ICTS INTERNATIONAL N.V. |
Not Applicable |
The Netherlands |
Walaardt Sacréstraat 425-5, 1117 BM Schiphol-Oost, The Netherlands |
Alon Raich, Tel: +31-20-3471077, |
Common Stock, par value 0.45 Euro per share |
Securities for which there is a reporting obligation pursuant to |
None |
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ |
U.S. GAAP ☒ | International Financial Reporting Standards as issued Other ☐ | by the International Accounting Standards Board ☐ |
Table of Contents | |||
Part I | |||
4 | |||
4 | |||
4 | |||
11 | |||
21 | |||
35 | |||
39 | |||
40 | |||
41 | |||
42 | |||
57 | |||
57 | |||
Part II | |||
58 | |||
58 | |||
58 | |||
58 | |||
58 | |||
58 | |||
59 | |||
59 | |||
59 | |||
59 | |||
Part III | |||
60 | |||
60 | |||
60 | |||
Exhibits | |||
(U.S. dollars in Thousands) | ||||||||||||||||||||
December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Cash and cash equivalents | $ | 88,753 | $ | 51,602 | $ | 52,352 | $ | 12,801 | $ | 9,073 | ||||||||||
Total current assets | 174,562 | 116,554 | 103,136 | 67,219 | 61,982 | |||||||||||||||
Total assets from discontinued operations | - | - | - | - | 306 | |||||||||||||||
Total assets | 195,880 | 140,388 | 123,447 | 75,087 | 71,853 | |||||||||||||||
Total current liabilities | 60,887 | 59,334 | 75,509 | 75,058 | 59,197 | |||||||||||||||
Total liabilities from discontinued operations | - | - | - | - | 41 | |||||||||||||||
Total liabilities | 111,234 | 95,551 | 84,832 | 109,943 | 98,595 | |||||||||||||||
Redeemable non-controlling interests | 90,478 | 75,322 | 74,300 | - | - | |||||||||||||||
Shareholders' deficit | $ | 5,832 | $ | 30,485 | $ | 35,685 | $ | 34,856 | $ | 26,742 |
U.S. Dollars in Thousands Year ended December 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 | $ | 345,221 | $ | 297,682 | ||||||||||
Cost of revenue | 209,771 | 196,569 | 290,461 | 311,994 | 254,728 | |||||||||||||||
GROSS PROFIT | 115,163 | 51,850 | 42,846 | 33,227 | 42,954 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 12,114 | 6,541 | 5,060 | 3,657 | 2,683 | |||||||||||||||
Selling, general and administrative | 50,882 | 37,239 | 33,063 | 34,924 | 26,201 | |||||||||||||||
Goodwill impairment | 139 | - | - | 1,563 | - | |||||||||||||||
Total operating expenses | 63,135 | 43,780 | 38,123 | 40,144 | 28,884 | |||||||||||||||
OPERATING INCOME (LOSS) | 52,028 | 8,070 | 4,723 | (6,917 | ) | 14,070 | ||||||||||||||
Equity Income (loss) from investment in affiliate | (983 | ) | (790 | ) | 91 | 124 | - | |||||||||||||
Other expenses, net | 537 | 1,288 | 10,518 | 3,586 | 6,172 | |||||||||||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES | 50,508 | 5,992 | (5,704 | ) | (10,379 | ) | 7,898 | |||||||||||||
Income tax expenses | 9,220 | 590 | 1,549 | 685 | 2,033 | |||||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 41,288 | 5,402 | (7,253 | ) | (11,064 | ) | 5,865 | |||||||||||||
Loss from discontinued operations | - | - | - | 289 | 95 | |||||||||||||||
NET INCOME (LOSS) | $ | 41,288 | $ | 5,402 | $ | (7,253 | ) | $ | (11,353 | ) | $ | 5,770 | ||||||||
Net income (loss) attributable to non-controlling interests | 6,481 | 999 | 789 | (123 | ) | (50 | ) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. | $ | 34,807 | $ | 4,403 | $ | (8,042 | ) | $ | (11,230 | ) | $ | 5,820 | ||||||||
BASIC NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.PER SHARE | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.66 | $ | 0.12 | $ | (0.26 | ) | $ | (0.47 | ) | $ | (0.28 | ) | |||||||
Loss from discontinued operations | - | - | - | (0.01 | ) | - | ||||||||||||||
Net income (loss) | $ | 0.66 | $ | 0.12 | $ | (0.26 | ) | $ | (0.48 | ) | $ | (0.28 | ) | |||||||
Basic weighted average number of shares | 37,433,333 | 35,827,854 | 30,524,461 | 23,415,068 | 21,000,000 | |||||||||||||||
DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. PER SHARE | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.61 | $ | 0.11 | $ | (0.26 | ) | $ | (0.47 | ) | $ | (0.28 | ) | |||||||
Loss from discontinued operations | - | - | - | (0.01 | ) | - | ||||||||||||||
Net income (loss) | $ | 0.61 | $ | 0.11 | $ | (0.26 | ) | $ | (0.48 | ) | $ | (0.28 | ) | |||||||
Diluted weighted average number of shares | 40,237,340 | 38,424,718 | 30,524,461 | 23,415,068 | 21,000,000 |
• | Private Charter Flight Screening for Airlines - which includes security check of passengers' body andcarry-on items. |
• | Cargo Security Screening – for some international and domestic carriers. |
• | Catering Security Screening – for some international and domestic carriers. |
• | Aircraft Security Screening – for some international and domestic carriers. |
• | Aircraft Search – search of the entire aircraft to detect dangerous objects. |
• | Cleaning the aircraft interior |
• | Conducting cabin searches |
• | Waxing the aircraft exterior |
Year ended December 31, | ||||
2022 | $ | 3.8 | ||
2023 | 3.4 | |||
2024 | 2.8 | |||
2025 | 1.2 | |||
2026 | 0.9 | |||
Thereafter | 0.9 | |||
$ | 13.0 |
U.S. dollars in Thousands | ||||||||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 | ||||||
Cost of revenue | 209,771 | 196,569 | 290,461 | |||||||||
Gross profit | 115,163 | 51,850 | 42,846 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 12,114 | 6,541 | 5,060 | |||||||||
Selling, general and administrative | 50,882 | 37,239 | 33,063 | |||||||||
Goodwill impairment | 139 | - | - | |||||||||
Total operating expenses | 63,135 | 43,780 | 38,123 | |||||||||
OPERATING INCOME | 52,028 | 8,070 | 4,723 | |||||||||
Equity income (loss) from investment in affiliate | (983 | ) | (790 | ) | 91 | |||||||
Other expenses, net | (537 | ) | (1,288 | ) | (10,518 | ) | ||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES | 50,508 | 5,992 | (5,704 | ) | ||||||||
Income tax expenses | 9,220 | 590 | 1,549 | |||||||||
NET INCOME (LOSS) | 41,288 | 5,402 | (7,253 | ) | ||||||||
Less: Net income attributable to non-controlling interests | 6,481 | 999 | 789 | |||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V | $ | 34,807 | $ | 4,403 | $ | (8,042 | ) |
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of revenue | 64.6 | % | 79.2 | % | 87.1 | % | ||||||
Gross profit | 35.4 | % | 20.8 | % | 12.9 | % | ||||||
Research and development | 3.7 | % | 2.6 | % | 1.5 | % | ||||||
Selling, general and administrative | 15.7 | % | 15.0 | % | 9.9 | % | ||||||
Goodwill impairment | - | % | - | % | - | % | ||||||
Total operating expenses | 19.4 | % | 17.6 | % | 11.4 | % | ||||||
OPERATING INCOME (LOSS) | 16.0 | % | 3.2 | % | 1.5 | % | ||||||
Equity loss from investment in affiliate | 0.3 | % | 0.3 | % | - | % | ||||||
Other expenses, net | 0.2 | % | 0.5 | % | 3.2 | % | ||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES | 15.5 | % | 2.4 | % | (1.7 | )% | ||||||
Income tax expenses | 2.8 | % | 0.2 | % | 0.5 | % | ||||||
INCOME (LOSS) | 12.7 | % | 2.2 | % | (2.2 | )% | ||||||
NET INCOME (LOSS) | 12.7 | % | 2.2 | % | (2.2 | )% | ||||||
Less: Net income attributable to non-controlling interests | 2.0 | % | 0.4 | % | 0.2 | % | ||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V | 10.7 | % | 1.8 | % | (2.4 | )% |
(U.S. dollars in Thousands) | ||||||||||||
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Germany | $ | 126,367 | $ | 119,500 | $ | 137,207 | ||||||
Netherlands | 52,165 | 58,446 | 97,700 | |||||||||
United States of America | 94,743 | 45,305 | 73,719 | |||||||||
Spain | 30,946 | 7,465 | 3,138 | |||||||||
Other | 20,713 | 17,703 | 21,543 | |||||||||
Total Revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 |
• | Decrease of travel by flights, reducing the demand for services the Company provide as part of its airport security and other aviation services. As a result, our cumulative revenues of the airport security and other aviation services in the twelve months ended December 31, 2021 and 2020 were lower than our revenues for the twelve months ended December 31, 2019. Many of the Company’s employees were laid off and / or ordered to stay home. |
• | Governments in some of the countries in which we operate have announced the implementation of government assistance measures, which mitigated the impact of the COVID-19 outbreak on our results and liquidity. During 2021 and 2020, in the United States of America, the government has approved a payroll support of $15.9 million and $13.7 million to the American subsidiary of the Company. Out of those amounts the American subsidiary recognized amounts of $16.9 million and $12.7 million respectively, as reduction of labor expenses for the years ended December 31, 2021 and 2020. In the Netherlands, the government has approved a support of €18.1 million and €17.6 million ($20.6 million and $21.6 million as of December 31, 2021 and 2020) for the years ended December 31, 2021 and 2020. The Dutch government extended the support program until March, 2022. For the months January through March 2022, the Company was granted additional assistance up to €4.6 million. In Germany, the employees are eligible for payroll support up to 60% of the employee’s payroll (on individual basis) in case the employees meet the support plan requirements. Currently, the Company does not expect those governmental measures to be renewed or extended. |
• | Depending on the duration of the COVID-19 crisis and continued negative impact on economic activity, the Company might experience further negative results and liquidity restrains. The exact impact on our activities in the remainder of 2022 and thereafter cannot be predicted. |
U.S. Dollars in thousands | ||||||||||||||||
Corporate | Airport Security and Other Aviation Services | Authentication Technology | Total | |||||||||||||
Year ended December 31, 2021: | ||||||||||||||||
Revenue | $ | - | $ | 253,687 | $ | 71,247 | $ | 324,934 | ||||||||
Depreciation and amortization | 75 | 1,106 | 880 | 2,061 | ||||||||||||
Net Income (loss) | (1,666 | ) | 21,558 | 21,396 | 41,288 | |||||||||||
Goodwill | - | 690 | - | 690 | ||||||||||||
Total assets | 10,349 | 112,425 | 73,106 | 195,880 | ||||||||||||
Year ended December 31, 2020: | ||||||||||||||||
Revenue | $ | - | $ | 222,654 | $ | 25,765 | $ | 248,419 | ||||||||
Depreciation and amortization | 72 | 1,302 | 716 | 2,090 | ||||||||||||
Net Income (loss) | (3,853 | ) | 6,056 | 3,199 | 5,402 | |||||||||||
Goodwill | - | 746 | - | 746 | ||||||||||||
Total assets | 12,488 | 86,550 | 41,350 | 140,388 | ||||||||||||
Year ended December 31, 2019: | ||||||||||||||||
Revenue | $ | - | $ | 309,548 | $ | 23,759 | $ | 333,307 | ||||||||
Depreciation and amortization | 46 | 1,328 | 314 | 1,688 | ||||||||||||
Net Income (loss) | (11,740 | ) | (2,406 | ) | 6,893 | (7,253 | ) | |||||||||
Goodwill | - | 681 | - | 681 | ||||||||||||
Total assets | 23,381 | 64,647 | 35,419 | 123,447 |
• | Decrease of travel by flights, reducing the demand for services the Company provide as part of its airport security and other aviation services. As a result, our cumulative revenues of the airport security and other aviation services are lower compared to the period before the COVID-19 outbreak. Those revenues for the years ended December 31, 2021, 2020 and 2019 were $253.6 million, $222.7 million and $309.5 million, respectively. |
• | Governments in some of the countries in which we operate have announced the implementation of government assistance measures, which mitigated the negative impact of the COVID-19 outbreak on our results and liquidity. In the United States of America, the government has approved in 2021 and 2020 a payroll support of $15.9 and $13.7 million respectively, to the American subsidiary of the Company. In the Netherlands, the government has approved a financial assistance of €18.1 and €17.6 million ($20.6 and $21.6 million as of December 31, 2021 and 2020) and additional assistance up to €4.6 million for the period January through March 2022. In Germany, the Company’s employees are eligible for payroll support up to 60% of the employee’s payroll (on individual basis) in case the employees meet the support plan requirements. The Company pays to its German employees their full salary and the Company is being reimbursed by the German government for the payroll support amount. The Company has applied for this support starting April 2020. These available governmental support plans might be extended and/or changed according to the future COVID-19 developments although, currently, the Company does not expect those measures to be renewed or extended. |
• | In the Netherlands wage tax, social security and VAT payments for the period March 2020 until September 2021 were postponed and will have to be paid in 60 installments, starting March 2023, except for VAT payments starting October 2022. As of December 31, 2021 and 2020, the Company accumulated debt of €33.5 million and €20.8 million ($38.0 million and $25.5 million as of December 31, 2021 and 2020), respectively, to the Dutch tax authorities. In Germany, the government postponed the payments of the VAT for the period February through April, 2020. The Company accumulated €55 million ($6.7 million as of December 31, 2020) which was paid during the year 2021. |
• | Depending on the duration of the COVID-19 crisis and continued negative impact on economic activity, the Company might experience negative results and liquidity restrains. The exact impact on our activities in the remainder of 2022 and thereafter cannot be predicted. |
Contractual Obligations | Payments due by Period (U.S. Dollars in Thousands) | |||||||||||||||||||
Total | Less than 1 Year | 1-3 years | 4-5 years | more than 5 years | ||||||||||||||||
Consulting agreements | $ | 1,020 | $ | 170 | $ | 510 | $ | 340 | $ | - | ||||||||||
Convertible notes payable - related party | 1,261 | - | 1,261 | - | - | |||||||||||||||
Operating lease obligations | 12,962 | 3,752 | 7,406 | 1,490 | 314 | |||||||||||||||
Governmental payments in the Netherlands (VAT, social security and wage tax) | 38,011 | 774 | 22,804 | 14,433 | - | |||||||||||||||
$ | 53,254 | $ | 4,696 | $ | 31,981 | $ | 16,263 | $ | 314 |
Contractual Obligations | Payments due by Period (U.S. Dollars in Thousands) | |||||||||||||||||||
Total | Less than 1 Year | 1-3 years | 4-5 years | more than 5 years | ||||||||||||||||
Guarantees | $ | 1,161 | $ | - | $ | 1,161 | $ | - | $ | - | ||||||||||
Letters of credit | 3,250 | 275 | 2,975 | - | - | |||||||||||||||
$ | 4,411 | $ | 275 | $ | 4,136 | $ | - | $ | - |
Age | Position | |||
Menachem Atzmon | 77 | Chairman of the Supervisory Board | ||
Ron Atzmon | 48 | Member of the Supervisory Board and Managing Director of AU10TIX | ||
Gil Atzmon | 46 | Member of the Supervisory Board | ||
Philip M. Getter | 85 | Member of the Supervisory Board, Chairman of the Audit Committee | ||
David W. Sass | 86 | Member of the Supervisory Board | ||
Gail F. Lieberman | 78 | Member of the Supervisory Board, Member of the Audit Committee and Chairman of the Compensation Committee | ||
Gordon Hausmann | 76 | Member of the Supervisory Board, Member of the Audit Committee and member of the Compensation Committee Committee and Member of the Audit Committee | ||
Alon Raich | 46 | Joint Managing Director and Chief Financial Officer | ||
Rom Shaked | 39 | Joint Managing Director |
Principal Position | Year | Salary | Sales Commission | All Other Compensations | Non-equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | Number of Option Award | Number of Stock Awards | Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Managing | 2021 | 204 | 1,397 | 109 | - | - | - | - | 1,700 | |||||||||||||||||||||||||
Director of a | 2020 | 192 | 459 | 90 | - | - | - | - | 741 | |||||||||||||||||||||||||
Subsidiary | 2019 | 185 | 529 | 87 | - | - | - | - | 801 |
Salaries, fees, | Pension, retirement | |||||||
commissions | and other | |||||||
and bonuses | similar benefits | |||||||
(in thousands) | ||||||||
Supervisory Directors as a group (7 persons) | $ | 304 | $ | - | ||||
Officers as a group (6 persons) | $ | 2,671 | $ | 332 |
Percent of | ||||||||
Amount Beneficially | Common shares | |||||||
Name Shareholders Holding Five Percent or More | Owned (a) | Outstanding (a) | ||||||
MacPherson Trust and its Ultimate Beneficial Owners (b) | 62.6 | % | 23,418,861 | |||||
Menachem J. Atzmon | 13.0 | % | 4,850,000 | |||||
Igal Tabori | 5.3 | % | 2,002,483 | |||||
All officers and directors as a group (9 persons), the MacPherson Trust and its Ultimate Beneficial Owners | 84.1 | % | 31,480,721 |
Year | High | Low | ||||||
2017 | $ | 1.30 | $ | 0.45 | ||||
2018 | $ | 1.09 | $ | 0.40 | ||||
2019 | $ | 3.00 | $ | 0.15 | ||||
2020 | $ | 4.09 | $ | 1.34 | ||||
2021 | $ | 10.00 | $ | 4.00 |
2021 | High | Low | ||||||
First quarter | $ | 6.00 | $ | 4.00 | ||||
Second quarter | $ | 10.00 | $ | 5.00 | ||||
Third quarter | $ | 10.00 | $ | 6.00 | ||||
Fourth quarter | $ | 9.10 | $ | 6.25 |
2020 | High | Low | ||||||
First quarter | $ | 4.09 | $ | 2.40 | ||||
Second quarter | $ | 3.00 | $ | 1.34 | ||||
Third quarter | $ | 3.35 | $ | 2.56 | ||||
Fourth quarter | $ | 4.00 | $ | 2.31 |
2019 | High | Low | ||||||
First quarter | $ | 0.26 | $ | 0.25 | ||||
Second quarter | $ | 0.25 | $ | 0.15 | ||||
Third quarter | $ | 1.45 | $ | 0.19 | ||||
Fourth quarter | $ | 3.00 | $ | 1.05 |
• | The excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the shares, |
• | The amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Company was a PFIC, will be treated as ordinary income, and |
• | The amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
• | a corporation; |
• | another entity with a capital divided into shares; |
• | a cooperative (association); or |
• | another legal entity that has an enterprise or an interest in an enterprise to which the Shares are attributable, |
• | a qualifying pension fund; |
• | a qualifying investment fund (fiscale beleggingsinstelling) or a qualifying exempt investment Institution (“vrijgestelde beleggingsinstelling”); or |
• | another entity exempts from corporate income tax, |
(a) | such holder has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment (“vaste inrichting”) or a permanent representative (“vaste vertegenwoordiger”) in the Netherlands and to which enterprise or part of an enterprise, as the case may be, Shares are attributable; or |
(b) | such income or capital gain forms a “benefit from miscellaneous activities in the Netherlands” (“resultaat uit overige werkzaamheden in Nederland”) which would for instance be the case if the activities in the Netherlands with respect to Shares exceed “normal active asset management” (“normaal, actief vermogensbeheer” or if such income and gains are derived from the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights (together, a “lucrative interest” (“lucratief belang”)) that the holder thereof has acquired under such circumstances that such income and gains are intended to be remuneration for work or services performed by such holder (or a related person), in whole or in part, in the Netherlands, whether within or outside an employment relation, where such lucrative interest provides the holder thereof, economically speaking, with certain benefits that have a relation to the relevant work or services. |
(a) | such holder has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment (“vaste inrichting”) or a permanent representative (“vaste vertegenwoordiger”) in the Netherlands and to which enterprise or part of an enterprise, as the case may be, Shares are attributable; or |
(b) | such holder has a substantial interest in ICTS, that (i) is held with the avoidance of Netherlands income tax as (one of) the main purpose(s) and (ii) forms part of an artificial structure or series of structures (such as structures which are not put into place for valid business reasons reflecting economic reality). |
2021 | 2020 | |||||||
Audit fees | $ | 268 | $ | 257 | ||||
Audit related fees | - | - | ||||||
Tax fees | - | - | ||||||
Total fees | $ | 268 | $ | 257 |
1. | The audit report of MHM on the financial statements of the Company as of and for the years ended December 31, 2020 and 2019 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. |
2. | During the years ended December 31, 2020 and 2019 and during the period from January 1, 2021 to the present, there were no disagreements with MHM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to MHM satisfaction, would have caused MHM to make reference in connection with its opinion to the subject matter of the disagreement. |
3. | No “reportable events”, as that term is described in Item 16F(a)(1)(v)(A)-(D) of this form 20-F, occurred within the years ended December 31, 2020 and 2019 and subsequently up to date hereof. |
* | Incorporated by reference to the Company’s fillings. |
By: | /s/ Rom Shaked | |
Name: | Rom Shaked | |
Title: | Managing Director | |
Date: | May 16, 2022 | |
By: | /s/ Alon Raich | |
Name: | Alon Raich | |
Title: | Managing Director and Chief Financial Officer | |
Date: | May 16, 2022 |
Page | |
Consolidated Financial Statements: | |
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 199) | F-2 |
F-3 | |
F-4 | |
F-5 | |
F-6 | |
F-8 | |
Financial Statement Schedule: | |
F-38 |
(The New York Practice of Mayer Hoffman McCann P.C.)
New York, New York
May 16, 2022
December 31, | ||||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 88,753 | $ | 51,602 | ||||
Restricted cash | 14,699 | 9,472 | ||||||
Accounts receivable, net | 55,089 | 34,371 | ||||||
Receivable from a related party | 0 | 2,200 | ||||||
Prepaid expenses and other current assets | 16,021 | 18,909 | ||||||
Total current assets | 174,562 | 116,554 | ||||||
Deferred tax assets, net | 1,403 | 1,169 | ||||||
Investments | 525 | 1,482 | ||||||
Property and equipment, net | 5,710 | 5,525 | ||||||
Operating lease right of use assets | 10,938 | 12,938 | ||||||
Goodwill | 690 | 746 | ||||||
Other assets | 2,052 | 1,974 | ||||||
Total assets | $ | 195,880 | $ | 140,388 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Notes payable-banks | $ | 199 | $ | 8,104 | ||||
Accounts payable | 5,857 | 3,716 | ||||||
Accrued expenses and other current liabilities | 39,834 | 32,320 | ||||||
Value added tax (VAT) payable | 5,378 | 11,096 | ||||||
Income taxes payable | 6,292 | 567 | ||||||
Operating lease liabilities, current | 3,317 | 3,531 | ||||||
Total current liabilities | 60,877 | 59,334 | ||||||
Convertible notes payable to a related party | 1,192 | 1,200 | ||||||
Operating lease liabilities, non-current | 8,298 | 9,333 | ||||||
Other liabilities | 40,867 | 25,684 | ||||||
Total liabilities | 111,234 | 95,551 | ||||||
COMMITMENTS AND CONTINGENCIES (NOTE 18) | 0 | 0 | ||||||
REDEEMABLE NON-CONTROLLING INTERESTS (NOTE 13) | 90,478 | 75,322 | ||||||
SHAREHOLDERS' DEFICIT: | ||||||||
Common stock, €0.45 par value; 150,000,000 shares authorized as of December 31, 2021 and 2020. 37,433,333 shares issued and outstanding as of December 31, 2021 and 2020. | 19,186 | 19,186 | ||||||
Additional paid-in capital | 16,844 | 26,706 | ||||||
Accumulated deficit | (33,796 | ) | (68,603 | ) | ||||
Accumulated other comprehensive loss | (7,866 | ) | (6,259 | ) | ||||
Non-controlling interests in subsidiaries | (200 | ) | (1,515 | ) | ||||
Total shareholders' deficit | (5,832 | ) | (30,485 | ) | ||||
Total liabilities and shareholders' deficit | $ | 195,880 | $ | 140,388 |
F - 3
For the Years Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 | ||||||
Cost of revenue | 209,771 | 196,569 | 290,461 | |||||||||
GROSS PROFIT | 115,163 | 51,850 | 42,846 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 12,114 | 6,541 | 5,060 | |||||||||
Selling, general and administrative | 50,882 | 37,239 | 33,063 | |||||||||
Goodwill impairment | 139 | 0 | 0 | |||||||||
Total operating expenses | 63,135 | 43,780 | 38,123 | |||||||||
OPERATING INCOME | 52,028 | �� | 8,070 | 4,723 | ||||||||
Equity income (loss) from investment in affiliates | (983 | ) | (790 | ) | 91 | |||||||
Other expenses, net | (537 | ) | (1,288 | ) | (10,518 | ) | ||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSES | 50,508 | 5,992 | (5,704 | ) | ||||||||
Income tax expenses | 9,220 | 590 | 1,549 | |||||||||
NET INCOME (LOSS) | 41,288 | 5,402 | (7,253 | ) | ||||||||
Net income attributable to non-controlling interests | 6,481 | 999 | 789 | |||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. | $ | 34,807 | $ | 4,403 | $ | (8,042 | ) | |||||
BASIC AND DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. PER SHARE | ||||||||||||
Net income (loss) attributable to ICTS International N.V. | $ | 34,807 | $ | 4,403 | $ | (8,042 | ) | |||||
Less deemed dividend attributable to redeemable non-controlling interests | 10,102 | 0 | 0 | |||||||||
Net income (loss) available to ICTS International N.V. shareholders | 24,705 | 4,403 | (8,042 | ) | ||||||||
Basic weighted average number of shares | 37,433,333 | 35,827,854 | 30,524,461 | |||||||||
Net income (loss) per share attributable to ICTS International N.V. - basic | $ | 0.66 | $ | 0.12 | $ | (0.26 | ) | |||||
Diluted weighted average number of shares | 40,237,340 | 38,424,718 | 30,524,461 | |||||||||
Net income (loss) per share attributable to ICTS International N.V. - diluted | $ | 0.61 | $ | 0.11 | (0.26 | ) | ||||||
COMPREHENSIVE INCOME (LOSS) | ||||||||||||
Net income (loss) | $ | 41,288 | $ | 5,402 | $ | (7,253 | ) | |||||
Other Comprehensive Income (loss) - Translation adjustments | (1,861 | ) | 20 | 79 | ||||||||
Unrealized gains on derivative instruments | 32 | - | - | |||||||||
Comprehensive income (loss) | 39,459 | 5,422 | (7,174 | ) | ||||||||
Comprehensive income attributable to non-controlling interests | 6,259 | 1,106 | 795 | |||||||||
COMREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. | $ | 33,200 | $ | 4,316 | $ | (7,969 | ) |
Common Stock | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Non-Controlling | Total Shareholders' | |||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Loss | Interests | Deficit | ||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2018 | 25,100,000 | $ | 12,896 | $ | 23,457 | $ | (64,964 | ) | $ | (6,245 | ) | $ | 0 | $ | (34,856 | ) | ||||||||||||
Net income (loss) | - | 0 | 0 | (8,042 | ) | 0 | 15 | (8,027 | ) | |||||||||||||||||||
Issuance of common stock | 10,333,333 | 5,224 | 1,474 | 0 | 0 | 0 | 6,698 | |||||||||||||||||||||
Sale of AU10TIX Technologies B.V. preferred shares, series A-1, net | - | 0 | 2,041 | 0 | 0 | (1,614 | ) | 427 | ||||||||||||||||||||
Translation adjustment | - | 0 | 0 | 0 | 73 | 0 | 73 | |||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | 35,433,333 | 18,120 | 26,972 | (73,006 | ) | (6,172 | ) | (1,599 | ) | (35,685 | ) | |||||||||||||||||
Issuance of common stock | 2,000,000 | 1,066 | (266 | ) | 0 | 0 | 0 | 800 | ||||||||||||||||||||
Net income | - | 0 | 0 | 4,403 | 0 | 74 | 4,477 | |||||||||||||||||||||
Translation adjustment | - | 0 | 0 | 0 | (87 | ) | 10 | (77 | ) | |||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 37,433,333 | 19,186 | 26,706 | (68,603 | ) | (6,259 | ) | (1,515 | ) | (30,485 | ) | |||||||||||||||||
Conversion of preferred shares A and A-1 in AU10TIX Technologies B.V. to new series A | 0 | (10,102 | ) | 0 | 0 | 1,045 | (9,057 | ) | ||||||||||||||||||||
Net income | - | 0 | 0 | 34,807 | 0 | 281 | 35,088 | |||||||||||||||||||||
Stock-based compensation – AU10TIX Technologies B.V. | - | 0 | 240 | 0 | 0 | 0 | 240 | |||||||||||||||||||||
Translation adjustment | - | 0 | 0 | 0 | (1,639 | ) | (11 | ) | (1,650 | ) | ||||||||||||||||||
Unrealized gains on derivatives instruments | - | 0 | 0 | 0 | 32 | 0 | 32 | |||||||||||||||||||||
BALANCE AT DECEMBER 31, 2021 | 37,433,333 | $ | 19,186 | $ | 16,844 | $ | (33,796 | ) | $ | (7,866 | ) | $ | (200 | ) | $ | (5,832 | ) |
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||||
Net income (loss) | $ | 41,288 | $ | 5,402 | $ | (7,253 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 2,061 | 2,090 | 1,688 | |||||||||
Goodwill impairment | 139 | 0 | 0 | |||||||||
Gain from sale of investment | (186 | ) | 0 | 0 | ||||||||
Bad debt expense | 864 | 272 | 260 | |||||||||
Deferred income taxes | (292 | ) | (651 | ) | (35 | ) | ||||||
Loss on disposal of property and equipment | 0 | 71 | 0 | |||||||||
Equity loss (income) from investment in affiliates | 983 | 790 | (91 | ) | ||||||||
Stock-based compensation | 350 | 0 | 0 | |||||||||
Revaluation and related costs reimbursed to related party | 0 | 0 | 8,139 | |||||||||
Changes in assets and liabilities: | - | - | - | |||||||||
Accounts receivable, net | (23,280 | ) | 11,395 | 669 | ||||||||
Receivable from related party | 2,200 | (2,200 | ) | 0 | ||||||||
Prepaid expenses and other current assets | 1,442 | (13,562 | ) | 1,366 | ||||||||
Other assets | (112 | ) | 485 | (89 | ) | |||||||
Accounts payable | 2,321 | (2,548 | ) | (30 | ) | |||||||
Accrued expenses and other current liabilities | 9,400 | (5,521 | ) | (7,055 | ) | |||||||
VAT payable | (4,793 | ) | 3,999 | (4,734 | ) | |||||||
Income taxes payable | 5,745 | 405 | (1,799 | ) | ||||||||
Operating lease accounts, net | (1,919 | ) | 19 | (102 | ) | |||||||
Other liabilities | 17,172 | 23,786 | (26 | ) | ||||||||
Net cash provided by (used in) operating activities | 53,383 | 24,232 | (9,092 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchase of property and equipment | (1,434 | ) | (2,197 | ) | (1,884 | ) | ||||||
Purchase of company in Sweden | (150 | ) | 0 | 0 | ||||||||
Capitalization of software costs | (1,040 | ) | (603 | ) | 0 | |||||||
Proceeds from sale of property and equipment | 79 | 67 | 0 | |||||||||
Proceeds from sale of investment | 200 | 0 | 0 | |||||||||
Investments | (68 | ) | (150 | ) | (1,800 | ) | ||||||
Deposits at (withdraws from) insurance companies | (4 | ) | (226 | ) | 151 | |||||||
Repayments from an affiliate | 0 | 0 | 180 | |||||||||
Net cash used in investing activities | $ | (2,417 | ) | $ | (3,109 | ) | $ | (3,353 | ) |
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||||||
Borrowings (repayments) under lines of credit, net | $ | (7,230 | ) | $ | (13,091 | ) | $ | 8,076 | ||||
Repayments of convertible notes payable to a related party | (8 | ) | 0 | (29,572 | ) | |||||||
Proceeds from a related party | 0 | 0 | 1,000 | |||||||||
Repayments of loan payable to a related party | 0 | (1,538 | ) | (368 | ) | |||||||
Repayment of loan payable | 0 | (1,121 | ) | (1,120 | ) | |||||||
Proceeds from sale of a subsidiary's preferred shares | 0 | 0 | 80,000 | |||||||||
Transaction costs | 0 | 0 | (6,054 | ) | ||||||||
Decrease in bank overdrafts | 0 | (738 | ) | (107 | ) | |||||||
Net cash provided by (used in) financing activities | (7,238 | ) | (16,488 | ) | 51,855 | |||||||
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,350 | ) | 1,594 | (482 | ) | |||||||
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 42,378 | 6,229 | 38,928 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF YEAR | 61,074 | 54,845 | 15,917 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF YEAR | $ | 103,452 | $ | 61,074 | $ | 54,845 | ||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||
Stock issuance as reduction against convertible notes payable to related party | $ | 0 | $ | 800 | $ | 6,698 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | 152 | $ | 613 | $ | 1,963 | ||||||
Income taxes | $ | 2,175 | $ | 1,329 | $ | 3,129 |
F - 8 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31, | ||||||||
2021 | 2020 | |||||||
Cash and cash equivalents | $ | 88,753 | $ | 51,602 | ||||
Restricted cash | 14,699 | 9,472 | ||||||
Total cash, cash equivalents and restricted cash | ||||||||
shown in the statement of cash flows | $ | 103,452 | $ | 61,074 |
Level 1 - | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Companies have the ability to access at the measurement date. |
Level 2 - | Inputs to the valuation methodology include: |
• | Quoted prices for similar assets or liabilities in active markets; |
• | Quoted prices for identical or similar assets or liabilities in inactive markets; |
• | Inputs other than quoted prices that are observable for the asset or liability; |
• | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 3 - | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
F - 9 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Years | ||
Equipment and facilities | 3-7 | |
Internal- use software | 4-7 | |
Vehicles | 3-7 |
F - 10 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 11 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 12 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Airport Security and Other Aviation Services | $ | 253,687 | $ | 222,654 | $ | 309,548 | ||||||
Authentication Technology | 71,247 | 25,765 | 23,759 | |||||||||
Total revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 |
Year ended December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||
Germany | $ | 126,367 | 39 | % | $ | 119,500 | 48 | % | $ | 137,207 | 41 | % | ||||||||||||
The Netherlands | 52,165 | 16 | % | 58,446 | 24 | % | 97,700 | 29 | % | |||||||||||||||
United States | 94,743 | 29 | % | 45,305 | 18 | % | 73,719 | 22 | % | |||||||||||||||
Spain | 30,946 | 10 | % | 7,465 | 3 | % | 3,138 | 1 | % | |||||||||||||||
Other countries | 20,713 | 6 | % | 17,703 | 7 | % | 21,543 | 7 | % | |||||||||||||||
Total revenue | $ | 324,934 | 100 | % | $ | 248,419 | 100 | % | $ | 333,307 | 100 | % |
F - 13 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 14 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 15 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 16 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 17 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 18 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements (continued)
Accounting Standards Update 2020-06
SEK | U.S. Dollars | |||||||
Current assets | 140 | 17 | ||||||
Goodwill | 1,178 | 146 | ||||||
Total identifiable assets acquired | 1,318 | 163 | ||||||
Current liabilities | 68 | 13 | ||||||
Total liabilities assumed | 68 | 13 | ||||||
1,250 | 150 |
F - 19 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31, | ||||||||
2021 | 2020 | |||||||
Receivable from the Dutch tax authorities (1) | $ | 9,091 | $ | 12,285 | ||||
Receivable from the German authorities – COVID-19 (2) | 527 | 1,887 | ||||||
Dutch Governmental support – COVID-19 (3) | 2,614 | 1,068 | ||||||
Other | 3,789 | 3,669 | ||||||
Total prepaid expenses and other current assets | $ | 16,021 | $ | 18,909 |
(1) | The Company is obligated to hold restricted cash in the Netherlands, which is restricted for payments to the tax authorities. From time to time the Company is allowed to make a request to release the money from the restricted account into the regular bank account. As part of the process the Company transfers the requested amount to the Dutch tax authorities, who pay it back after a few weeks into the Company’s regular bank account. |
(2) | In Germany, the employees are eligible for payroll support. The Company pays to its German employees their full salary and the Company is being reimbursed by the German government for the payroll support amount. |
(3) | In the Netherlands, the Company is eligible for support following the COVID-19 crisis. |
Artemis Therapeutics, Inc.
As of December 31, 2021, the Company owns 125,916 shares or 2.4% of the outstanding common stock of Artemis Therapeutics, Inc. (“ATMS”). As of December 31, 2021, ATMS has no operating business.
Mesh Technologies, Inc.
In January 2019, the Company invested an amount of $50 in Mesh Technologies, Inc. (“Mesh”), a company incorporated in the USA. As of December 31, 2021, the investment represented less than 1% of the issued and outstanding share capital of Mesh. Mesh is a technology company providing cross border payments technology by innovating on the existing payment rails of established card networks available in the market. As Mesh is a private, closely held company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment. In December 2021, the Company sold approximately 25% of its investment for a total amount of $200 and recognized a gain of $186.
F - 20 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTE 5 – INVESTMENTS (CONTINUED)
Arrow Ecology & Engineering Overseas (1999)
December 31, | ||||||||
2021 | 2020 | |||||||
Office, equipment and facilities | $ | 9,222 | $ | 10,796 | ||||
Internal-use software | 1,490 | 1,449 | ||||||
Vehicles | 1,617 | 1,958 | ||||||
Leasehold improvements | 2,893 | 2,972 | ||||||
15,222 | 17,175 | |||||||
Less: accumulated depreciation and amortization | 9,512 | 11,650 | ||||||
Total property and equipment, net | $ | 5,710 | $ | 5,525 |
F - 21 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Operating lease cost | $ | 4,422 | $ | 3,914 | $ | 3,421 | ||||||
Short-term lease cost | 1,542 | 1,580 | 994 | |||||||||
Total lease cost | $ | 5,964 | $ | 5,494 | $ | 4,415 |
Other information: | ||||||||
Cash paid for amounts included in the measurement of Lease liabilities: | ||||||||
Operating cash flows from operating leases | $ | 4,465 | $ | 3,962 | ||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 3,164 | $ | 4,941 | ||||
Weighted-average remaining lease term - operating leases | 4.0 years | 4.5 years | ||||||
Weighted-average discount rate - operating leases | 5.12 | % | 4.8 | % |
December 31, | ||||||||
2021 | 2020 | |||||||
Operating lease ROU assets | $ | 10,938 | $ | 12,938 | ||||
Other current liabilities | $ | 3,317 | $ | 3,531 | ||||
Operating lease liabilities | 8,298 | 9,333 | ||||||
Total operating lease liabilities | $ | 11,615 | $ | 12,864 |
Year ending December 31, | ||||
2022 | 3,753 | |||
2023 | 3,365 | |||
2024 | 2,802 | |||
2025 | 1,239 | |||
2026 | 862 | |||
Thereafter | 941 | |||
Total future minimum lease payments | 12,962 | |||
Less: imputed interest | 1,347 | |||
Total | $ | 11,615 |
F - 22 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
2021 | 2020 | |||||||
Balance as of the beginning of the year: | ||||||||
Goodwill | $ | 2,361 | $ | 2,182 | ||||
Accumulated impairment losses | (1,615 | ) | (1,501 | ) | ||||
746 | 681 | |||||||
Goodwill acquired during the year | 146 | 0 | ||||||
Impairment losses | (139 | ) | 0 | |||||
Exchange rate effect | (63 | ) | 65 | |||||
690 | 746 | |||||||
Balance as of the end of the year: | ||||||||
Goodwill | 2,346 | 2,361 | ||||||
Accumulated impairment losses | (1,656 | ) | (1,615 | ) | ||||
$ | 690 | $ | 746 |
F - 23 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31, | ||||||||
2021 | 2020 | |||||||
Accrued payroll and related costs | $ | 25,050 | $ | 18,938 | ||||
Accrued vacation | 7,152 | 5,582 | ||||||
Labor union contribution | 925 | 1,440 | ||||||
Deferred revenue | 2,239 | 2,143 | ||||||
Payroll support program funding | 0 | 1,019 | ||||||
Other | 4,468 | 3,198 | ||||||
Total accrued expenses and other current liabilities | $ | 39,834 | $ | 32,320 |
F - 24 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
In January 2019, the entity related to the main shareholder converted $2,889 accrued interest into 3,852,364 shares at a price of$0.75 per share.
In June 2019, the Board of Directors approved a one-time compensation of $8,139 to this entity for exchange rate and related losses suffered in connection with its convertible notes to the Company during the years. Compensation was approved subject to closing of investment transaction in the Company’s subsidiary, AU10TIX Technologies B.V. (“AU10TIX”), which happened in July 2019 (see note 13). As a result, the Company recorded $8,139 in connection with this payment which is included in other expenses in the consolidated statement of operation and comprehensive income (loss) during the year ended December 31, 2019.
In December 2021, the loan was extended until January 2024, the loan amount was reduced to $2,000 and the interest rate was adjusted to 2.5% per annum.
Total interest expense related to the note is $83, $171 and $1,218 for the years ended December 2021, 2020 and 2019, respectively.
December 31, | ||||||||
2021 | 2020 | |||||||
Severance pay liability | $ | 1,631 | $ | 1,556 | ||||
Deferred revenue | 1,030 | 263 | ||||||
Deferred VAT (1) | 14,703 | 10,319 | ||||||
Deferred wage tax and social security (1) | 22,534 | 13,100 | ||||||
Other (2) | 969 | 446 | ||||||
Total other liabilities | $ | 40,867 | $ | 25,684 |
(1) | Deferred VAT and deferred wage tax relates to measurements taken by the Dutch government, on which they postponed all VAT payable for the years 2021 and 2020 and all wage tax and social security payable for the months March – December 2021 to be paid in 60 installments starting March 2023, except for VAT payments starting October 2022. |
(2) | Including a 50 million Yen loan with a financial institution as a financial support in connection of COVID-19. The loan was provided in July 2020 for a period of five years with a variable interest of 0.21% - 1.10%. The long term balances as of December 31, 2021 and 2020 are $280 and $425, respectively.
|
F - 25 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
On July 3, 2019, AU10TIX entered into a Series A Preferred Subscription Agreement (the "Agreement") with TPG Lux 2018 SC I, S.a.r.l ("TPG"), according to which AU10TIX issued 3,000,000 Series A Preferred Shares ("Series A Shares") to TPG for a subscription price of US$60,000 in cash representing approximately 24% of the outstanding share capital of AU10TIX and 23.077% of the fully-diluted share capital of AU10TIX (see note 15). Transaction costs totaled $4,540 and were deducted from the redeemable non-controlling interests balance.
On November 7, 2019, AU10TIX entered into a Series A and Series A-1 Preferred Subscription Agreement with Oak HC/FT Partners II, L.P. ("Oak"), according to which AU10TIX issued 1,000,000 Series A Preferred Shares and 23,622 Series A-1 Preferred Shares ("Series A-1 Shares" and together with Series A Shares – "the Preferred Shares") to Oak for a subscription price of US$20,000 in cash representing approximately 7.401% of the outstanding share capital of AU10TIX and 7.143% of the fully-diluted share capital of AU10TIX. For accounting purposes, the investment was allocated to the Series A and Series A-1 Preferred Shares on a relative fair value basis: $19,537 and $461, respectively. Transaction costs totaled $1,513 and were deducted from the respective investment amounts.
The Preferred Shares Rights
Liquidation Preference: The holders of Series A Shares (“Series A Holders”) are entitled to a liquidation preference upon the occurrence of a sale, initial public offering (“IPO”), merger, consolidation, reorganization, winding-up, dissolution or liquidation of AU10TIX, pursuant to which the Series A Holders are entitled, on the occurrence of such event and in priority to the ordinary shares, to receive the greater of: (a) an amount equal to the initial subscription price for the Series A Shares, plus all accrued but unpaid dividends in respect of the Series A Shares, less all dividends previously paid on the Series A Shares, and (b) the proceeds distributable in respect of the Series A Shares had they been converted into ordinary shares. The initial subscription price for the Series A Shares (and calculations derived therefrom) are subject to customary adjustments as set forth in the agreements executed in connection with the Sale.
F - 26 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 27 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 28 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
F - 29 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTE 13 – REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Balance as of the beginning of the year | $ | 75,322 | $ | 74,300 | ||||
Net Income | 6,200 | 925 | ||||||
Other Comprehensive Income - Translation adjustment | (211 | ) | 97 | |||||
Conversion of AU10TIX shares A-1 into new series A | 9,057 | 0 | ||||||
Stock-based compensation | 110 | 0 | ||||||
Balance as of the end of the year | $ | 90,478 | $ | 75,322 |
F - 30 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Number of options | Weighted average exercise price | Weighted average remaining contractual term | ||||||||||
Options outstanding as of December 31, 2020 | 200,500 | $ | 0.01 | |||||||||
Options granted | 0 | 0 | ||||||||||
Options exercised | 0 | 0 | ||||||||||
Forfeited | 625 | 0 | ||||||||||
Options outstanding , end of the year | 199,875 | $ | 0.01 | 5.5 years | ||||||||
Options exercisable, as of December 31, 2021 | 199,875 | $ | 0.01 | 5.5 years |
Number of options | Weighted average exercise price | Weighted average remaining contractual term | |||||||
Options outstanding as of December 31, 2020 | 0 | $ | 0 | ||||||
Options granted | 30,000 | 26.46 | |||||||
Options exercised | 0 | 0 | |||||||
Forfeited | 0 | 0 | |||||||
Options outstanding , end of the year | 30,000 | $ | 26.46 | 5.2 years | |||||
Options exercisable, as of December 31, 2021 | 22,500 | $ | 26.46 | 5.2 years |
F - 31 |
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Interest expense to related parties (see Note 11) | $ | (83 | ) | $ | (171 | ) | $ | (1,218 | ) | |||
Interest expense and other bank charges | (801 | ) | (901 | ) | (1,479 | ) | ||||||
Interest income | 24 | 178 | 151 | |||||||||
Revaluation and related costs reimbursed to related party | 0 | 0 | (8,139 | ) | ||||||||
Foreign currency gain (loss) | 60 | (254 | ) | 148 | ||||||||
Gain from sale of Mesh shares (see Note 5) _ | 186 | 0 | 0 | |||||||||
Other income (expense) | 77 | (140 | ) | 19 | ||||||||
Total other income (expense), net | $ | (537 | ) | $ | (1,288 | ) | $ | (10,518 | ) |
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
The Netherlands | $ | (3,070 | ) | $ | 469 | $ | (11,508 | ) | ||||
Subsidiaries outside of the Netherlands | 53,578 | 5,523 | 5,804 | |||||||||
Income (loss) before income tax expenses | $ | 50,508 | $ | 5,992 | $ | (5,704 | ) |
December 31, | ||||||||
2021 | 2020 | |||||||
Deferred tax assets: | ||||||||
Operating loss carryforwards | $ | 10,547 | $ | 16,694 | ||||
Capital loss carryforwards | 165 | 159 | ||||||
Allowance for doubtful accounts | 150 | 110 | ||||||
Tax credit carryforwards | 560 | 560 | ||||||
Accrued expenses and other | 536 | 774 | ||||||
Research and development expenses, net | 1,183 | 432 | ||||||
Total deferred tax assets | 13,141 | 18,729 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation of property and equipment | (108 | ) | (115 | ) | ||||
13,033 | 18,614 | |||||||
Valuation allowance | (11,630 | ) | (17,445 | ) | ||||
Deferred tax assets, net | $ | 1,403 | $ | 1,169 |
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ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
The ultimate realization of the net deferred tax assets in each jurisdiction the Company does business in is dependent upon the generation of future taxable income in that jurisdiction during the periods in which net operating loss carry forwards are available and items that gave rise to the net deferred tax assets become deductible. At present, the Company does not have a sufficient history of generating taxable income in the various jurisdictions it does business in, or positive expected core earnings to conclude that it is more likely than not that the Company will be able to realize its net deferred tax assets in the near future and, therefore, a valuation allowance was established for the carrying value of the net deferred tax assets, with the exception of few locations, which are currently generating taxable income. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion of the valuation allowance in other jurisdictions.
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Effective loss (income) tax benefit from continuing operations at statutory rate | $ | (12,627 | ) | $ | (1,498 | ) | $ | 1,426 | ||||
Rate differential | 2,915 | 610 | 1,024 | |||||||||
Non-deductible expenses | (1,643 | ) | (857 | ) | (584 | ) | ||||||
Adjustments to prior year tax losses | (2,599 | ) | (3,604 | ) | (429 | ) | ||||||
Changes in valuation allowance | 5,815 | 3,601 | (2,568 | ) | ||||||||
Other | (1,081 | ) | 1,158 | (418 | ) | |||||||
Income tax expense from continuing operations | $ | (9,220 | ) | $ | (590 | ) | $ | (1,549 | ) |
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ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
December 31, | ||||||||
2021 | 2020 | |||||||
Balance at beginning of year | $ | 0 | $ | 0 | ||||
Additions based on tax positions taken in prior years | 546 | 0 | ||||||
Additions based on tax positions taken in the current year | 142 | 0 | ||||||
Reduction based on tax positions taken in prior years | 0 | 0 | ||||||
Balance at end of year | $ | 688 | $ | 0 |
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ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
As of December 31, 2021, the Company has $3,250 in outstanding letters of credit. Such letters of credit are being secured by the same amounts in restricted cash with commercial banks (see note 2).
As of December 31, 2021, the Company has €1,022 ($1,161 as of December 31, 2021) in outstanding guarantees on its lines of credit arrangement in Europe (see note 9), which relate to leases and performance guarantee for contracts.
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. These claims are primarily related to grievances filed by current and former employees for unfair labor practices or discrimination, and for passenger aviation claims. Management recognizes a liability for any matter when the likelihood of an unfavorable outcome is deemed to be probable and the amount is able to be reasonably estimated. Management has concluded that such claims, in the aggregate, would not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.
Inquiry Proceedings
On June 24, 2021 a minority shareholder of the Company initiated inquiry proceedings before the Enterprise Chamber of the Amsterdam Court of Appeal (the “Court”) which is a specialized court dedicated to resolving corporate disputes. The shareholder has requested the Court to appoint an investigator on behalf of the Court in accordance with Dutch law, to investigate certain activities of the Company that have been previously disclosed by the Company in its periodic filings with the SEC for the fiscal years ended December 31, 2020 and 2019. The shareholder has not requested the Court to order preliminary relief, but has requested the Court to order the registrant to pay the costs of the proceedings. The Company expects that the Court will grant its judgement in June 2022.
White Line
In 2017, the company invested $3,500 in White Line B.V., a limited Company incorporated in the Netherlands, representing 10% of the issued and outstanding share capital of White Line B.V.
The Company had an agreement with an entity related to its main shareholder, according to which, if the value of this investment decreased, the related party entity has guaranteed to repurchase this full investment in minimum amount of $3,500. In December 2018, the related party entity purchased the full investment from the Company for $3,500. In 2021, the Company has a dispute with White Line B.V. as certain items disclosed in White Line B.V. financials appeared questionable. As the economical ownership is not within the Company any more, the Company has no financial exposure on this dispute.
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ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTE 19 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Agency Agreements (continued)
In March 2016, the Company entered into an agreement with a third party to assist the Company with the possible sale of one of the Company’s subsidiaries (see note 13). The fees depend on the outcome of the assignment and are between 2% - 5% of the sale consideration but not less than $4,000. In February 2019 the agreement was amended. According to the amendment, in case that less than 50% of the voting stock or majority of the subsidiary assets are being sold, the transaction fee will be 5% of the sale consideration but not lower than $3,000. In January 2022, the agreement was amended so that the fees will be 2%-3% of the sale consideration but not less than $4,000 and with a cap of $20,000. In case that less than 50% of the voting stock or majority of the subsidiary assets are being sold the transaction fee will be 5% of the sale consideration but not lower than $4,000.
In August 2017, the Company entered into an agreement with a third party to assist the Company with a possible sale of one of the Company’s subsidiaries. The fees depend on the outcome of the assignment and are between 2% - 10% of the sale consideration but not less than € 2,000 ($2,273 as of December 31, 2021). The agreement was terminated in June 2021, although the third party is entitled to the consideration in case that subsidiary will be sold before December 2022.
Corporate | Airport Security and Other Aviation Services | Authentication Technology | Total | |||||||||||||
Year ended December 31, 2021: | ||||||||||||||||
Revenue | $ | 0 | $ | 253,687 | $ | 71,247 | $ | 324,934 | ||||||||
Depreciation and amortization | 75 | 1,106 | 880 | 2,061 | ||||||||||||
Net income (loss) | (1,666 | ) | 21,558 | 21,396 | 41,288 | |||||||||||
Goodwill | 0 | 690 | 0 | 690 | ||||||||||||
Total assets | 10,349 | 112,425 | 73,106 | 195,880 | ||||||||||||
Year ended December 31, 2020: | ||||||||||||||||
Revenue | $ | 0 | $ | 222,654 | $ | 25,765 | $ | 248,419 | ||||||||
Depreciation and amortization | 72 | 1,302 | 716 | 2,090 | ||||||||||||
Net income (loss) | (3,853 | ) | 6,056 | 3,199 | 5,402 | |||||||||||
Goodwill | 0 | 746 | 0 | 746 | ||||||||||||
Total assets | 12,488 | 86,550 | 41,350 | 140,388 | ||||||||||||
Year ended December 31, 2019: | ||||||||||||||||
Revenue | $ | 0 | $ | 309,548 | $ | 23,759 | $ | 333,307 | ||||||||
Depreciation and amortization | 46 | 1,328 | 314 | 1,688 | ||||||||||||
Net income (loss) | (11,740 | ) | (2,406 | ) | 6,893 | (7,253 | ) | |||||||||
Goodwill | 0 | 681 | 0 | 681 | ||||||||||||
Total assets | 23,381 | 64,647 | 35,419 | 123,447 |
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ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
Year Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Germany | $ | 126,367 | $ | 119,500 | $ | 137,207 | ||||||
The Netherlands | 52,165 | 58,446 | 97,700 | |||||||||
United States | 94,743 | 45,305 | 73,719 | |||||||||
Spain | 30,946 | 7,465 | 3,138 | |||||||||
Other countries | 20,713 | 17,703 | 21,543 | |||||||||
Total revenue | $ | 324,934 | $ | 248,419 | $ | 333,307 |
December 31, | ||||||||
2021 | 2020 | |||||||
Germany | $ | 361 | $ | 449 | ||||
The Netherlands | 624 | 598 | ||||||
United States | 422 | 305 | ||||||
Spain | 118 | 159 | ||||||
Other countries | 4,185 | 4,014 | ||||||
Total property and equipment, net | $ | 5,710 | $ | 5,525 |
Beginning of year | Charges to Costs and Expenses | Charges to other accounts | Deductions | End of Year | ||||||||||||||||
Allowance for doubtful accounts (1): | ||||||||||||||||||||
Year ended December 31, 2019 | $ | 240 | 261 | (83 | ) | 0 | $ | 418 | ||||||||||||
Year ended December 31, 2020 | $ | 418 | 710 | (438 | ) | 0 | $ | 690 | ||||||||||||
Year ended December 31, 2021 | $ | 690 | 864 | (563 | ) | 0 | $ | 991 | ||||||||||||
Allowance for net deferred tax assets: | ||||||||||||||||||||
Year ended December 31, 2019 | $ | 18,478 | 0 | 2,568 | 0 | $ | 21,046 | |||||||||||||
Year ended December 31, 2020 | $ | 21,046 | 0 | 0 | (3,601 | ) | $ | 17,445 | ||||||||||||
Year ended December 31, 2021 | $ | 17,445 | 0 | 0 | (5,815 | ) | $ | 11,630 |
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