Exhibit 99.01
SUPERCOM LTD
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of June 30, 2015
(Unaudited)
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SUPERCOM LTD
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
as of June 30, 2015
(Unaudited)
IN U.S. DOLLARS
INDEX
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Interim Consolidated Balance Sheets | 3 |
Interim Consolidated Statements of Operations | 4 |
Interim Statements of Changes in Shareholders' equity | 5 |
Interim Consolidated Statements of Cash Flows | 6 – 7 |
Notes to Interim Consolidated Financial Statements | 8 – 10 |
- - - - - - - - - - - - - - - - - - - - -
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SUPERCOM LTD
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
Unaudited | Audited | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | 32,393 | 4,789 | ||||||
Restricted bank deposits | 3,043 | 5,195 | ||||||
Trade receivable, net | 15,901 | 11,628 | ||||||
Deferred tax short term | 3,495 | 3,958 | ||||||
Other accounts receivable and prepaid expenses | 1,242 | 1,190 | ||||||
Inventories, net | 1,818 | 1,614 | ||||||
Total current assets | 57,892 | 28,374 | ||||||
LONG-TERM ASSETS | ||||||||
Severance pay funds | 102 | 325 | ||||||
Deferred tax long term | 134 | 301 | ||||||
Customer Contracts | 4,128 | 4,587 | ||||||
Software and other IP | 4,772 | 4,949 | ||||||
Goodwill | 3,722 | 3,722 | ||||||
Property and equipment, net | 855 | 616 | ||||||
Total assets | 71,605 | 42,874 | ||||||
CURRENT LIABILITIES | ||||||||
Trade payables | 2,783 | 2,892 | ||||||
Employees and payroll accruals | 1,668 | 944 | ||||||
Related parties | 401 | 341 | ||||||
Accrued expenses and other liabilities | 2,981 | 2,755 | ||||||
Advances from customers | - | 2,864 | ||||||
Short-term liability for future earn-out | 2,482 | 2,870 | ||||||
Total current liabilities | 10,315 | 12,666 | ||||||
LONG-TERM LIABILITIES | ||||||||
Long-term liability for future earn-out | 1,477 | 1,477 | ||||||
Accrued severance pay | 147 | 425 | ||||||
Total long-term liabilities | 1,624 | 1,902 | ||||||
SHAREHOLDERS' EQUITY: | ||||||||
Ordinary shares | 1,100 | 937 | ||||||
Additional paid-in capital | 86,259 | 58,210 | ||||||
Accumulated deficit | (27,693 | ) | (30,841 | ) | ||||
Total shareholders' equity | 59,666 | 28,306 | ||||||
Total Liabilities and Shareholders' Equity | 71,605 | 42,874 |
The accompanying notes are an integral part of these interim consolidated financial statements.
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SUPERCOM LTD
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except per share data)
Six months ended June 30 | ||||||||
2015 | 2014 | |||||||
REVENUES | 15,444 | 12,364 | ||||||
COST OF REVENUES | (5,116 | ) | (2,696 | ) | ||||
GROSS PROFIT | 10,328 | 9,668 | ||||||
OPERATING EXPENSES | ||||||||
Research and development, net | 1,510 | 1,802 | ||||||
Sales and marketing | 2,869 | 3,222 | ||||||
General and administration | 2,060 | 1,094 | ||||||
Total operating expenses | 6,439 | 6,118 | ||||||
OPERATING INCOME | 3,889 | 3,550 | ||||||
FINANCIAL EXPENSES, NET | 111 | 100 | ||||||
INCOME BEFORE INCOME TAX | 3,778 | 3,450 | ||||||
INCOME TAX EXPENSES | 630 | - | ||||||
NET INCOME | 3,148 | 3,450 | ||||||
NET INCOME PER SHARE | ||||||||
Basic | 0.23 | 0.26 | ||||||
Diluted | 0.22 | 0.26 | ||||||
Weighted average number of ordinary shares used in computing basic income per share | 13,862,731 | 13,391,037 | ||||||
Weighted average number of ordinary shares used in computing diluted income per share | 14,048,570 | 13,471,288 |
The accompanying notes are an integral part of these interim consolidated financial statements.
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SUPERCOM LTD
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except share data)
Ordinary shares | ||||||||||||||||||||
Number of | Share | Additional | Accumulated | Total | ||||||||||||||||
Balance as of December 31, 2013 | 13,284,144 | 904 | 55,530 | (37,042 | ) | 19,392 | ||||||||||||||
Changes during the six months ended June 30, 2014 (unaudited): | ||||||||||||||||||||
Exercise of options and issuance of share capital, net of issuance costs | 414,911 | 30 | 2,464 | - | 2,494 | |||||||||||||||
Stock- based compensation | - | - | 17 | - | 17 | |||||||||||||||
Net income | - | - | - | 3,450 | 3,450 | |||||||||||||||
Balance as of June 30, 2014 | 13,699,055 | 934 | 58,011 | (33,592 | ) | 25,353 | ||||||||||||||
Balance as of December 31, 2014 | 13,742,586 | 937 | 58,210 | (30,841 | ) | 28,306 | ||||||||||||||
Changes during the six months ended June 30, 2015 (unaudited): | ||||||||||||||||||||
Exercise of options, warrants and issuance of share capital, net of issuance costs | 2,523,466 | 163 | 27,171 | - | 27,334 | |||||||||||||||
Stock- based compensation | - | - | 878 | - | 878 | |||||||||||||||
Net income | - | - | - | 3,148 | 3,148 | |||||||||||||||
Balance as of June 30, 2015 | 16,266,052 | 1,100 | 86,259 | (27,693 | ) | 59,666 |
The accompanying notes are an integral part of these interim consolidated financial statements.
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SUPERCOM LTD
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars in thousands)
Six months ended June 30 | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income | 3,148 | 3,450 | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 743 | 817 | ||||||
Increase (decrease ) in accrued severance pay | (278 | ) | 168 | |||||
Stock-based compensation | 878 | 17 | ||||||
Decrease in deferred tax | 630 | - | ||||||
Increase in trade receivables, net | (4,273 | ) | (7,334 | ) | ||||
Decrease (increase) in other accounts receivable and prepaid expenses | (52 | ) | 1,366 | |||||
Increase in inventories, net | (204 | ) | (342 | ) | ||||
Increase (decrease) in trade payables | (109 | ) | 781 | |||||
Increase in employees and payroll accruals | 724 | 542 | ||||||
Decrease in advance payment | (2,864 | ) | - | |||||
Increase (decrease) in accrued expenses and other liabilities | 286 | (1,667 | ) | |||||
Net cash used in operating activities | (1,371 | ) | (2,202 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (346 | ) | (168 | ) | ||||
Decrease (increase ) in severance pay fund | 223 | (55 | ) | |||||
Liability for future earn-out | (388 | ) | (230 | ) | ||||
Restricted bank deposits, net | 2,152 | (478 | ) | |||||
Net cash provided (used in) by investing activities | 1,641 | (931 | ) | |||||
Cash flows from financing activities: | ||||||||
Short-term bank credit, net | - | 25 | ||||||
Proceeds from issuance of share capital, net of issuance costs | 27,153 | 2,449 | ||||||
Proceeds from exercise of options and warrants, net | 181 | 45 | ||||||
Net cash provided by financing activities | 27,334 | 2,519 | ||||||
Increase (decrease) in cash and cash equivalents | 27,604 | (614 | ) | |||||
Cash and cash equivalents at the beginning of the year | 4,789 | 2,673 | ||||||
Cash and cash equivalents at the end of the year | 32,393 | 2,059 |
The accompanying notes are an integral part of these interim consolidated financial statements.
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SUPERCOM LTD
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
(U.S. dollars in thousands)
Six months | ||||||||
Ended June 30, | ||||||||
2015 | 2014 | |||||||
Supplemental disclosure of cash flows information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes, net | 16 | - |
The accompanying notes are an integral part of the consolidated financial statements.
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SUPERCOM LTD
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: | GENERAL |
a. | SuperCom Ltd. (the “Company") is an Israeli resident company organized in 1988 in Israel. On January 24, 2013 the Company changed its name back to SuperCom Ltd, its original name, from Vuance Ltd. On September 12, 2013, the Company’s ordinary shares were approved for listing on the NASDAQ Capital Market and began trading under the ticker symbol “SPCB” on September 17, 2013. Previously, the Company’s ordinary shares traded on the OTCQB® electronic quotation service. |
We are a global provider of traditional and digital identity solutions, providing advanced safety, identification, tracking and security products to governments and public organizations throughout the world. We offer three lines of solutions, our e-ID platform and solutions, from which we derive the majority of our revenue, our M2M/IoT suite and services and our Secure Mobile Payments (SMP) suite and solutions.
e-ID Platform and Solutions. Through our proprietary e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services, we have helped governments and national agencies design and issue secured multi-ID documents and robust digital identity solutions to their citizens and visitors. Our e-ID division engages in several activities and solutions, including the production of: (i) paper secured by different levels of security patterns (i.e., ultraviolet, holograms, etc.) and (ii) electronic identification secured by biometric data, principally used in connection with the issuance of national multi-ID documents (including IDs, passports, driver’s licenses, vehicle permits, and visas), border control applications, national ID registries, electronic passports, biometric visas, automated fingerprint identification systems, digitized driver’s licenses, and electronic voter registration and election management. Our solutions include MAGNA™, a complete end-to-end solution for the electronic identification documents and systems listed above. Customers of our e-ID division include governments in Europe, Asia and Africa. On December 26, 2013, we acquired the SmartID™ division of On Track Innovations Ltd., or OTI, including all contracts, software, other related technologies and IP assets. The SmartID division has an international presence, with a broad range of competitive and well-known e-ID solutions and technology. The acquisition significantly expanded the breadth of our e-ID capabilities globally, while providing us with market and technological experts, together with advanced ID software platforms and technologies.
M2M/IoT Suite and Services. Our M2M solutions are designed to reliably identify, track and monitor people or objects in real time, enabling our customers to detect the unauthorized movement of people, vehicles and other monitored objects. We provide RFID and mobile technology, accompanied by services specifically tailored to meet the requirements of electronic monitoring. Our propriety M2M suite of hybrid hardware and software components is the foundation of these products and services. This suite can be used in various industries, including healthcare and homecare, security and safety, community public safety, law enforcement, electronic monitoring, livestock monitoring and building and access automation. Our M2M division has primarily focused on growing three markets: (i) public safety, (ii) healthcare and homecare and (iii) animal and livestock management.
SMP Suite and Solutions. Our SMP division offers a product called SuperPayTM with a suite of solutions for advanced secure mobile payments and financial services, ranging from mobile wallet to mobile point of service (POS). SuperPayTM allows customers to securely make payments using a mobile device (smartphones, tablets or traditional 2G/3G handsets) and allows merchants to use a smartphone, tablet or any existing POS to receive secure mobile payments. SuperPayTM features an array of payment technologies including near field communication (NFC) using host card emulation (HCE), bluetooth low energy (BLE) and audio, and secures payment by using one-time password (OTP), biometric authentication, and SuperCom's proprietary SafeMoneyTMplatform
As of June 30, 2015, the Company’s principal activities were conducted mainly through SuperCom Ltd. and Supercom Inc. and through SuperCom Tanzania and SuperCom Panama, that were acquired in December 2013 as part of the acquisition of the SmartID division. The subsidiaries in Tanzania and Panama provide support and maintenance services to the Company’s customers in these countries.
b. | On June 23, 2015, the Company closed a public offering whereby 2,415,000 shares of common stock were sold by the Company to the public (inclusive of 315,000 shares of common stock pursuant to the full exercise of an overallotment option granted to the underwriters). The aggregate net proceeds received by the Company from the offering were approximately $27.1 million, net of underwriting discounts and commissions and offering expenses payable by the Company. |
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SUPERCOM LTD
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: | GENERAL (cont.) |
c. | Concentration of risk that may have a significant impact on the Company: |
In the first half of year 2015, the Company derived most of its revenues from 3 major customers. In year 2014, the Company derived most of its revenues from four major customers. Throughout the 2012 and 2013 periods the Company derived most of its revenues from one major customer.
The Company purchases certain services and products used by it to generate revenues in its projects and sales from several sole suppliers. Although there are only a limited number of manufacturers of those particular services and products, management believe that other suppliers could provide similar services and products on comparable terms without affecting operating results.
NOTE 2: | UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Financial Statement preparation
These unaudited interim consolidated financial statements of the Company and its subsidiaries (collectively referred to in its report as "Company"), as of June 30, 2015 and for the six and three months then ended have been prepared, in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). They do not include all information and notes required by U.S. GAAP in the preparation of annual consolidated financial statements.
The accounting policies used in the preparation of the unaudited interim consolidated financial statements is the same as those described in the Company's audited consolidated financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2014.
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated interim Financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
The Company believes all adjustments necessary for a fair statement of the results for the period presented have been made and all such adjustments were of a normal recurring nature unless otherwise disclosed. The financial results for the period are not necessarily indicative of financial results for the full year.
These financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2014 and the accompanying notes. There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2014 included in the 2014 Form 20-F.
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SUPERCOM LTD
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: | INVENTORIES, NET |
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
$ | $ | |||||||
Raw materials, parts and supplies | 1,600 | 759 | ||||||
Finished products | 218 | 855 | ||||||
1,818 | 1,614 |
As of June 30, 2015 and December 31, 2014, inventory is presented net of write offs for slow inventory in the amount of approximately $121 and $121, respectively.
NOTE 4: | COMMITMENTS AND CONTINGENT LIABILITIES – LITIGIATION |
As part of the acquisition of the SmartID division of OTI, the Company assumed a dispute with Merwell Inc. (“Merwell”). Merwell has alleged that it has not received the full payment it is entitled to for its services in respect of a drivers’ license project. OTI alleged that Merwell breached its commitments under the service agreement and also acted in concert with third parties to damage OTI’s business activities. This matter is now subject to an arbitration proceeding.
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