| Accounting Policies, by Policy (Policies) | 12 Months Ended |
| Dec. 31, 2020 |
| Accounting Policies [Abstract] | |
| Liquidity and Capital Resources | A. Liquidity
and Capital Resources The Company has had recurring losses
and currently has an accumulated deficit as of December 31, 2020 of $222,965. The Company also has a payable balance on its short-term
liabilities that is due within the next 12 months, of $1,167, of which an amount of $625 reflects a convertible short-term loan from a
controlling shareholder. This amount does not include short-term loans held for sale. In January 2021, subsequent to the balance sheet
date, the Company received an additional convertible short-term loan from two shareholders in a total amount of $975, as mentioned in
Note 20. Since inception, the Company’s principal sources of liquidity
have been revenues, proceeds from sales of equity securities (regarding to the issuance of shares during the reporting period, see Note
12), borrowings from banks, government and shareholders, including convertible loans, proceeds from the exercise of options and warrants
as well as proceeds from the divestiture of parts of the Company’s businesses. The Company had cash, cash equivalents and short-term
investments representing bank deposits of $1,482 (of which an amount of $105 has been pledged as security for certain items), excluding
cash and cash equivalents held for sale, as of December 31, 2020. The recent deterioration in the Corona Virus (COVID-19) (“COVID-19”)
pandemic situation in Poland has led to an almost complete stop to the Company’s Mass Transit Ticketing sales business, negatively
impacting the Company’s cash flow since March 2020. On March 29, 2021, the Company entered into an agreement to sell ASEC, including
its Mass Transit Ticketing activity - see Note 1B(2). Further, in December 2020 and January 2021, the Company borrowed a loan, in two
tranches aggregating $1,600, from its controlling shareholder and another shareholder that, if not converted, would mature in May 2021.
Based on the projected cash flows and the Company’s cash balances as of December 31, 2020, the Company’s management is of
the opinion that without further fund raising or other increase in its cash, the Company will not have sufficient resources to enable
it to continue its operations for a period of at least the next 12 months. As a result, there is a substantial doubt regarding the Company’s
ability to continue as a going concern. The Company’s management has taken cost reduction steps, including material reductions
in the salaries of its management and employees, and has been working for the past few months on updating the Company’s strategy
for the coming years in order to realize its potential and resume its growth, and ultimately create shareholder value. The Company
is attempting to raise additional funds and to increase its cash. While the Company’s management believes in its ability to raise
additional funds and increase its cash, there can be no assurances to that effect. In addition, the Company engaged an investment bank
to explore strategic options and is investing resources in this process. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. In connection with the outbreak
of COVID-19, the Company has taken steps to protect its workforce in Israel, the United States, Poland, South Africa and elsewhere. Such
steps include work from home where possible, minimizing face-to-face meetings and utilizing video conference as much as possible, social
distancing at facilities and elimination of all international travel. The Company continues to comply with all local health directives. So far, the main direct impact of the COVID-19 pandemic has been a
decrease in the Company’s revenues derived from Mass Transit Ticketing activity in the Polish market. The revenues from this operation,
that were relatively stable during the year preceding the COVID-19 outbreak, decreased by approximately $1,300 in 2020 compared to 2019,
mainly due to the lockdown and other restrictions and consequences of the COVID-19 as started in March 2020. On March 29, 2021, the Company
entered into an agreement to sell ASEC, including its Mass Transit Ticketing activity, as mentioned above. The consideration for ASEC
is $3,000 of which approximately $2,100 shall be used to repay Polish banks loans at the closing date, as mentioned in the Sale Agreement,
offset by minor adjustments. The results and the cash flows of the Mass Transit Ticketing operation for all reporting periods are presented
in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing
operations. As part of the Polish regulations and government assistance introduced in relation to the COVID-19, the Polish subsidiary
received a long-term loan and a consent to postpone the maturity date of a secured bank loan. Both loans are presented as held for sale
in the balance sheets (see Note 15) and have been disposed of through the Mass Transit Ticketing divestiture. In addition, recently, as a result
of COVID-19, some of the Company’s customers have delayed issuance of orders in the Company’s pipeline. As a response to this
effect, the Company has taken steps to reduce some costs that are not essential under the current circumstances and during the fourth
quarter of 2020 the Company took additional steps to reduce its cash expenses, including voluntary reduction of salaries to its management
and employees. Another impact of COVID-19 has been
on product delivery, where components’ procurement lead time is longer and a shortage in components has grown as the duration of
the COVID-19 pandemic has continued. As long as the COVID-19 pandemic continues, the components’ lead time may be longer than normal
and shortage in components may continue or get worse. Therefore, the Company maintains a comprehensive network of world-wide suppliers. The Company has seen a higher interest
from a growing number of potential customers and partners as they forecasted that the need for the Company’s products will grow,
yet execution of closing is still slow due to the current business environment. It is difficult to predict what
other impacts the COVID-19 pandemic may have on the Company.
B. Financial
statements in U.S. dollars Substantially
all of the Company’s and certain of its subsidiaries’ revenues are in U.S. dollars. A significant portion of purchases
of materials, components and marketing costs are denominated in U.S. dollars. Therefore, both the functional and reporting currencies
of the Company and certain of its subsidiaries are the U.S. dollar. Transactions
and balances denominated in U.S. dollars are presented at their original amounts. For
entities with a U.S. dollar functional currency, transactions and balances in other currencies are remeasured into U.S. dollars
in accordance with the principles set forth in Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency
Matters At
each balance sheet date, recorded balances of monetary assets and liabilities that are denominated in a currency other than the
functional currency are adjusted to reflect the current exchange rate. Exchange gains and losses from the remeasurement of such
items denominated in non U.S. dollar currencies are reflected in the consolidated statements of operations, among ‘financial
expenses, net’, as appropriate. The
functional currency of the Company’s subsidiary in South Africa changed in October 2017 from the South African Rand to U.S.
dollar. This change resulted from a change in relevant circumstances whereby sales transactions denominated in U.S. dollars became
the primary source of sales revenue. The functional currency of the Polish subsidiary is its local currency. The financial statements
of companies with a functional currency that is not the U.S. dollar are translated into U.S. dollars using the exchange rate at
the balance sheet date for assets and liabilities, and weighted average exchange rates for revenues and expenses (which approximates
the translation of each transaction). Translation adjustments resulting from the process of the aforesaid translation are included
as a separate component of equity (accumulated other comprehensive gain or loss).
C. Principles
of consolidation The
consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation.
D. Estimates
and assumptions The
preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions
relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the year. Such estimates include
the valuation of useful lives of long-lived assets, revenue recognition, discontinued operations, valuation of accounts receivable
and allowance for doubtful accounts, valuation of inventories, legal contingencies, the assumptions whether renewal options of
lease period of buildings will be exercised in the future, the assumptions used in the calculation of stock-based compensation,
income taxes and other contingencies. Estimates and assumptions are periodically reviewed by management and the effects of any
material revisions are reflected in the period that they are determined to be necessary. Actual results, however, may vary from
these estimates.
E. Cash
equivalents Cash
equivalents are short-term highly liquid investments and debt instruments that are readily convertible to cash with original maturities
of three months or less from the date of purchase. Bank deposits with original maturities of more than three months, or specific
deposits that are intended to be held as bank deposits for more than three months, and which will mature within one year, are
classified as short-term investments.
F. Trade
receivables Trade
receivables are recorded at the invoiced amount and do not bear interest. Collections of trade receivables are included in net
cash provided by operating activities in the consolidated statements of cash flows. The consolidated financial statements include
an allowance for loss from receivables for which collection is in doubt. In determining the adequacy of the allowance consideration
is given to each trade receivable historical experience, aging of the receivable, adjusted to take into account current market
conditions and information available about specific debtors, including their financial condition, current payment patterns, the
volume of their operations, and evaluation of the security received from them or their guarantors.
G. Short-term
investments Short-term
investments consist of:
(1) Bank
deposits whose maturities are longer than three months from the date of purchase, but
not longer than one year from the balance sheet date.
(2) Bank
deposits whose maturities are less than three months from the date of purchase, but are
intended to be held as bank deposits for more than three months.
(3) Restricted
bank deposits whose maturities are not longer than one year from the balance sheet date
(for further details, see Note 10C).
H. Inventories Inventories
are stated at the lower of cost or net realizable value. Cost is determined by calculating raw materials, work in process and
finished products on a “moving average” basis. Net realizable value is defined as the “estimated selling prices
in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” Inventory
write-offs are provided to cover risks arising from slow moving items or technological obsolescence. Such write-offs have been
included in cost of revenues.
I. Property,
plant and equipment, net Property,
plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method
over the estimated useful lives of the assets as follows:
Years
Computers, software and manufacturing equipment 3-5
Office furniture and equipment 5-16
(mainly - 10) Leasehold
improvements are amortized by the straight-line method over the shorter of the lease term or the estimated useful economic life
of such improvements.
J. Impairment
of long-lived assets Long-lived
assets, such as right-of-use assets due to operating leases, property, plant, and equipment, and intangible assets subject to
amortization, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, the Company first
compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value
of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the
carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash
flow models, quoted market values and third-party independent appraisals, as considered necessary.
K. Revenue
recognition The
Group generates revenues from product sales manufactured based on the Company’s technology. In addition, the Company generates
revenues from the technology it developed through transaction fee arrangements and licensing agreements. Revenues are also generated
from non-recurring engineering, customer services and technical support. In
May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 606, Revenue from Contracts with Customers
Topic
606 requires entities to follow a five-step process:
(1) Identify
the contract(s) with a customer,
(2) Identify
the performance obligations in the contract,
(3) Determine
the transaction price,
(4) Allocate
the transaction price to the performance obligations in the contract, and
(5) Recognize
revenue when (or as) the entity satisfies a performance obligation. The
Company accounts for a contract with a customer when it has approval and commitment from both parties, the rights of the parties
and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For
each contract, the Company exercises judgement to identify separate performance obligations and to evaluate, at the inception
of the contract, if each distinct performance obligation within the contract is satisfied at a point in time or over time. Revenue
is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected
on behalf of third parties. In
certain arrangements with variable consideration, the Company exercises judgement in order to estimate the amount of variable
consideration to be included in the transaction price. In these arrangements, revenue is recognized over time as it is mainly
attributed to ongoing services provided. Revenue
is allocated among performance obligations in a manner that reflects the consideration that the Company expects to be entitled
for the promised goods or services based on standalone selling prices “SSP”. SSP are estimated for each distinct performance
obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product
or service when the Company sells the goods separately in similar circumstances and to similar customers. The
Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
For an analysis of the performance obligations and the timing of revenue recognition, for each type of the contract, see also
Note 11. In
addition, when the Company has an unconditional right to receive proceeds before the performance obligation was fulfilled, it
is required to record receivables against contract liabilities.
L. Research,
development costs and intangible assets Research
and development costs, which consist mainly of labor costs, materials and subcontractors, are charged to operations as incurred. In
accordance with ASC Topic 350-40, “Internal Use Software” According
to ASC Topic 350, “ Intangibles - Goodwill and Other Amortization
expenses amounted to $180 and $202 for the years ended December 31, 2020 and 2019, respectively. The amortization is presented
within research and development in the consolidated statements of operations.
M. Stock-based
compensation The
Company measures and recognizes compensation expense for all stock-based payment awards made to employees and directors based
on estimated grant date fair values. The estimated fair value of awards is charged to income on a straight-line basis over the
requisite service period, which is generally the vesting period. ASC
Topic 718, Compensation – Stock Compensation The
Company estimates forfeitures based on historical experience. The
Company elected to recognize compensation cost for awards with only service conditions that have a graded vesting schedule using
the straight-line method.
N. Basic
and diluted net loss per share Basic
and diluted net loss per ordinary share is computed based on the weighted average number of ordinary shares outstanding during
each year. Shares issuable for little or no cash consideration, are considered outstanding ordinary shares and included in the
computation of basic net loss per ordinary share as of the date that all necessary conditions have been satisfied. In years that
discontinued operations are presented, the Company uses income from continuing operations (attributable to the parent entity)
as the benchmark to determine whether potential common shares are dilutive or antidilutive. Therefore, when the Company records
a loss from continuing operations and the issuance of option shares would be anti-dilutive due to the loss, but the Company has
net income from discontinued operations, potential shares are excluded from the diluted calculation even though the effect on
net income from discontinued operations would be dilutive. Stock
options and warrants in the amounts of 6,483,656 and 809,000 outstanding as of the years ended December 31, 2020 and 2019, respectively,
have been excluded from the calculation of the diluted net loss per ordinary share because all such securities have an anti-dilutive
effect for those periods presented.
O. Fair
value of financial instruments The
Company’s financial instruments consist mainly of cash and cash equivalents, short-term interest bearing investments, accounts
receivable, restricted deposits for employee benefits, accounts payable and short-term and long-term loans. Fair
value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value
is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. The Company utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy
prioritizes the inputs into three broad levels as follows:
● Level 1
Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities
accessible to the reporting entity at the measurement date.
● Level 2
Inputs: Other than quoted prices included in Level 1 inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full
term of the asset or liability.
● Level 3
Inputs: Unobservable inputs for the asset or liability used to measure fair value to
the extent that observable inputs are not available, thereby allowing for situations
in which there is little, if any, market activity for the asset or liability at measurement
date. By
distinguishing between inputs that are observable in the market place, and therefore more objective, and those that are unobservable
and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that
is significant to the fair value measurement. The
Company, in estimating fair value for financial instruments, determined that the carrying amounts of cash and cash equivalents,
trade receivables, short-term bank credit and trade payables are equivalent to, or approximate their fair value due to the short-term
maturity of these instruments. The carrying amounts of variable interest rate long-term loans are equivalent or approximate to
their fair value as they bear interest at approximate market rates. The liabilities held for sale includes long-term loan, that
does not bear any interest, but taking into account the schedule of its maturities, its amount and the relatively current low
market rates, the difference between its carrying amount and its fair value is insignificant. Derivatives Embedded
derivatives are separated from the host contract and carried at fair value when (1) the embedded derivative possesses economic
characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate,
standalone instrument with the same terms would qualify as a derivative instrument. The derivative is measured both initially
and in subsequent periods at fair value, with changes in fair value charged to financial expenses, net. As to embedded derivatives
arising from the issuance of convertible debentures, see Note 9. Transaction expenses related to the embedded derivatives are
recognized as financial expenses at the date of the initial recognition.
P. Income
tax The
Company accounts for taxes on income in accordance with ASC Topic 740, Income Taxes The
Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized
income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. The
Company accounts for interest and penalties as a component of income tax expense.
Q. Severance
pay The
Company’s liability for severance pay for some of its Israeli employees is calculated pursuant to Israeli Severance Pay
Law, 1963 (the “Israeli Severance Pay Law”) based on the most recent salary of the employee multiplied by the number
of years of employment, as of the balance sheet date. Those employees are entitled to one month’s salary for each year of
employment or a portion thereof. Certain senior executives were entitled to receive additional severance pay. The Company records
the liability as if it were payable at each balance sheet date on an undiscounted basis. The liability is classified based on
the expected date of settlement, and therefore is usually classified as a long-term liability, unless the cessation of the employees
is expected during the upcoming year. The
Company’s liability for those Israeli employees is partially provided for by monthly deposits for insurance policies and
the remainder by an accrual. The value of these policies is recorded as an asset in the Company’s balance sheet. The
deposited funds include profits and losses accumulated up to the balance sheet date. The deposited funds may be withdrawn only
upon the fulfillment of the obligation pursuant to the Israeli Severance Pay Law or labor agreements. The value of the deposited
funds is based on the cash redemption value of these policies. In addition, the Company has deposited certain amounts with a trustee,
to compensate for any severance pay liability that is not covered by other funds. These deposits are restricted and may be withdrawn
only for payment of severance pay liabilities. The severance pay funds and the restricted deposits for employee benefits are classified
based on the classification of the corresponding liability. In
respect of other Israeli employees, the Company acts pursuant to the general approval of the Israeli Ministry of Labor and Welfare,
pursuant to the terms of Section 14 of the Israeli Severance Pay Law, according to which the current deposits with the pension
fund and/or with the insurance company exempt the Company from any additional obligation to these employees for whom the said
depository payments are made. These deposits are accounted as defined contribution payments. Severance
pay expenses for the years ended December 31, 2020 and 2019 amounted to $249 and $275, respectively. Defined contribution plan
expenses were $224 and $231 in the years ended December 31, 2020 and 2019, respectively.
R. Advertising
expenses Advertising
expenses are charged to the statements of operations as incurred. Advertising expenses as presented within the results of the
continuing operations for the years ended December 31, 2020 and 2019 amounted to $250 and $216, respectively.
S. Concentrations
of credit or business risk Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, bank
deposits and trade receivables. Cash
equivalents are invested mainly in U.S. dollars with major banks in Israel and Europe. Management believes that the financial
institutions that hold the Group’s investments are financially sound and, accordingly, minimal credit risk exists with respect
to these investments. Most
of the Company’s trade receivables are derived from sales to large and financially secure organizations. In determining
the adequacy of the allowance, management bases its opinion, inter alia, on the estimated risks, current market conditions and
in reliance on available information with respect to the debtor’s financial position. As for major customers, see Note 17.
The Company acquires certain components of its products from single source manufacturers. The
activity in the allowance for doubtful accounts for the years ended December 31, 2020 and 2019 is as follows:
2020 (*)
2019
Allowance for doubtful accounts at beginning of year $ (*) 570 $ 502
Additions charged to allowance for doubtful accounts 109 54
Write-downs charged against the allowance (82 ) -
Other 23 14
Allowance for doubtful accounts at end of year $ 620 $ 570
(*) Reclassified
to conform with the current period presentation, see Note 1B(2).
T. Commitments
and contingencies Liabilities
for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recognized when
it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Loss recovery
related to recovery of a loss when the recovery is less than or equal to the amount of the loss recognized in the financial statements
is recognized if collection is probable and estimable. Gain contingencies are recognized only when resolved.
U. Business
divestures As
described in Note 1B, the Company has sold certain operations. Upon reaching a definitive agreement with an acquirer, the Company
recognizes the consideration received from the divesture, less all assets and liabilities sold, as a gain or loss. Discontinued
operations Upon
divesture of a business, the Company classifies such business as a discontinued operation, if the divested business represents
a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. For
disposals other than by sale such as abandonment, the results of operations of a business would not be recorded as a discontinued
operation until the period in which the business is actually abandoned. The Mass Transit Ticketing divesture
and the SmartID Division divesture qualify as discontinued operations and therefore have been presented as such. Assets
and liabilities of discontinued operations that have not yet been actually sold are presented on the balance sheet as of the end
of each reporting year in one line. The
results of businesses that have qualified as discontinued operations have been presented as such for all reporting periods. Results
of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead
is not allocated to discontinued operations. Any
loss or gain that arose from the divesture of a business that qualifies as discontinued operations has been included within the
results of the discontinued operations. The
Company also presents cash flows from discontinued operations separately from cash flows of continuing operations. Contingent
consideration The
Company’s sale arrangements consist of contingent consideration based on the divested businesses’ future sales or
profits. The Company records the contingent consideration portion of the arrangement when the consideration is determined to be
realizable.
V. Restricted
Cash and Cash Equivalents in Statement of Cash Flows The
Company implements the Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash The
following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within
the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated
statements of cash flows:
December 31
2020 2019
Cash and cash equivalents (*) $ 2,394 $ 2,543
Restricted cash and cash equivalents (**) 105 105
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the statements of cash flows $ 2,499 $ 2,648
(*) Including
cash and cash equivalents held for sale. See Notes 1B(2) and 15.
(**) The
restricted cash and cash equivalents are included in short-term investments in the accompanying
consolidated balance sheets.
W. Leases In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Leases In
addition, the definition of a lease in the ASU has been revised with respect to when an arrangement conveys the right to control
the use of the identified asset under the arrangement, which may result in changes to the classification of an arrangement as
a lease. The ASU does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash
flows from the previous accounting standard. Lessors’ accounting under the ASU is largely unchanged from the previous accounting
standard. The ASU expands the disclosure requirements of lease arrangements. The
Company has adopted ASU 2016-02 commencing from January 1, 2019, under the effective date method. In accordance with the
effective date method, comparative periods are not restated, and the Company needs to record a cumulative-effect adjustment within
its accumulated deficit in the equity on January 1, 2019, without reclassification of previous financial statements. ASU 2016-02
provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’,
which permits the Company not to reassess its prior conclusions regarding lease identification, lease classification and initial
direct costs under ASU 2016-02 and also elected the practical expedient pertaining to the use-of hindsight. ASU 2016-02 also provides
practical expedients for an entity’s ongoing accounting. The Company also elected the practical expedient to not separate
lease and non-lease components for all of the Company’s leases, other than leases of real estate. Additionally, following
the adoption of ASU 2016-02 and in subsequent measurements, the Company applies the portfolio approach to account for the operating
lease right-of-use assets and liabilities for certain leases and incremental borrowing rates. The
Company did not have a cumulative-effect adjustment to retained earnings as a result of the adoption of ASU 2016-02 on January
1, 2019. The adoption of this standard did not have a material impact on the results of operations and cash flows. See Note 18
for additional disclosures, as required by the ASU 2016-02.
X. Recent
accounting pronouncements
1. In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326) |
| Financial statements in U.S. dollars | B. Financial
statements in U.S. dollars Substantially
all of the Company’s and certain of its subsidiaries’ revenues are in U.S. dollars. A significant portion of purchases
of materials, components and marketing costs are denominated in U.S. dollars. Therefore, both the functional and reporting currencies
of the Company and certain of its subsidiaries are the U.S. dollar. Transactions
and balances denominated in U.S. dollars are presented at their original amounts. For
entities with a U.S. dollar functional currency, transactions and balances in other currencies are remeasured into U.S. dollars
in accordance with the principles set forth in Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency
Matters At
each balance sheet date, recorded balances of monetary assets and liabilities that are denominated in a currency other than the
functional currency are adjusted to reflect the current exchange rate. Exchange gains and losses from the remeasurement of such
items denominated in non U.S. dollar currencies are reflected in the consolidated statements of operations, among ‘financial
expenses, net’, as appropriate. The
functional currency of the Company’s subsidiary in South Africa changed in October 2017 from the South African Rand to U.S.
dollar. This change resulted from a change in relevant circumstances whereby sales transactions denominated in U.S. dollars became
the primary source of sales revenue. The functional currency of the Polish subsidiary is its local currency. The financial statements
of companies with a functional currency that is not the U.S. dollar are translated into U.S. dollars using the exchange rate at
the balance sheet date for assets and liabilities, and weighted average exchange rates for revenues and expenses (which approximates
the translation of each transaction). Translation adjustments resulting from the process of the aforesaid translation are included
as a separate component of equity (accumulated other comprehensive gain or loss). |
| Principles of consolidation | C. Principles
of consolidation The
consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. Intercompany
transactions and balances have been eliminated in consolidation. |
| Estimates and assumptions | D. Estimates
and assumptions The
preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions
relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the year. Such estimates include
the valuation of useful lives of long-lived assets, revenue recognition, discontinued operations, valuation of accounts receivable
and allowance for doubtful accounts, valuation of inventories, legal contingencies, the assumptions whether renewal options of
lease period of buildings will be exercised in the future, the assumptions used in the calculation of stock-based compensation,
income taxes and other contingencies. Estimates and assumptions are periodically reviewed by management and the effects of any
material revisions are reflected in the period that they are determined to be necessary. Actual results, however, may vary from
these estimates. |
| Cash equivalents | E. Cash
equivalents Cash
equivalents are short-term highly liquid investments and debt instruments that are readily convertible to cash with original maturities
of three months or less from the date of purchase. Bank deposits with original maturities of more than three months, or specific
deposits that are intended to be held as bank deposits for more than three months, and which will mature within one year, are
classified as short-term investments. |
| Trade receivables | F. Trade
receivables Trade
receivables are recorded at the invoiced amount and do not bear interest. Collections of trade receivables are included in net
cash provided by operating activities in the consolidated statements of cash flows. The consolidated financial statements include
an allowance for loss from receivables for which collection is in doubt. In determining the adequacy of the allowance consideration
is given to each trade receivable historical experience, aging of the receivable, adjusted to take into account current market
conditions and information available about specific debtors, including their financial condition, current payment patterns, the
volume of their operations, and evaluation of the security received from them or their guarantors. |
| Short-term investments | G. Short-term
investments Short-term
investments consist of: |
| Inventories | H. Inventories Inventories
are stated at the lower of cost or net realizable value. Cost is determined by calculating raw materials, work in process and
finished products on a “moving average” basis. Net realizable value is defined as the “estimated selling prices
in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” Inventory
write-offs are provided to cover risks arising from slow moving items or technological obsolescence. Such write-offs have been
included in cost of revenues. |
| Property, plant and equipment, net | I. Property,
plant and equipment, net Property,
plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method
over the estimated useful lives of the assets as follows:
Years
Computers, software and manufacturing equipment 3-5
Office furniture and equipment 5-16
(mainly - 10) Leasehold
improvements are amortized by the straight-line method over the shorter of the lease term or the estimated useful economic life
of such improvements. |
| Impairment of long-lived assets | J. Impairment
of long-lived assets Long-lived
assets, such as right-of-use assets due to operating leases, property, plant, and equipment, and intangible assets subject to
amortization, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, the Company first
compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value
of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the
carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash
flow models, quoted market values and third-party independent appraisals, as considered necessary. |
| Revenue recognition | K. Revenue
recognition The
Group generates revenues from product sales manufactured based on the Company’s technology. In addition, the Company generates
revenues from the technology it developed through transaction fee arrangements and licensing agreements. Revenues are also generated
from non-recurring engineering, customer services and technical support. In
May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 606, Revenue from Contracts with Customers
Topic
606 requires entities to follow a five-step process:
(1) Identify
the contract(s) with a customer,
(2) Identify
the performance obligations in the contract,
(3) Determine
the transaction price,
(4) Allocate
the transaction price to the performance obligations in the contract, and
(5) Recognize
revenue when (or as) the entity satisfies a performance obligation. The
Company accounts for a contract with a customer when it has approval and commitment from both parties, the rights of the parties
and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For
each contract, the Company exercises judgement to identify separate performance obligations and to evaluate, at the inception
of the contract, if each distinct performance obligation within the contract is satisfied at a point in time or over time. Revenue
is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected
on behalf of third parties. In
certain arrangements with variable consideration, the Company exercises judgement in order to estimate the amount of variable
consideration to be included in the transaction price. In these arrangements, revenue is recognized over time as it is mainly
attributed to ongoing services provided. Revenue
is allocated among performance obligations in a manner that reflects the consideration that the Company expects to be entitled
for the promised goods or services based on standalone selling prices “SSP”. SSP are estimated for each distinct performance
obligation and judgment may be required in their determination. The best evidence of SSP is the observable price of a product
or service when the Company sells the goods separately in similar circumstances and to similar customers. The
Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
For an analysis of the performance obligations and the timing of revenue recognition, for each type of the contract, see also
Note 11. In
addition, when the Company has an unconditional right to receive proceeds before the performance obligation was fulfilled, it
is required to record receivables against contract liabilities. |
| Research, development costs and intangible assets | L. Research,
development costs and intangible assets Research
and development costs, which consist mainly of labor costs, materials and subcontractors, are charged to operations as incurred. In
accordance with ASC Topic 350-40, “Internal Use Software” According
to ASC Topic 350, “ Intangibles - Goodwill and Other Amortization
expenses amounted to $180 and $202 for the years ended December 31, 2020 and 2019, respectively. The amortization is presented
within research and development in the consolidated statements of operations. |
| Stock-based compensation | M. Stock-based
compensation The
Company measures and recognizes compensation expense for all stock-based payment awards made to employees and directors based
on estimated grant date fair values. The estimated fair value of awards is charged to income on a straight-line basis over the
requisite service period, which is generally the vesting period. ASC
Topic 718, Compensation – Stock Compensation The
Company estimates forfeitures based on historical experience. The
Company elected to recognize compensation cost for awards with only service conditions that have a graded vesting schedule using
the straight-line method. |
| Basic and diluted net loss per share | N. Basic
and diluted net loss per share Basic
and diluted net loss per ordinary share is computed based on the weighted average number of ordinary shares outstanding during
each year. Shares issuable for little or no cash consideration, are considered outstanding ordinary shares and included in the
computation of basic net loss per ordinary share as of the date that all necessary conditions have been satisfied. In years that
discontinued operations are presented, the Company uses income from continuing operations (attributable to the parent entity)
as the benchmark to determine whether potential common shares are dilutive or antidilutive. Therefore, when the Company records
a loss from continuing operations and the issuance of option shares would be anti-dilutive due to the loss, but the Company has
net income from discontinued operations, potential shares are excluded from the diluted calculation even though the effect on
net income from discontinued operations would be dilutive. Stock
options and warrants in the amounts of 6,483,656 and 809,000 outstanding as of the years ended December 31, 2020 and 2019, respectively,
have been excluded from the calculation of the diluted net loss per ordinary share because all such securities have an anti-dilutive
effect for those periods presented. |
| Fair value of financial instruments | O. Fair
value of financial instruments The
Company’s financial instruments consist mainly of cash and cash equivalents, short-term interest bearing investments, accounts
receivable, restricted deposits for employee benefits, accounts payable and short-term and long-term loans. Fair
value for the measurement of financial assets and liabilities is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value
is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. The Company utilizes a valuation hierarchy for disclosure of the inputs for fair value measurement. This hierarchy
prioritizes the inputs into three broad levels as follows:
● Level 1
Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities
accessible to the reporting entity at the measurement date.
● Level 2
Inputs: Other than quoted prices included in Level 1 inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full
term of the asset or liability.
● Level 3
Inputs: Unobservable inputs for the asset or liability used to measure fair value to
the extent that observable inputs are not available, thereby allowing for situations
in which there is little, if any, market activity for the asset or liability at measurement
date. By
distinguishing between inputs that are observable in the market place, and therefore more objective, and those that are unobservable
and therefore more subjective, the hierarchy is designed to indicate the relative reliability of the fair value measurements.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that
is significant to the fair value measurement. The
Company, in estimating fair value for financial instruments, determined that the carrying amounts of cash and cash equivalents,
trade receivables, short-term bank credit and trade payables are equivalent to, or approximate their fair value due to the short-term
maturity of these instruments. The carrying amounts of variable interest rate long-term loans are equivalent or approximate to
their fair value as they bear interest at approximate market rates. The liabilities held for sale includes long-term loan, that
does not bear any interest, but taking into account the schedule of its maturities, its amount and the relatively current low
market rates, the difference between its carrying amount and its fair value is insignificant. Derivatives Embedded
derivatives are separated from the host contract and carried at fair value when (1) the embedded derivative possesses economic
characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate,
standalone instrument with the same terms would qualify as a derivative instrument. The derivative is measured both initially
and in subsequent periods at fair value, with changes in fair value charged to financial expenses, net. As to embedded derivatives
arising from the issuance of convertible debentures, see Note 9. Transaction expenses related to the embedded derivatives are
recognized as financial expenses at the date of the initial recognition. |
| Income tax | P. Income
tax The
Company accounts for taxes on income in accordance with ASC Topic 740, Income Taxes The
Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized
income tax positions are measured at the largest amount that is greater than 50 percent likely of being realized. The
Company accounts for interest and penalties as a component of income tax expense. |
| Severance pay | Q. Severance
pay The
Company’s liability for severance pay for some of its Israeli employees is calculated pursuant to Israeli Severance Pay
Law, 1963 (the “Israeli Severance Pay Law”) based on the most recent salary of the employee multiplied by the number
of years of employment, as of the balance sheet date. Those employees are entitled to one month’s salary for each year of
employment or a portion thereof. Certain senior executives were entitled to receive additional severance pay. The Company records
the liability as if it were payable at each balance sheet date on an undiscounted basis. The liability is classified based on
the expected date of settlement, and therefore is usually classified as a long-term liability, unless the cessation of the employees
is expected during the upcoming year. The
Company’s liability for those Israeli employees is partially provided for by monthly deposits for insurance policies and
the remainder by an accrual. The value of these policies is recorded as an asset in the Company’s balance sheet. The
deposited funds include profits and losses accumulated up to the balance sheet date. The deposited funds may be withdrawn only
upon the fulfillment of the obligation pursuant to the Israeli Severance Pay Law or labor agreements. The value of the deposited
funds is based on the cash redemption value of these policies. In addition, the Company has deposited certain amounts with a trustee,
to compensate for any severance pay liability that is not covered by other funds. These deposits are restricted and may be withdrawn
only for payment of severance pay liabilities. The severance pay funds and the restricted deposits for employee benefits are classified
based on the classification of the corresponding liability. In
respect of other Israeli employees, the Company acts pursuant to the general approval of the Israeli Ministry of Labor and Welfare,
pursuant to the terms of Section 14 of the Israeli Severance Pay Law, according to which the current deposits with the pension
fund and/or with the insurance company exempt the Company from any additional obligation to these employees for whom the said
depository payments are made. These deposits are accounted as defined contribution payments. Severance
pay expenses for the years ended December 31, 2020 and 2019 amounted to $249 and $275, respectively. Defined contribution plan
expenses were $224 and $231 in the years ended December 31, 2020 and 2019, respectively. |
| Advertising expenses | R. Advertising
expenses Advertising
expenses are charged to the statements of operations as incurred. Advertising expenses as presented within the results of the
continuing operations for the years ended December 31, 2020 and 2019 amounted to $250 and $216, respectively. |
| Concentrations of credit or business risk | S. Concentrations
of credit or business risk Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, bank
deposits and trade receivables. Cash
equivalents are invested mainly in U.S. dollars with major banks in Israel and Europe. Management believes that the financial
institutions that hold the Group’s investments are financially sound and, accordingly, minimal credit risk exists with respect
to these investments. Most
of the Company’s trade receivables are derived from sales to large and financially secure organizations. In determining
the adequacy of the allowance, management bases its opinion, inter alia, on the estimated risks, current market conditions and
in reliance on available information with respect to the debtor’s financial position. As for major customers, see Note 17.
The Company acquires certain components of its products from single source manufacturers. The
activity in the allowance for doubtful accounts for the years ended December 31, 2020 and 2019 is as follows:
2020 (*)
2019
Allowance for doubtful accounts at beginning of year $ (*) 570 $ 502
Additions charged to allowance for doubtful accounts 109 54
Write-downs charged against the allowance (82 ) -
Other 23 14
Allowance for doubtful accounts at end of year $ 620 $ 570
(*) Reclassified
to conform with the current period presentation, see Note 1B(2). |
| Commitments and contingencies | T. Commitments
and contingencies Liabilities
for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recognized when
it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Loss recovery
related to recovery of a loss when the recovery is less than or equal to the amount of the loss recognized in the financial statements
is recognized if collection is probable and estimable. Gain contingencies are recognized only when resolved. |
| Business divestures | U. Business
divestures As
described in Note 1B, the Company has sold certain operations. Upon reaching a definitive agreement with an acquirer, the Company
recognizes the consideration received from the divesture, less all assets and liabilities sold, as a gain or loss. Discontinued
operations Upon
divesture of a business, the Company classifies such business as a discontinued operation, if the divested business represents
a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. For
disposals other than by sale such as abandonment, the results of operations of a business would not be recorded as a discontinued
operation until the period in which the business is actually abandoned. The Mass Transit Ticketing divesture
and the SmartID Division divesture qualify as discontinued operations and therefore have been presented as such. Assets
and liabilities of discontinued operations that have not yet been actually sold are presented on the balance sheet as of the end
of each reporting year in one line. The
results of businesses that have qualified as discontinued operations have been presented as such for all reporting periods. Results
of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead
is not allocated to discontinued operations. Any
loss or gain that arose from the divesture of a business that qualifies as discontinued operations has been included within the
results of the discontinued operations. The
Company also presents cash flows from discontinued operations separately from cash flows of continuing operations. Contingent
consideration The
Company’s sale arrangements consist of contingent consideration based on the divested businesses’ future sales or
profits. The Company records the contingent consideration portion of the arrangement when the consideration is determined to be
realizable. |
| Restricted Cash and Cash Equivalents in Statement of Cash Flows | V. Restricted
Cash and Cash Equivalents in Statement of Cash Flows The
Company implements the Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash The
following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within
the accompanying consolidated balance sheets that sum to the total of the same such amounts presented in the accompanying consolidated
statements of cash flows:
December 31
2020 2019
Cash and cash equivalents (*) $ 2,394 $ 2,543
Restricted cash and cash equivalents (**) 105 105
Total cash, cash equivalents, and restricted cash and cash equivalents presented in the statements of cash flows $ 2,499 $ 2,648
(*) Including
cash and cash equivalents held for sale. See Notes 1B(2) and 15. |
| Leases | W. Leases In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) Leases In
addition, the definition of a lease in the ASU has been revised with respect to when an arrangement conveys the right to control
the use of the identified asset under the arrangement, which may result in changes to the classification of an arrangement as
a lease. The ASU does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash
flows from the previous accounting standard. Lessors’ accounting under the ASU is largely unchanged from the previous accounting
standard. The ASU expands the disclosure requirements of lease arrangements. The
Company has adopted ASU 2016-02 commencing from January 1, 2019, under the effective date method. In accordance with the
effective date method, comparative periods are not restated, and the Company needs to record a cumulative-effect adjustment within
its accumulated deficit in the equity on January 1, 2019, without reclassification of previous financial statements. ASU 2016-02
provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’,
which permits the Company not to reassess its prior conclusions regarding lease identification, lease classification and initial
direct costs under ASU 2016-02 and also elected the practical expedient pertaining to the use-of hindsight. ASU 2016-02 also provides
practical expedients for an entity’s ongoing accounting. The Company also elected the practical expedient to not separate
lease and non-lease components for all of the Company’s leases, other than leases of real estate. Additionally, following
the adoption of ASU 2016-02 and in subsequent measurements, the Company applies the portfolio approach to account for the operating
lease right-of-use assets and liabilities for certain leases and incremental borrowing rates. The
Company did not have a cumulative-effect adjustment to retained earnings as a result of the adoption of ASU 2016-02 on January
1, 2019. The adoption of this standard did not have a material impact on the results of operations and cash flows. See Note 18
for additional disclosures, as required by the ASU 2016-02. |
| Recent accounting pronouncements | X. Recent
accounting pronouncements
1. In
June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(Topic 326)
2. In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying
the Accounting for Income Taxes
3. In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40) |
