executive officers and members of the board of directors for the year 2023. |
| (2) | “Social Benefits” include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the relevant officers, payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy), education funds (referred to in Hebrew as "keren hishtalmut"), pension, severance, vacation, car or car allowance, rent for relocated officers, medical insurances and benefits, risk insurance (e.g., life, disability, accident), telephone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites. |
| (3) | Represents the equity-based compensation expenses recorded in the Company's consolidated financial statements for the year ended December 31, 2023, calculated in accordance with accounting guidance for equity-based compensation. For a discussion on the assumptions used in reaching this valuation, see Note 18 to our consolidated financial statements included elsewhere in this Annual Report. |
| (4) | “All Other Compensation” includes, among other things, car-related expenses (including tax gross-up), communication expenses, basic health insurance, and holiday presents. |
| (5) | Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy Bulgaria effective April 30, 3023. |
Employment and Incentive Arrangements with our Directors and CEO
Employment Agreement — Mr. Nir Barkan
SatixFy Israel Ltd. entered into an agreement on May 23, 2023 with Mr. Nir Barkan, effective June 1, 2023, pursuant to which Mr. Nir Barkan agreed to serve as Acting Chief Executive Officer. The compensation to be paid to Mr. Nir Barkan pursuant to this agreement consists of GBP 244,134 (approximately $26 thousand per month) annual salary. In addition, as part of his prior role with the Company, he received an annual bonus opportunity of up to $160,000, 500,000 RSUs, which shall vest quarterly in equal installments over 15 quarters, provided that 25% of the RSUs vests on January 1, 2024 and if a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within 24 months of the effective date of the agreement and thereafter Mr. Barkan’s employment with the Company is terminated by the Company without cause, 100% of the unvested RSUs shall automatically vest, and (v) other customary executive perquisites and benefits.
Separation Agreement — Mr. Ido Gur
On June 6, 2023, SatixFy Israel Ltd. entered into a separation agreement with Mr. Ido Gur, pursuant to which Mr. Gur resigned from his position as CEO as of the date of the agreement. Pursuant to the separation agreement, Mr. Gur remained an employee of the Company until November 20, 2023 solely for the purpose of transition of his position to the new CEO. We agreed to pay Mr. Gur his monthly salary of NIS 130,000 (approximately $36 thousand per month) and other benefits (including vacation, pension insurance fund, cellular phone, and leased car) up to the date of termination.
Separation Agreement — Mr. David Ripstein
On January 12, 2023, we entered into a separation agreement with Mr. David Ripstein, our former CEO, pursuant to which SatixFy and Mr. Ripstein mutually agreed to the termination of Mr. Ripstein’s employment as CEO effective January 13, 2023. In connection with the termination of Mr. Ripstein’s employment as CEO, SatixFy agreed to provide compensation to Mr. Ripstein consisting of, (i) continued payment of regular salary and access to certain benefits under his existing employment agreement through his employment termination date on April 12, 2023, (ii) a one-time bonus of $125,000 for fiscal year 2022 pursuant to Mr. Ripstein’s existing employment agreement, (iii) a one-time bonus of $95,000 payable on April 12, 2023, (iv) a one-time payment of $30,000 in exchange for Mr. Ripstein’s agreement to assist with transition of our new CEO, and (v) other customary terms and conditions.
Separation Agreement — Ms. Simona Gat
On April 30, 2023, SatixFy Communications Ltd. and Ilan Gat Ltd. entered into a Separation Agreement pursuant to which Ms. Gat resigned from all positions at the Company and its subsidiaries, including serving as the President of the Company. Effective May 1, 2023, she instead began serving as an observer on the board of directors of the Company. We agreed to pay Ms. Gat compensation consisting of (i) five monthly payments in the gross sum of $55,000 plus VAT from May through September 2023; (ii) one monthly payment of $110,000 plus VAT in October 2023, totaling in the aggregate, $385,000 plus VAT; and (iii) other customary terms and conditions.
Employment Agreement — Mr. Itzik Ben Bassat
SatixFy Israel Ltd. SatixFy Israel Ltd. entered into an agreement on February 7, 2023 with Mr. Itzik Ben Bassat, effective February 12, 2023, pursuant to which Mr. Ben Bassat agreed to serve as EVP Product Development and Operation. The compensation to be paid to Mr. Ben Bassat pursuant to this agreement consists of, (i) a monthly gross salary of NIS 75,000 (which is equivalent to approximately $21,000 as of March 1, 2023), (ii) an annual bonus opportunity of up to NIS 450,000 (which is equivalent to approximately $125,000 as of March 1, 2023), (iii) 400,000 RSUs convertible into 400,000 ordinary shares, which shall vest yearly in equal installments over four years, provided that 25% of the RSUs shall vest on the first anniversary of the agreement and if a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within 24 months of the effective date of the agreement and thereafter Mr. Ben Bassat’s employment with the Company is terminated by the Company without cause, 100% of the unvested RSUs shall automatically vest, and (iv) other customary executive perquisites and benefits. On November 29, 2023, the board approved a new title of Chief Operating Officer.
Employment Agreement — Mr. Oren Harari
SatixFy Israel Ltd. entered into an agreement on April 1, 2018 with Mr. Oren Harari, which was subsequently amended on October 28, 2022, pursuant to which Mr. Oren Harari agreed to serve as Interim Chief Financial Officer. The compensation to be paid to Mr. Oren Harari pursuant to this agreement consists of, (i) a monthly gross salary of NIS 60,000 (which is equivalent to approximately $16,000 as of March 1, 2023), (ii) an annual bonus opportunity in 2023 of up to four times the then applicable month salary, and (iii) other customary executive perquisites and benefits. Effective April 1, 2023, Mr. Harari’s salary was raised to NIS 70,000 (approximately $20,000).
Services Agreement — Mr. Yoav Leibovitch
SatixFy Israel Ltd. and RaySat Ltd. (“RaySat”), an entity organized under the laws of the State of Israel and controlled by Mr. Yoav Leibovitch, our Chairman of the board of directors and one of our significant shareholders, are parties to a Services Agreement effective as of January 1, 2013 (as amended as of June 27, 2017, September 6, 2020,January 4, 2021 and February 24, 2022). Pursuant to this agreement, Mr. Yoav Leibovitch provides financial management, business development, presidential and management services to SatixFy Israel Ltd. and its affiliates. On September 15, 2022, SatixFy’s board approved an amendment, which was approved by SatixFy’s shareholders on September 28, 2022, to Mr. Leibovitch’s compensation under this agreement to (i) grant Mr. Leibovitch a $2 million success bonus payable upon the Closing of the Business Combination, (ii) increase Mr. Leibovitch’s monthly fee for services provided to $100,000 per month, effective as of October 1, 2022, increase Mr. Leibovitch’s yearly bonus such that the yearly bonus shall be 2% of the incremental year-over-year growth of the shareholders’ equity in the consolidated financial statements of the Company and increase Mr. Leibovitch’s annual bonus such that the annual bonus shall be 2% of the incremental year- over-year growth of revenues in the consolidated financial statements of the Company.
Employment Agreement — Mr. Doron Rainish.
Effective as of the incorporation of our subsidiary, SatixFy Israel Ltd., in 2012, SatixFy Israel Ltd. entered into an employment agreement with Doron Rainish to serve as Chief Technology Officer, which was amended on December 1, 2016. The employment agreement provided for compensation equal to an annual gross amount of $160,000, plus $60,000” paid in four quarterly installments of $15,000 in the NIS equivalent. The employment agreement further provided for severance equal to two months’ base salary and an additional 8.33% employer contribution to any pension insurance. The employment agreement further provided for (i) pension insurance up to 14.33% employer contribution, depending on the type of insurance, (ii) advanced study fund with 7.5% employer contribution up to the limit recognized by the Income Tax Authority and (iii) employer car and mileage payments.
Services Agreement and Option Grant — Lord David Willetts.
On September 7, 2020, we entered into a Board Member Services Agreement with Lord David Willets, who serves as a director of the Company. With respect to his services as a director of the Company, Lord Willetts shall be entitled to receive annual remuneration and remuneration for participating in meetings at a fixed amount according to the applicable U.K. remuneration regulations. Pursuant to this agreement, Lord Willets is entitled to receive 50,000 non-tradable options exercisable into 50,000 SatixFy Ordinary Shares in accordance with the terms of the 2020 Share Award Plan (which was updated to 52,798 following the initial listing of our securities as a result of the Business Combination).
Director Compensation
We pay each of our external directors and to each other (non-external director) member of the compensation committee of the board (i) a fee of NIS 10,000 per month, (ii) a per meeting fee for participation in board and committee meetings of NIS 4,000 plus VAT, to the extent applicable, and (iii) reimbursement of expenses incurred in connection with service on the board and its committees, all in accordance with the Israeli Companies Law and applicable regulations. The other members of the board are entitled to reimbursement of expenses to the same extent to which the external directors are entitled to such reimbursement. No other compensation is currently paid to these other members of the board.
Internal Auditor
Under the Israeli Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Israeli Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in the Israeli Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or as a chief executive officer of the company. On September 28, 2022, the Company’s Board approved the appointment of Mr. Yisrael Gewirtz from Fahn Kanne Grant Thornton as the Company’s internal auditor.
Approval of Related Party Transactions under Israeli Law
Fiduciary Duties of Directors and Executive Officers
The Israeli Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. An office holder is defined in the Israeli Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title, a director, and any other manager directly subordinate to the general manager. Each person listed in the table under “Management — Management and Board of Directors” is an office holder under the Israeli Companies Law.
An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would act under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means, in light of the circumstances, to obtain:
information on the business advisability of a given action brought for the office holder’s approval or performed by virtue of the office holder’s position; and
all other important information pertaining to such action.
The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to:
refrain from any act involving a conflict of interest between the performance of the office holder’s duties in the company and the office holder’s other duties or personal affairs;
refrain from any activity that is competitive with the business of the company;
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for the office holder or others; and
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of the office holder’s position.
Under the Israeli Companies Law, a company may approve an act, specified above, which would otherwise constitute a breach of the office holder’s fiduciary duty, provided that the office holder acted in good faith, neither the act nor its approval harms the company, and the personal interest of the office holder is disclosed (including any significant fact or document) a sufficient time before the approval of such act. Any such approval is subject to the terms of the Israeli Companies Law setting forth, among other things, the appropriate bodies of the company required to provide such approval and the methods of obtaining such approval.
Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions
The Israeli Companies Law requires that an office holder promptly disclose to the Company any personal interest and all related material information known to such office holder concerning any existing or proposed transaction with the company. The Israeli Companies Law does not specify to whom within us or the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our board of directors. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate in which such person or a relative of such person is an interested party (as described above), but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest in a non-extraordinary transaction (meaning any transaction that is in the ordinary course of business, on market terms or that is not likely to have a material impact on the company’s profitability, assets or liabilities), approval by the board of directors is required for the transaction unless the company’s articles of association provide for a different method of approval. Any such transaction that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s audit committee and subsequently by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities) in which an office holder has a personal interest.
A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or at a committee meeting may generally not be present at such a meeting or vote on that matter unless a majority of the directors or members of the committee, as applicable, have a personal interest in the matter. If a majority of the members of the committee or the board of directors have a personal interest in the matter, then all of the directors may participate in deliberations of the committee or board of directors, as applicable, with respect to such transaction and vote on the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest, and certain arrangements regarding the terms of service or employment of a controlling shareholder and his relatives. For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint 50% or more of the directors of the company or its general manager. In the context of a transaction involving a related party, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated.
For a description of the approvals required under Israeli law for compensation arrangements of officers and directors, see “Management — Compensation of Directors and Executive Officers.”
Shareholder Duties
Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:
an amendment to the company’s articles of association;
an increase of the company’s authorized share capital;
interested party transactions that require shareholder approval.
In addition, a shareholder has a general duty to refrain from discriminating against other shareholders. Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote, and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under the company’s articles of association with respect to the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty of fairness.
Corporate
Governance Practices
A majority of our board of directors are composed of directors who are “independent” as defined by the rules of the NYSE, although we may decide to rely on the foreign private issuer exemption from this requirement in the future. The board of directors is expected to establish categorical standards to assist it in making its determination of director independence.
The board of directors will assess on a regular basis the independence of directors and will make a determination as to which members are independent. The term “executive officer” above is expected to have the same meaning specified for such term in the NYSE listing standards.
For a discussion of certain home country corporate governance practices we are permitted to follow as a foreign private issuer whose shares are listed on the NYSE instead of certain requirements of the rules of the NYSE, see “Item 16G. Corporate Governance.”
External Directors
Under the Israeli Companies Law, except as provided below, companies incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on the NYSE are required to appoint at least two external directors who meet the qualification requirements set forth in the Israeli Companies Law.
Pursuant to the regulations promulgated under the Israeli Companies Law, companies whose shares are traded on specified U.S. stock exchanges, including the NYSE, which do not have a controlling shareholder (as such term is defined in the Israeli Companies Law) and which comply with the independent director requirements and the audit committee and compensation committee composition requirements of U.S. law and the U.S. stock exchange applicable to domestic issuers, may (but are not required to) elect to opt out of the requirement to maintain external directors and opt out of the composition requirements under the Israeli Companies Law with respect to the audit and compensation committees. We currently do not qualify for such exemption.
In January 2023, the general meeting of shareholders approved the re-appointment of Moshe Eisenberg and Yoram Stettiner, as external directors for a three year period from January 12, 2023.
The provisions of the Israeli Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting at a meeting of shareholders, provided that either:
such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or
the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the election of the external director against the election of the external director does not exceed 2% of the aggregate voting rights in the company.
The term “controlling shareholder” as used in the Israeli Companies Law for purposes of all matters related to external directors and for certain other purposes (such as the requirements related to appointment to the audit committee or compensation committee, as described below), means a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint a majority of the directors of the company or its general manager.
With respect to certain matters (various related party transactions), a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company, but excludes a shareholder whose power derives solely from his or her position as a director of the company or from any other position with the company. For the purpose of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.
The initial term of an external director is three years. Thereafter, an external director may be re-elected, subject to certain circumstances and conditions, by shareholders to serve in that capacity for up to two additional three-year terms, provided that either:
his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such re-election exceeds 2% of the aggregate voting rights in the company, subject to additional restrictions set forth in the Israeli Companies Law with respect to affiliations of external director nominees;
the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described in the paragraph above; or
his or her service for each such additional term is recommended by the board of directors and is approved at a meeting of shareholders by the same majority required for the initial election of an external director (as described above).
Our Class I director, Yair Shamir, will hold office until our 2026 Annual General Meeting of Shareholders. Our Class II directors, Mary Cotton and David Willetts, will hold office until our 2024 Annual General Meeting of Shareholders. Our Class III directors, Yoav Leibovitch and Richard Davis, will hold office until our 2025 Annual General Meeting of Shareholders. The directors (other than the outside directors) are elected by a vote of the holders of a majority of the voting power present and voting at the meeting. Each director will hold office and, unless otherwise provided, serve on the committees to which he or she have been appointed by the Board, until the annual general meeting of our shareholders for the year in which his or her term expires and until his or her successor is duly elected and qualified, unless the tenure of such director expires earlier pursuant to the Companies Law or unless he or she resigns or is removed from office.
The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NYSE, may be extended indefinitely in increments of additional three- year terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution to the work of the board of directors and its committees, the re-election for such additional period(s) is beneficial to the company, and provided that the external director is re-elected subject to the same shareholder vote requirements (as described above regarding the re- election of external directors). Prior to the approval of the re-election of the external director at a general meeting of shareholders, the company’s shareholders must be informed of the term previously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.
External directors may be removed from office only by a special general meeting of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage required for their election or by a court order, in each case, only under limited circumstances, including ceasing to meet the statutory qualifications for appointment or violating their duty of loyalty to the company. An external director may also be removed by order of an Israeli court if, following a request made by a director or shareholder of the company, the court finds that such external director has ceased to meet the statutory qualifications for his or her appointment as stipulated in the Israeli Companies Law or has violated his or her duty of loyalty to the company.
If an external directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is required under the Israeli Companies Law to call a meeting of the shareholders as soon as practicable to appoint a replacement external director. Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors and an external director must serve as chair thereof. Under the Israeli Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than for their services as external directors pursuant to the Israeli Companies Law and the regulations promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during his or her term subject to certain exceptions.
The Israeli Companies Law provides that a person is not qualified to be appointed as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had during the two years preceding the date of appointment as an external director: (a) any affiliation or other disqualifying relationship with the company, with any person or entity controlling the company or a relative of such person, or with any entity controlled by or under common control with the company; or (b) in the case of a company with no controlling shareholder or any shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director any affiliation or other disqualifying relationship with a person then serving as chair of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.
The term “relative” is defined in the Israeli Companies Law as a spouse, sibling, parent, grandparent or descendant, a spouse’s sibling, parent or descendant and the spouse of each of the foregoing persons. Under the Israeli Companies Law, the term “affiliation” and the similar types of disqualifying relationships include (subject to certain exceptions):
an employment relationship;
a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);
service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.
The term “office holder” is defined in the Israeli Companies Law as a general manager (i.e., chief executive officer), chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.
In addition, no person may serve as an external director if that person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director or if the person is an employee of the Israel Securities Authority, or ISA, or an Israeli stock exchange. A person may also not continue to serve as an external director if he or she received direct or indirect compensation from the company including amounts paid pursuant to indemnification or exculpation contracts or commitments and insurance coverage for his or her service as an external director, other than as permitted by the Israeli Companies Law and the regulations promulgated thereunder.
Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an office holder of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.
If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director of the first company at such time.
According to the Israeli Companies Law and regulations promulgated thereunder, a person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise (each, as defined below); provided that at least one of the external directors must be determined by our board of directors to have accounting and financial expertise. However, if at least one of our other directors (i) meets the independence requirements under the Exchange Act, (ii) meets the independence requirements of the NYSE rules for membership on the audit committee and (iii) has accounting and financial expertise as defined under the Israeli Companies Law, then neither of our external directors is required to possess accounting and financial expertise as long as each possesses the requisite professional qualifications.
A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion about the presentation of financial data. A director is deemed to have professional qualifications if he or she has any of the following: (i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field which is relevant to his or her position in the company or (iii) at least five years of experience serving in one of the following capacities or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant volume of business, (b) a senior position in the company’s primary field of business or (c) a senior position in public administration or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional qualifications.
Chairman of the Board
The A&R Articles of Association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as a director, unless resolved otherwise by the board of directors. Under the Israeli Companies Law, the chief executive officer (or any relative of the chief executive officer) may not serve as the chairman of the board of directors, and the chairman (or any relative of the chairman) may not be vested with authorities of the chief executive officer without shareholder approval consisting of a majority vote of the shares present and voting at a shareholders meeting, for a period of not exceeding three (3) years, provided that either:
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against such appointment does not exceed 2% of the aggregate voting rights in the company.
In addition, a person subordinated, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the chief executive officer; and the chairman of the board may not serve in any other position in the company or a controlled company, but he may serve as a director or chairman of a subsidiary.
Committees of the Board of Directors
The board of directors has the following standing committees: an audit committee and a compensation committee.
Audit Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint an audit committee (the “Audit Committee”). The audit committee must be comprised of at least three directors, including all of the external directors, one of whom must serve as chair of the committee. The audit committee may not include the (i) chair of the board; (ii) a controlling shareholder of the company; (iii) a relative of a controlling shareholder; (iv) a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or (v) a director who derives most of his or her income from a controlling shareholder. In addition, under the Israeli Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an “unaffiliated director” under the Israeli Companies Law is defined as either an external director or as a director who meets the following criteria:
he or she meets the qualifications for being appointed as an external director, except for the requirement (i) that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed for trading outside of Israel) and (ii) for accounting and financial expertise or professional qualifications; and
| • | he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in his or her service as a director shall not be deemed to interrupt the continuity of the service. A majority of our audit committee (each, as identified in the second paragraph under “— Listing Requirements” below) are external directors under the Israeli Companies Law, thereby fulfilling the foregoing Israeli law requirement for the composition of the audit committee. |
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.
The members of the Audit Committee are our two external directors, Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. We have designated Mr. Moshe Eisenberg and Ms. Mary P. Cotton as “audit committee financial experts” as defined by the SEC and each member of the Audit Committee is “financially literate” under the NYSE rules. The board of directors has determined that each member of the Audit Committee is “independent” as defined under the NYSE rules and Exchange Act rules and regulations.
Audit Committee Role
Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee, which are consistent with the Israeli Companies Law, the SEC rules, and the corporate governance rules of the NYSE. These responsibilities include:
retaining and terminating our independent auditors, subject to ratification by the board of directors and by the shareholders;
pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms;
overseeing the accounting and financial reporting processes of our company;
managing audits of our financial statements;
preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act;
reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication, filing, or submission to the SEC;
recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with the Israeli Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;
reviewing with counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements;
identifying irregularities in our business administration, including by consulting with the internal auditor (if any) or with the independent auditor, and suggesting corrective measures to the board of directors;
reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services) between the company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course of the Company’s business and deciding whether to approve such acts and transactions if so required under the Israeli Companies Law; and
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees.
Additionally, under the Israeli Companies Law, the role of the audit committee includes the identification of irregularities in our business management, among other things, by consulting with the internal auditor or our independent auditors and suggesting an appropriate course of action to the board of directors. The audit committee is required to assess the company’s internal audit system and the performance of its internal auditor. The Israeli Companies Law also requires that the audit committee assess the scope of the work and compensation of the company’s external auditor. In addition, the audit committee is required to determine whether certain related party actions and transactions are “material” or “extraordinary” for the purpose of the requisite approval procedures under the Israeli Companies Law and whether certain transactions with a controlling shareholder will be subject to a competitive procedure.
Compensation Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint a compensation committee (the “Compensation Committee”). The compensation committee generally must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. The chair of the compensation committee must be an external director. Each compensation committee member who is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is subject to the same Israeli Companies Law restrictions as the audit committee as to who may not be a member of the compensation committee. Each member of our compensation committee (each, as identified in the second paragraph under “— Listing Requirements” below) fulfills the foregoing Israeli law requirements related to the composition of the compensation committee.
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies are required to maintain a compensation committee consisting of at least two independent directors.
The members of the Compensation Committee are our two external directors, Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. The board of directors has determined that each member of the Compensation Committee is “independent” as defined under the NYSE listing standards, taking into consideration the additional independence criteria applicable to the members of a compensation committee. The Compensation Committee has the authority to retain compensation consultants, outside counsel and other advisers.
Compensation Committee Role
In accordance with the Israeli Companies Law, the responsibilities of the compensation committee are, among others, as follows:
recommending to the board of directors with respect to the approval of the compensation policy for “office holders” (a term used under the Israeli Companies Law, which essentially means directors and executive officers) and, once every three years, regarding any extensions to a compensation policy that has been in effect for a period of more than three years;
reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any amendments or updates of the compensation plan;
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
exempting, under certain circumstances, from the requirement of approval by the general meeting of shareholders, transactions with a candidate to serve as the chief executive officer of SatixFy.
Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the committee, which include among others:
recommending to our board for its approval a compensation policy in accordance with the requirements of the Israeli Companies Law as well as other compensation policies, incentive- based compensation plans and equity-based compensation plans, and overseeing the development and implementation of such policies and recommending to our board of directors any amendments or modifications the committee deems appropriate, including as required under the Israeli Companies Law;
reviewing and approving the granting of options and other incentive awards to our Chief Executive Officer and other executive officers, including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, including evaluating their performance in light of such goals and objectives;
approving and exempting certain transactions regarding office holders’ compensation pursuant to the Israeli Companies Law
administer our clawback policy; and
administering our equity-based compensation plans, including without limitation, approving the adoption of such plans, amending and interpreting such plans and the awards and agreements issued pursuant thereto, and making awards to eligible persons under the plans and determining the terms of such awards.
Compensation Policy under the Israeli Companies Law
In general, under the Israeli Companies Law, a public company must have a compensation policy approved by the board of directors after receiving and considering the recommendations of the compensation committee. In addition, a compensation policy must be approved at least once every three years, first, by the issuer’s board of directors, upon recommendation of its compensation committee, and second, by a general shareholders meeting, provided that either:
such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such compensation policy and who are present and voting (excluding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation policy and who vote against the policy, does not exceed 2% of the company’s aggregate voting rights.
In the event that the shareholders fail to approve the compensation policy in a duly convened meeting, the board of directors may nevertheless override that decision, provided that the compensation committee and then the board of directors decide, on the basis of detailed reasons and after further review of the compensation policy, that approval of the compensation policy is for the benefit of the company despite the failure of the shareholders to approve the policy.
If a company that adopts a compensation policy in advance of its initial public offering (or in this case, prior to the closing of the Business Combination) describes the policy in its prospectus for such offering, then that compensation policy shall be deemed validly adopted in accordance with the Israeli Companies Law and will remain in effect for term of five years from the date such company becomes a public company.
The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors as set forth in the Israeli Companies Law, including advancement of the company’s objectives, business plan and long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:
the education, skills, experience, expertise and accomplishments of the relevant office holder;
the office holder’s position, responsibilities and prior compensation agreements with him or her;
the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost, the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in the company;
if the terms of employment include variable components — the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and
if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, his or her individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.
The compensation policy must also include, among other things:
with regard to variable components of compensation:
with the exception of office holders who report directly to the chief executive officer, provisions determining the variable components on the basis of long-term performance and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder’s contribution to the company; and
the ratio between variable and fixed components, as well as the limit on the values of variable components at the time of their grant.
a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;
the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and
a limit on retirement grants.
Our compensation policy is designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers with our long-term performance and provide a risk management tool. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, its compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.
The compensation policy also addresses our executive officers’ individual characteristics (such as their respective positions, education, scope of responsibilities and contribution to the attainment of its goals) as the basis for compensation variation among its executive officers and considers the internal ratios between compensation of its executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with respect to any special achievements, such as outstanding personal achievement or outstanding company performance), equity-based compensation, benefits and retirement and termination of service arrangements and the compensation that may be granted to the chairman of our board of directors may include, among others, an annual cash retainer, annual bonuses and other cash bonuses as an executive officer other than our chief executive officer and equity based compensation. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may not exceed 90% of each executive officer’s total compensation package with respect to any given calendar year.
An annual cash bonus may be awarded to executive officers and the chairman of our board of directors upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers other than its chief executive officer is based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by the chief executive officer. The annual cash bonus that may be granted to executive officers other than our chief executive officer and to the chairman of our board of directors may be based entirely on a discretionary evaluation. Furthermore, our chief executive officer is entitled to recommend performance objectives, and such performance objectives will be approved by the Compensation Committee (and, if required by law, by our board of directors).
The performance measurable objectives of our chief executive officer will be determined by our Compensation Committee and board of directors. A non-material portion of the chief executive officer’s annual cash bonus may be based on a discretionary evaluation of the chief executive officer’s overall performance by the Compensation Committee and the board of directors based on quantitative and qualitative criteria.
The equity-based compensation under the compensation policy for our executive officers is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus. Primary objectives include enhancing the alignment between the executive officers’ interests and our long-term interests and those of its shareholders and strengthening the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and RSUs, in accordance with its share incentive plan then in place. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.
In addition, the compensation policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enables its chief executive officer to approve immaterial changes in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation policy) and allows us to exculpate, indemnify and insure its executive officers and directors to the maximum extent permitted by Israeli law, subject to certain limitations as set forth therein.
The compensation policy also provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded on Stock Exchanges Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in the compensation policy.
Compensation of Directors and Executive Officers
Directors
Under the Israeli Companies Law, the compensation of a public company’s directors requires the approval of (i) its compensation committee, (ii) its board of directors and, unless exempted under regulations promulgated under the Israeli Companies Law, (iii) the approval of its shareholders at a general meeting. In addition, if the compensation of a public company’s directors is inconsistent with the company’s compensation policy, then those inconsistent provisions must be separately considered by the compensation committee and board of directors, and approved by the shareholders by a special majority by one of the following:
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against the inconsistent provisions of the compensation package does not exceed 2% of the aggregate voting rights in the company.
Executive Officers other than the Chief Executive Officer
The Israeli Companies Law requires the compensation of a public company’s office holders (other than the chief executive officer) be approved in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special majority as described above).
However, there are exceptions to the foregoing approval requirements with respect to non-director office holders. If the shareholders of the company do not approve the compensation of a non-director office holder, the compensation committee and board of directors may in special circumstances override the shareholders’ disapproval for such non-director office holder provided that the compensation committee and the board of directors each detailed reasons for their decision to override the disapproval of the shareholders and approve the compensation, , including regarding the shareholders of the Company objection.
An amendment to an existing compensation arrangement with a non-director office holder requires only the approval of the compensation committee, if the compensation committee determines that the amendment is immaterial. However, if the non-director office holder is subordinate to the chief executive officer, an amendment to an existing compensation arrangement shall not require the approval of the compensation committee if (i) the amendment is approved by the chief executive officer, (ii) the company’s compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii) the engagement terms are consistent with the company’s compensation policy.
Chief Executive Officer
Under the Israeli Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee, (ii) the company’s board of directors and (iii) the company’s shareholders (by a special majority as described above). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may in special circumstances override the shareholders’ decision provided that they each detailed reasons for their decision, after rediscussing the terms of the compensation and the shareholders decline the approval thereof, and if the compensation is in accordance with the company’s compensation policy.
In the case of a new chief executive officer, the compensation committee may waive the shareholder approval requirement with regard to the compensation of a candidate for the chief executive officer position if the compensation committee determines that: (i) the compensation arrangement is consistent with the company’s compensation policy , (ii) the chief executive officer candidate did not have a prior business relationship with the company or a controlling shareholder of the company and (iii) subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate. However, if the chief executive officer candidate will serve as a member of the board of directors, such candidate’s compensation terms as chief executive officer must be approved in accordance with the rules applicable to approval of compensation of directors.
As of December 31, 2023, we had 135 full-time employees, based primarily in Israel, the United Kingdom and Bulgaria, of whom more than 120 are engineers focused on the development of Very Large Scale Integration (VLSI), hardware, software, algorithms, satellite payloads and communications systems. None of our employees are represented by a labor union, and we consider our relations with our employees to be good. To date, we have not experienced any work stoppages.
Information regarding the ownership of our ordinary shares by our executive officers and directors is set forth in “Item 7. – Major Shareholders and Related Party Transactions – A. Major Shareholders.”
2020 Share Award Plan.
On May 12, 2020, we adopted our 2020 Share Award Plan and the EMI options (for UK employees). Addendum to the 2020 Share Award Plan, and on September 30, 2020, we adopted the U.S. Addendum to the 2020 Share Award Plan (as amended from time to time, together the “Plans”). The purpose of the Plans is to advance our and our shareholders’ interests by attracting and retaining the best available personnel for positions of substantial responsibility and provide additional incentive to our officers, directors, employees and other key persons, upon whose judgment, initiative and efforts we depend for the successful conduct of our business, to acquire a proprietary interest in the Company and/or its Affiliates. Under the Plans, select eligible participants have been granted share options and RSUs. The Plans are administered by our board of directors or, at the discretion of our board, a committee of directors.
The Plans provide for the grant of options and/or shares, including restricted shares, and/or RSUs and/or stock appreciation rights and/or performance units, performance shares and other stock or cash awards to employees, officers, directors, advisors and consultants of SatixFy and its subsidiaries. The Plans are administered by our board of directors, or a committee of the board of directors, appointed by the board.
The Plans provide for granting awards under various tax regimes, including in compliance with Section 102 (“Section 102”) of the Israeli Income Tax Ordinance (New Version), 5721-1961, or the “Ordinance,” and Section 3(i) of the Ordinance, and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the U.S. Internal Revenue Code (the “Code”).
Section 102 allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options under certain terms and conditions. Our non-employee consultants and/or controlling shareholders who are considered Israeli residents may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102 includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance, the most favorable tax treatment for the grantee, permits the issuance to a trustee under the “capital gain track.”
Options granted under the U.S. Addendum to the 2020 Share Award Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of incentive stock options granted to certain significant shareholders).
In the event of termination of a grantee’s employment or service with SatixFy or any of its affiliates, all vested and exercisable awards held by such grantee as of the date of termination may be exercised within three months after such date of termination, unless otherwise determined by the administrator. After such three month period, all such unexercised awards will terminate and the shares covered by such awards shall again be available for issuance under the Plans.
In the event of termination of a grantee’s employment or service with SatixFy or any of its affiliates due to such grantee’s death or total and permanent disability, all vested and exercisable awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided by the administrator or specified in the terms and conditions included in the Plans.
If a grantee’s employment or services with SatixFy or any of its affiliates is terminated for “cause” (as defined in the 2020 Share Award Plan), unless otherwise determined by the administrator or specified in the terms and conditions included in the Plans, all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination and all shares issued upon previous exercise or vesting of awards of such grantee shall be subject to repurchase at their nominal value, for no value or for the exercise price previously received by SatixFy, as the administrator deems fit, and the shares covered by such awards shall again be available for issuance under the Plans.
F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. |
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table sets forth information regarding the beneficial ownership of our ordinary shares by:
each person who is the beneficial owner of more than 5% of the outstanding shares of any series of our voting ordinary shares;
each of our then-current executive officers and directors; and
all executive officers and directors of the Company, as a group.
The beneficial ownership of ordinary shares of the Company is based on 83,586,790 ordinary shares issued and outstanding as of March 28, 2024.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to, or the power to receive the economic benefit of ownership of, the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares that the person has the right to acquire within 60 days are included, including through the exercise of any option or other right or the conversion of any other security. However, these shares are not included in the computation of the percentage ownership of any other person.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of our ordinary shares beneficially owned by them.
| | Number of Shares Beneficially Owned | | | Percentage of Outstanding Shares | |
5% Holders (other than executive officers and directors): | | | | | | |
Endurance Antarctica Partners, LLC(1) | | | 9,438,942 | | | | 10.8 | % |
FP Credit Partners II, L.P. | | | 5,936,409 | | | | 7.1 | % |
Simona Gat(2)(3) | | | 17,590,279 | | | | 20.7 | % |
Executive Officers and Directors(4) | | | | | | | | |
| | | | | | | | |
Oren Harari | | | 139,275 | | | | * | |
Nir Barkan | | | 367,442 | | | | * | |
Itzik Ben Bassat | | | 125,000 | | | | * | |
Mary P. Cotton | | | — | | | | — | |
Richard C. Davis(1) | | | — | | | | — | |
Moshe Eisenberg. | | | — | | | | — | |
Doron Rainish(5) | | | 1,224,098 | | | | 1.5 | % |
Yair Shamir (6) | | | — | | | | — | |
Yoram Stettiner | | | — | | | | — | |
David L. Willetts(7) | | | 39,600 | | | | * | |
| | | | | | | | |
Yoav Leibovitch(9) | | | 23,307,330 | | | | 27.4 | % |
Divaydeep Sikry(10) | | | 108,016 | | | | * | |
Stephane Zohar(11) | | | 143,069 | | | | * | |
All Executive Officers and Directors as a Group | | | 43,044,109 | | | | 49.3 | % |
| | | | | | | | |
* Less than 1%. | | | | | | | | |
(1) | Consists of 5,673,846 SatixFy Ordinary Shares, including 500,000 Price Adjustment Shares, and 3,765,096 SatixFy Ordinary Shares underlying the SatixFy Warrants. Richard C. Davis shares voting and investment control over shares held by the Sponsor by virtue of his shared control of the Sponsor. By virtue of this relationship, Richard C. Davis may be deemed to share beneficial ownership of the securities held of record of the Sponsor. Richard C. Davis has disclaimed beneficial ownership of the shares, except to the extent of his pecuniary interest therein, if any. The business address for Endurance Antarctica Partners, LLC is 200 Park Avenue, 32nd Floor New York, NY 10166. |
(2) | Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy Bulgaria, effective April 30, 2023. |
(3) | Consists of 16,186,297 SatixFy Ordinary Shares held directly. Ms. Simona Gat is one of SatixFy’s founders. Ms. Simona Gat’s holdings include 9,000,000 Price Adjustment Shares, and 1,403,981 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
(4) | The business address for each of the directors and officers of SatixFy is 2 Hamada St., Rehovot 670315, Israel. |
(5) | Consists of 1,153,679 SatixFy Ordinary Shares held directly and 179,513 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. And 10,586 vested RSUs. |
(6) | Mr. Yair Shamir is a director of CEL Catalyst Communications Limited and has the power to direct it to vote and dispose of the shares and has shared voting and investment power over the shares. Mr. Yair Shamir disclaims any beneficial ownership of any shares owned by CEL Catalyst Communications Limited other than to the extent of any pecuniary interest he may have therein, directly or indirectly. |
(7) | Consists of 39,600 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. |
(8) | Consists of 21,903,349 SatixFy Ordinary Shares held directly. Mr. Yoav Leibovitch is one of SatixFy’s founders. Mr. Yoav Leibovitch’s holdings include 18,000,000 Price Adjustment Shares and 1,403,981 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
(9) | Consists of 53,328 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. And 54,688 vested RSUs |
(10) | Consists of 64,944 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024.and 54,688 vested RSUs |
As of March 25, 2024, we had 37 record holders, of which 10 record holders were located in Israel and held approximately 83.6 million ordinary shares.
| B. | Related Party Transactions |
The following is a description of related party transactions for the period from January 1, 2023 to the date of this Annual Report with any of our executive officers, directors or their affiliates and holders of more than 10% of any class of our voting securities in the aggregate, which we refer to as related parties, other than employment, compensation and indemnification arrangements which are described under “Management,” which are incorporated by reference herein.
Business Combination AgreementKey Factors and Trends Affecting our Performance
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled “Item 3.D.—Risk Factors.”
Expanding our Customer Base and Relationships
We are focused on attracting new customers and expanding our relationships and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and products that make our offerings compatible with the latest advances in satellite-enabled communications. As of December 31, 2023, we had binding contracts with our 12 customers under which we recorded revenues in the 2023 or in 2022, or expect to record future revenues. Ongoing business developments discussed elsewhere in this Annual Report continue to impact our customer base and plans for expansion.
Backlog
As of December 31, 2023, we had signed contracts representing revenue backlog of approximately $59 million. Our backlog consists of estimated revenue pursuant to customer orders and onesigned contracts. Our customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach our contracts and most of our subsidiaries enteredcustomer contracts are terminable upon prior notice to us, without penalty. There is no assurance that we will be able to expand our customer relationships with existing customers, and therefore our backlog, or that our backlog will translate into revenue or cash flows. See “Item 3.D. Risk Factors – Amounts included in backlog may not result in actual revenue and are an uncertain indicator of our future earnings.
Development of New Products
Since commencing operations in 2012, we have invested a total of approximately $243 million in R&D as of December 31, 2023, a portion of which has been defrayed by government and public entity grants (recognized in our statement of operations as reductions in research and development expenses). To date, we have received over $77.5 million in grants from the Business Combination Agreement and on October 27, 2022, our subsidiary, Merger Sub, merged with and into Endurance, with Endurance continuing as the surviving company and becoming our direct, wholly owned subsidiary. The Business Combination Agreement, as amended, and the related transactions were approved by both our board of directors and the board of directors of Endurance.
Additionally, on October 24 and 25, 2022, Endurance, SatixFy, Merger Sub and the Sellers entered into the Forward Purchase Agreement, pursuant to which we agreed to register for resale the shares purchasedESA, sponsored by the Sellers thereunderUKSA, and under which we receivedover $6.3 million in grants from the Prepayment Amount of approximately $10.0IIA. Our net research and development expenses amounted to $29.1 million from Sellers (including $1.6and $16.8 million as a result of our issuance to Vellar of Additional Shares followingin the consummationyears ended December 31, 2023 and 2022, respectively. Our gross R&D spend, exclusive of the Business Combination) uponimpact of offsetting government and public entity grants, amounted to $33.4 million and $29.1 million in 2023 and 2022, respectively. In some cases, such as with grants from the effectivenessIIA, we are required to repay a portion of the Registration Statement. We may also be entitled to additional proceedsgrants at a future date in the form of any OET Salesa royalty on the sales of products developed with the assistance of such shares by Seller, as described in “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Forward Purchase Agreement” (subject to the payment of fees, expenses and break-up fees, as applicable).
Concurrently with the execution of the Business Combination Agreement, we entered into the Equity Line of Credit with CF Principal Investments, pursuant to which we may issue and sell to CF Principal Investments, from time to time and subject to the conditions in the related purchase agreement, up to $75.0 million in SatixFy Ordinary Shares.grants. See “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Equity LineResources—Commitments." Our R&D efforts also benefit from our experience on customer projects, including collaborations with leading companies in the satellite communications industry. We have generated $8.2 million and $10.1 million in revenues from the provision of Credit.”R&D services (recorded under “Development services and preproduction” in our statements of income) in the years ended December 31, 2023 and 2022, respectively, while maintaining ownership of our intellectual property developed in connection with such projects and licensing such intellectual property to our customers.
The Business Combination is accounted for as a capital reorganization, with no goodwill or other intangible assets recorded, in accordance with IFRS. SatixFy has been determined to be the accounting acquirer. In connection with the Business Combination, the SatixFy Ordinary Shares have been registered under the Exchange ActMarket Trends and listed on the NYSE, which will require SatixFy to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. SatixFy expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources.
Impact of COVID-19Uncertainties
On March 11, 2020,The markets in which our customers operate, including the World Health Organization designated the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic has hindered the movement of peoplesatellite payloads, ground terminals and goods worldwide,IFC markets, are characterized by increasingly rapid technological changes, product obsolescence, competitive pricing pressures, evolving standards and many governments instituted restrictions on workfluctuations in product supply and travel. For example, the U.S. government declared a national emergencydemand. New technology may result in sudden changes in system designs or platform changes that may render our products obsolete and subsequently issued a “do not travel” advisory advising U.S. citizensrequire us to avoid all international travel duedevote significant additional R&D resources to the global impact of COVID-19. Governments, non-governmental organizations and private sector entitiescompete effectively. We believe we have also issued and may continue to issue non-binding advisories or recommendations regarding air travel or other social distancing measures, including limitations on the number of persons that should be present at public gatherings. The U.S. and other governments also implemented enhanced immigration controls for air travel, including screenings, mandatory quarantine requirements and restrictions on travel. The Israeli and many foreign and U.S. state governments also issued stay home or “shelter in place” orders or advisories and imposed limits or advised against non-essential travel. We took precautionary measures intended to help minimize the risk of the virus to our employees, including requiring some of our employees to work remotely and suspending all non-essential travel.
Among other things, the COVID-19 pandemic caused a significant decline in aviation travel, the industry primarily servedopportunity ahead of us, with an aggregate TAM across our key markets that is expected to reach approximately $18 to $22 billion by many of our current customers, and resulted in several project delays in the Aero/IFC sector, which adversely affected our business and results starting in 2020. Beginning in the first quarter of 2020, several opportunities at different stages of negotiations were postponed and exhibitions and sales meetings were canceled. In addition, work on many of our current projects was delayed, as more than 50% of our employees worked from home during a period of over eight months. This lead to delays in project schedules, and several of our customers put current projects on hold or postponed anticipated projects in light of uncertainties surrounding the air travel industry and demand for satellite communications-related products and services.
Our business volume and revenues improved following the end of the pandemic, as air travel gradually resumedcurrent decade (see “Item 4. Information on the Company — B. Business — Market Opportunity”). However, we have no control over market demand and airlinesthere is no assurance that we will be successful in capturing a substantial portion of the TAM, and providers ofour ability to do so will be contingent on numerous factors, including developments in the satellite communications services resumed investments in satellite communications projectsindustry and geopolitical and macroeconomic conditions and our employees returnedability to work. On themeet demand, to overcome chip supply shortages and other hand, we and certain of our customers have continued to be hampered by pandemic-related supply chain capacity challenges, among others. See “Item 3. Key Information - D. Risk Factors — Our estimates, including a substantial manufacturing backlog for silicon chips, whichmarket opportunity estimates and market growth forecasts, are manufactured for us by a third party under contract,subject to inherent challenges in measurement and related suppliessignificant uncertainty, and services. Additionally, we have continued to experience periodic disruptionsreal or perceived inaccuracies in air travelthose metrics and normal business practices as a result of restrictions imposed in response to new COVID-19 variants.
estimates may harm our reputation and negatively affect our business..”
DespiteOur revenues amounted to $10.7 million and $10.6 million in the challenges associated with COVID-19years ended December 31, 2023, and 2022, while our net losses amounted to $29.7 million. We had an accumulated deficit (i.e., negative retained earnings) of $511 million as of December 31, 2023 (mostly derived from $333 million non-recurring listing expenses in 2022) . There is no assurance that we will achieve profitability in the clear impact on the Aero/IFC sector, we have continuednear future, if at all, and may require additional funding to invest insupport our continuing operations, fund our R&D and also believe the circumstances have provided us with an opportunity to gain IFC market share. Significant delays occurred in the procurement of IFC antennas as a result of the pandemic, providing us with the opportunity to maturecapital expenditure requirements and service our technologydebt obligations. See “— Liquidity and design lower cost,Capital Resources” below for more powerful and easier to install Aero/IFC terminals at a time that our principal competitors’ market-ready products, based on more traditional mechanical antennas operating over GEO, did not receive substantial orders. Subject to the developments discussed below under “— Key Factors and Trends Affecting our Performance — Market Trends and Uncertainties,” we believe we have an opportunity to bring our Aero/ IFC terminals to market at the time the industry is likely to begin procuring its next-generation of IFC equipment, which we expect to better coincide with new services being introduced by new LEO constellations.information.
We currently rely on third parties for a substantial amount of our chip manufacturing and system assembly operations, and for assemblies and chip development software. The majority of our chips are supplied by a single foundry, GlobalFoundries, and we purchase chip development software and software libraries from a limited number of providers, such as Cadence Design Systems, Inc. and Siemens. The majority of our chips are designed to be compatible with the manufacturing processes and equipment employed by GlobalFoundries and switching to a new foundry vendor for these chips may require significant cost and time. The current global shortage in semiconductor and related electronic components and assemblies, resulting mainly from macro trends such as strong demand for 5G devices and high-performance computing has resulted in increases in the prices we pay for the manufacturing of our chips and assemblies, disruptions in our supply chain and disruptions in the operations of our suppliers and customers. If one or more of our vendors terminates its relationship with us, or if they fail to produce and deliver our products or provide services according to our requested demands in specification, quantity, cost and time, our ability to ship our chips or satellite communications systems to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales and damage our customer relationships. While in some cases we are notmay be able to predict whether the COVID-19 pandemic will result in long-term changesleverage our relationships with certain large, well-known customers to secure contract manufacturing capacity on better price and delivery terms, this cannot be assured and our ability to mitigate potential adverse impacts of supply chain constraints is limited at this time.
Additionally, we may experience supply chain and other disruptions to our business practices,that may be caused by a range of factors beyond our control, including, but not limited to, geopolitical uncertainty, international trade disputes, armed conflicts and sanctions, such as the ongoing Israel-Hamas and Russia-Ukraine wars and the related sanctions, or economic and political instability in Asia, such as the military threat posed by China against Taiwan, climate change, increased costs of labor, freight cost and raw material price fluctuations, a long-term reductionshortage of qualified workers or material changes in air travel as a result of increased usage of “virtual” and “teleconferencing” products, which could lead to a decline in demand for air travel and related satellite communications services. macroeconomic conditions.
The full extenteffects of the ongoing impactRussia-Ukraine war, including the changes for the timing of COVID-19 on our longer-term operationalnew satellite launches by SatixFy’s current and prospective customers that previously launched from Russia, increased supply chain difficulties for SatixFy and its customers, and recent developments in SatixFy’s discussions with prospective customers, pose challenges to SatixFy’s business and future financial performance will depend on future developments, many of which are outsideresults, particularly in the near-term. For example, in March 2022, OneWeb, one of our control. The magnitudesignificant customers, announced that it was suspending all satellite launches from Russia’s Baikonur Cosmodrome and naturerecently announced that it would partner with companies in other countries, which may result in a significant delay of the effectsits test launch of these challenges and uncertaintiessatellites equipped with our payload systems if it is unable to transition its expected satellite launches on our business are difficult to predict and such effects may not be fully realized, or reflected in our financial results, until future periods.a timely basis. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — The global COVID-19 pandemic has harmedWe are currently experiencing, and couldmay continue to harmexperience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our business,operations.” Industry supply chain challenges may be exacerbated and the demand for our products may be adversely affected as a result of the indirect effects of the Russia-Ukraine war, related sanctions or their impacts on global and regional economies. Recent global inflationary trends, higher interest rates and financial markets volatility have also resulted in funding constraints that have affected and created more uncertainty about the timing and scale of investments in new communications satellite constellations, new aircraft fleets and updated IFC solutions and related infrastructure by some of our existing and prospective customers. For example, the scale and timing of Telesat’s plans to launch a new LEO communications satellite constellation will depend on its ability to obtain the necessary funding for this project. The effects of recent macroeconomic uncertainties on our customers have also resulted in delays to contract negotiations or customer orders, and may result in further delays. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — Deterioration of the financial condition of our customers could adversely affect our operating results.” SatixFy believes that recent media and regulatory scrutiny of SPAC business combinations may lead customers to view SatixFy as a riskier or undercapitalized partner. Prior to the consummation of the Business Combination, two customers (including a significant customer that recently announced an agreement to enter into a merger of equals with another major satellite operator) with whom SatixFy was discussing prospective new contracts informed SatixFy that they selected SatixFy’s larger competitors with longer track records of providing space-based and aircraft-based satellite communications solutions as principal contractors for their satellite communications needs. While SatixFy’s management believes that these developments are unlikely to materially impact the long-term demand for our products or our long-term customer relationships (including with the two customers that terminated new contract discussions, for whom SatixFy believes it may be selected as the provider of satellite communication chips in connection with these ongoing projects in the future), they make it more difficult for us to budget for expected customer demand and therefore may adversely impact our results of operations” and financial condition, especially in the near-term. Our ability to mitigate these supply chain and other disruptions, including the potential adverse impacts of the Russia-Ukraine conflict on our supply chain or the supply chains of our customers, is limited, as the impacts are largely indirect and it is difficult for us to predict at this time how our suppliers and customers will adjust to the new challenges or how these challenges will impact our costs or demand for our products and services. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations,” .“ — We rely on third parties for manufacturing of our chips and other satellite communications system components. We do not have long-term supply contracts with our foundry or most of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions” and “— Deterioration of the financial condition of our customers could adversely affect our operating results.”
In addition, the recent escalation of the Israel-Hamas conflict could cause disruptions to our operations, and a delay in the development, production and shipment of our products and the heightened tension in our relations with various Middle Eastern countries could adversely affect our customer relationships as well as our sales and performance of existing or future contracts, which in turn could adversely affect our operating results, financial conditions and the expansion of our business. Furthermore, the latest Israel-Hamas war and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and its neighboring states and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of this ongoing conflict are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices and supply chain disruptions. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Operations in Israel — Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them.”
Basis of Presentation
We currently conduct our business through one reportable operating segment. We prepare our consolidated financial statements under IFRS as issued by the International Accounting Standards Board.
Our management continues to monitorfunctional and to examinereporting currency is the effectsU.S. dollar (which is also the functional currency of our Israeli subsidiary), as the demand for satellite communications chips and systems, and many of the COVID-19 pandemicdevelopment costs with respect thereto, are priced in U.S. dollars. Certain of our subsidiaries, on the other hand, have other functional currencies (being the currencies in which their assets, liabilities, revenues and expenses are recorded). The functional currency of our businessU.K. subsidiary is the GBP and has made adjustments,the functional currency of our Bulgarian subsidiary is the EUR. Accordingly, in the preparation of our consolidated financial statements, we are required to translate these subsidiaries’ GBP and EUR balances to U.S. dollars. Assets and liabilities are generally translated at year-end exchange rates, while revenues and expenses are generally translated at the average exchange rates for the period presented. The differences resulting from currency translations are presented in our consolidated statements of comprehensive loss under Exchange gain (loss) arising on translation of foreign operations, but are not reflected in our loss for the period. As a result of our foreign currency translation exposure, certain amounts in our consolidated financial statements may make further adjustments,not be comparable between periods. Additionally, subsidiary cash and financial asset and liability balances that are denominated in currencies other than the functional currency of the subsidiary are remeasured into the functional currency, with the resulting gain or loss recorded in the financial income or financial expenses line-items in our statements of income. For more information about the comparability impact of our foreign currency translation exposure, see below under “Item 11 — Quantitative and Qualitative Disclosure About Market Risk — Foreign Currency Exchange Risk.”
Key Financial and Operating Metrics
We monitor several financial and operating metrics in order to keepmeasure our employeescurrent performance and partners safe, meetproject our contractual obligations and continue developing our proprietary technology. Our management has not identified any asset impairments or solvency challenges to date. See “— Key Factors and Trends Affecting our Performance” below for additional information.
Our Revenue Model and Prospects
We seek to provide end-to-end solutions for the satellite communications industry, driven by our proprietary chip technology, which we believe allow us to develop and provide satellite communications systems that have higher system processing capacities and throughputs and thatfuture performance. These metrics are lighter in weight, consume less power and are lower in cost than competing systems. In most cases, our systems must be tailored to our customers’ specifications. A typical system development life cycle starts with an assessment of the customer’s needs and specifications, is followed by the design of a communications system based on those specifications and the integration of our proprietary chips, and culminatespresented in the delivery of the final product to the customer.following table.
| | Year Ended December 31 | |
| | 2023 | | | 2022 | |
| | (U.S.$ in thousands, except percentages) | |
Revenues | | $ | 10,730 | | | $ | 10,626 | |
Gross profit | | $ | | | | $ | 6,128 | |
Gross margin | | | 45 | % | | | 58 | % |
Net loss | | $ | (29,715
| ) | | $ | (397,789 | )(*) |
The structure of our contracts with customers varies based on the needs and preferences of our individual customers. For example, while we may enter into agreements with some customers that cover the whole life cycle of a project from the definition of requirements to the development and delivery of a system, at the outset of the engagement, other customers may prefer a phased approach, placing a contract with us for an initial product demonstration, followed by a second phase for the delivery of a commercial-ready product. Accordingly, the length and nature of our contracts vary across our customer base. We are an early stage company and, to date, a substantial portion of our revenues has been derived from relatively few customers.
We recorded $ 10.6 million, $21.7 million and $10.6 million in revenues for the years ended December 31, 2022, 2021 and 2020, respectively. To date, most of our customer contracts have covered the early phases of satellite communications system development, typically requiring our R&D personnel to team with our customers on the development of system specifications. Accordingly, over the last three years, most of our customer revenues have related to these phases of product development, and have been recorded under “development services and preproduction,” which accounted for approximately 95%, 89% and 97% of our total revenues in the years ended December 31, 2022, 2021 and 2020, respectively. Our revenues from sales of products have related mainly to sales of modems and chips, which amounted to $0.5 million, $2.4 million and $0.3 million in the years ended December 31, 2022, 2021 and 2020, respectively. Ongoing macro-level events and supply-chain constraints across the satellite industry have resulted in order delays and project cancellations by certain of our current and prospective customers, which we expect will continue to impact our business in the near term.
Our three largest customers accounted for, in the aggregate, approximately 78%, 64% and 35% of our revenues in the years ended December 31, 2022, 2021 and December 31, 2020, respectively. Of our three top customers in 2021 and 2020, Jet Talk, our equity method investee in which we own a 51% equity stake but which we do not control, did not contribute to our revenues(*) Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and accounteda $37 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the afore-mentioned non-cash expenses had any impact on our income tax expense or benefit for approximately 14% and 68% of our revenues in the yearsyear ended December 31, 2021 and December 31, 2020, respectively, all2022 or on our deferred tax assets or liabilities as of which was revenue for the provision of R&D services. See “— that date.
Principal Components of Our Results of Operations — Share in the loss of a company accounted by equity method, net” below.
WeRevenues
In the periods discussed in this Annual Report, we have two commercial contracts with Jet Talk, both related to the development of an Aero/IFC satellite communications terminal for commercial aircraft, which under our joint venture agreement Jet Talk will have the exclusive right to commercialize and sell. Jet Talk pays for thegenerated substantial revenues from development services associatedand preproduction provided to our customers in connection with these contractsprojects on which we are engaged (although we maintain ownership of the intellectual property developed in connection with the proceeds of a $20.0 million investment by our joint venture partner, STE. We believe our partnership with STE, which under our joint venture contributes to Jet Talk’s funding and its marketing and other activities, will allow us to benefit from STE’s resources, commercial aviation industry expertise and strong presence in East Asia, thus providing us with an added advantage in commercializing our Aero/IFC satellite communications terminals, once their development is complete.
Jet Talk did not generate any revenue in 2022 and is not expected to generate material revenue until at least 2024. Once we complete the development of and are able to commercialize our Aero/IFC satellite communications terminal product, the revenues and margins attributable to such sales will not be fully reflected in our consolidated financial statements, which will instead reflectprojects). Our revenue from our sales of products consisted mostly of revenue from contracts for the provision of products, including product prototypes, and services to Jet Talk on a contract basis (which we expect Jet Talk to sell to end-users in the commercial aviation market) andcomponents, including our equity in Jet Talk’s net income or loss for each reporting period. Accordingly, our consolidated statements of operations for future periods may not fully reflect the underlying revenues and margins of our future IFC/Aero terminals business. See Note 6 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
proprietary chips.
We expect ourOur mix of revenue has begun to gradually shift to sales of products towardssince the end of 2023 and beginning of 2024,we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products and begin to deliver satellite communications systems at scale.
Cost of sales and services
Our cost of sales and services includes mainly salaries (including bonuses, share-based awards, benefits and related expenses) of our service personnel and the costs of our chip manufacturing subcontractors, chip manufacturing tools and materials and models, shipping cost, and related depreciation and amortization, including amortization of intangible assets, if any.
Research and development expenses
Research and development expenses consist primarily of salaries (including bonuses, benefits and related expenses) of personnel involved in R&D and the cost of development tools, third- party intellectual property licenses, and subcontractors, net of public sector grants, including from ESA, which offset some of our research and development expenses. See Note 22 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
To date, we have expensed all of our R&D costs as incurred. See “— Critical Accounting Policies and Estimates — Research and Development Costs.” We expect to continue investing in R&D and, accordingly, expect our research and development expenses to increase. We also expect to benefit from additional funding from the ESA and other government and public sector entities, which, if obtained, would offset a portion of our research and development expenses.
Selling and marketing expenses
Selling and marketing expenses consist mainly of salaries (including bonuses, share-based awards, benefits and related expenses) of our personnel involved in the sales and marketing of our products, as well as advertising, exhibition and related expenses (including related travel).
We expect our sales and marketing costs to increase as we bring more products to market, the demand for our products increases and we hire more sales and marketing personnel.
General and administrative expenses
General and administrative expenses consist mainly of salaries (including bonuses, share-based awards, benefits and related expenses) of management and administrative personnel, overhead costs (including facilities rent and utilities), legal expenses, depreciation and amortization of property and equipment not used in the manufacturing of our products or provisions of our services and costs associated with being a public company, such as costs related to director and officer liability insurance, director fees and public company-related auditing and compliance costs.
Share in the loss of a company accounted by equity method, net
This represents our share in the loss of a company accounted by equity method, net, which reflects our proportionate share of the loss of Jet Talk, a joint venture with STE. We own 51% of Jet Talk’s equity, but do not control the company, as STE controls the company’s financing, participates substantially in directing its marketing and R&D activities (the latter generally being contracted to us) and also participates in the appointment of the chief executive officer, among other senior management personnel. We are committed to provide Jet Talk with future development services for a large Aero/IFC terminal, exclusive marketing rights for the commercial aviation market, technical skills, staff expertise, R&D facilities and an exclusive, royalty-free, world-wide, perpetual, non-transferable, irrevocable license to use and commercially exploit our intellectual property for the development, production, sales and marketing of satellite antenna systems for the commercial aviation market. While Jet Talk has generated losses to date, we expect Jet Talk to contribute significantly to our results of operations in the future. See Note 7 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Finance Income and Expenses
Finance income includes mainly the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities (see “— Basis of Presentation”), fair value adjustments related to financial assets and liabilities and interest on bank deposits.
Finance expenses include mainly interest on loans and bank fees, depreciation of our right-of-use assets, amortization of debt and warrant discounts, fair value adjustments related to financial assets and liabilities (including, in 2022, our outstanding warrants and repayable grants from the IIA) and the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities.
Income taxes
To date, we have not been subject to income taxes associated with our operating activity, due to the fact that we have incurred losses in every year since commencing operations, and we have not recorded any income tax benefits since there is uncertainty as to our ability to utilize our tax loss carryforwards in future periods. As part of the MDA Agreement, we recorded a tax liability associated with the sale of SatixFy Space Systems UK Ltd. as a potential capital gain. See Note 26 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Results of Operations for the Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022
The following table provides our consolidated statements of operations for the years ended December 31, 2023 and 2022:
| | Year Ended December 31, | |
| | 2023 | | | 2022 | | | Change | | | % | |
| | (U.S.$ in thousands, except percentages) | |
Revenues: | | | | | | | | | | | | |
Development services and preproduction | | $ | 8,249 | | | $ | 10,081 | | | $ | (1,832 | ) | | | (18 | )% |
Sale of products | | | 2,481 | | | | 545 | | | | 1,936 | | | | 355 | % |
Total revenues | | $ | 10,730 | | | $ | 10,626 | | | $ | 104 | | | | 1 | % |
Cost of sales and services: | | | | | | | | | | | | | | | | |
Development services and preproduction | | | 4,930 | | | | 4,166 | | | | 764 | | | | 18 | % |
Sale of products | | | 1,008 | | | | 332 | | | | 676 | | | | 204 | % |
Total cost of sales and services | | | 5,938 | | | | 4,498 | | | | 1,440 | | | | 32 | % |
| | | | | | | | | | | | | | | | |
Gross profit | | $ | 4,792 | | | $ | 6,128 | | | $ | (1,336 | ) | | | (22 | )% |
Research and development expenses | | | 29,126 | | | | 16,842 | | | | 12,284 | | | | 73 | % |
Selling and marketing expenses | | | 2,866 | | | | 2,335 | | | | 531 | | | | 23 | % |
General and administrative expenses | | | 14,561 | | | | 9,249 | | | | 5,312 | | | | 57 | % |
Loss from operations | | $ | (41,761 | ) | | $ | (22,298 | ) | | $ | 19,463 | | | | 87 | % |
Finance Income | | | 83 | | | | 17 | | | | 66 | | | | 388 | % |
Finance Expenses | | | (12,129 | ) | | | (9,919 | ) | | | 2,210 | | | | 22 | % |
Derivatives Revaluation | | | (17,217 | ) | | | (37,377 | ) | | | (20,160 | ) | | | (54 | %) |
Other Income | | | 41,657 | | | | 5,474 | | | | 36,183 | | | | 661 | % |
Listing Expenses | | | - | | | | (333,326 | ) | | | (333,326 | ) | | | (100 | )% |
Share in the loss of a company accounted by equity method, net | | | (226 | ) | | | (360 | ) | | | (134 | ) | | | (37 | )% |
| | | | | | | | | | | | | | | | |
Loss before income taxes | | $ | (29,593 | ) | | $ | (397,789 | ) | | $ | (368,196 | ) | | | (93 | )% |
Tax expenses | | | (122 | ) | | | - | | | | 122 | | | | 100 | % |
Loss for the period (1) | | $ | (29,715 | ) | | $ | (397,789 | ) | | $ | (368,074 | ) | | | (93 | )% |
| (1) | Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring, listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and a $37.4 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the aforementioned non-cash expenses had any impact on our income tax expense or benefit for the year ended December 31, 2022 or on our deferred tax assets or liabilities as of that date. See 25 to our consolidated financial statements included elsewhere in this Annual Report for more information. |
Revenues
Total Revenues
Total revenues of $10.7 million increased by $0.1 million, or 1%, for the year ended December 31, 2023 compared to $10.6 million for the year ended December 31, 2022. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry.”
Development services and preproduction
Development services and preproduction of $8.2 million decreased by $1.8 million, or 18%, for the year ended December 31, 2023 compared to $10.1 million for the year ended December 31, 2022. The decrease was primarily driven by a delay in progress in one of our projects in 2023 due to a customer request and completion of one of our projects which in 2022.
Sale of products
Sale of products of $2.48 million increased by $1.9 million, or 355%, for the year ended December 31, 2023 compared to 545,000 for the year ended December 31, 2022. The increase was primarily driven by deliveries of an order that was received during 2022.
Cost of sales and services of Development services and preproduction
Total cost of sales and services of $4.9 million increased by $0.8 million, or 18%, for the year ended December 31, 2023 compared to $4.1 million for the year ended December 31, 2022. The increase is associated with the Company’s engagement in 2023 in projects which carry lower gross margins compared to 2022.
Cost of sales and services of Sale of Products
Total cost of sales and services of $1 million increased by $0.7 million, or 204%, for the year ended December 31, 2023 compared to $0.3 million the year ended December 31, 2022. The increase reflects increased revenues from sale of products as described above.
Gross profit
Gross profit of $4.8 million decreased by $1.3 million, or 22%, for the year ended December 31, 2023, compared to $6.1 million for the year ended December 31, 2022, reflecting our decrease in revenue from the sale of development services and preproduction, which bears a higher gross margin. Our gross margin in the year ended December 31, 2023 decreased due to the higher revenue from sale of products, which bears a lower gross margin.
Research and development expenses
Research and development net expenses of $29.1 million increased by $12.3 million, or 73%, for the year ended December 31, 2023 compared to $16.8 million the year ended December 31, 2022. Our gross R&D expenditure increased by $4.2 million, or 14%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was mostly driven by an increase in production cost associated with our space grades ASICs of approximately $2 million, combined with an increase of approximately $2 million in payroll and related expenses and RSU grants that were granted during the year. Research and development expenses were affected mostly by a net decrease in ESA grants and tax credits for the year ended December 31, 2023, and a decline in contributions from government support and grants, which all are recorded as offsets to R&D expenses, by $8.1 million, to $4.2 million in the year ended December 31, 2023 from $12.3 million in the year ended December 31, 2022.
Selling and marketing expenses
Selling and marketing expenses of 2.9 million increased by $0.5 million, or 23%, for the year ended December 31, 2023 compared to $2.3 million in the year ended December 31, 2022. The increase was primarily driven by our increased participation in trade shows, related travel costs and a slight increase in payroll and RSU grants.
General and administrative expenses
General and administrative expenses of $14.6 million increased by $5.3 million, or 57%, for the year ended December 31, 2023 compared to $9.2 million for the year ended December 31, 2022. The increase was primarily driven by the settlement of a legal proceeding with Alta of $2.3 million , as well as an increase in legal costs of $2 million, an increase of director and officer insurance expenses of $1 million, a provision for expected credit loss of $1.8 million, offset by a decrease of $2 million in bonuses to the chairman of our board of directors. See “Item 8.A. Financial Information—Legal Proceedings” for additional information.
Loss from operations
Loss from regular operations of $41.8 million increased by $19.5 million, or 87%, for the year ended December 31, 2023 compared to $22.3 million in the year ended December 31, 2022, reflecting the factors discussed above.
Finance Expenses
Finance expenses of $12.1 million increased by $2.2 million, or 22%, for the year ended December 31, 2023 compared to $9.9 million for the year ended December 31, 2022. The increase was primarily driven by a $3 million expense of interest recorded on the advanced payments from MDA (See Note 3 to our audited consolidated financial statements for the fiscal year ended December 31, 2023) offset by $1 million in currency fluctuation affects. The increase in interest expenses associated with the amendments of the 2022 Credit Agreement were offset almost entirely by the finance income associated with the economical effects of the modified loan terms (See Note 12 to our consolidated financial statements included elsewhere in this Annual Report).
Derivatives revaluation
Derivatives revaluation of $17.2 million decreased by $20.2 million, or 54%, for the year ended December 31, 2023 compared to $37 million for the year ended December 31, 2022. The decrease was primarily driven by a decrease in our stock price, which effected our financial instruments (PAS and Warrants).
Other Income
Other income of $41.7 million increased by $36.2, or 661%, for the year ended December 31, 2023, compared to $5.5 million for the year ended December 31, 2022, which was primarily due to the MDA Agreement See “Item 4 Information on the Company — B. Business Overview” andNote 3 to our consolidated financial statements, included elsewhere in this Annual Report, for further information.
Listing Expenses
We had no listing expenses for the year ended December 31, 2023, compared to listing expenses of $333 million for the year ended December 31, 2022. For further information regarding listing expense, see Note 25 to our audited consolidated financial statements for the fiscal year ended December 31, 2023, included elsewhere in this Annual Report.
Share in the loss of a company accounted by equity method, net
Share in the loss of a company accounted by equity method, net, decreased by $0.1 million, or 37%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease reflects a decrease in R&D expenses by Jet Talk due to the substantial completion of its development project and lower activity levels at Jet Talk in the absence of commercial production of IFC terminals.
Tax expenses
Tax expenses were $0.1 million for the year ended December 31, 2023 compared to $0 for the year ended December 31, 2022. The tax expenses were primarily attributable to the MDA Agreement with respect to the sale of Satixfy Space Systems UK Ltd (See Note 3 to our consolidated financial statements included elsewhere in this Annual Report).
Net loss for the period
Net loss for the period decreased by $368.2 million, or 93%, for the year ended December 31, 2023 compared to $397.8 million for the year ended December 31, 2022, reflecting the factors discussed above.
B. | Liquidity and Capital Resources |
Our primary cash needs are for working capital, including funding our R&D and meeting our contractual obligations and other commitments, and payment of principal and interest on our outstanding debt. To date, we have funded these working capital requirements and other expenses mainly through issuances of equity capital and borrowings, as further discussed below, as well as grants and other funds received from the ESA and the IIA. Our ability to expand our business and become cash flow positive will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate revenuepositive cash flows from operations, all of which depend on our ability to attract and profits is subject to numerous contingenciesretain customers, develop new products and uncertainties, including those discussed below undercompete effectively, as well as certain factors outside of our control. See “— Key Factors and Trends Affecting our Performance.”
As of December 31, 2023, our cash and cash equivalents amounted to $14 million and our financial debt amounted to $59.8 million.
Accordingly, we plan to try to raise additional capital, whether in the public or private markets, and are currently examining different alternatives. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have a material adverse impact on our business and financial prospects, seek protection under insolvency laws or cease our operations altogether. “Item 3. Key Information—D. Risk Factors—We are an early stage company with a history of losses, have generated less revenues than our prior projections, and have not demonstrated a sustained ability to generate predictable revenues or cash flows. If we do not generate revenue as expected, our financial condition will be materially and adversely affected.”
As discussed above under “Item 5. Operating3. Key Information—D. Risk Factors—Risks Related to Ownership of Our Securities —The market price of our equity securities may be volatile, and Financial Review and Prospects Liquidity and Capital Resourcesyour investment could suffer or decline in value” and elsewhere in this Annual Report, the sales and further issuances of our ordinary shares could materially adversely affect the market price for our securities, which could, in turn, materially adversely affect our ability to raise additional capital in the public or private markets or the terms on which such capital could be raised. Further, recent declines in our share price mean that our ability to raise new capital under the Equity Line of Credit Facility, which limits the number of shares we can sell based on their daily average trading volume, could be substantially less than we initially expected.
We have based our estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Changing circumstances could also cause us to consume capital faster than we currently anticipate, and we may need to spend more than currently expected.
If we are successful in overcoming our short-term funding challenges, over the long term we may decide to develop new products, enter new markets or build additional or expand current manufacturing facilities, any of which would require substantial additional capital. The timing of the completion of the development and engineering, and commercial launch of our satellite communications systems that are expected to drive our future results is uncertain. The commercialization of these products may also entail unpredictable costs and delays and is subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Certain of these risks and uncertainties are described in more detail in this Annual Report under “Item 3. Key Information – D. Risk Factors” and include, but are not limited to, changed business conditions, continued supply chain challenges, and governmental responses thereto, geopolitical uncertainty, competitive pressures, regulatory developments or the cessation of public sector R&D funding, among other potential developments.
Debt and other financing arrangements
As of December 31, 2023, we had total borrowings (not including lease liabilities) of approximately $59.8 million, all of which is long-term debt under the 2022 Credit Agreement entered into in connection with the Debt Financing, a portion of the proceeds from which we used to repay our prior borrowings.
Business Combination Agreement and 2022 Debt Financing
On March 8, 2022, we and one of our subsidiaries entered the Business Combination Agreement and on October 27, 2022, our subsidiary, Merger Sub, merged with and into Endurance, with Endurance continuing as the surviving company and becoming our direct, wholly owned subsidiary.
In anticipation of the Business Combination, on February 1, 2022, we entered into the 2022 Credit Agreement with FP pursuant to which we borrowed an aggregate principal amount of $55.0 million in the form of a term loan, which is guaranteed by certain of our subsidiaries. The obligations under the 2022 Credit Agreement, as amended, are secured by a lien and security interest over substantially all of our and the guarantors’ assets. In order to preserve liquidity and allow us more time to evaluate our financing and strategic alternatives, on April 23, 2023, we entered into the Waiver and Second Amendment to the Credit Agreement, which, among other things, (i) provided a waiver of certain defaults or potential defaults, (ii) permitted us to make our interest payments for 2023 on a pay-in-kind basis if its cash balance is less than $12.5 million, (iii) temporarily reduced our minimum cash requirement from $10 million to $8 million and $7 million for the months of April and May 2023, respectively, and thereafter to $10 million, in each case plus an amount sufficient to cover our and our subsidiaries’ accounts payable that are past 60 days due, (iv) increased the interest rate of the loan to SOFR + 8.50% (with a 3% SOFR floor) and (v) provided for certain additional reporting obligations by us. The 2022 Credit Agreement provides that the term loan matures on February 1, 2026.
The 2022 Credit Agreement contains customary covenants that restrict the way in which we may conduct our business and our ability to take certain actions. In particular, it limits our ability to incur additional indebtedness or liens, dispose of assets to third parties, repurchase our shares and pay dividends. The 2022 Credit Agreement also imposed a financial maintenance covenant, requiring that, for so long as we have a leverage ratio (debt to Consolidated Adjusted EBITDA (as defined in the 2022 Credit Agreement)) greater than or equal to 6.00 to 1.00, SatixFy must maintain a minimum cash balance of $8 million and $7 million for the months of April and May 2023, respectively, and thereafter of $10 million, in each case plus an amount sufficient to cover its and its subsidiaries’ accounts payable that are past 60 days due, which cash is held in deposit accounts subject to a security interest in favor of the Agent. The 2022 Credit Agreement also contains customary events of default, which provide that the lenders are entitled to automatically accelerate payment of the loans upon the occurrence of an event of default.
In connection with the Debt Financing, SatixFy also entered into an equity grant agreement, dated February 1, 2022, pursuant to which it issued 808,907 SatixFy Ordinary Shares (before giving effect to the Pre-Closing Recapitalization) to the lenders under the 2022 Credit Agreement in consideration for the funds borrowed.
In June 2023 , the parties to the 2022 Credit Agreement entered into the Third Amendment. The Third Amendment provides that, among other things, upon our receipt of such prepayment, interest payable thereunder will be added to the principal of the term loan on a “pay in kind” basis through June 28, 2024, the payments made in connection with the pre-purchase agreement will not be applied to repay debt under the 2022 Credit Agreement, a limited waiver, subject to certain conditions, of the liquidity covenant therein, and following closing of the MDA Agreement, a reduced interest rate and the grant of the 4.1 million ordinary shares under the 2022 Credit Agreement. On October 31, 2023, we entered into the Fourth Amendment and the Fifth Amendment to the 2022 Credit Agreement, whereby the lenders provided their consent to those certain agreements entered into by us. Further, the Fifth Amendment extended the period of time by which we must issue or cause the transfer the 4.1 million ordinary shares pursuant to the Third Amendment to the Credit Agreement from four business days to 90 days following the date the Fifth Amendment became effective; and reduced the 4.1 million ordinary shares which we must issue or cause the transfer of pursuant to the Third Amendment to the 2022 Credit Agreement, by the amount of shares transferred pursuant to the Vellar Termination Agreement and the ACM Termination Agreement, and, subject to the timely transfers of shares as contemplated in the Vellar Termination Agreement and ACM Termination Agreement, we will also issue 500,556 new ordinary shares to the lenders(which is the difference between 4.1 million ordinary shares and the shares to be transferred to the lenders from Vellar and ACM). In addition, we agreed to issue the lenders 1,000,000 Price Adjustment Shares in a private placement within 30 days, which shares will be subject to substantially the same terms governing the Price Adjustment Shares previously issued in connection with our business combination with Endurance and as further described in the Fifth Amendment.
Equity Line of Credit
Concurrently with the execution of the Business Combination Agreement, SatixFy and CF Principal Investments entered into that certain CF Purchase Agreement and that certain CF Registration Rights Agreement in connection with the Equity Line of Credit. Pursuant to the CF Purchase Agreement, following the Closing, the Company has the right to sell to CF Principal Investments up to the lesser of (i) $77,250,000 aggregate principal amount of newly issued SatixFy Ordinary Shares (before the 3.0% purchase price discount on sales under the Equity Line of Credit discussed below) and (ii) the number of shares equal to 19.99% of the voting power or number of SatixFy Ordinary Shares issued and outstanding after giving effect to the Business Combination and other transactions contemplated by the Business Combination Agreement (the “Exchange Cap”), subject to certain exceptions as provided in the CF Purchase Agreement.
Upon the satisfaction of the conditions to CF Principal Investments’ purchase obligation set forth in the CF Purchase Agreement (the “Commencement”), SatixFy will have the right, but not the obligation, from time to time at its sole discretion over the 36-month period from and after the Commencement, to direct CF Principal Investments to purchase up to a specified maximum amount of its ordinary shares as set forth in the CF Purchase Agreement by delivering written notice to CF Principal Investments prior to the commencement of trading of the SatixFy Ordinary Shares on the NYSE on any trading day, so long as all of its ordinary shares subject to all prior purchases by CF Principal Investments under the CF Purchase Agreement have theretofore been received by CF Principal Investments electronically as set forth in the CF Purchase Agreement. The purchase price of the ordinary shares that SatixFy may elect to sell to CF Principal Investments pursuant to the CF Purchase Agreement will be determined by reference to the VWAP defined for this agreement of the SatixFy Ordinary Shares on the date of purchase, which is when SatixFy has timely delivered written notice to CF Principal Investments directing it to purchase its ordinary shares under the CF Purchase Agreement, less a fixed 3.0% discount to such VWAP.
SatixFy controls the timing and amount of any sales of its ordinary shares to CF Principal Investments. Actual sales of its ordinary shares to CF Principal Investments under the CF Purchase Agreement will depend on a variety of factors to be determined by SatixFy from time to time, including, among other things, market conditions, the trading price of its ordinary shares and SatixFy’s needs for financing resources.
Forward Purchase Agreement
On October 24, 2022, Endurance, SatixFy, Merger Sub and Vellar entered into an agreement for an OTC Equity Prepaid Forward Transaction (the “Forward Purchase Transaction”), which was subsequently amended on October 25, 2022 (as amended, the “Forward Purchase Agreement”). Subsequent to entering into the Amendment, Endurance, SatixFy, Merger Sub and Vellar entered into an Assignment and Novation Agreement with ACM ARRT G LLC (together with Vellar, the “Sellers”), pursuant to which Vellar assigned its rights and obligations with respect to up to 4,000,000 ordinary shares (the “Subject Shares”) under the Forward Purchase Agreement to ACM ARRT G LLC (the “Assignment and Novation Agreement”),
Pursuant to the terms of the Forward Purchase Agreement, the Sellers thereunder purchased, through a broker in the open market, (i) 8,544,284 Endurance Class A ordinary shares. Following the closing of the Business Combination, we issued to Vellar, in a private placement pursuant to the Forward Purchase Agreement, 1,605,100 additional ordinary shares (the “Additional Shares”). Pursuant to the Forward Purchase Agreement, the Sellers were paid directly, out of the funds held in Endurance’s trust account, approximately $86.5 million.
Pursuant to the Forward Purchase Agreement, we filed the Registration Statement with the SEC. The Sellers paid to SatixFy approximately $10.0 million.
On October 31, 2023, we entered into termination agreements (the “Termination Agreements”) with the Sellers, dated October 31, 2023. Pursuant to the Termination Agreements, the parties agreed (i) terminating Forward Purchase Agreement, (ii) terminating the Assignment and Novation Agreement, and (iii) that Vellar and ACM relinquish their rights to an aggregate of 3,599,444 ordinary shares (which includes all remaining Subject Shares held by ACM and Vellar), which are to be transferred to the lenders in connection with their consent to the transactions contemplated by the MDA Agreement. Further, we will pay Vellar and ACM an aggregate amount of approximately $6.5 million in installments until May 31, 2024, in the case of Vellar, and March 31, 2024, in the case of ACM. The Termination Agreements further provide that if we fail to make the required payments to ACM on time (subject to certain conditions as described therein), the total amount payable by us to ACM will increase by $3.7 million (which amount will be payable on the final installment date).
PIPE Financing
Concurrently with the execution of the Business Combination Agreement, Endurance and SatixFy entered into Subscription Agreements with certain investors. Pursuant to the Subscription Agreements, the PIPE Investors agreed to subscribe for and purchase, and SatixFy agreed to issue and sell to the PIPE Investors, immediately prior to the closing of the Business Combination, an aggregate of 2,910,000 PIPE Units consisting of (i) one PIPE Share and (ii) one-half of one PIPE Warrant exercisable for one SatixFy Ordinary Share at a price of $11.50 per share for a purchase price of $10.00 per PIPE Unit, for gross proceeds of $29,100,000, on the terms and subject to the conditions set forth in the applicable Subscription Agreement. Affiliates of the Sponsor agreed to purchase $10,000,000 of PIPE Units on the same terms and conditions as all other PIPE Investors. Each PIPE Warrant will entitle the holder to one SatixFy Ordinary Share at an exercise price $11.50 per share. The terms of the PIPE Warrants are substantially the same as the existing Endurance warrants.
Pursuant to the terms of the Subscription Agreements, concurrently with the Closing, SatixFy delivered 1,175,192 ordinary shares issuable to certain SatixFy shareholders and 391,731 ordinary shares on behalf of the Sponsor into an escrow account (collectively, the “Escrow Shares”). In March 2023, we instructed our transfer agent to release from escrow the 1,163,077 Escrow Shares held by the Sponsor and shareholders.
As described above, pursuant to the terms of the Subscription Agreements, SatixFy delivered the Escrow Shares into the escrow account, and on or about March 31, 2023, subsequently released the Escrow Shares to the PIPE Investors and SatixFy shareholders pursuant to the terms thereof.
In connection with the Subscription Agreements pursuant to which SatixFy has agreed to sell the PIPE Units to the PIPE Investors, SatixFy and Continental entered into a warrant agreement, pursuant to which SatixFy issued 1,000,000 warrants, each entitling the warrant holder to purchase one (1) SatixFy Ordinary Share at an exercise price of $11.50 per share, subject to adjustment and on the terms and subject to the limitations described therein. The original PIPE Warrants were issued on terms identical to the Endurance Public Warrants (and, accordingly, the SatixFy Public Warrants) in all material respects, except for a distinct CUSIP, certain resale restrictions and registration rights set forth in the Subscription Agreements, and a book entry restrictive legend. On January 12, 2023, we exchanged, on a one-for-one and cashless basis, the 1,000,000 original PIPE Warrants previously issued to the Sponsor and Cantor in connection with the PIPE Financing for new PIPE Warrants under the terms of the SatixFy A&R Warrant Agreement. The new PIPE Warrants have the same terms as the Public Warrants and are identical to the Public Warrants, except that they will bear restrictive legends until they are resold by the applicable PIPE Investors pursuant to an effective registration statement or Rule 144 under the Securities Act.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| | For the year ended December 31 (in thousands of USD) | |
| | 2023 | | | 2022 | |
Cash Flow Data: | | | |
Net cash used in operating activities | | | (24,635 | ) | | | (31,480 | ) |
Net cash used in investing activities | | | 17,341 | | | | (582 | ) |
Net cash provided by financing activities | | | 9,114 | | | | 40,523 | |
Increase (decrease) in cash and cash equivalents | | | 1,820 | | | | 8,461 | |
Cash and cash equivalents balance at the beginning of the year | | | 11,934 | | | | 3,854 | |
Effect of changes in foreign exchange rates on cash and cash equivalents | | | 225 | | | | (381 | ) |
| | | | | | | | |
Cash and cash equivalents balance at the end of the period | | | 13,979 | | | | 11,934 | |
Operating Activities
During the year ended December 31, 2023, net cash used in operating activities was $25 million, compared to $31 million in the year ended December 31, 2022, reflecting the factors discussed under “— Results of Operations” above and the evolution of our working capital. The principal drivers of working capital were prepayment from customers, which increased by $15.6 million in 2023 compared to a $ 11.8 million increase in 2022, offset by advances from ESA, which decreased by $1.3 million in 2023 compared to a $7.6 million increase in 2022, other current assets (comprised mainly of prepaid expenses and accruals for tax credits), which decreased by $3.5 million in 2022 compared to a $7 million increase in 2022, and trade account payables, accounts payable and accrued expenses, which together increased by $5.2 million in 2023 compared to a decrease of $7.8 million in 2022.
During the year ended December 31, 2022, net cash used in operating activities was $31 million, compared to $5.8 million in the year ended December 31, 2021, reflecting the factors discussed under “— Results of Operations” above and the evolution of our working capital. The principal drivers of working capital were prepayments from customers, which increased by $11.8 million in 2022 compared to a $ 1.5 million increase in 2021, offset by advances from ESA, which decreased by $7.6 million in 2022 compared to a $1.9 million increase in 2021, other current assets (comprised mainly of prepaid expenses and accruals for tax credits), which increased by $7.0 million in 2022 compared to a $3.3 million decrease in 2021, and trade account payables, accounts payable and accrued expenses, which together decreased by $7.8 million in 2022 compared to an increase of $4.7 million in 2021.
Investing Activities
During the year ended December 31, 2023, net cash received in investing activities was $17 million. Net cash used in investing activities for year ended December 31, 2023 is attributable to the MDA transaction (see Note 3 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report).
During the year ended December 31, 2022, net cash used in investing activities was $0.6 million.
Financing Activities
During the year ended December 31, 2023, net cash from financing activities amounted to $9 million, consisting mainly of issuance of shares of $10 million as part of the Forward Purchase Agreement.
During the year ended December 31, 2022, net cash from financing activities amounted to $41 million, consisting mainly of proceeds under our 2022 Credit Agreement and issuance of shares due to conversion of warrants of $6.5 million net of repayment of existing loans in the sum of $18.8 million.
Commitments
As of the date of this Annual Report, our material financial commitments were comprised of the amounts outstanding under the Debt Facility, as described above, and the lease liabilities described in Note 6 to our consolidated financial statements included elsewhere in this Annual Report.
In connection with the ESA grants described above, which are intended to fund 50%-75% of the cost of development of integrated chip sets for several industries (depending on the nature of the engagement), including both hardware and software, our agreement stipulates that the resulting intellectual property will be available to ESA on a free, worldwide license for its own requirements. In addition, ESA can require us to license the intellectual property to certain bodies that are part of specified ESA programs, for ESA’s own requirements on acceptable commercial terms, and can also require us to license the intellectual property to any other third party for purposes other than ESA’s requirements, subject to our approval that such other purposes do not contradict our commercial interests.
Additionally, approximately $3.3 million of the $6.3 million in R&D grants we obtained from the IIA is subject to repayment through royalties. We are required to pay the IIA royalties of 3% to 4% of total sales of products resulting from R&D funded by such grants, up to a maximum amount of 100% of total grants received, plus interest. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to US Dollar deposits. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank of Israel plus 0.71513%; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%. We record the royalty liability once the repayment obligation is deemed probable. Our royalty liability to the IIA amounted to $1.3 million as of December 31, 2023. Of the $1.3 million subject to repayment through royalties, approximately $1.2 million represented a contingent liability (fair value measured based on discounted future royalties and an interest rate of 20%).
Other than the commitments and contingencies disclosed in this discussion and analysis and our consolidated financial statements included elsewhere in this Annual Report, we did not have material contractual commitments or contingencies for payments of cash as of the date of this Annual Report.
Off-balance Sheet Arrangements
Other than the contingencies described above, we did not have any off-balance sheet arrangements as of the date of this Annual Report.
Seasonality
We do not believe that demand for our products and services is seasonal. As an early-stage company, most of our revenue to date has been project-based. Accordingly, our revenue and results of operations may fluctuate from period to period based on the number of customer projects or the achievement of key milestones under our customer contracts.
C. | Research and Development, Patents and Licenses |
For a discussion of our research and development policies, see “Item 4. – Information on the Company – B. Business Overview – Research and Development.”
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse effect on our revenue, income, profitability, liquidity or capital resources, or that caused that disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. | Critical Accounting Policies and Estimates |
Our discussion and analysis of financial condition results of operations are based upon our consolidated financial statements included elsewhere in this Annual Report. The preparation of our consolidated financial statements in accordance with IFRS requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.
Our critical accounting policies are those that materially affect our consolidated financial statements and involve difficult, subjective or complex judgments by management. A thorough understanding of these critical accounting policies is essential when reviewing our consolidated financial statements. We believe that the critical accounting policies listed below involve the most difficult management decisions because they require the use of significant estimates and assumptions as described above. See Note 2 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report for a summary of our significant accounting policies. Our critical accounting policies are the following.
Revenue Recognition
We recognize revenue using the five-step model set forth in IFRS 15, Revenue from Contracts with Customers. To date, we have earned revenue mainly from providing customers with development services and the sale of ground-based modems for satellite communications and related products.
We recognize revenue from the provision of NRE services at the time the service is transferred to the customer and measure the revenue in an amount that represents the consideration that we expect to be entitled to for the same goods or services, while revenue from the sale of satellite communications modems and related products is recognized when control of the products is transferred to our customers, both as described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report. In connection with the recognition of revenue from NRE services, we measure the progress of our performance commitments based on the portion of completion of each project or project deliverable. Changes in these estimates could have a material impact on the amount of revenue recognized for a given period.
Research and Development Costs
To date, we have recognized all expenditures on R&D activities in our statement of operations as they were incurred. Going forward, we may elect to capitalize expenditures incurred on development activities where the expenditure will lead to new or substantially improved products and only if all the following can be demonstrated:
the product is technically and commercially feasible;
we intend to complete the product so that it will be available for use or sale;
we have the ability to use or sell the product;
we have the technical, financial and other resources to complete the development and to use or sell the product;
we can demonstrate the probability that the product will generate future economic benefits; and
we are able to reliably measure the expenditure attributable to the product during its development.
Capitalized development costs are included in the carrying amount of an intangible asset, and the capitalization of costs ceases when the asset is in the condition necessary for it to be capable of operating in the manner intended by management. Capitalized development costs are amortized on a straight-line basis over their estimated useful lives once the development is completed and the assets are in use. Subsequent expenditure on capitalized intangible assets is capitalized only where it clearly increases the economic benefits to be derived from the asset to which it relates. All other expenditure, including that incurred in order to maintain an intangible asset’s current level of performance, is expensed as incurred. As of December 31, 2022, our management concluded that we did not meet the aforementioned requirements for capitalization of any research and development expenses. Management’s conclusions may change in future periods, which could have a material impact on the comparability of our financial results for future periods with the results presented in this Annual Report.
Share-based payments
We record share-based payments to employees, which are measured at the value of the equity instrument at the time of grant, and record a corresponding expense.
As our ordinary shares are not listed on a public market, the calculation of the fair value of our ordinary shares is subject to a greater degree of estimation in determining the basis for share- based grants. Accordingly, we are required to estimate the fair value of both the instrument entitling the recipient to purchase shares, as well as the shares themselves, at the time of each grant. We consider objective and subjective factors in determining the estimated fair value of our shares, with input from management and an independent valuation firm. We determined the value of our shares based on interpolating from the valuations in our most recent external equity financing rounds and, when applicable, an expected valuation for a public offering, subject to discounts for the probability and timing of an exit event and lack of marketability, among other factors.
In turn, we measure the value of options or warrants to purchase our shares based on the value of the shares and an option pricing or hybrid model. We used the Black-Scholes model to determine the fair value of options to buy our shares, based on assumptions as to dividend yield (0%), expected volatility (56.43%), risk-free interest rate (1.6%) and expected life of the instrument (3 years). We used a hybrid of the Black-Scholes and Merton (Structural Model) models for the purpose of determining the fair value of our warrants, based on assumptions as to risk- free interest rate (0.59%), expected exercise period (between 5 and 8 years) and expected volatility (approximately 40%).
The assumptions underlying the valuations represent our best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if we used significantly different assumptions or estimates, our share-based compensation expense for prior periods could have been materially different.
We expect to use the market price of our ordinary shares as the basis for the valuation of future grants, based on the reported closing price of such shares on the date of grant. We expect to record a substantial expense in our future financial statements for periods that include the date of consummation of the Business Combination as a result of the issuance of the Price Adjustment Shares and IFRS accounting for Founder Shares.
Inventory
Inventories are recognized at the lower of cost and net realizable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. We measure the cost of raw materials on a first-in, first-out basis and finished goods according to costs based on direct costs of materials and labor. We review the net realizable value of our inventory at the end of each reporting period. Factors that may affect inventory selling prices include the existing market demand, competition, the availability of superior technology in the market, the prices of raw materials and the solvency of customers and suppliers. Write-downs in the value of inventory are also expensed on our statement of operations. While we have not historically held significant inventory on hand, and have not experienced inventory write-downs, we expect this to change over time as develop more customer relationships and commercialize more products.
Quantitative and Qualitative Disclosures about Market Risk
For a discussion of our quantitative and qualitative disclosures about market risk, please see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”
Emerging Growth Company Status
We are an emerging growth company, as defined in Section 102(b)(1) of the JOBS Act. The JOBS Act exempts emerging growth companies from certain SEC disclosure requirements and standard and we intend to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company, including, but not limited to, (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and (2) not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or current or future PCAOB rules requiring supplements to the auditor’s report providing additional information about the audit and the consolidated financial statements (critical audit matters or auditor discussion and analysis). Although under the JOBS Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies, this exemption does not apply to companies, such as us, reporting under IFRS since IFRS does not provide for different transition periods for public and private companies.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. | Directors and Senior Management |
The following table sets forth the name, age and position of each of our executive officers and directors as of the date of this Annual Report. For biographical information concerning the executive officers and directors, see below.
Name | | Age | | Position |
Yoav Leibovitch(8) | | 66 | | Executive Chairman of the Board of Directors |
Nir Barkan | | 45 | | Acting Chief Executive Officer |
Oren Harari | | 49 | | Interim Chief Financial Officer |
Doron Rainish | | 68 | | Chief Technology Officer |
Divaydeep Sikri | | 45 | | Vice President and Chief Engineer |
Stephane Zohar | | 57 | | Executive Vice President — VLSI |
Itzik Ben Bassat | | 55 | | Chief Operating Officer |
Mary P. Cotton((1)2)((3)(4)( (7) | | 66 | | Director |
Yair Shamir(6) | | 78 | | Director |
David L. Willetts(7) | | 68 | | Director |
Richard C. Davis(8) | | 58 | | Director |
Moshe Eisenberg(1)(2)(3)(4)(5) | | 57 | | Director |
Yoram Stettiner(1)(2)((3)(4)(5) | | 66 | | Director |
(1) | Member of the Compensation Committee |
(2) | Member of the Audit Committee |
(3) | Independent Director (as defined under Israeli law) |
(4) | Independent Director (as defined under NYSE American LLC Company Guide Manual Section 803(A)(2), or NYSE American Section 803(A)(2)) |
(5) | External director, if required under the Companies law |
(6) | Class I directors hold office until the annual general meeting to be held in 2026 and until their successors shall have been elected and qualified |
(7) | Class II directors hold office until the annual general meeting to be held in 2024 and until their successors shall have been elected and qualified |
(8) | Class III directors hold office until the annual general meeting to be held in 2025 and until their successors shall have been elected and qualified |
Yoav Leibovitch is a member of our board of directors, , and was appointed as our Executive Chairman of the board of directors in March 2022 and served as our interim Chief Executive Officer from April 2022 to June 2022, following the passing of our co-founder and Chief Executive Officer, Mr. Yoel Gat. Mr. Leibovitch also served as our Chief Financial Officer from 2012 until the closing of the Business Combination in October 2022. Prior to SatixFy, Mr. Leibovitch was the Chief Executive Officer of Raysat, Inc. from 2009 to 2012, a leading developer of Communication-On-The-Move antennas. Additionally, Mr. Leibovitch was the Vice President of Business Development at Gilat Satellite Networks Ltd. (“Gilat”), a company founded by our late co-founder and Chief Executive Officer, Mr. Yoel Gat, from 2005 to 2008, and the Chief Financial Officer of Gilat from 1991 to 2003. Mr. Leibovitch holds an M.B.A. from the Hebrew University of Jerusalem. Mr. Leibovitch is a Certified Public Accountant in Israel.
Nir Barkan has served as our Acting Chief Executive Officer since June 1, 2023. Mr. Barkan has previously served as our Chief Commercial Officer from 2014 until 2018. Prior to joining SatixFy, from 2018 to 2023, Mr. Barkan was a Co-Founder, Group Chief Technology Officer and the General Manager as well as a Director of Curvalux UK Limited (“Curvalux”), a company operating in the field of sustainable fixed wireless broadband technology. Prior to Curvalux, Mr. Barkan served as a Satcom Product Marketing Manager at Orbit Technologies Ltd. from 2013 to 2014 , as a Director of Marketing, Pre-Sale and Support at Novelsat from 2011 to 2013, as a Product Marketing Manager in SanDisk from 2010 to 2011 and also served as a Strategic Marketing Manager, a Customer Programs Manager and an application engineer at Texas Instruments from 2004 to 2009. Mr. Barkan also served as an R&D Engineer and a Captain in Reserve in the IDF. Mr. Barkan holds an MBA in Strategy and Entrepreneurship University and a B.SC in Electronics and Electricity from Tel-Aviv University.
Oren Harari has served as our Interim Chief Financial Officer since October 2022. Prior to that, Mr. Harari was our Vice President of Finance, a position he has held since joining SatixFy in 2018. Prior to joining SatixFy, Mr. Harari was the Chief Financial Officer of MICT Inc. (NASDAQ:MICT) from 2016 to 2018, a holding company operating in the field of telematics and commercial MRM. Prior to MICT, Mr. Harari served as a VP Finance at AGT international SpA, a global homeland security company, from 2012 until 2015. Prior to that, he served as a VP Finance at Raysat Antenna Systems LLC, a leading developer of Communication-On-The-Move antennas. Additionally, Mr. Harari was a Finance Director at Telrad Connegy, Inc. (a subsidiary of Telrad Networks Ltd. (TASE:TLRD)). Mr. Harari holds an M.B.A. from the College of Management Academic Studies and is a Certified Public Accountant in Israel.
Doron Rainish is our Chief Technology Officer, a position he has held since co-founding SatixFy in 2012, and served as a director for the same period until October 2022. Mr. Rainish has over 40 years of experience in algorithm research and management of large teams of researchers in the field of advanced wireless communications. Mr. Rainish is an expert in information theory and digital signal processing and has over 30 patents issued and many publications on the field of digital communications. Prior to SatixFy, from 2006 to 2011, Mr. Rainish served as the Communication Director for RaySat Broadcasting Corporation Israel Ltd. and served as a research group leader for Intel Mobile Communication from 1999 to 2006. Mr. Rainish holds a M.Sc. in Electrical Engineering from Tel Aviv University and a B.Sc. in Electrical Engineering from the Technion, Israel Institute of Technology. He is not director anymore.
Divaydeep Sikri is a Vice President and the Chief Engineer of SatixFy, positions he has held since joining SatixFy in August 2016. In this role, Mr. Sikri leads SatixFy’s R&D for Antenna technology, including Digital Beamforming Chip Architecture, RFIC Chip development, and Antenna system designs and software. Prior to SatixFy, Mr. Sikry held various Staff Systems Engineer roles with Qualcomm (Nasdaq:QCOM) between 2004 and 2016, where he led various aspects of Qualcomm’s 2G/2.5G/3G/4G modem technology development. Mr. Sikry holds a M.S. in Electrical and Electronics Engineering from the New Jersey Institute of Technology and a Bachelors in Engineering from the Netaji Subhas Institute of Technology.
Stephane Zohar is our Executive Vice President of VLSI, a position he has held since February 2019. Mr. Zohar has over 25 years of research and development experience in executive and VLSI expert roles. Prior to joining SatixFy, from 2011 to 2019, Mr. Zohar served as a Director of VLSI at Multiphy, a complex signal processing and mixed signal VLSI solution company. Prior to this, from 2005 to 2011, Mr. Zohar served as a Director of VLSI at Ethernity Networks, a leading provider of networking and security software solutions on Field Programmable Gate Arrays (FPGAs) company, and from 1997 to 2005 he was the VLSI Manager at Metalink, a silicon solutions for wireless and wireline broadband communications company. Mr. Zohar holds a B.Sc. in Computer Engineering from the Technion, Israel Institute of Technology with specialization in digital communication, signal processing and VLSI.
Itzik Ben Bassat has been our Chief Operating Officer since December 2023, prior to which he was our Executive Vice President of Product Development and Operation since February 12, 2023. Prior to joining Satixfy, Mr. Ben Bassat served as a Chief Operating Officer of Nexite from 2019 until 2023. Mr. Ben Bassat also served as VP Business Development and Strategic Partnership in Flex from 2017-2019. Prior to this, between 2008 until 2016, Mr. Ben Bassat served as Chief Executive Officer of Siklu, he also served as Chief Operating Officer of Metalnik between the years 2006 until 2008. From 2002 until 2004, Mr. Ben Bassat served as the VP of R&D and Chief Technology Officer of Scopus Video Networks Ltd. In the years 1996 until 2002, he worked in Gilat Satellite Networks Ltd. and served as a Marketing Senior Director and Satellite IP product line as well as a R&D Director. Mr. Ben Bassat served in the IDF – Intelligence Technical Research Department, as the head of the R&D Group, Project Leader and R&D engineer. Mr. Ben Bassat holds a B.Sc. degree in Electrical Engineering from the Technion - Israel Institute of Technology.
Directors
Mary P. Cotton has served as a member of our board of directors since 2014. Ms. Cotton previously served at ST Engineering iDirect as Chief Executive Officer from 2007 to 2017, as a director from 2007 to 2018, and as a Senior Advisor until 2022. Ms. Cotton previously served on the board of Seachange International from 2004 to 2019 and as the chair of Seachange’s audit and compensation and governance committees. Ms. Cotton holds a B.Sc. in accounting from Boston College.
Yair Shamir has served as a member of our board of directors since 2016. . Mr. Shamir co-founded Catalyst Investments L.P. in 1993 and served as a Managing Partner from 1993 to 2013 and has served in this role since 2015. Mr. Shamir was elected as a member of the Israeli Parliament (Knesset) and served as Minister of Agriculture of the State of Israel from 2013 to 2015. Mr. Shamir served as the Chairman of the Board of the N.T.A. Metropolitan Mass Transit System from 2017 to August 2018 and as the Chairman of the Israeli Road Safety Authorities from September 2018 until November 2020. Mr. Shamir served as the Chairman of Israel’s National Roads Company from 2011 to 2012 and Chairman of Israel Aerospace Industries Ltd. from 2005 until 2011. Mr. Shamir also served as the Chairman and Chief Executive Officer of VCON Telecommunications Ltd. from 1997 to 2010 and Chairman of El Al (Israeli Airlines), where he led El Al’s privatization from 2004 to 2005. Mr. Shamir holds a B.Sc. in Electronics Engineering from the Technion, Israel Institute of Technology.
Lord David L. Willetts has served as a member of our board of directors since 2020. The Rt. Hon. Lord Willetts served as a British Member of Parliament from 1992 to 2015 and since 2015 has been a member of the House of Lords. Lord Willetts served as Minister for Universities and Science in the British Government from 2010 to 2014 and oversaw space policy issues. He served as an Adviser to Dresdner Kleinwort Bank from 1997 to 2008. Lord Willetts has served on the boards of several public companies, including Surrey Satellites Technology Ltd., a subsidiary of Airbus PLC (since 2015), Biotech Growth Trust PLC (since 2015), Verditek Ltd., a solar cell company (since 2018), Tekcapital PLC (since 2020), and Darktrace PLC (since its initial public offering in 2021). Lord Willetts holds a first class honors degree in politics, philosophy and economics from Christ Church, Oxford, a constituent college of the University of Oxford, and is a visiting Professor at King’s College, London.
Richard C. Davis has been a member of our board of directors since October 2022, and was the Chief Executive Officer and a director of Endurance from April 2021 until the consummation of the Business Combination in October 2022. Mr. Davis is a highly experienced executive with over 25 years of experience in corporate finance, private equity and the space industry. Since July of 2022, he has served as Chief Executive Officer of Descartes Labs, Inc., a leading provider of geospatial intelligence products. Since March 2021, he has served as a Managing Director of ADP. He is also a founder and Managing Member of ArgoSat Advisors LLC, a premier global advisory firm focused on the space industry that was founded in 2009. Mr. Davis has been a director of EarthDaily Analytics Corporation since February 2021, a director of Descartes Labs since July 2022, and a Director of AscendArc, Inc. since July 2023. Mr. Davis was formerly an instructor pilot in the United States Air Force. He received his B.S. in Astrophysics (cum laude) from the University of Minnesota, and his MBA from the University of Virginia.
Moshe Eisenberg has been a member of our board of directors since October 2022. Mr. Eisenberg currently serves as the Chief Financial Officer of Camtek Ltd., a position he has held since 2011. Prior to Camtek, Mr. Eisenberg served as the Chief Financial Officer of Ex Libris Group, a global provider of library automation solution for the academic market, from 2010 to 2011, and as the Chief Financial Officer of Scopus Video Networks Ltd., a leading provider of digital compression, decoding & video processing equipment, from 2005 to 2009. Mr. Eisenberg holds an MBA from Tel Aviv University and a B.Sc. in Agricultural Economics from the Hebrew University of Jerusalem.
Yoram Stettiner has been a member of our board of directors since October 2022. Dr. Stettiner currently serves as the Chief Scientist Officer at Arbe Robotics, Ltd., a position he has held since 2016. Dr. Stettiner is a Signal Processing Ph.D. with 35 years of R&D experience. Dr. Stettiner specializes in RTLS Radio Location and Tracking Systems, Array Processing, Sensor Fusion, Speech Signal Processing and VoIP. Dr. Stettiner has held various leadership positions at eight startups from foundation or early stage, with five of them having gone public or acquired. Dr. Stettiner holds a B.Sc. in Electrical Engineering, a M.Sc. and Ph.D. in Speech Signal Processing all from the Tel Aviv University.
CEO Succession
On June 1, 2023, Nir Barkan became our acting Chief Executive Officer. He succeeded Ido Gur, who had served as our Chief Executive Officer since January 15, 2023. Mr. Gur succeeded David Ripstein, who had served as our Chief Executive Officer since June 26, 2022 after succeeding our late co-founder and Chief Executive Officer, Mr. Yoel Gat.
CFO Succession
Mr. Yoav Leibovitch was required to step down as Chief Financial Officer in connection with the consummation of the Business Combination pursuant to Israeli law, which stipulates that a chairman of the board of directors of a public company should not also serve as its chief financial officer.
Notwithstanding his resignation as Chief Financial Officer, Mr. Leibovitch remains actively involved in our strategy, governance and oversight as Chairman of the board of directors and will continue to contribute to our day-to-day operations as a consultant under his existing services agreement.
In the interim, Mr. Oren Harari has been appointed as SatixFy’s Interim Chief Financial Officer.
Arrangements for Election of Directors and Members of Management
There are no arrangements or understandings with major shareholders or others pursuant to which any of our executive officers or directors are selected.
Aggregate Compensation of Directors and Executive Officers
The aggregate compensation (not including share-based compensation) paid by us and our subsidiaries to our executive officers and directors as a group for the year ended December 31, 2023 was approximately $5.6 million (including amounts set aside or accrued to provide pension, severance, retirement or similar benefits), and does not include business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefits commonly reimbursed or paid by companies in Israel. This amount includes bonuses earned with respect to 2023. It does not include the grant-date value of share-based compensation awarded in 2023.
As of December 31, 2023, options to purchase 3,316,936 of our ordinary shares granted to our executive officers and directors as a group were outstanding under our equity incentive plans at a weighted average exercise price of $2.24 per ordinary share, and 1,508,874 RSUs were outstanding.
The table and summary below outline the compensation paid and/or accrued to our five highest compensated directors and executive officers during the year ended December 31, 2023. The compensation detailed in the table below refers to actual compensation granted or paid to the director or officer during the year 2023. The compensation paid to Mr. Nir Barkan was in GBP and converted into U.S. dollars for the purposes of the table below at the exchange rate of GBP 1.2747 = U.S. $1.00, based on the rate of exchange between the GBP and the U.S. dollar as reported by the Bank of England on December 29, 2023. The compensation for the remaining individuals in the table below was paid in New Israel Shekels and converted into U.S. dollars for purposes of the table below at the exchange rate of NIS 3.627 = U.S.$1.00, based on the rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel on December 29, 2023.
Name and Position of Director or Officer | | Base Salary or Other Payment (1) | | | Value of Social Benefits (2) | | | Bonuses | | | Value of Equity- Based Compensation Granted (3) | | | All Other Compensation (4) | | | Total | |
Yoav Leibovitch | | | 1,200,000 | | | | 0 | | | | 1,000,000 | | | | 38,309 | | | | 0 | | | | 2,238,309 | |
Nir Barkan | | | 207,356 | | | | 60,073 | | | | 195,768 | | | | 128,875 | | | | 0 | | | | 592,072 | |
Oren Harari | | | 229,942 | | | | 64,384 | | | | 191,538 | | | | 73,590 | | | | 0 | | | | 559,454 | |
Itzik Ben Bassat | | | 220,223 | | | | 61,663 | | | | 110,284 | | | | 279,516 | | | | 0 | | | | 671,686 | |
Simona Gat (5) | | | 605,000 | | | | 0 | | | | 38,309 | | | | 38,309 | | | | 0 | | | | 643,309 | |
| (1) | “Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to the Company’s executive officers and members of the board of directors for the year 2023. |
| (2) | “Social Benefits” include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to the relevant officers, payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy), education funds (referred to in Hebrew as "keren hishtalmut"), pension, severance, vacation, car or car allowance, rent for relocated officers, medical insurances and benefits, risk insurance (e.g., life, disability, accident), telephone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites. |
| (3) | Represents the equity-based compensation expenses recorded in the Company's consolidated financial statements for the year ended December 31, 2023, calculated in accordance with accounting guidance for equity-based compensation. For a discussion on the assumptions used in reaching this valuation, see Note 18 to our consolidated financial statements included elsewhere in this Annual Report. |
| (4) | “All Other Compensation” includes, among other things, car-related expenses (including tax gross-up), communication expenses, basic health insurance, and holiday presents. |
| (5) | Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy Bulgaria effective April 30, 3023. |
Employment and Incentive Arrangements with our Directors and CEO
Employment Agreement — Mr. Nir Barkan
SatixFy Israel Ltd. entered into an agreement on May 23, 2023 with Mr. Nir Barkan, effective June 1, 2023, pursuant to which Mr. Nir Barkan agreed to serve as Acting Chief Executive Officer. The compensation to be paid to Mr. Nir Barkan pursuant to this agreement consists of GBP 244,134 (approximately $26 thousand per month) annual salary. In addition, as part of his prior role with the Company, he received an annual bonus opportunity of up to $160,000, 500,000 RSUs, which shall vest quarterly in equal installments over 15 quarters, provided that 25% of the RSUs vests on January 1, 2024 and if a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within 24 months of the effective date of the agreement and thereafter Mr. Barkan’s employment with the Company is terminated by the Company without cause, 100% of the unvested RSUs shall automatically vest, and (v) other customary executive perquisites and benefits.
Separation Agreement — Mr. Ido Gur
On June 6, 2023, SatixFy Israel Ltd. entered into a separation agreement with Mr. Ido Gur, pursuant to which Mr. Gur resigned from his position as CEO as of the date of the agreement. Pursuant to the separation agreement, Mr. Gur remained an employee of the Company until November 20, 2023 solely for the purpose of transition of his position to the new CEO. We agreed to pay Mr. Gur his monthly salary of NIS 130,000 (approximately $36 thousand per month) and other benefits (including vacation, pension insurance fund, cellular phone, and leased car) up to the date of termination.
Separation Agreement — Mr. David Ripstein
On January 12, 2023, we entered into a separation agreement with Mr. David Ripstein, our former CEO, pursuant to which SatixFy and Mr. Ripstein mutually agreed to the termination of Mr. Ripstein’s employment as CEO effective January 13, 2023. In connection with the termination of Mr. Ripstein’s employment as CEO, SatixFy agreed to provide compensation to Mr. Ripstein consisting of, (i) continued payment of regular salary and access to certain benefits under his existing employment agreement through his employment termination date on April 12, 2023, (ii) a one-time bonus of $125,000 for fiscal year 2022 pursuant to Mr. Ripstein’s existing employment agreement, (iii) a one-time bonus of $95,000 payable on April 12, 2023, (iv) a one-time payment of $30,000 in exchange for Mr. Ripstein’s agreement to assist with transition of our new CEO, and (v) other customary terms and conditions.
Separation Agreement — Ms. Simona Gat
On April 30, 2023, SatixFy Communications Ltd. and Ilan Gat Ltd. entered into a Separation Agreement pursuant to which Ms. Gat resigned from all positions at the Company and its subsidiaries, including serving as the President of the Company. Effective May 1, 2023, she instead began serving as an observer on the board of directors of the Company. We agreed to pay Ms. Gat compensation consisting of (i) five monthly payments in the gross sum of $55,000 plus VAT from May through September 2023; (ii) one monthly payment of $110,000 plus VAT in October 2023, totaling in the aggregate, $385,000 plus VAT; and (iii) other customary terms and conditions.
Employment Agreement — Mr. Itzik Ben Bassat
SatixFy Israel Ltd. SatixFy Israel Ltd. entered into an agreement on February 7, 2023 with Mr. Itzik Ben Bassat, effective February 12, 2023, pursuant to which Mr. Ben Bassat agreed to serve as EVP Product Development and Operation. The compensation to be paid to Mr. Ben Bassat pursuant to this agreement consists of, (i) a monthly gross salary of NIS 75,000 (which is equivalent to approximately $21,000 as of March 1, 2023), (ii) an annual bonus opportunity of up to NIS 450,000 (which is equivalent to approximately $125,000 as of March 1, 2023), (iii) 400,000 RSUs convertible into 400,000 ordinary shares, which shall vest yearly in equal installments over four years, provided that 25% of the RSUs shall vest on the first anniversary of the agreement and if a change of control (meaning a simultaneous ownership change of more than 50% of the outstanding SatixFy shares) occurs within 24 months of the effective date of the agreement and thereafter Mr. Ben Bassat’s employment with the Company is terminated by the Company without cause, 100% of the unvested RSUs shall automatically vest, and (iv) other customary executive perquisites and benefits. On November 29, 2023, the board approved a new title of Chief Operating Officer.
Employment Agreement — Mr. Oren Harari
SatixFy Israel Ltd. entered into an agreement on April 1, 2018 with Mr. Oren Harari, which was subsequently amended on October 28, 2022, pursuant to which Mr. Oren Harari agreed to serve as Interim Chief Financial Officer. The compensation to be paid to Mr. Oren Harari pursuant to this agreement consists of, (i) a monthly gross salary of NIS 60,000 (which is equivalent to approximately $16,000 as of March 1, 2023), (ii) an annual bonus opportunity in 2023 of up to four times the then applicable month salary, and (iii) other customary executive perquisites and benefits. Effective April 1, 2023, Mr. Harari’s salary was raised to NIS 70,000 (approximately $20,000).
Services Agreement — Mr. Yoav Leibovitch
SatixFy Israel Ltd. and RaySat Ltd. (“RaySat”), an entity organized under the laws of the State of Israel and controlled by Mr. Yoav Leibovitch, our Chairman of the board of directors and one of our significant shareholders, are parties to a Services Agreement effective as of January 1, 2013 (as amended as of June 27, 2017, September 6, 2020,January 4, 2021 and February 24, 2022). Pursuant to this agreement, Mr. Yoav Leibovitch provides financial management, business development, presidential and management services to SatixFy Israel Ltd. and its affiliates. On September 15, 2022, SatixFy’s board approved an amendment, which was approved by SatixFy’s shareholders on September 28, 2022, to Mr. Leibovitch’s compensation under this agreement to (i) grant Mr. Leibovitch a $2 million success bonus payable upon the Closing of the Business Combination, (ii) increase Mr. Leibovitch’s monthly fee for services provided to $100,000 per month, effective as of October 1, 2022, increase Mr. Leibovitch’s yearly bonus such that the yearly bonus shall be 2% of the incremental year-over-year growth of the shareholders’ equity in the consolidated financial statements of the Company and increase Mr. Leibovitch’s annual bonus such that the annual bonus shall be 2% of the incremental year- over-year growth of revenues in the consolidated financial statements of the Company.
Employment Agreement — Mr. Doron Rainish.
Effective as of the incorporation of our subsidiary, SatixFy Israel Ltd., in 2012, SatixFy Israel Ltd. entered into an employment agreement with Doron Rainish to serve as Chief Technology Officer, which was amended on December 1, 2016. The employment agreement provided for compensation equal to an annual gross amount of $160,000, plus $60,000” paid in four quarterly installments of $15,000 in the NIS equivalent. The employment agreement further provided for severance equal to two months’ base salary and an additional 8.33% employer contribution to any pension insurance. The employment agreement further provided for (i) pension insurance up to 14.33% employer contribution, depending on the type of insurance, (ii) advanced study fund with 7.5% employer contribution up to the limit recognized by the Income Tax Authority and (iii) employer car and mileage payments.
Services Agreement and Option Grant — Lord David Willetts.
On September 7, 2020, we entered into a Board Member Services Agreement with Lord David Willets, who serves as a director of the Company. With respect to his services as a director of the Company, Lord Willetts shall be entitled to receive annual remuneration and remuneration for participating in meetings at a fixed amount according to the applicable U.K. remuneration regulations. Pursuant to this agreement, Lord Willets is entitled to receive 50,000 non-tradable options exercisable into 50,000 SatixFy Ordinary Shares in accordance with the terms of the 2020 Share Award Plan (which was updated to 52,798 following the initial listing of our securities as a result of the Business Combination).
Director Compensation
We pay each of our external directors and to each other (non-external director) member of the compensation committee of the board (i) a fee of NIS 10,000 per month, (ii) a per meeting fee for participation in board and committee meetings of NIS 4,000 plus VAT, to the extent applicable, and (iii) reimbursement of expenses incurred in connection with service on the board and its committees, all in accordance with the Israeli Companies Law and applicable regulations. The other members of the board are entitled to reimbursement of expenses to the same extent to which the external directors are entitled to such reimbursement. No other compensation is currently paid to these other members of the board.
Internal Auditor
Under the Israeli Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure. Under the Israeli Companies Law, the internal auditor cannot be an interested party or an office holder or a relative of an interested party or an office holder, nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in the Israeli Companies Law as: (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or as a chief executive officer of the company. On September 28, 2022, the Company’s Board approved the appointment of Mr. Yisrael Gewirtz from Fahn Kanne Grant Thornton as the Company’s internal auditor.
Approval of Related Party Transactions under Israeli Law
Fiduciary Duties of Directors and Executive Officers
The Israeli Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. An office holder is defined in the Israeli Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title, a director, and any other manager directly subordinate to the general manager. Each person listed in the table under “Management — Management and Board of Directors” is an office holder under the Israeli Companies Law.
An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would act under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means, in light of the circumstances, to obtain:
information on the business advisability of a given action brought for the office holder’s approval or performed by virtue of the office holder’s position; and
all other important information pertaining to such action.
The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to:
refrain from any act involving a conflict of interest between the performance of the office holder’s duties in the company and the office holder’s other duties or personal affairs;
refrain from any activity that is competitive with the business of the company;
refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for the office holder or others; and
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of the office holder’s position.
Under the Israeli Companies Law, a company may approve an act, specified above, which would otherwise constitute a breach of the office holder’s fiduciary duty, provided that the office holder acted in good faith, neither the act nor its approval harms the company, and the personal interest of the office holder is disclosed (including any significant fact or document) a sufficient time before the approval of such act. Any such approval is subject to the terms of the Israeli Companies Law setting forth, among other things, the appropriate bodies of the company required to provide such approval and the methods of obtaining such approval.
Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions
The Israeli Companies Law requires that an office holder promptly disclose to the Company any personal interest and all related material information known to such office holder concerning any existing or proposed transaction with the company. The Israeli Companies Law does not specify to whom within us or the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our board of directors. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate in which such person or a relative of such person is an interested party (as described above), but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest in a non-extraordinary transaction (meaning any transaction that is in the ordinary course of business, on market terms or that is not likely to have a material impact on the company’s profitability, assets or liabilities), approval by the board of directors is required for the transaction unless the company’s articles of association provide for a different method of approval. Any such transaction that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s audit committee and subsequently by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities) in which an office holder has a personal interest.
A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or at a committee meeting may generally not be present at such a meeting or vote on that matter unless a majority of the directors or members of the committee, as applicable, have a personal interest in the matter. If a majority of the members of the committee or the board of directors have a personal interest in the matter, then all of the directors may participate in deliberations of the committee or board of directors, as applicable, with respect to such transaction and vote on the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest, and certain arrangements regarding the terms of service or employment of a controlling shareholder and his relatives. For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint 50% or more of the directors of the company or its general manager. In the context of a transaction involving a related party, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated.
For a description of the approvals required under Israeli law for compensation arrangements of officers and directors, see “Management — Compensation of Directors and Executive Officers.”
Shareholder Duties
Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:
an amendment to the company’s articles of association;
an increase of the company’s authorized share capital;
interested party transactions that require shareholder approval.
In addition, a shareholder has a general duty to refrain from discriminating against other shareholders. Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote, and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under the company’s articles of association with respect to the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty of fairness.
Corporate
Governance Practices
A majority of our board of directors are composed of directors who are “independent” as defined by the rules of the NYSE, although we may decide to rely on the foreign private issuer exemption from this requirement in the future. The board of directors is expected to establish categorical standards to assist it in making its determination of director independence.
The board of directors will assess on a regular basis the independence of directors and will make a determination as to which members are independent. The term “executive officer” above is expected to have the same meaning specified for such term in the NYSE listing standards.
For a discussion of certain home country corporate governance practices we are permitted to follow as a foreign private issuer whose shares are listed on the NYSE instead of certain requirements of the rules of the NYSE, see “Item 16G. Corporate Governance.”
External Directors
Under the Israeli Companies Law, except as provided below, companies incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on the NYSE are required to appoint at least two external directors who meet the qualification requirements set forth in the Israeli Companies Law.
Pursuant to the regulations promulgated under the Israeli Companies Law, companies whose shares are traded on specified U.S. stock exchanges, including the NYSE, which do not have a controlling shareholder (as such term is defined in the Israeli Companies Law) and which comply with the independent director requirements and the audit committee and compensation committee composition requirements of U.S. law and the U.S. stock exchange applicable to domestic issuers, may (but are not required to) elect to opt out of the requirement to maintain external directors and opt out of the composition requirements under the Israeli Companies Law with respect to the audit and compensation committees. We currently do not qualify for such exemption.
In January 2023, the general meeting of shareholders approved the re-appointment of Moshe Eisenberg and Yoram Stettiner, as external directors for a three year period from January 12, 2023.
The provisions of the Israeli Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting at a meeting of shareholders, provided that either:
such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or
the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the election of the external director against the election of the external director does not exceed 2% of the aggregate voting rights in the company.
The term “controlling shareholder” as used in the Israeli Companies Law for purposes of all matters related to external directors and for certain other purposes (such as the requirements related to appointment to the audit committee or compensation committee, as described below), means a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint a majority of the directors of the company or its general manager.
With respect to certain matters (various related party transactions), a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company, but excludes a shareholder whose power derives solely from his or her position as a director of the company or from any other position with the company. For the purpose of determining the holding percentage stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company’s approval are deemed as joint holders.
The initial term of an external director is three years. Thereafter, an external director may be re-elected, subject to certain circumstances and conditions, by shareholders to serve in that capacity for up to two additional three-year terms, provided that either:
his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such re-election exceeds 2% of the aggregate voting rights in the company, subject to additional restrictions set forth in the Israeli Companies Law with respect to affiliations of external director nominees;
the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described in the paragraph above; or
his or her service for each such additional term is recommended by the board of directors and is approved at a meeting of shareholders by the same majority required for the initial election of an external director (as described above).
Our Class I director, Yair Shamir, will hold office until our 2026 Annual General Meeting of Shareholders. Our Class II directors, Mary Cotton and David Willetts, will hold office until our 2024 Annual General Meeting of Shareholders. Our Class III directors, Yoav Leibovitch and Richard Davis, will hold office until our 2025 Annual General Meeting of Shareholders. The directors (other than the outside directors) are elected by a vote of the holders of a majority of the voting power present and voting at the meeting. Each director will hold office and, unless otherwise provided, serve on the committees to which he or she have been appointed by the Board, until the annual general meeting of our shareholders for the year in which his or her term expires and until his or her successor is duly elected and qualified, unless the tenure of such director expires earlier pursuant to the Companies Law or unless he or she resigns or is removed from office.
The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NYSE, may be extended indefinitely in increments of additional three- year terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution to the work of the board of directors and its committees, the re-election for such additional period(s) is beneficial to the company, and provided that the external director is re-elected subject to the same shareholder vote requirements (as described above regarding the re- election of external directors). Prior to the approval of the re-election of the external director at a general meeting of shareholders, the company’s shareholders must be informed of the term previously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.
External directors may be removed from office only by a special general meeting of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage required for their election or by a court order, in each case, only under limited circumstances, including ceasing to meet the statutory qualifications for appointment or violating their duty of loyalty to the company. An external director may also be removed by order of an Israeli court if, following a request made by a director or shareholder of the company, the court finds that such external director has ceased to meet the statutory qualifications for his or her appointment as stipulated in the Israeli Companies Law or has violated his or her duty of loyalty to the company.
If an external directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is required under the Israeli Companies Law to call a meeting of the shareholders as soon as practicable to appoint a replacement external director. Each committee of the board of directors that exercises the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors and an external director must serve as chair thereof. Under the Israeli Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than for their services as external directors pursuant to the Israeli Companies Law and the regulations promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during his or her term subject to certain exceptions.
The Israeli Companies Law provides that a person is not qualified to be appointed as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had during the two years preceding the date of appointment as an external director: (a) any affiliation or other disqualifying relationship with the company, with any person or entity controlling the company or a relative of such person, or with any entity controlled by or under common control with the company; or (b) in the case of a company with no controlling shareholder or any shareholder holding 25% or more of its voting rights, had at the date of appointment as an external director any affiliation or other disqualifying relationship with a person then serving as chair of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.
The term “relative” is defined in the Israeli Companies Law as a spouse, sibling, parent, grandparent or descendant, a spouse’s sibling, parent or descendant and the spouse of each of the foregoing persons. Under the Israeli Companies Law, the term “affiliation” and the similar types of disqualifying relationships include (subject to certain exceptions):
an employment relationship;
a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);
service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.
The term “office holder” is defined in the Israeli Companies Law as a general manager (i.e., chief executive officer), chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.
In addition, no person may serve as an external director if that person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director or if the person is an employee of the Israel Securities Authority, or ISA, or an Israeli stock exchange. A person may also not continue to serve as an external director if he or she received direct or indirect compensation from the company including amounts paid pursuant to indemnification or exculpation contracts or commitments and insurance coverage for his or her service as an external director, other than as permitted by the Israeli Companies Law and the regulations promulgated thereunder.
Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an office holder of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.
If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender. A director of one company may not be appointed as an external director of another company if a director of the other company is acting as an external director of the first company at such time.
According to the Israeli Companies Law and regulations promulgated thereunder, a person may be appointed as an external director only if he or she has professional qualifications or if he or she has accounting and financial expertise (each, as defined below); provided that at least one of the external directors must be determined by our board of directors to have accounting and financial expertise. However, if at least one of our other directors (i) meets the independence requirements under the Exchange Act, (ii) meets the independence requirements of the NYSE rules for membership on the audit committee and (iii) has accounting and financial expertise as defined under the Israeli Companies Law, then neither of our external directors is required to possess accounting and financial expertise as long as each possesses the requisite professional qualifications.
A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion about the presentation of financial data. A director is deemed to have professional qualifications if he or she has any of the following: (i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field which is relevant to his or her position in the company or (iii) at least five years of experience serving in one of the following capacities or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant volume of business, (b) a senior position in the company’s primary field of business or (c) a senior position in public administration or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional qualifications.
Chairman of the Board
The A&R Articles of Association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as a director, unless resolved otherwise by the board of directors. Under the Israeli Companies Law, the chief executive officer (or any relative of the chief executive officer) may not serve as the chairman of the board of directors, and the chairman (or any relative of the chairman) may not be vested with authorities of the chief executive officer without shareholder approval consisting of a majority vote of the shares present and voting at a shareholders meeting, for a period of not exceeding three (3) years, provided that either:
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against such appointment does not exceed 2% of the aggregate voting rights in the company.
In addition, a person subordinated, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the chief executive officer; and the chairman of the board may not serve in any other position in the company or a controlled company, but he may serve as a director or chairman of a subsidiary.
Committees of the Board of Directors
The board of directors has the following standing committees: an audit committee and a compensation committee.
Audit Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint an audit committee (the “Audit Committee”). The audit committee must be comprised of at least three directors, including all of the external directors, one of whom must serve as chair of the committee. The audit committee may not include the (i) chair of the board; (ii) a controlling shareholder of the company; (iii) a relative of a controlling shareholder; (iv) a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or (v) a director who derives most of his or her income from a controlling shareholder. In addition, under the Israeli Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an “unaffiliated director” under the Israeli Companies Law is defined as either an external director or as a director who meets the following criteria:
he or she meets the qualifications for being appointed as an external director, except for the requirement (i) that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed for trading outside of Israel) and (ii) for accounting and financial expertise or professional qualifications; and
| • | he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in his or her service as a director shall not be deemed to interrupt the continuity of the service. A majority of our audit committee (each, as identified in the second paragraph under “— Listing Requirements” below) are external directors under the Israeli Companies Law, thereby fulfilling the foregoing Israeli law requirement for the composition of the audit committee. |
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.
The members of the Audit Committee are our two external directors, Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. We have designated Mr. Moshe Eisenberg and Ms. Mary P. Cotton as “audit committee financial experts” as defined by the SEC and each member of the Audit Committee is “financially literate” under the NYSE rules. The board of directors has determined that each member of the Audit Committee is “independent” as defined under the NYSE rules and Exchange Act rules and regulations.
Audit Committee Role
Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee, which are consistent with the Israeli Companies Law, the SEC rules, and the corporate governance rules of the NYSE. These responsibilities include:
retaining and terminating our independent auditors, subject to ratification by the board of directors and by the shareholders;
pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms;
overseeing the accounting and financial reporting processes of our company;
managing audits of our financial statements;
preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act;
reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication, filing, or submission to the SEC;
recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with the Israeli Companies Law as well as approving the yearly or periodic work plan proposed by the internal auditor;
reviewing with counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements;
identifying irregularities in our business administration, including by consulting with the internal auditor (if any) or with the independent auditor, and suggesting corrective measures to the board of directors;
reviewing policies and procedures with respect to transactions (other than transactions related to the compensation or terms of services) between the company and officers and directors, or affiliates of officers or directors, or transactions that are not in the ordinary course of the Company’s business and deciding whether to approve such acts and transactions if so required under the Israeli Companies Law; and
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees.
Additionally, under the Israeli Companies Law, the role of the audit committee includes the identification of irregularities in our business management, among other things, by consulting with the internal auditor or our independent auditors and suggesting an appropriate course of action to the board of directors. The audit committee is required to assess the company’s internal audit system and the performance of its internal auditor. The Israeli Companies Law also requires that the audit committee assess the scope of the work and compensation of the company’s external auditor. In addition, the audit committee is required to determine whether certain related party actions and transactions are “material” or “extraordinary” for the purpose of the requisite approval procedures under the Israeli Companies Law and whether certain transactions with a controlling shareholder will be subject to a competitive procedure.
Compensation Committee
Israeli Companies Law Requirements
Under the Israeli Companies Law, the board of directors of a public company must appoint a compensation committee (the “Compensation Committee”). The compensation committee generally must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. The chair of the compensation committee must be an external director. Each compensation committee member who is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is subject to the same Israeli Companies Law restrictions as the audit committee as to who may not be a member of the compensation committee. Each member of our compensation committee (each, as identified in the second paragraph under “— Listing Requirements” below) fulfills the foregoing Israeli law requirements related to the composition of the compensation committee.
Listing Requirements
Under the corporate governance rules of the NYSE, listed companies are required to maintain a compensation committee consisting of at least two independent directors.
The members of the Compensation Committee are our two external directors, Messrs. Moshe Eisenberg and Yoram Stettiner, and Ms. Mary P. Cotton. The board of directors has determined that each member of the Compensation Committee is “independent” as defined under the NYSE listing standards, taking into consideration the additional independence criteria applicable to the members of a compensation committee. The Compensation Committee has the authority to retain compensation consultants, outside counsel and other advisers.
Compensation Committee Role
In accordance with the Israeli Companies Law, the responsibilities of the compensation committee are, among others, as follows:
recommending to the board of directors with respect to the approval of the compensation policy for “office holders” (a term used under the Israeli Companies Law, which essentially means directors and executive officers) and, once every three years, regarding any extensions to a compensation policy that has been in effect for a period of more than three years;
reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any amendments or updates of the compensation plan;
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
exempting, under certain circumstances, from the requirement of approval by the general meeting of shareholders, transactions with a candidate to serve as the chief executive officer of SatixFy.
Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the committee, which include among others:
recommending to our board for its approval a compensation policy in accordance with the requirements of the Israeli Companies Law as well as other compensation policies, incentive- based compensation plans and equity-based compensation plans, and overseeing the development and implementation of such policies and recommending to our board of directors any amendments or modifications the committee deems appropriate, including as required under the Israeli Companies Law;
reviewing and approving the granting of options and other incentive awards to our Chief Executive Officer and other executive officers, including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, including evaluating their performance in light of such goals and objectives;
approving and exempting certain transactions regarding office holders’ compensation pursuant to the Israeli Companies Law
administer our clawback policy; and
administering our equity-based compensation plans, including without limitation, approving the adoption of such plans, amending and interpreting such plans and the awards and agreements issued pursuant thereto, and making awards to eligible persons under the plans and determining the terms of such awards.
Compensation Policy under the Israeli Companies Law
In general, under the Israeli Companies Law, a public company must have a compensation policy approved by the board of directors after receiving and considering the recommendations of the compensation committee. In addition, a compensation policy must be approved at least once every three years, first, by the issuer’s board of directors, upon recommendation of its compensation committee, and second, by a general shareholders meeting, provided that either:
such majority includes at least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such compensation policy and who are present and voting (excluding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation policy and who vote against the policy, does not exceed 2% of the company’s aggregate voting rights.
In the event that the shareholders fail to approve the compensation policy in a duly convened meeting, the board of directors may nevertheless override that decision, provided that the compensation committee and then the board of directors decide, on the basis of detailed reasons and after further review of the compensation policy, that approval of the compensation policy is for the benefit of the company despite the failure of the shareholders to approve the policy.
If a company that adopts a compensation policy in advance of its initial public offering (or in this case, prior to the closing of the Business Combination) describes the policy in its prospectus for such offering, then that compensation policy shall be deemed validly adopted in accordance with the Israeli Companies Law and will remain in effect for term of five years from the date such company becomes a public company.
The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors as set forth in the Israeli Companies Law, including advancement of the company’s objectives, business plan and long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:
the education, skills, experience, expertise and accomplishments of the relevant office holder;
the office holder’s position, responsibilities and prior compensation agreements with him or her;
the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost, the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in the company;
if the terms of employment include variable components — the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and
if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, his or her individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.
The compensation policy must also include, among other things:
with regard to variable components of compensation:
with the exception of office holders who report directly to the chief executive officer, provisions determining the variable components on the basis of long-term performance and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder’s contribution to the company; and
the ratio between variable and fixed components, as well as the limit on the values of variable components at the time of their grant.
a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;
the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and
a limit on retirement grants.
Our compensation policy is designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers with our long-term performance and provide a risk management tool. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, its compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.
The compensation policy also addresses our executive officers’ individual characteristics (such as their respective positions, education, scope of responsibilities and contribution to the attainment of its goals) as the basis for compensation variation among its executive officers and considers the internal ratios between compensation of its executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as a signing bonus and special bonuses with respect to any special achievements, such as outstanding personal achievement or outstanding company performance), equity-based compensation, benefits and retirement and termination of service arrangements and the compensation that may be granted to the chairman of our board of directors may include, among others, an annual cash retainer, annual bonuses and other cash bonuses as an executive officer other than our chief executive officer and equity based compensation. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may not exceed 90% of each executive officer’s total compensation package with respect to any given calendar year.
An annual cash bonus may be awarded to executive officers and the chairman of our board of directors upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers other than its chief executive officer is based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by the chief executive officer. The annual cash bonus that may be granted to executive officers other than our chief executive officer and to the chairman of our board of directors may be based entirely on a discretionary evaluation. Furthermore, our chief executive officer is entitled to recommend performance objectives, and such performance objectives will be approved by the Compensation Committee (and, if required by law, by our board of directors).
The performance measurable objectives of our chief executive officer will be determined by our Compensation Committee and board of directors. A non-material portion of the chief executive officer’s annual cash bonus may be based on a discretionary evaluation of the chief executive officer’s overall performance by the Compensation Committee and the board of directors based on quantitative and qualitative criteria.
The equity-based compensation under the compensation policy for our executive officers is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus. Primary objectives include enhancing the alignment between the executive officers’ interests and our long-term interests and those of its shareholders and strengthening the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and RSUs, in accordance with its share incentive plan then in place. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.
In addition, the compensation policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enables its chief executive officer to approve immaterial changes in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation policy) and allows us to exculpate, indemnify and insure its executive officers and directors to the maximum extent permitted by Israeli law, subject to certain limitations as set forth therein.
The compensation policy also provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded on Stock Exchanges Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in the compensation policy.
Compensation of Directors and Executive Officers
Directors
Under the Israeli Companies Law, the compensation of a public company’s directors requires the approval of (i) its compensation committee, (ii) its board of directors and, unless exempted under regulations promulgated under the Israeli Companies Law, (iii) the approval of its shareholders at a general meeting. In addition, if the compensation of a public company’s directors is inconsistent with the company’s compensation policy, then those inconsistent provisions must be separately considered by the compensation committee and board of directors, and approved by the shareholders by a special majority by one of the following:
at least a majority of the shares of non-controlling shareholders or shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding abstentions); or
the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against the inconsistent provisions of the compensation package does not exceed 2% of the aggregate voting rights in the company.
Executive Officers other than the Chief Executive Officer
The Israeli Companies Law requires the compensation of a public company’s office holders (other than the chief executive officer) be approved in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special majority as described above).
However, there are exceptions to the foregoing approval requirements with respect to non-director office holders. If the shareholders of the company do not approve the compensation of a non-director office holder, the compensation committee and board of directors may in special circumstances override the shareholders’ disapproval for such non-director office holder provided that the compensation committee and the board of directors each detailed reasons for their decision to override the disapproval of the shareholders and approve the compensation, , including regarding the shareholders of the Company objection.
An amendment to an existing compensation arrangement with a non-director office holder requires only the approval of the compensation committee, if the compensation committee determines that the amendment is immaterial. However, if the non-director office holder is subordinate to the chief executive officer, an amendment to an existing compensation arrangement shall not require the approval of the compensation committee if (i) the amendment is approved by the chief executive officer, (ii) the company’s compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii) the engagement terms are consistent with the company’s compensation policy.
Chief Executive Officer
Under the Israeli Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee, (ii) the company’s board of directors and (iii) the company’s shareholders (by a special majority as described above). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may in special circumstances override the shareholders’ decision provided that they each detailed reasons for their decision, after rediscussing the terms of the compensation and the shareholders decline the approval thereof, and if the compensation is in accordance with the company’s compensation policy.
In the case of a new chief executive officer, the compensation committee may waive the shareholder approval requirement with regard to the compensation of a candidate for the chief executive officer position if the compensation committee determines that: (i) the compensation arrangement is consistent with the company’s compensation policy , (ii) the chief executive officer candidate did not have a prior business relationship with the company or a controlling shareholder of the company and (iii) subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate. However, if the chief executive officer candidate will serve as a member of the board of directors, such candidate’s compensation terms as chief executive officer must be approved in accordance with the rules applicable to approval of compensation of directors.
As of December 31, 2023, we had 135 full-time employees, based primarily in Israel, the United Kingdom and Bulgaria, of whom more than 120 are engineers focused on the development of Very Large Scale Integration (VLSI), hardware, software, algorithms, satellite payloads and communications systems. None of our employees are represented by a labor union, and we consider our relations with our employees to be good. To date, we have not experienced any work stoppages.
Information regarding the ownership of our ordinary shares by our executive officers and directors is set forth in “Item 7. – Major Shareholders and Related Party Transactions – A. Major Shareholders.”
2020 Share Award Plan.
On May 12, 2020, we adopted our 2020 Share Award Plan and the EMI options (for UK employees). Addendum to the 2020 Share Award Plan, and on September 30, 2020, we adopted the U.S. Addendum to the 2020 Share Award Plan (as amended from time to time, together the “Plans”). The purpose of the Plans is to advance our and our shareholders’ interests by attracting and retaining the best available personnel for positions of substantial responsibility and provide additional incentive to our officers, directors, employees and other key persons, upon whose judgment, initiative and efforts we depend for the successful conduct of our business, to acquire a proprietary interest in the Company and/or its Affiliates. Under the Plans, select eligible participants have been granted share options and RSUs. The Plans are administered by our board of directors or, at the discretion of our board, a committee of directors.
The Plans provide for the grant of options and/or shares, including restricted shares, and/or RSUs and/or stock appreciation rights and/or performance units, performance shares and other stock or cash awards to employees, officers, directors, advisors and consultants of SatixFy and its subsidiaries. The Plans are administered by our board of directors, or a committee of the board of directors, appointed by the board.
The Plans provide for granting awards under various tax regimes, including in compliance with Section 102 (“Section 102”) of the Israeli Income Tax Ordinance (New Version), 5721-1961, or the “Ordinance,” and Section 3(i) of the Ordinance, and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the U.S. Internal Revenue Code (the “Code”).
Section 102 allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options under certain terms and conditions. Our non-employee consultants and/or controlling shareholders who are considered Israeli residents may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102 includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance, the most favorable tax treatment for the grantee, permits the issuance to a trustee under the “capital gain track.”
Options granted under the U.S. Addendum to the 2020 Share Award Plan to our employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of incentive stock options granted to certain significant shareholders).
In the event of termination of a grantee’s employment or service with SatixFy or any of its affiliates, all vested and exercisable awards held by such grantee as of the date of termination may be exercised within three months after such date of termination, unless otherwise determined by the administrator. After such three month period, all such unexercised awards will terminate and the shares covered by such awards shall again be available for issuance under the Plans.
In the event of termination of a grantee’s employment or service with SatixFy or any of its affiliates due to such grantee’s death or total and permanent disability, all vested and exercisable awards held by such grantee as of the date of termination may be exercised by the grantee or the grantee’s legal guardian, estate, or by a person who acquired the right to exercise the award by bequest or inheritance, as applicable, within twelve months after such date of termination, unless otherwise provided by the administrator or specified in the terms and conditions included in the Plans.
If a grantee’s employment or services with SatixFy or any of its affiliates is terminated for “cause” (as defined in the 2020 Share Award Plan), unless otherwise determined by the administrator or specified in the terms and conditions included in the Plans, all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination and all shares issued upon previous exercise or vesting of awards of such grantee shall be subject to repurchase at their nominal value, for no value or for the exercise price previously received by SatixFy, as the administrator deems fit, and the shares covered by such awards shall again be available for issuance under the Plans.
F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation. |
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table sets forth information regarding the beneficial ownership of our ordinary shares by:
each person who is the beneficial owner of more than 5% of the outstanding shares of any series of our voting ordinary shares;
each of our then-current executive officers and directors; and
all executive officers and directors of the Company, as a group.
The beneficial ownership of ordinary shares of the Company is based on 83,586,790 ordinary shares issued and outstanding as of March 28, 2024.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to, or the power to receive the economic benefit of ownership of, the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares that the person has the right to acquire within 60 days are included, including through the exercise of any option or other right or the conversion of any other security. However, these shares are not included in the computation of the percentage ownership of any other person.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of our ordinary shares beneficially owned by them.
| | Number of Shares Beneficially Owned | | | Percentage of Outstanding Shares | |
5% Holders (other than executive officers and directors): | | | | | | |
Endurance Antarctica Partners, LLC(1) | | | 9,438,942 | | | | 10.8 | % |
FP Credit Partners II, L.P. | | | 5,936,409 | | | | 7.1 | % |
Simona Gat(2)(3) | | | 17,590,279 | | | | 20.7 | % |
Executive Officers and Directors(4) | | | | | | | | |
| | | | | | | | |
Oren Harari | | | 139,275 | | | | * | |
Nir Barkan | | | 367,442 | | | | * | |
Itzik Ben Bassat | | | 125,000 | | | | * | |
Mary P. Cotton | | | — | | | | — | |
Richard C. Davis(1) | | | — | | | | — | |
Moshe Eisenberg. | | | — | | | | — | |
Doron Rainish(5) | | | 1,224,098 | | | | 1.5 | % |
Yair Shamir (6) | | | — | | | | — | |
Yoram Stettiner | | | — | | | | — | |
David L. Willetts(7) | | | 39,600 | | | | * | |
| | | | | | | | |
Yoav Leibovitch(9) | | | 23,307,330 | | | | 27.4 | % |
Divaydeep Sikry(10) | | | 108,016 | | | | * | |
Stephane Zohar(11) | | | 143,069 | | | | * | |
All Executive Officers and Directors as a Group | | | 43,044,109 | | | | 49.3 | % |
| | | | | | | | |
* Less than 1%. | | | | | | | | |
(1) | Consists of 5,673,846 SatixFy Ordinary Shares, including 500,000 Price Adjustment Shares, and 3,765,096 SatixFy Ordinary Shares underlying the SatixFy Warrants. Richard C. Davis shares voting and investment control over shares held by the Sponsor by virtue of his shared control of the Sponsor. By virtue of this relationship, Richard C. Davis may be deemed to share beneficial ownership of the securities held of record of the Sponsor. Richard C. Davis has disclaimed beneficial ownership of the shares, except to the extent of his pecuniary interest therein, if any. The business address for Endurance Antarctica Partners, LLC is 200 Park Avenue, 32nd Floor New York, NY 10166. |
(2) | Ms. Gat resigned from her positions as President of SatixFy, the CEO and a director of Satixfy UK Limited, and a director of Satixfy Bulgaria, effective April 30, 2023. |
(3) | Consists of 16,186,297 SatixFy Ordinary Shares held directly. Ms. Simona Gat is one of SatixFy’s founders. Ms. Simona Gat’s holdings include 9,000,000 Price Adjustment Shares, and 1,403,981 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
(4) | The business address for each of the directors and officers of SatixFy is 2 Hamada St., Rehovot 670315, Israel. |
(5) | Consists of 1,153,679 SatixFy Ordinary Shares held directly and 179,513 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. And 10,586 vested RSUs. |
(6) | Mr. Yair Shamir is a director of CEL Catalyst Communications Limited and has the power to direct it to vote and dispose of the shares and has shared voting and investment power over the shares. Mr. Yair Shamir disclaims any beneficial ownership of any shares owned by CEL Catalyst Communications Limited other than to the extent of any pecuniary interest he may have therein, directly or indirectly. |
(7) | Consists of 39,600 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. |
(8) | Consists of 21,903,349 SatixFy Ordinary Shares held directly. Mr. Yoav Leibovitch is one of SatixFy’s founders. Mr. Yoav Leibovitch’s holdings include 18,000,000 Price Adjustment Shares and 1,403,981 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024 |
(9) | Consists of 53,328 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024. And 54,688 vested RSUs |
(10) | Consists of 64,944 SatixFy Ordinary Shares underlying options to acquire SatixFy Ordinary Shares exercisable within 60 days of March 28, 2024.and 54,688 vested RSUs |
As of March 25, 2024, we had 37 record holders, of which 10 record holders were located in Israel and held approximately 83.6 million ordinary shares.
| B. | Related Party Transactions |
The following is a description of related party transactions for the period from January 1, 2023 to the date of this Annual Report with any of our executive officers, directors or their affiliates and holders of more than 10% of any class of our voting securities in the aggregate, which we refer to as related parties, other than employment, compensation and indemnification arrangements which are described under “Management,” which are incorporated by reference herein.
Key Factors and Trends Affecting our Performance
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section titled ““Item 3.D.—Risk Factors.”
Expanding our Customer Base and Relationships
We are focused on attracting new customers and expanding our relationships and revenue with existing customers, which we believe will be driven by our ability to continue to improve our technologies and products that make our offerings compatible with the latest advances in satellite-enabled communications. As of December 31, 2022,2023, we had binding contracts with our 12 customers under which we recorded revenues in the 20222023 or in 2021,2022, or expect to record future revenues. Ongoing business developments discussed elsewhere in this Annual Report continue to impact our customer base and plans for expansion.
Backlog
As of December 31, 2022,2023, we had signed contracts representing revenue backlog of approximately $45$59 million. Our backlog consists of estimated revenue pursuant to customer orders and signed contracts. Our customer orders may be terminated under certain circumstances, including if we fail to meet delivery deadlines or otherwise breach our contracts and most of our customer contracts are terminable upon prior notice to us, without penalty. There is no assurance that we will be able to expand our customer relationships with existing customers, and therefore our backlog, or that our backlog will translate into revenue or cash flows. Additionally, we previously reported estimatesSee “Item 3.D. Risk Factors – Amounts included in backlog may not result in actual revenue and are an uncertain indicator of our potential future revenue pipeline, however, due to the cessation or narrowing of negotiations of new contracts with existing and prospective customers, our potential revenue pipeline is uncertain and we do not plan to report this metric in future periods unless and until these circumstances change, as such pipeline information would be of limited utility to investors.earnings.
Development of New Products
Since commencing operations in 2012, we have invested a total of approximately $209$243 million in R&D as of December 31, 2022,2023, a substantial portion of which has been defrayed by government and public entity grants (recognized in our statement of operations as reductions in research and development expenses). To date, we have received over $77.5 million in grants from the ESA, sponsored by the UKSA, and over $6.3 million in grants from the Israeli Innovation Authority (“IIA”).IIA. Our net research and development expenses amounted to $17.0 million, $17.9$29.1 million and $16.6$16.8 million in the years ended December 31, 2022, 20212023 and 2020,2022, respectively. Our gross R&D spend, exclusive of the impact of offsetting government and public entity grants, amounted to $29.3 million, $31.7$33.4 million and $30.9$29.1 million in 2022, 20212023 and 2020,2022, respectively. In some cases, such as with grants from the IIA, we are required to repay a portion of the grants at a future date in the form of a royalty on the sales of products developed with the assistance of such grants. See “Item 5. Operating and Financial Review and Prospects Liquidity and Capital Resources—Commitments." Our R&D efforts also benefit from our experience on customer projects, including collaborations with leading companies in the satellite communications industry. We have generated $10.1 million, $19.2$8.2 million and $10.3$10.1 million in revenues from the provision of R&D services (recorded under “Development services and preproduction” in our statements of income) in the years ended December 31, 2022, 20212023 and 2020,2022, respectively, while maintaining ownership of our intellectual property developed in connection with such projects and licensing such intellectual property to our customers.
Our R&D efforts focus primarily on developing new chips, systems and technologies, as well as improving our existing systems with additional innovative features and functionality. For example, based on our SX-3099 chip, we developed the SX-4000 chip to be used in space by applying a radiation hardening process. The development of modem and antenna chips requires us to improve the performance, size, power consumption, product roadmap, resilience and cost of our chips. We combine technologies, such as beamforming, beam-hopping and silicon development processes with our proprietary design methods, intellectual property and our expertise to develop new technologies and advanced systems. To date, our R&D efforts have yielded, in addition to our proprietary chips, satellite-capable modems that are in production and several products, including satellite payloads, Aero/IFC terminals and ground terminals and hubs, that are in late stage development or nearing the prototype phase.
As of December 31, 2022, we had a team of over 160 engineers supporting our mission to innovate the satellite communications industry, including hardware and software, VLSI, product and antenna and algorithm engineers. We conduct our R&D across centers in Israel, the United Kingdom and Bulgaria. By spreading our R&D team across multiple locations, we increase our access to highly skilled engineering talent, which we believe provides us with opportunities for evolution and growth.
We believe that continued investment in R&D is critical to our business, and accordingly expect to continue expanding the scope and scale of our R&D activities, including with the proceeds of the Business Combination, and also anticipate continued R&D funding from the ESA, although there can be no assurance as to when or if such funding occurs, or to what the amount and terms of such funding may be.
Notwithstanding our continued investment, there is no assurance that our R&D efforts will be successful in yielding new or improved satellite communications products.
Market Trends and Uncertainties
The markets in which our customers operate, including the satellite payloads, ground terminals and IFC markets, are characterized by increasingly rapid technological changes, product obsolescence, competitive pricing pressures, evolving standards and fluctuations in product supply and demand. New technology may result in sudden changes in system designs or platform changes that may render our products obsolete and require us to devote significant additional R&D resources to compete effectively. We believe we have a significant opportunity ahead of us, with an aggregate TAM across our key markets that is expected to reach approximately $18 to $22 billion by the end of the current decade (see “Item 4. Information on the Company — B. Business — Market Opportunity”). However, we have no control over market demand and there is no assurance that we will be successful in capturing a substantial portion of the TAM, and our ability to do so will be contingent on numerous factors, including developments in the satellite communications industry and geopolitical and macroeconomic conditions and our ability to meet demand, to overcome chip supply shortages and other supply chain capacity challenges, among others. See “Item 3. Key Information - D. Risk Factors — Our estimates, including market opportunity estimates and market growth forecasts, are subject to inherent challenges in measurement and significant uncertainty, and real or perceived inaccuracies in those metrics and estimates may harm our reputation and negatively affect our business.business..”
Our revenues amounted to $10.6 million, $21.7$10.7 million and $10.6 million in the years ended December 31, 2022, 20212023, and 2020, respectively,2022, while our net losses amounted to $398 million (reflecting a $333 million non-recurring listing expense), of which $318 million was attributable to a non-recurring, non-cash listing expense due to the application of IFRS 2 (Share-based Payments) and $37 million was attributable to non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement, neither of which non-cash items had any tax impact (see Notes 16 and 24 to our audited consolidated financial statements included elsewhere in this Annual Report), $17.1 million and $17.6 million, for the years ended December 31, 2022, 2021 and 2020, respectively.$29.7 million. We had an accumulated deficit (i.e., negative retained earnings) of $482$511 million as of December 31, 2022.2023 (mostly derived from $333 million non-recurring listing expenses in 2022) . There is no assurance that we will achieve profitability in the near future, if at all, and may require additional funding to support our continuing operations, fund our R&D and capital expenditure requirements and service our debt obligations. See “— Liquidity and Capital Resources” below for more information.
We currently rely on third parties for a substantial amount of our chip manufacturing and system assembly operations, and for assemblies and chip development software. The majority of our chips are supplied by a single foundry, GlobalFoundries, and we purchase chip development software and software libraries from a limited number of providers, such as Cadence Design Systems, Inc. and Siemens. The majority of our chips are designed to be compatible with the manufacturing processes and equipment employed by GlobalFoundries and switching to a new foundry vendor for these chips may require significant cost and time. The current global shortage in semiconductor and related electronic components and assemblies, resulting mainly from macro trends such as strong demand for 5G devices and high-performance computing as well as the impact of the COVID-19 pandemic, has resulted in increases in the prices we pay for the manufacturing of our chips and assemblies, disruptions in our supply chain and disruptions in the operations of our suppliers and customers. If one or more of our vendors terminates its relationship with us, or if they fail to produce and deliver our products or provide services according to our requested demands in specification, quantity, cost and time, our ability to ship our chips or satellite communications systems to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales and damage our customer relationships. While in some cases we may be able to leverage our relationships with certain large, well-known customers to secure contract manufacturing capacity on better price and delivery terms, this cannot be assured and our ability to mitigate potential adverse impacts of supply chain constraints is limited at this time.
Additionally, we may experience supply chain and other disruptions to our business that may be caused by a range of factors beyond our control, including, but not limited to, COVID-19 related impacts, geopolitical uncertainty, international trade disputes, armed conflicts and sanctions, such as the ongoing Israel-Hamas and Russia-Ukraine warwars and the related sanctions, or economic and political instability in Southeast Asia, such as the military threat posed by China against Taiwan, climate change, increased costs of labor, freight cost and raw material price fluctuations, a shortage of qualified workers or material changes in macroeconomic conditions.
The effects of the ongoing Russia-Ukraine war, including the changes for the timing of new satellite launches by SatixFy’s current and prospective customers that previously launched from Russia, increased supply chain difficulties for SatixFy and its customers, and recent developments in SatixFy’s discussions with prospective customers, pose challenges to SatixFy’s business and future financial results, particularly in the near-term. For example, in March 2022, OneWeb, one of our significant customers, announced that it was suspending all satellite launches from Russia’s Baikonur Cosmodrome and recently announced that it would partner with companies in other countries, which may result in a significant delay of its test launch of satellites equipped with our payload systems if it is unable to transition its expected satellite launches on a timely basis. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations.” Industry supply chain challenges may be exacerbated and the demand for our products may be adversely affected as a result of the indirect effects of the Russia-Ukraine war, related sanctions or their impacts on global and regional economies. Recent global inflationary trends, higher interest rates and financial markets volatility have also resulted in funding constraints that have affected and created more uncertainty about the timing and scale of investments in new communications satellite constellations, new aircraft fleets and updated IFC solutions and related infrastructure by some of our existing and prospective customers. For example, the scale and timing of Telesat’s plans to launch a new LEO communications satellite constellation will depend on its ability to obtain the necessary funding for this project. The effects of recent macroeconomic uncertainties on our customers have also resulted in delays to contract negotiations or customer orders, and may result in further delays. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — Deterioration of the financial condition of our customers could adversely affect our operating results.” SatixFy believes that recent media and regulatory scrutiny of SPAC business combinations may lead customers to view SatixFy as a riskier or undercapitalized partner. Prior to the consummation of the Business Combination, two customers (including a significant customer that recently announced an agreement to enter into a merger of equals with another major satellite operator) with whom SatixFy was discussing prospective new contracts informed SatixFy that they selected SatixFy’s larger competitors with longer track records of providing space-based and aircraft-based satellite communications solutions as principal contractors for their satellite communications needs. While SatixFy’s management believes that these developments are unlikely to materially impact the long-term demand for our products or our long-term customer relationships (including with the two customers that terminated new contract discussions, for whom SatixFy believes it may be selected as the provider of satellite communication chips in connection with these ongoing projects in the future), they make it more difficult for us to budget for expected customer demand and therefore may adversely impact our results of operations and financial condition, especially in the near-term. Our ability to mitigate these supply chain and other disruptions, including the potential adverse impacts of the Russia-Ukraine conflict on our supply chain or the supply chains of our customers, is limited, as the impacts are largely indirect and it is difficult for us to predict at this time how our suppliers and customers will adjust to the new challenges or how these challenges will impact our costs or demand for our products and services. See “Item 3. Key Information — D. Risk Factors — Risks Related to SatixFy’s Business, Operations and Industry — We are currently experiencing, and may continue to experience, increased risks and costs associated with volatility in labor or component prices or as a result of supply chain or procurement disruptions, which may adversely affect our operations,” “ — We rely on third parties for manufacturing of our chips and other satellite communications system components. We do not have long-term supply contracts with our foundry or most of our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions” and “— Deterioration of the financial condition of our customers could adversely affect our operating results.”
Competition
The satellite communications industry is competitiveIn addition, the recent escalation of the Israel-Hamas conflict could cause disruptions to our operations, and characterized by rapid advancesa delay in technology, new product introductions, high levelsthe development, production and shipment of investment in R&Dour products and high costs associated with generating marketable products. Our competitiveness depends on our ability to develop and launch products superior in performance and SWaP-C than our competitors and our ability to anticipate and adjust to changesthe heightened tension in our customers’ requirements. The competitionrelations with various Middle Eastern countries could adversely affect our customer relationships as well as our sales and performance of existing or future contracts, which in turn could adversely affect our operating results, financial conditions and the expansion of our business. Furthermore, the latest Israel-Hamas war and the resulting measures that have been taken, and could be taken in the satellite communications market focuses primarily on performance, size, power consumption, product roadmap resiliencefuture, by NATO, the United States, the United Kingdom, the European Union, Israel and cost. Our customers’ selection processes are often highly competitive, and there are no guarantees that our products will be included in the next generation of our customers’ products and systems.
Many of our current and potential competitors have existing customer relationships, established patentsits neighboring states and other intellectual property,countries have created global security concerns that could have a longer track recordlasting impact on regional and global economies. Although the length and impact of this ongoing conflict are highly unpredictable, they could lead to market disruptions, including significant volatility in supplying satellite communications solutionscommodity prices and substantial technological capabilities. For example, two customers with whom we were discussing prospective new contracts recently informed us that they selected our larger competitors with longer track records of providing space-based and aircraft-based satellite communications solutions as principal contractors for their satellite communications needs. In some cases, our competitors are also our customers or suppliers. Some of our competitors have recently introduced products with more advanced technologies than in the past, which increases competition with our products. Additionally, many of our competitors may have significantly greater financial, technical, manufacturing and marketing resources than we do, which may allow them to invest more in R&D, implement new technologies and develop new products more quickly than we can. For further information, see “Itemsupply chain disruptions. See “Item 3. Key Information — D. Risk Factors — We operateRisks Related to SatixFy’s Operations in a highly competitive industryIsrael — Our headquarters and other significant operations are located in Israel, and, therefore, our results may be unsuccessfuladversely affected by political, economic and military instability in effectively competing inIsrael, including the future.recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them.”
Basis of Presentation
We currently conduct our business through one reportable operating segment. We prepare our consolidated financial statements under IFRS as issued by the IASB.International Accounting Standards Board.
Our functional and reporting currency is the U.S. dollar (which is also the functional currency of our Israeli subsidiary), as the demand for satellite communications chips and systems, and many of the development costs with respect thereto, are priced in U.S. dollars. Certain of our subsidiaries, on the other hand, have other functional currencies (being the currencies in which their assets, liabilities, revenues and expenses are recorded). The functional currency of our U.K. subsidiariessubsidiary is the GBP and the functional currency of our Bulgarian subsidiary is the EUR. Accordingly, in the preparation of our consolidated financial statements, we are required to translate these subsidiaries’ GBP and EUR balances to U.S. dollars. Assets and liabilities are generally translated at year-end exchange rates, while revenues and expenses are generally translated at the average exchange rates for the period presented. The differences resulting from translationcurrency translations are presented in our consolidated statementstatements of comprehensive loss under Exchange gains (losses)gain (loss) arising on translation of foreign operations, but are not reflected in our net loss.loss for the period. As a result of our foreign currency translation exposure, certain amounts in our consolidated financial statements may not be comparable between periods. Additionally, subsidiary cash and financial asset and liability balances that are denominated in currencies other than the functional currency of the subsidiary are remeasured into the functional currency, with the resulting gain or loss recorded in the financial income or financial expenses line-items in our statements of income. For more information about the comparability impact of our foreign currency translation exposure, see below under “—“Item 11 — Quantitative and Qualitative Disclosure About Market Risk — Foreign Currency Exchange Risk.”
Key Financial and Operating Metrics
We monitor several financial and operating metrics in order to measure our current performance and project our future performance. These metrics are presented in the following table.
| | Year Ended December 31, | | |
| | 2022 | | | 2021 | | | 2020 | | | Year Ended December 31 | |
| | (U.S.$ in thousands, except percentages) | | | 2023 | | | 2022 | |
| | | | | | | | | | | (U.S.$ in thousands, except percentages) | |
Revenues | | $ | 10,626 | | | $ | 21,720 | | | $ | 10,632 | | | $ | 10,730 | | | $ | 10,626 | |
Gross profit | | $ | 6,128 | | | $ | 12,877 | | | $ | 7,572 | | | $ | | | | $ | 6,128 | |
Gross margin | | | 58 | % | | | 59 | % | | | 71 | % | | | 45 | % | | | 58 | % |
Net loss (1)
| | $ | (397,789 | ) | | $ | (17,050 | ) | | $ | (17,563 | ) | |
Net loss | | | $ | (29,715
| ) | | $ | (397,789 | )(*) |
| (1) | (*) Net loss for the year ended December 31, 2022 reflects the impact of a $333 million non-recurring listing expense, of which $318 million was a non-cash expense due to the application of IFRS 2 (Share-based Payments) and a $37 million non-cash finance expense reflecting the revaluation of a derivative contract relating to the transactions under the Forward Purchase Agreement. Neither of the afore-mentioned non-cash expenses had any impact on our income tax expense or benefit for the year ended December 31, 2022 or on our deferred tax assets or liabilities as of that date. See Notes 16 and 24 to our consolidated financial statements included elsewhere in this Annual Report for more information. |
Principal Components of Our Results of Operations
Revenues
In the periods discussed in this Annual Report, we have generated substantially all of oursubstantial revenues from development services and preproduction provided to our customers in connection with projects on which we are engaged (although we maintain ownership of the intellectual property developed in connection with such projects). Our revenue from sales of products consisted mostly of revenue from contracts for the provision of products, including product prototypes, and components, including our proprietary chips.
We expect ourOur mix of revenue has begun to gradually shift to sales of products insince the near term,end of 2023 and we expect this trend to continue as we attract more customers, develop custom-tailored and off-the-shelf products and begin to deliver satellite communications systems at scale.
Cost of sales and services
Our cost of sales and services includes mainly salaries (including bonuses, share-based awards, benefits and related expenses) of our service personnel and the costs of our chip manufacturing subcontractors, chip manufacturing tools and materials and models, shipping cost, and related depreciation and amortization, including amortization of intangible assets, if any.
Research and development expenses
Research and development expenses consist primarily of salaries (including bonuses, benefits and related expenses) of personnel involved in R&D and the cost of development tools, third-partythird- party intellectual property licenses, and subcontractors, net of public sector grants, including from ESA, which offset some of our research and development expenses. See Note 2122 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
To date, we have expensed all of our R&D costs as incurred. See “— Critical Accounting Policies and Estimates — Research and Development Costs.” We expect to continue investing in R&D and, accordingly, expect our research and development expenses to increase. We also expect to benefit from additional funding from the ESA and other government and public sector entities, which, if obtained, would offset a portion of our research and development expenses.
We expect our sales and marketing costs to increase as we bring more products to market, the demand for our products increases and we hire more sales and marketing personnel.
General and administrative expenses consist mainly of salaries (including bonuses, stock-basedshare-based awards, benefits and related expenses) of management and administrative personnel, overhead costs (including facilities rent and utilities) and, legal expenses, depreciation and amortization of property and equipment not used in the manufacturing of our products or provisions of our services.
This represents our share in the loss of a company accounted by equity method, net, which reflects our proportionate share of the loss of Jet Talk, a joint venture with STE. We own 51% of Jet Talk’s equity, but do not control the company, as STE controls the company’s financing, and participates substantially in directing its marketing and R&D activities (the latter generally being contracted to us) and also participates in the appointment of the chief executive officer, among other senior management personnel. We are committed to provide Jet Talk with future development services for ana large Aero/IFC terminal, exclusive marketing rights for the commercial aviation market, technical skills, staff expertise, R&D facilities and a non-exclusive,an exclusive, royalty-free, world-wide, perpetual, non-transferable, irrevocable license to use and commercially exploit our intellectual property for the development, production, sales and marketing of satellite antenna systems for the commercial aviation market. While Jet Talk has generated losses to date, we expect Jet Talk to contribute significantly to our results of operations in the future. See Note 67 to SatixFy’s consolidated financial statements included elsewhere in this Annual Report.
Finance income includes mainly the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities (see “— Basis of Presentation”), fair value adjustments related to financial assets and liabilities (including, in 2020 and 2021, a deemed gain resulting from a discounted bank loan obtained in connection with the COVID-19 pandemic) and interest on bank deposits.
Finance expenses include mainly interest on loans and bank fees, depreciation of our right-of-use assets, amortization of debt and warrant discounts, fair value adjustments related to financial assets and liabilities (including, in 2020 and 2021,2022, our outstanding warrants and repayable grants from the IIA) and the impact of foreign exchange remeasurement of certain subsidiary financial assets and liabilities.
The following table provides our consolidated statements of operations for the years ended December 31, 20222023 and 2021:2022: