UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6 - K

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a - 16 or 15d -16

Under the Securities Exchange Act of 1934

 

For the Month of October, 2020

 

Commission file number 001-14184

 

B.O.S. Better Online Solutions Ltd.

(Translation of Registrant’s Name into English)

 

20 Freiman Street, Rishon LeZion, 7535825, Israel

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F ☒         Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___________

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ___________

 

 

 

 

 

 

B.O.S. Better Online Solutions Ltd.

 

This Report on Form 6-K, including the exhibits, is hereby incorporated by reference into all effective registration statements, filed by us under the Securities Act of 1933, as amended, to the extent not superseded by documents or reports subsequently filed or furnished.

 

Change in Reportable Segments

 

Effective January 1, 2020, the Company has realigned its reporting structure to include three reportable segments: RFID, Supply Chain Solutions and Intelligent Robotics. During the first six months of 2020, the Company experienced a worsening in its Intelligent Robotics business, which was previously reported as part of the RFID segment. In order to remedy the problems associated with the Intelligent Robotics’ business, management determined that it would be advisable to review its operating results on a stand-alone basis.

 

The Company is filing this Report on Form 6-K (“Report”) to provide revised segment reporting financial information with respect to the historical financial information included in its Annual Report on Form 20-F for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 31, 2020 (the “Annual Report”). This Report is being filed to revise, in part, (i) Item 5A of the Annual Report – Operating Results to reflect our new reportable segments, and (ii) the segment information in our Consolidated Financial Statements as of December 31, 2019.

 

Attached hereto are the following exhibits:

 

99.1 Revised Consolidated Financial Statements of the Registrant as of December 31, 2019.
   
99.2 Revised Management’s Discussion and Analysis of Results of Operations for the year ended December 31, 2019.
   
99.3 Consent of Fahn Kanne & Co. Grant Thornton Israel, an independent registered public accounting firm and a member of Grant Thornton.

 

Other than the exhibits filed herewith, this Report does not update or revise any other information or any exhibits in our Annual Report and does not otherwise reflect events occurring after the date of the Annual Report. Accordingly, this Report should be read in conjunction with the Annual Report and other filings made by the Company with the Securities and Exchange Commission subsequent to the filing of the Annual Report.

 

1

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  B.O.S. Better Online Solutions Ltd.
  (Registrant)
     
  By: /s/ Hagit Vizner
    Hagit Vizner
    Chief Financial Officer

 

Dated: October 22, 2020

 

2

 

 

EXHIBIT INDEX

 

EXHIBIT NO.   DESCRIPTION
     
99.1   Revised Consolidated Financial Statements of the Registrant as of December 31, 2019.
     
99.2   Revised Management’s Discussion and Analysis of Results of Operations for the year ended December 31, 2019.
     
99.3   Consent of Fahn Kanne & Co. Grant Thornton Israel, an independent registered public accounting firm and a member of Grant Thornton.

 

 

 

3

 

 

Exhibit 99.1

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

 

AND SUBSIDIARIES

 

CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2019

 

IN U.S. DOLLARS

 

INDEX

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets F-3 - F-4
   
Consolidated Statements of Operations F-5
   
Consolidated Statements of Comprehensive Income (loss) F-6
   
Statements of Changes in Shareholders’ Equity F-7
   
Consolidated Statements of Cash Flows F-8 - F-9
   
Notes to Consolidated Financial Statements F-10 - F-43

 

- - - - - - - - - - - -

F-1

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

Fahn Kanne & Co.

Head Office

32 Hamasger Street

Tel-Aviv 6721118, ISRAEL

PO Box 36172, 6136101

 

T +972 3 7106666

F +972 3 7106660

www.gtfk.co.il

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors and Shareholders

B.O.S Better Online Solutions Ltd.

 

Opinion on the financial statements

 

We have audited the accompanying consolidated balance sheets of B.O.S Better Online Solutions Ltd. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements, present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audits of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

   

/s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL

 

We have served as the Company’s auditor since 2017.

 

Tel-Aviv, Israel

March 31, 2020, except for Notes 1b, 2j, 3 and 18 dated October 22, 2020.

 

F-2

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 U.S. dollars in thousands

 

   December 31 
   2019   2018 
ASSETS        
         
CURRENT ASSETS:        
         
Cash and cash equivalents  $339   $1,410 
Restricted bank deposits   240    332 
Trade receivables (net of allowance for doubtful accounts of $32 and $31 at December 31, 2019 and 2018, respectively)   10,063    8,624 
Other accounts receivable and prepaid expenses   1,273    829 
Inventories   5,407    2,874 
           
Total current assets   17,322    14,069 
           
LONG-TERM ASSETS   155    177 
           
PROPERTY AND EQUIPMENT, NET   1,257    1,108 
           
OPERATING LEASE RIGHT-OF-USE ASSETS, NET   720    - 
           
OTHER INTANGIBLE ASSETS, NET   598    81 
           
GOODWILL   5,147    4,676 
           
Total assets  $25,199   $20,111 

  

The accompanying notes are an integral part of the consolidated financial statements.

 

F-3

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 U.S. dollars in thousands, except share and per share data

 

   December 31 
   2019   2018 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
CURRENT LIABILITIES:        
         
Current maturities of long-term loans  $664   $467 
Operating lease liabilities, current   551    - 
Trade payables   6,503    4,106 
Employees and payroll accruals   1,007    778 
Deferred revenues   836    768 
Advances net of inventory in progress   29    - 
Accrued expenses and other liabilities   419    313 
           
Total current liabilities   10,009    6,432 
           
LONG-TERM LIABILITIES:          
Long-term loans, net of current maturities   2,041    1,867 
Operating lease liabilities, non-current   289    - 
Accrued severance pay   303    301 
           
Total long-term liabilities   2,633    2,168 
           
COMMITMENTS AND CONTINGENT LIABILITIES          
           
SHAREHOLDERS’ EQUITY:          
Share capital:          
  Ordinary Shares of NIS 80.00 nominal value: Authorized; 6,000,000 shares at December 31, 2019 and 2018, respectively; Issued and outstanding: 4,257,790 and 3,553,714 shares at December 31, 2019 and 2018, respectively   80,482    75,317 
Additional paid-in capital   2,063    5,369 
Accumulated other comprehensive loss   (233)   (333)
Accumulated deficit   (69,755)   (68,842)
           
Total shareholders’ equity   12,557    11,511 
           
Total liabilities and shareholders’ equity  $25,199   $20,111 

  

The accompanying notes are an integral part of the consolidated financial statements.

 

March  31, 2020  
Date of approval of the financial statements  

   

F-4

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 U.S. dollars in thousands

  

   Year ended December 31, 
   2019   2018   2017 
             
Revenues  $33,817   $32,650   $28,932 
Cost of revenues   27,159    25,907    22,587 
                
Gross profit   6,658    6,743    6,345 
                
Operating costs and expenses:               
                
Sales and marketing   4,064    3,705    3,389 
General and administrative   2,255    1,834    1,870 
Impairment of intangible assets   356    -    - 
Impairment of Goodwill   614    -    - 
                
Total operating costs and expenses   7,289    5,539    5,259 
                
Operating income (loss)   (631)   1,204    1,086 
Financial expenses, net   (330)   (255)   (297)
                
Income before taxes on income (loss)   (961)   949    789 
Taxes on income (tax benefit)   (48)    (41)   16 
                
Net income (loss)  $(913)  $990   $773 
                
Basic and diluted net Income (loss) per share  $(0.23)  $0.28   $0.24 
Shares (in thousands) used in calculation of earnings per share:               
                
Basic   4,053    3,500    3,171 
Diluted   4,059    3,500    3,171 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

F-5

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 U.S. dollars in thousands

  

   Year ended December 31, 
   2019   2018   2017 
             
Net income (loss)  $(913)  $990   $773 
                
Cash flow hedging instruments:               
Change in unrealized gains and losses   53    (76)   (93)
Gain (loss) in respect of derivative instruments designated for cash flow hedge, net of taxes   47    (37)   148 
                
Other comprehensive income (loss)   100    (113)   55 
                
Comprehensive income (loss)  $(813)  $877   $828 

  

The accompanying notes are an integral part of the consolidated financial statements.

 

F-6

 

  

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 U.S. dollars in thousands, except share data

  

   Ordinary Shares   Share capital and additional paid-in capital   Accumulated other comprehensive income (loss)   Accumulated deficit   Total shareholders’ equity 
                     
Balance at January 1, 2017   2,935,286   $79,464   $(275)  $(70,605)  $8,584 
                          
Issuance of Ordinary Shares   421,403    746    -    -    746 
Other comprehensive income   -    -    55    -    55 
Share-based compensation expense   -    60    -    -    60 
Net income   -    -    -    773    773 
                          
Balance at December 31, 2017   3,356,689   $80,270   $(220)  $(69,832)  $10,218 
                          
Issuance of Ordinary Shares   197,025    349    -    -    349 
Other comprehensive loss   -    -    (113)   -    (113)
Share-based compensation expense   -    67    -    -    67 
Net income   -    -    -    990    990 
                          
Balance at December 31, 2018   3,553,714   $80,686   $(333)  $(68,842)  $11,511 
                          
Issuance of Ordinary Shares (see Note 15a(1) and 15a(3))   178,881    527    -    -    527 
Issuance of Ordinary shares related to securities purchase agreement, net (see Note 15a(4))   400,000    935    -    -    935 
Exercise of options   125,195    316    -    -    316 
Other comprehensive income   -    -    100    -    100 
Share-based compensation expense   -    81    -    -    81 
Net loss   -    -    -    (913)   (913)
                          
Balance at December 31, 2019   4,257,790   $82,545   $(233)  $(69,755)  $12,557 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

F-7

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

   Year ended December 31, 
   2019   2018   2017 
             
Cash flows from operating activities:            
Net income (loss)  $(913)  $990   $773 
                
Adjustments to reconcile net income to net cash provided by (used in) operating activities:               
Depreciation, amortization and Impairment of Goodwill   1,327    289    245 
Gain from sale and disposal of property and equipment   (10)   -    (10)
Currency fluctuation of loans   213    (225)   264 
Severance pay, net   2    15    92 
Share-based compensation expense   81    67    60 
Decrease (Increase) in trade receivables, net   (1,970)   1,180    (1,876)
Decrease (Increase) in other accounts receivable and other assets   (357)   84    58 
Decrease (Increase) in inventories   (2,125)   366    (926)
Increase (decrease) in trade payables   2,397    (1,845)   1,350 
Increase (decrease) in employees and payroll accruals, deferred revenues, accrued expenses and other liabilities   440    (178)   347 
                
Net cash used in (provided by) operating activities   (915)   743    377 
                
Cash flows from investing activities:               
                
Purchase of property and equipment   (335)   (689)   (368)
Proceeds from sale of property and equipment   10    -    53 
Acquisition of Imdecol (c)   (1,895)   -    - 
                
Net cash used in investing activities   (2,220)   (689)   (315)
                
Cash flows from financing activities:               
                
Proceeds from issuance of shares, net   1,498    377    606 
Proceeds from exercise of options   316    -    - 
Proceeds from long-term loans   737    -    2,976 
Repayment of long-term loans   (579)   (469)   (3,346)
                
Net cash provided by (used in) financing activities   1,972    (92)   236 
                
Increase (decrease) in cash, cash equivalents and restricted cash   (1,163)   (38)   298 
Cash, cash equivalents and restricted cash at the beginning of the year   1,742    1,780    1,482 
                
Cash, cash equivalents and restricted cash at the end of the year  $579   $1,742   $1,780 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

F-8

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

   Year ended December 31, 
   2019   2018   2017 
Supplemental disclosure of cash flow activities:            
             
(a) Net cash paid during the year for:            
             
Interest  $98   $91   $161 
                
Taxes  $31   $15   $7 
                
(b) Non-cash activities:               
                
Prepaid expenses related to 2017 SEDA (see Note 15a(1))  $35   $28   $- 
                
Operating lease right-of-use assets due to adoption of ASU No. 2016-02  $1,176    -    - 
                
Operating lease liabilities due to adoption of ASU No. 2016-02  $1,176    -    - 

 

(c) Net cash used to pay for the Acquisition of Imdecol (see Note 3):

 

   June 1,
2019
 
     
Inventory  $380 
Intangible assets , Net  $953 
Property and equipment, Net  $91 
Loss Contracts  $(614)
Goodwill  $1,085 
Net cash used to pay for the Acquisition  $1,895 

 

F-9

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 1:- GENERAL

 

a.B.O.S. Better Online Solutions Ltd. (“BOS” or the “Company”) is an Israeli corporation.

 

The Company’s shares are listed on NASDAQ under the ticker BOSC.

 

  b. The Company has three operating segments: the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment (see Note 18).

 

The Company’s wholly owned subsidiaries include:

 

  1. BOS-Dimex Ltd., (“BOS-Dimex”), is an Israeli company that comprises the RFID segment. BOS-DIMEX provides comprehensive turn-key solutions for Automatic Identification and Data Collection (AIDC), combining a mobile infrastructure with software application of manufacturers that we represent. In addition, BOS-Dimex offers on-site inventory count services in the fields of apparel, food, convenience and pharma, asset tagging and counting services for corporate and governmental entities.

 

2.BOS-Odem Ltd. (“BOS-Odem”), an Israeli company, that is a distributor of electro-mechanical components, mainly to customers in the aerospace, defense and other industries and a supply chain service provider for aviation customers that seek a comprehensive solution to their components-supply needs. BOS-Odem is part of the Supply Chain Solutions segment; and

 

3.Ruby-Tech Inc., a New York corporation, is a wholly-owned subsidiary of BOS-Odem and a part of the Supply Chain Solutions segment.

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated financial statements are prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”).

 

a.Use of estimates:

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions are used in determining values of goodwill and other identifiable intangible assets, revenues and the net realizable value of inventory. Actual results could differ from those estimates.

 

b.Financial statements in U.S. dollars:

 

A substantial portion of the Company’s revenues is denominated in U.S. dollars (“dollars”). The Company’s management believes that the dollar is the primary currency of the economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters. All transactions gains and losses from the measurement of monetary balance sheet items are reflected in the statement of operations as financial income or expenses as appropriate.

 

F-10

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

c.Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances, including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.

 

d.Cash equivalents:

 

Cash equivalents are short-term highly liquid investments with original maturities of less than three months from date of purchase.

 

e.Restricted bank deposits:

 

Restricted bank deposits are deposits related to forward contracts with banks. Restricted deposits are presented at their cost.

 

f.Inventories:

 

The inventory is valued at the lower of cost or net realizable value. Cost is determined using the moving average cost method. In 2019 and 2018, inventory write-offs amounted to $91 and $52, respectively.

 

Inventory write-offs and write-downs are provided to cover risks arising from slow-moving items or technological obsolescence.

 

g.Property and equipment, net:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

 

    %    
         
Computers and software   20 - 33   (Mainly 33)
Office furniture and equipment   6 - 15   (Mainly 6)
Leasehold improvements  

Over the shorter of the period

of the lease or the life of the assets

   
Motor vehicles   15    

 

h.Business combination:

 

The consolidated financial statements include the operations of an acquired business from the date of the acquisition’s consummation. Acquired businesses are accounted for using the acquisition method of accounting in accordance with ASC 805, “Business Combinations”, which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

 

F-11

 

  

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. Contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at a probability weighted assessment of its fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings.

 

i.Impairment of long-lived assets and intangible assets subject to amortization:

 

The Company’s long-lived assets are reviewed for impairment in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Asset, whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value.

 

Recoverability of intangible assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the asset. If intangible assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.

 

Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. As of December 31, 2019 the remaining intangible assets were comprised mainly of costumer relationship.

 

During the year ended December 31, 2019 the Company recognized an impairment loss related to intangible assets in an amount of $356. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

 

j.Goodwill:

 

Goodwill represents excess of the costs over the net assets of businesses acquired. Under ASC 350, Intangibles - Goodwill and Other (“ASC 350”), goodwill is not amortized but instead is tested for impairment at least annually or between annual tests in certain circumstances, and written-down when impaired.

 

The Company performs its annual impairment analysis of goodwill as of December 31 of each year, or more often if indicators of impairment are present. The provisions of ASC 350 require that the impairment test be performed on goodwill at the level of the reporting units As required by ASC 350, the Company chooses either to perform a qualitative assessment whether the two-step goodwill impairment test is necessary or proceeds directly to the two-step goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the two-step goodwill impairment test. If the Company determines otherwise, no further evaluation is necessary.

 

F-12

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

When the Company decides or is required to perform the two-step goodwill impairment test, in the first step, or “Step 1”, the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or “Step 2”, of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions. 

 

The Company operates in three operating-based segments: the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment. The Company’s goodwill is related to the Intelligent Robotics segment and the RFID segment, which are both reporting units.

 

The Company determined the fair value of each of the reporting units using the Income Approach, which utilizes a discounted cash flow model, as it believes that this approach best approximates each of the reporting units fair value at this time. The impairment test was based on a valuation performed by management with the assistance of a third party appraiser. Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. The most significant assumptions used for the Income Approach for the 2019 impairment test were five years of projected net cash flows, WACC of 15% and a long-term growth rate of 2% for two reporting units. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record additional impairment charges for its remaining balance of goodwill.

 

The aggregate fair value of the reporting units tested for impairment depends on various factors, some of which are qualitative and involve management judgment, including stable backlog coverage and experience in meeting operating cash flow targets.

 

During the year ended December 31, 2019 the Company recognized an impairment loss of $614 related to its Intelligent Robotics segment. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

 

F-13

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

k.Severance pay:

 

The Company’s liability for severance pay for its Israeli employees is calculated pursuant to the Israeli Severance Pay Law - 1963 (the “Israeli Severance Pay Law”), based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. Employees employed for a period of more than one year are entitled to one month’s salary for each year of employment or a portion thereof. The Company’s liability for its Israeli employees is mostly covered by insurance or pension policies designed solely for distributing severance pay.

 

Most of the Company’s employees are subject to Section 14 of the Israeli Severance Pay Law. The Company’s contributions towards severance pay, for Israeli employees subject to this section, have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are required to be made by the Company to the employee in respect of severance pay. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.

 

Severance expenses for years 2019, 2018 and 2017 amounted to $315, $ 210 and $ 451, respectively.

 

l.Revenue recognition:

 

The Company derives its revenues mainly from the sale of products and supporting services.

 

In accordance with ASC Topic 605 “Revenue Recognition”, until December 31, 2017 (prior to the adoption of ASC Topic 606) the Company recognized revenues from sale of products when the following fundamental criteria were met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.

 

Revenues from service contracts were recognized ratably over the service period.

 

The Company applied the provisions of ASC Topic 605-25, “Revenue Recognition - Multiple-Element Arrangements”, as amended. ASC Topic 605-25 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products and services. For such arrangements, each element of the contract was accounted for as a separate unit when it provided the customer value on a stand-alone basis.

 

The Company followed the guidance in ASC 605-35, “Revenue Recognition - Construction-Type and Production-Type Contracts” (“ASC 605-35”), with respect to revenues from customized software solutions, whereby the Company applied the Completed contract method, since the Company was unable to obtain reasonable dependable estimates of the total effort required for completion. Under the completed contract method, all revenue and related costs of revenue were deferred and recognized upon completion. Provisions for estimated losses on contracts in process were recognized in the period such losses were determined.

 

F-14

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

Deferred revenues included unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts were recognized over the period of the contract and advances were recognized once the delivery of the products is done.

 

Revenue recognition accounting policy applied from January 1, 2018 (following the adoption of ASC Topic 606):

 

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective transition method to all contracts that were not completed on the effective date of ASC 606. Among others. The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The adoption of ASC 606 resulted in changes to the Company’s accounting policies for revenue recognition previously recognized under ASC 605 as detailed below. However, there were no significant changes to the timing or pattern of revenue recognition to any of the revenue streams of the Company under ASC 606 and those that were previously reported under ASC 605. Accordingly, the adoption of ASC 606 did not have material effect on the consolidated statements of operations and balance sheets.

 

In accordance with ASC 606, The Company determines revenue recognition through the following five steps:

 

Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.

 

A contract with a customer exists when all of the following criteria are met: the parties to the contract have approved it (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only if it is not considered constrained (i.e. it is considered probable that a significant reversal in the amount of cumulative revenue recognized will not occur).

  

F-15

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. A product is transferred when, or as, the customer obtains control of that product, and a service is considered transferred as the services are received and used by the customers.

 

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations such as different products or products and services the Company performs an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

 

The Company records revenues net of any value added or sales tax.

 

In accordance with ASC 606, the Company’s revenues are recognized as follows:

 

1.The Company generates its revenues primarily from the sale of products such as electro mechanical components and Automatic Identification Data Capture hardware manufactured by third parties, through a direct sales to its customers. Revenues from sales of products are recognized at the point of time when the control of the product is passed on to the customer, mostly upon delivery to the customer, either at the Company premises by delivery to the customer carrier or upon delivery to the customer premises, as applicable to each contract.

 

2.Revenues from service contracts are recognized over the contract’s period (for time-based services) or based on the amount of work performed (for on-site inventory count and similar services). Renewals of service support contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably over the period.

 

3.For arrangements that involve the delivery or performance of multiple products or products sold with service contracts, the Company analyzes whether the goods or services that were promised to the customer are distinct. A good or service promised to a customer is considered ‘distinct’ if both of the following criteria are met: 1. The customer can benefit from the goods or service, either on its own (i.e. without any professional services, updates or technical support) or together with other resources that are readily available to the customer; and, 2. The Company’s promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract.

 

Revenues from service contracts sold to customers within a single contractually binding arrangement together with products, were determined to be distinct and therefore, are accounted for revenue recognition purposes, as a separate performance obligation. Accordingly, the amount attributed to the service contract is recognized over time, on a straight-line basis over the contract’s period, as the services are mostly refer to time-based support services.

 

Revenues from operating services and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from robotics and automation projects are recognized using the percentage-of-completion method. When the Company is unable to recognize Revenues according to this method, the Revenues are recognized upon Completion of the projects.

 

F-16

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

Revenues are recognized based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenues, and are recognized in the period in which the revisions are determined.

 

In specific instances where there is a lack of dependable estimates or inherent risks that may cause the forecast to be doubtful, then the completed-contract method is followed. Revenue is recognized when the contract is substantially complete and when collectability is reasonably assured. Costs that are closely associated with the project are deferred as contract costs and recognized similarly to the associated revenues.

 

4.Deferred revenues include unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts are recognized over the period of the contract and advances are recognized once the delivery of the products is done. Deferred revenues include advanced payments from customers in the amount of $144 as of December 31, 2019. This amount is expected to be recognized during 2020, once the delivery of the products is done. In addition, deferred revenues include unearned amounts from service contracts, which are mostly for a period of three to five years, and the Company recognizes the revenues over the contract’s period. As of December 31, 2019, the deferred revenues from service contracts amounted to $717. This amount will be mostly recognized in the years 2020 until 2022. The deferred revenues also include amounts related to software projects in the amount of $188.

 

m.Income taxes:

 

The Company and its subsidiaries account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely than not to be realized. Interest expense and potential penalties related to income taxes are included in the tax expense line of the Company’s Consolidated Statements of Operations.

 

Following the initial application of ASU 2015-17, which became effective on January 1, 2017, deferred tax balances are presented as non-current amounts.

 

The Company implements a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with ASC 740. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

 

F-17

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

n.Concentrations of credit risk and allowance for doubtful accounts:

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, trade receivables, other accounts receivable and foreign currency derivative contracts.

 

The trade receivables of the Company are derived from sales to customers located primarily in Israel, the Far East, Europe and America. The Company generally does not require collateral however a significant part of the Company’s customers outside of Israel are insured against customer nonpayment, through the Israeli Credit Insurance Company Ltd.

 

In certain circumstances, the Company may require letters of credit, other collateral, additional guarantees or advanced payments. An allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection. The expenses (income) related to the allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017, is $1, $17 and $27, respectively.

 

  o. Contingencies

 

The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of their business and in connection with certain agreements with third parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.

 

p.Derivative financial instruments:

 

ASC 815, “Derivatives and Hedging”, requires the presentation of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) the Company applied the following:

 

Until December 31, 2018, the effective portion of the changes in fair value of the derivative instruments designated for hedging purposes was reported as a component of other comprehensive income (“OCI”), net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, was recognized in current earnings during the period of change. During the reporting periods, up and until December 31, 2017, the gains or losses required to be recognized in earnings for hedge ineffectiveness were insignificant.

 

F-18

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

Commencing January 1, 2019, the entire changes in fair value of the derivative instruments designated for hedging purposes that were determined as qualifying for hedging purposes (including the ineffective components of the hedging relationship) were reported as a component of OCI, net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

 

For other derivatives which do not qualify for hedge accounting, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income as incurred in financing income (expenses), net.

 

See Note 11 for disclosure of the derivative financial instruments in accordance with ASC 815.

 

q.Basic and diluted net income per share:

 

Basic net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year. Diluted net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year, plus the potential dilution to Ordinary Shares considered outstanding during the year, in accordance with ASC 260, Earning per Share.

 

The total number of Ordinary Shares related to outstanding options and warrants that was excluded from the calculations of diluted net earnings per share, since they were determined to have an anti-dilutive effect, was 13,373, 196,750 and 314,125 for the years ended December 31, 2019, 2018, and December 31, 2017, respectively.

 

r.Accounting for share-based compensation:

 

The Company accounts for equity-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”), which requires the recognition of compensation expenses based on estimated fair values for all equity-based awards made to employees and directors.

 

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company’s consolidated statements of operations.

 

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures. The Company considers many factors when estimating forfeitures, including employee class and historical experience. 

 

F-19

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the date of grant, equal to the expected option terms. The expected option term represents the period that the Company’s stock options are expected to be outstanding and was determined based on the simplified method permitted by the SEC’s Staff Accounting Bulletin (“SAB”) No.107 and extended by SAB 110 as the average of the vesting period and the contractual term.

 

The Company currently uses the simplified method as adequate historical experience is not available to provide a reasonable estimate.

 

The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

 

The fair value for options granted in years 2019, 2018 and 2017 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

 

   Year ended December 31, 
   2019   2018   2017 
             
Risk-free interest   1.52%   2.73%   2.05%
Dividend yields   0    0    0 
Volatility   55%   55%   57%
Expected option term   3.5 years    3.5 years    3.5 years 
Forfeiture rate   0%   0%   0%

  

Until December 31, 2018 the Company applies ASC 505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”) with respect to options and warrants issued to non-employees, which requires the use of option valuation models to measure the fair value of the options and warrants at the measurement date. Commencing January 1, 2019, following the adoption of ASU 2018-07, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees (with certain exceptions), share-based payments to non-employees are accounted in accordance with ASC 718.

 

s.Fair value of measurements:

 

The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities.

 

The Company also measures certain non-financial assets, consisting mainly of goodwill and intangible assets at fair value on a nonrecurring basis.  These assets are adjusted to fair value when they are considered to be impaired (see Note 8).  As of December 31, 2019 the Company measured the fair value of goodwill with a total carrying amount of US$ 5.76 million that was allocated to two reporting unit. The evaluation provided an impairment in an amount of $614, (see Note 8). The fair value measurement of the non-financial assets is classified as level 3.

 

The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received in consideration for the sale of an asset or paid for the transfer of a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

 

F-20

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

 

Unobservable inputs are inputs that the Company assumes market participants would use in pricing the asset or liability developed based on the best information available under the circumstances.

 

In accordance with ASC 820, derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

 

The Company’s financial assets and liabilities measured at fair value on a recurring basis, consisted of derivatives (foreign currency forward contracts and hedging contracts) which were classified within Level 2 and amounted to $ 13 asset and $ 87 liability as of December 31, 2019 and 2018, respectively.

 

The fair value hierarchy is broken down into three levels based on the inputs as follows:

 

Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.  

 

Level 2 -Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.  

 

Level 3 -Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The carrying amounts of cash and cash equivalents, restricted cash, restricted bank deposits, other accounts receivable, trade payables, and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.

 

t.Accounting pronouncements adopted during the reported period:

 

Accounting Standards Update 2016-02, “Leases (Topic 842): Section A – Leases: Amendments to the FASB Accounting Standards Codification; Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification; Section C – Background Information and Basis for Conclusions”.

 

Commencing January 1, 2019, the Company adopted ASC Update 2016-02, Leases (Topic 842).

 

Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1. A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and, 2. A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

 

F-21

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

  

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

 

As permitted under ASU 2018-11, which provides, a transition election to not restate comparative periods for the effects of applying the new standard, the Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, the effect of the adoption was reflected through a cumulative-effect adjustment. Financial information for comparative periods was not required to be updated and the disclosures required under the new standard were provided for dates and periods before January 1, 2019.

 

The new lease standard provides a number of optional practical expedients in transition. The Company elected to apply 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 the new standard. The Company also elected the practical expedient pertaining to the use of hindsight and the practical expedient to not separate lease and non-lease components for all leases, other than leases of real estate.

 

The Company also elected the short-term lease recognition exemption for all leases that qualify (leases with a term shorter than 12 months). This means, for those leases, right-of-use assets or lease liabilities are not recognized (including right-of-use assets or lease liabilities for existing short-term leases of those assets in transition).

 

Following adoption of the new standard, the Company recognized additional operating liabilities in an amount of $866, with corresponding right-of-use assets of approximately the same amount based on the present value of the remaining minimum rental payments for existing operating leases of facilities and vehicles. In addition, the Company is required to provide additional new disclosures regarding the leasing activities to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. However, the adoption of this standard did not have a significant impact on the Company’s consolidated statements of operations and consolidated statements of cash flows.

 

See note 19 for further discussion.

 

Accounting Standards Update 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”

 

Commencing January 1, 2019, the Company adopted ASC Update 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (ASU 2017-12).

 

F-22

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

ASU 2017-12, amends the hedge accounting recognition and presentation requirements in ASC 815 in order to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.

 

ASU 2017-12 eliminates the concept of separately recognizing periodic hedge ineffectiveness for cash flow and net investment hedges. Accordingly, the impact of both the effective and ineffective components of a hedging relationship will be recognized in the same financial reporting period and in the same income statement line item. Also, the guidance in ASU 2017-12 includes certain targeted improvements to existing guidance on quantitative and qualitative assessments of initial and ongoing hedge effectiveness.

 

The transition guidance in ASU 2017-12 requires an entity to apply the amendments using a modified retrospective approach to hedging relationships that exist as of the date of adoption by recording a cumulative-effect adjustment to the opening balance of retained earnings as of the most recent period presented. Entities must apply the new and modified disclosure requirements prospectively from the date of adoption.

 

For public business entities, the guidance in ASU 2017-12 became effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years.

 

The Company applied ASU 2017-12, using the modified retrospective approach to hedging relationships that exist as of the date of adoption. However, due to the limited hedging activities of the Company as of the date of adoption, the adoption did not affect the consolidated financial statements.

 

Accounting Standard Update 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

 

Commencing January 1, 2019, the Company adopted ASC Update 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (ASU 2018-07). ASU 2018-07 aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions.

 

Consistent with the accounting requirement for employee share-based payment awards, awards within the scope of Topic 718 will be measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share-based payment awards will be measured at the grant date.

 

With respect to awards with performance conditions ASU 2018-07 concludes that, consistent with the accounting for employee share-based payment awards, an entity will consider the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions.

 

F-23

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

ASU 2018-07 also requires that the classification of equity classified nonemployee share-based payment awards will continue to be subject to the requirements of Topic 718 unless the award was modified after the good has been delivered, the service has been rendered, any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no longer providing goods or services. This eliminates the requirement to reassess classification of such awards upon vesting.

 

In addition, ASU 2018-07 includes certain Non-public Entity-Specific Amendments ASU 2018-07 became effective for Public entities in annual periods beginning after December 15, 2018, and interim periods within those years (first quarter of 2019 for the Company).

 

Based on the limited grants of share-based payments to nonemployees as of the adoption date, it was determined that the adoption of ASU 2018-07 did not have a significant impact on its consolidated financial statements.

 

u.Accounting pronouncements not yet adopted:

 

Accounting Standards Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”

 

In June 2016, the FASB issued ASC Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”

 

ASC Update 2016-13 revised the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning after December 15, 2019, including the interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods within those years.

 

The Company is in the process of evaluating the effect that ASU 2016-13 will have on the results of operations and financial statements, if any.

 

Accounting Standards Update 2017-04 “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”

 

In January 2017, the FASB issued ASC Update 2017-4, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.”

 

To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

 

The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

 

F-24

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

 

A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

 

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

The Company is evaluating the impact of ASU 2017-4 on its goodwill impairment valuation.

 

NOTE 3: ACQUISITION OF BUSINESS

 

On June 1, 2019, the Company completed the acquisition of the operational assets of Imdecol Ltd, a global integrator and manufacturer of automatic and robotic systems that enhance the productivity of production lines. The Company has determined that the acquired of assets and operations, represent a business and thus, the transaction was accounted for as a business combination transactions under ASC 805, “Bussiness Combinations” in accordance with the acquisition method.

 

The purchase price of Imdecol’s business was based on a multiple of four times the average annual operating profit of Imdecol’s business for the years 2017, 2018, 2019 and for the 12 months ended June 30, 2020 (“Formula of Consideration”).

 

The purchase price was comprised as follows:

 

a.An advance of $276 was paid to Imdecol in cash upon signing the definitive agreement in March 2019;

 

b.An additional approximately $1,619 was paid to Imdecol in cash at closing, on June 1, 2019.

 

c.The final consideration will be paid by August 2020, according to the Formula of Consideration (the “Contingent Consideration”). Additional payment, if required, will be done in the following manner:

 

Up to $417 shall be paid to Imdecol, by way of issuance of BOS’s ordinary shares. The value of the ordinary shares will be determined according to their market price prior to issuance and the shares will be subject to a lock-up period until June 2022.

  

The residual amount, if any, will be paid in cash.

 

The Imdecol’ acquisition expenses amounted to approximately $138.

 

F-25

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 3: ACQUISITION OF BUSINESS (Cont.)

 

The purchase price allocation of the acquired business was as follows:

 

   June 01, 
   2019 
Cash paid   1,895 
Contingent Consideration(1)   - 
Total acquisition price  $1,895 
      
Recognized amounts of identifiable assets acquired:     
Intangible assets, net (2)   953 
Property and equipment, net   91 
Inventory   380 
Loss Contracts  (3)   (614)
Net assets acquired   810 
Goodwill(4)   1,085 

 

(1) Company’s management expects that the acquired business performance by August 2020 will not meet the profitability goals for contingent payment. Accordingly, no Contingent Consideration was recorded.

 

(2) The fair value adjustment estimate of identifiable intangible assets were determined using the “income approach”, which is valuation technique that estimates the fair value of an assets based on market participants’ expectations of the cash flow an assets would generate over its remaining useful life.

 

(3) Loss contracts - management identified certain contracts of the acquired operations of Imdecol as loss contracts as it was determined that the unavoidable costs of meeting the obligations under such contracts (i.e. the expected manufacturing costs and service costs including labor expenses) exceed the expected future economic benefits to be received. Those loss contracts were recognized as a liability at fair value as of the acquisition date.

 

(4) As part of the purchase price allocation for the acquisition, the Company recorded goodwill for $1,085. Goodwill reflects the value or premium of the acquisition price in excess of the fair values assigned to specific tangible and intangible assets net of the fair value of. Goodwill has an indefinite useful life and therefore is not amortized as an expense (the goodwill balance is not deductible for income tax purposes), but is reviewed annually for impairment of its fair value to the Company. The purchase price intrinsically recognizes the benefits of the broadened depth of new markets and management team and is primarily attributable to expected synergies (See also Note 8B).

 

The Company filed pro-forma information regarding the acquisition and the acquired business operations was determined to be included in the Intelligent Robotics segment.

 

The Consolidated result of the operations do not include any revenue or expense related to Imdecol, prior to June 1, 2019, the closing date of the acquisitions.

 

The following table provides pro forma information as if the business acquisition had occurred on January 1, 2018:

 

   Year ended December 31 
   2018 
   Unaudited 
Revenues  $38,029 
Net Income  $987 
Basic and diluted net Income per share  $0.26 

 

F-26

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 4:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

 

   December 31 
   2019   2018 
         
Government authorities  $129   $96 
Advances to suppliers   568    268 
Derivatives (See Note 11)   13    - 
Prepaid expenses   482    377 
Accrued income   22    56 
Other   59    32 
           
   $1,273   $829 

 

NOTE 5:- INVENTORIES

 

   December 31 
   2019   2018 
         
Raw materials  $120   $83 
Inventory in progress   1,285    - 
Finished goods   4,906    2,791 
Net – advances from customers   (904)   - 
           
   $5,407   $2,874 

 

NOTE 6:- LONG TERM ASSETS

 

   December 31 
   2019   2018 
         
Prepaid expenses related to SEDA (see Note 15a1)  $77   $112 
Other   78    65 
           
   $155   $177 

 

NOTE 7:- PROPERTY AND EQUIPMENT, NET

 

  December 31, 
   2019   2018 
Cost:        
         
Computers and software  $1,396   $1,302 
Office furniture and equipment   893    733 
Leasehold improvements   1,100    1,064 
Motor Vehicles   456    302 
           
   $3,845   $3,401 
           
Accumulated Depreciation:          
           
Computers and software  $1,251   $1,099 
Office furniture and equipment   669    580 
Leasehold improvements   458    371 
Motor Vehicles   210    243 
           
   $2,588   $2,293 
           
Property and equipment, net  $1,257   $1,108 

 

Depreciation expenses amounted to $277, $232 and $ 188 for the years ended on December 31, 2019, 2018 and 2017, respectively.

F-27

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 8:- GOODWILL AND OTHER INTANGIBLE ASSETS, NET

 

A.Other Intangible Assets:

 

   December 31,
2019
   December 31,
2018
   Weighted average amortization period
            
Cost:             
Brand name   946    670   4.1
Customer list   2,450    2,450   2.5
Software   111    111   3
Customer relationship   728    141   7
Backlog   90    -    
              
    4,325    3,372    
Accumulated amortization:             
Brand name   946    670    
Customer list   2,450    2,450    
Software   111    111    
Customer relationship   130    60    
Backlog   90    -    
              
    3,727    3,291    
              
Amortized cost  $598   $81    

 

F-28

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 8:- GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Cont.)

 

Intangible assets are amortized based on the straight-line method for their remaining useful life.

 

Amortization expenses amounted to $79, $ 57 and $ 57 for the years ended December 31, 2019, 2018 and 2017, respectively. In addition the Company recognized an impairment loss of the brand name and backlog related to the acquisition of Imdecol’s business operation in the amount of $356.

 

B.The changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 are as follows:

 

   Goodwill 
Balance as of January 1and December 31,2018   4,676 
Changes during 2019     
Acquisition of Imdecol   1,085 
Impairment of Goodwill (See Note 2J)   (614)
Balance as of December 31,2019  $5,147 

 

NOTE 9:- CURRENT MATURITIES OF LONG TERM LOANS

 

   Loan 

Weighted

interest

rate as of December 31,

2019

  December 31 
Short term loans  currency  %  2019   2018 
               
Current maturities  NIS  3.5 (Prime+1.75%)   664    467 
                 
          664    467 

 

As of December 31, 2019, the Company and its subsidiaries had an unutilized short term credit line in the amount of $1,380, bearing an annual interest of 3.3%.

 

F-29

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 10:- ACCRUED EXPENSES AND OTHER LIABILITIES

 

   December 31 
   2019   2018 
         
Derivatives (See Note 11)  $-   $87 
Professional services   149    97 
Accrued expenses related to  retirement cost of CO-CEO   72    - 
Tax accruals   3    10 
Other   195    119 
           
   $419   $313 

 

NOTE 11:- DERIVATIVES INSTRUMENTS

 

For time to time the Company uses derivative instruments primarily to manage exposure to foreign currency exchange rates. The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows due to changes in foreign currency exchange rates related to forecasted monthly payroll payments of employees which are paid in NIS.

 

Losses (gains) on designated derivatives reclassified from OCI into Consolidated Statement of Operations for the years ended:

 

   Year ended December 31, 
   2019   2018   2017 
             
Derivatives designated as cash flow hedging instruments:            
Cost of revenues  $(25)  $18   $(63)
Sales and marketing  $(16)  $13   $(61)
General and administrative  $(6)  $6   $(24)
                
Total expenses (income)  $(47)  $37   $(148)

  

NOTE 12:- FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:

 

   December 31, 2019 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative asset  $13    -   $13    - 
                     
   $13    -   $13    - 

  

   December 31, 2018 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative liabilities  $87    -   $87    - 
                     
   $87    -   $87    - 

 

F-30

 

  

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 13:- LONG-TERM LOANS, NET OF CURRENT MATURITIES

 

Classified by linkage terms and interest rates, the total amount of the loans is as follows:

 

Loan currency  Weighted interest
rate as of
December 31,
2019
  December 31, 
   %  2019   2018 
            
NIS  3.5 (Prime+1.75%)  $2,705   $2,334 
              
Less - current maturities      664    467 
              
      $2,041   $1,867 

 

(1)In October 2017, the Company and its Israeli subsidiaries entered into an agreement with Bank Beinleumi for the provision of credit facilities, which were used to pay Bank Leumi loans amounting to $2,976, Amounts drawn under the credit facilities in 2017 will be paid in monthly equal installments for a period of 6 years. In May 2019, the Company increased its credit facilities from Bank Beinleumi in the amount of $708, to pay for the acquisition of Imdecol business operations. The loan will be paid in monthly equal installments for a period of 5 years. See Note 3.

 

The Bank Beinleumi loan agreement includes covenants to maintain certain financial ratios related to shareholders’ equity, EBITDA and operating results. The Bank Beinleumi credit facilities are secured by a first ranking fixed charge on any unpaid share capital of the Company, the goodwill of the Company, and any insurance entitlements in the Company’s assets pledged thereunder, and a floating charges on all of the assets of the Company and its Israeli subsidiaries, owned now or in the future. As of December 31, 2019, the Company met the covenants set forth in the agreement.

 

2)The total amount to be paid by the Company is as follows:

 

Payment schedule  December 31,
2019
 
     
2020   664 
2021   664 
2022   662 
2023   655 
2024   60 
Total  $2,705 

  

F-31

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 14:- COMMITMENTS AND CONTINGENT LIABILITIES

 

a.Commitments:

 

1.Royalty commitments:

 

Under the Company’s research and development agreements with the Office of the Chief Scientist (“OCS”) and pursuant to applicable laws, the Company is required to pay royalties at the rate of 3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the research and development grants (dollar-linked) received from the OCS. The obligation to pay these royalties is contingent upon actual sales of the products. Royalties payable with respect to grants received under programs approved by the OCS after January 1, 1999, are subject to interest on the U.S. dollar-linked value of the total grants received at the annual rate of LIBOR applicable to dollar deposits at the time the grants are received. No grants were received since 2007.As of December 31, 2019, the Company has an outstanding contingent obligation to pay royalties to the OCS, including interest, in the amount of approximately $ 3,794, with respect to the grants. Since year 2012, the developed software for which the grant was received is no longer being sold and is not expected to be sold in the future, accordingly no royalty expenses were recorded during the respective years, and the Company anticipates that no royalties will be paid in the future.

 

2.Litigation:

 

1.As of December 31, 2019 The Company is a party to legal proceedings.

 

On December 4, 2018 the lessors of the Company’s facilities in Rishon Lezion filed a claim against the Company in the amount of NIS 1,800,000 (approximately $500,000). The Company was the previous owner of these facilities and had sold them to the Lessor in May 2013. The plaintiffs claim the Company misrepresented the physical status of the sold premises. The Company rejects the claim and has filed a counterclaim of NIS 850,000 (approximately $222,000) alleging breaches by the lessors of the lease agreement. In July 2019, the court dismissed the counterclaim as well as all of the allegations of the plaintiffs, excluding the claim regarding the depreciation of the facilities’ value for which an appraiser has been appointed by the court.

 

2.On April 9, 2017 D.D. Goldstein Properties and Investments Ltd., a shareholder of the Company (the “Plaintiff”) filed a claim against the Company’s prior Chairman Yosi Lahad, the Company’s prior Co-CEO, Yuval Viner, the Company’s Co-CEO and CFO, Eyal Cohen and Ms. Gabriela Jacobs, an (indirect) shareholder of the Company.

 

The Plaintiff claimed that the defendants, acting in bad faith, breached their duties of loyalty and care and several laws, by inducing the Plaintiff to purchase shares of the Company. The Plaintiff claimed that he was led to believe that the defendants shall facilitate his becoming a controlling shareholder of the Company. The claim was for a total amount of NIS 2,600,000 (approximately $750,000).

  

On February 17, 2019 the parties reached a settlement agreement, which received court approval, pursuant to which the claim was dismissed against a certain payment to the Plaintiff. The payment was made by the Company’s insurance company, and the Company contributed the deductible in the amount of $35,000.

 

F-32

 

  

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 15:- SHAREHOLDERS’ EQUITY

 

a.Ordinary Shares:

 

1.Issuance of Ordinary Shares in connection with Standby Equity Distribution Agreement:

 

On each of February 17, 2015 and May 8, 2017 the Company entered into a Standby Equity Distribution Agreement (“SEDA”), with YA Global Master SPV Ltd. (“YA Global”) and with YA II PN Ltd., respectively (YA II PN together with YA Global, “YA”). The SEDAs were for the sale of up to $ 1,300 and $2,000, respectively, of the Company’s Ordinary Shares to YA. The Company may affect the sale, at its sole discretion, during a forty-month period for the 2015 SEDA and a four-year period for the 2017 SEDA, beginning on the date on which the Securities and Exchange Commission first declares effective a registration statement registering the resale of the Company’s Ordinary Shares by YA. For each Ordinary Share purchased under the SEDA, YA will pay 93% of the lowest daily VWAP (as defined below) of the Ordinary Shares during the five consecutive trading days (or, commencing June 2016, three consecutive trading days), following the date of an advance notice from the Company (provided such VWAP is greater than or equal to 90% of the last closing price of the Ordinary shares at the time of delivery of the advance notice). Notwithstanding the forgoing, the notice shall not exceed $500. “VWAP” is defined as of any date, to be such date’s daily dollar volume-weighted average price of the Ordinary Shares as reported by Bloomberg, LP.  The Company may terminate the SEDA at any time upon prior notice to YA, as long as there are no advance notices outstanding and the Company has paid to YA all amounts then due.

 

In connection with the 2015 SEDA and 2017 SEDA, the Company issued Ordinary shares to YA as a commitment fee of 28,930 and 67,307, respectively. The commitment fee is recorded as prepaid expenses according to the consumption of the SEDA. As of December 31, 2019, the balance of those prepaid expenses was $77.

 

During the years 2017 until 2019, the Company issued to YA 709,144 Ordinary Shares, for a total amount of $1,448, net of $45 issuance expenses.

 

2.From February 19, 2019 until March 15, 2019, 125,195 options were exercised for $316.

 

3.On February 25, 2019 the Company issued 20,858 Ordinary Shares (equivalent to $62) to officers of the Company as year 2018 Bonus payments approved by the Board of Directors and shareholders.

 

F-33

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 15:- SHAREHOLDERS’ EQUITY (Cont.)

 

4.On May 16, 2019 the Company entered into and closed a securities purchase agreement with several investors for the sale of 400,000 Ordinary Shares at a price of $2.50 per share, resulting in gross proceeds of $1,000 and $65 issuance expenses. In addition, the Company issued to the investors 240,000 warrants with an exercise price of $3.30 per Ordinary Share. The warrants shall be exercisable for 3.5 years and shall be subject to a three-year vesting period as follows: one third of the warrants shall vest annually (upon the lapse of 12 months, 24 months and 36 months from issuance), provided that on the applicable vesting date the investor did not sell any of the Ordinary Shares purchased on the private placement. Vesting of all of the warrants shall be accelerated in the event that any one or more shareholders acting together acquire a block of 40% of the Company’s issued and outstanding share capital. In addition, the Company issued 60,000 warrants as fees to a placement agent.

 

5.On July 18, 2018, the Company’s Board of Directors approved an increase of 2,000,000 Ordinary Shares in the Company’s authorized share capital, from 4,000,000 authorized shares to 6,000,000 authorized shares.

  

    b. Warrants to shareholders

 

The Company’s outstanding warrants to shareholders as of December 31, 2019 are as follows:

 

Outstanding and

exercisable

warrants

 

Weighted average

exercise price

of outstanding

warrants

 

Weighted

average Remaining contractual
life (years)

300,000  3.30  2.82

 

See Note 15(a) 4.

 

c.Stock option plans:

 

The term of Company’s Israeli Stock Option Plan (the “Plan”) is until May 31, 2023. On November 2016 , December 2017 and July 2018, the Company’s shareholders approved an increase in the number of options for Ordinary Shares available for issuance under the Plan by 125,000 ,100,000 and 200,000, respectively, resulting in 700,000 options for Ordinary Shares available for issuance under the Plan. Any option which is canceled or forfeited before expiration will become available for future grants.

 

As of December 31, 2019 there are 238,381 options available for future grants under the Plan. Each option granted under the Plan expires five years from the date of the grant. The options vest gradually over a period of up to three years.

 

F-34

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 15:- SHAREHOLDERS’ EQUITY (Cont.)

 

A summary of the Company’s employee and director stock option activity and related information for the year ended December 31, 2019, is as follows:

 

   2019   2018   2017 
   Number
of
options
   Weighted-
average exercise price
   Number
of
options
   Weighted average exercise price   Number
of
options
   Weighted-
average exercise price
 
                         
Outstanding - beginning of year   320,875   $2.59    314,125   $3.39    252,670   $6.21 
Changes during the year:                              
Granted   95,000   $2.13    108,000   $2.39    75,000   $2.13 
Exercised   (125,195)  $2.52    -   $-    -   $- 
Forfeited   (43,806)  $3.65    (101,250)  $4.85    (13,545)  $49.09 
                               
Outstanding - year end   246,874   $2.26    320,875   $2.59    314,125   $3.39 
                               
Vested and expected to vest   148,498   $2.41    167,874   $2.90    192,584   $4.10 
Exercisable at year end   79,372   $2.38    157,874   $2.89    182,584   $4.17 

 

During the years 2019, 2018, and 2017, stock-based compensation expense related to employees and directors stock options amounted to $81, $67 and $60, respectively, and is included in general and administrative expenses within the statement of operations.

 

The weighted-average grant-date fair value of options granted during the years ended December 31, 2019, 2018 and 2017 was $1.97, $ 2.58 and $ 2.16, respectively. The weighted-average grant-date fair value of unvested options as of December 31, 2019 was $ 2.18. The aggregate intrinsic value of the outstanding options in each of the years ended December 31, 2019, 2018 and 2017 is $ 0. The aggregate intrinsic value represents the total intrinsic value (the difference between the fair market value of the Company’s Ordinary Shares on December 31 of the respective year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on such date.

 

During the year ended December 31, 2019, 125,195 options were exercised. No options were exercised during the years ended on December 31, 2018 and December 31, 2017. As of December 31, 2019 and 2018, there were a total of $155 and $163, respectively, of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s Plan. That cost is expected to be recognized through 2022.

 

F-35

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 15:- SHAREHOLDERS’ EQUITY (Cont.)

 

Options granted to employees and directors that are outstanding as of December 31, 2019 broken into exercise prices, are as follows:

 

               Weighted average 
   Options   Weighted   Options   Remaining 
   outstanding   average   exercisable   Contractual 
   as of   remaining   as of   life of options 
Exercise  December 31,   contractual   December 31,   exercisable 
Price  2019   life (years)   2019   (years) 
                 
2.118   87,500    4.83    -    - 
2.126   9,999    1.86    9,999    1.86 
2.131   45,002    2.93    22,501    2.93 
2.287   7,500    4.08    -    - 
2.388   83,500    3.19    33,499    2.67 
2.960   13,373    0.81    13,373    0.81 
                     
Grand Total   246,874    3.02    79,372    1.93 

 

See also Note 2r regarding the assumptions utilized for the un measurement of the fair value of stock options at the grant date. 

 

NOTE 16:- TAXES ON INCOME

 

a.Corporate tax rates in Israel

 

On December 30, 2016, as part of the Economic Efficiency Law (Legislative Amendments for Accomplishment of Budgetary Targets for Budget Years 2017-2018), 5777-2016, the corporate tax rate was reduced to 24% for the 2017 tax year and to 23% in 2018 tax year and thereafter.

 

b.Loss carry forward:

 

The Company and its Israeli subsidiaries have accumulated losses for Israeli income tax purposes as of December 31, 2019, in the amount of approximately $ 33,204. These losses may be carried forward and offset against taxable income in the future for an indefinite period. In addition, the Company and its Israeli subsidiaries have accumulated capital loses in the amount of approximately $23,597.

 

c.Deferred income taxes:

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows:

 

F-36

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 16:- TAXES ON INCOME (Cont.)

 

   December 31 
   2019   2018 
         
Net operating loss carry forward (1)  $7,658   $7,407 
Net capital loss carry forward (1)   5,427    5,427 
Allowances and provisions   129    120 
Intangible assets, net   (393)   (372)
           
    12,821    12,582 
           
Valuation allowance (2)  $(12,821)  $(12,582)
           
Net deferred tax Liability  $-   $- 

 

(1)See Note 16b.

 

(2)In years 2019 and 2018, the Company has provided valuation allowances on deferred tax assets that results from tax loss carry forward and other reserves and allowances due to its history of operating and capital losses and current uncertainty about the ability to realize these deferred tax assets in the future. Net change in valuation allowance during 2019 was due to a increase of net capital loss carry forward.

 

d.Taxes on income (tax benefit) are comprised as follows:

 

   Year ended December 31, 
   2019   2018   2017 
             
Current  $31   $19   $16 
Other   (79)   (60)   - 
                
   $(48)  $(41)  $16 
                
Domestic  $(52)  $(44)  $9 
Foreign   4    3    7 
                
   $(48)  $(41)  $16 

 

F-37

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 16:- TAXES ON INCOME (Cont.)

 

e.Income (loss) before taxes on income is comprised as follows:
   
   Year ended December 31, 
   2019   2018   2017 
             
Domestic  $(980)  $877   $750 
Foreign   19    72    39 
                
   $(961)  $949   $789 

  

f.Reconciliation of the theoretical tax expense to the actual tax expense:

 

The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating losses carry forward among the Company and various subsidiaries due to uncertainty of the realization of such tax benefits.

 

g.Tax assessments:

 

BOS-Odem, BOS-Dimex and BOS have final tax assessments through 2014.

 

Ruby-Tech Inc., a U.S. subsidiary, has final tax assessments through 2014 have all been assessed as final.

 

h.The Company and its subsidiaries file income tax returns in Israel and in the United States. BOS, BOS-Dimex and BOS-Odem may be subject to auditing by the Israel tax authorities for fiscal years 2015 and thereafter. Ruby-Tech Inc., a U.S. subsidiary, may be subject to auditing by the U.S. Internal Revenue Service for fiscal years 2015 and thereafter.

 

The Company believes that it has adequately provided for any reasonably foreseeable outcome related to tax audits and settlement. The final tax outcome of the Company’s tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals. Such differences could have a material effect on the Company’s income tax provision and net loss in the period in which such determination is made.

 

i.Uncertain tax positions:

 

As of December 31, 2019 and 2018, there is no balance of uncertain tax positions.

 

In accordance with the Company’s accounting policy, interest expense and potential penalties related to income taxes are included in the tax expense line of the Company’s Consolidated Statements of Operations.

 

F-38

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 17:- SUPPLEMENTARY INFORMATION TO STATEMENTS OF OPERATIONS

 

a.Financial expenses, net:

 

  

Year ended December 31,

 
   2019   2018   2017 
             
Financial income:               
Interest income  $-   $-   $1 
foreign currency differences gains   26    -    12 
                
    26    -    13 
Financial expenses:               
In respect of interest related to bank loans and bank fees   (245)   (192)   (259)
Other (mainly foreign currency differences)   (111)   (63)   (51)
                
    (356)   (255)   (310)
                
   $(330)  $(255)  $(297)

 

The following table sets forth the computation of basic and diluted net income per share:

 

b.Net earnings per share:

 

       Year ended December 31, 
       2019   2018   2017 
1.   Numerator:       
    Income (loss)  $(913)  $990   $773 
                    
    Net income (loss) available to Ordinary shareholders  $(913)  $990   $773 
                    
2.   Denominator (in thousands):               
                    
    Basic weighted average Ordinary shares outstanding (in thousands)   4,053    3,500    3,171 
    Diluted weighted average Ordinary shares outstanding (in thousands)   4,059    3,500    3,171 
                    
    Basic and diluted income (loss) per share  $(0.23)  $0.28   $0.24 

 

F-39

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 18:- SEGMENTS AND GEOGRAPHICAL INFORMATION

  

The Company manages its business in three reportable segments, consisting of the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment.

  

The Company’s management makes financial decisions and allocates resources, based on the information it receives from its internal management system. The Company allocates resources and assesses performance for each operating segment using information about revenues and gross profit. The Company applies ASC 280, Segment Reporting.

 

a.Revenues, gross profit and assets for the operating segments for the years 2019, 2018 and 2017 were as follows:

 

   RFID  

Supply Chain Solutions

   Intelligent Robotics   Consolidated 
2019                
Revenues  $13,240   $19,750   $827   $33,817 
Gross profit  $2,906   $3,750   $2   $6,658 
Impairment of Goodwill and intangible assets  $-   $-   $(970)  $(970)
Operating Income (loss)  $(126)  $1,137   $(1,642)  $(631)
Goodwill  $4,676   $-   $471   $5,147 
Long Term assets related to segment (excluding Goodwill)  $786   $1,063   $881   $2,730 
                     
2018                    
Revenues  $14,445   $18,205   $-   $32,650 
Gross profit  $3,371   $3,372   $-   $6,743 
Operating Income  $306   $898   $-   $1,204 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $649   $717   $-   $1,366 
                     
2017                    
Revenues  $13,666   $15,495   $-   $28,932 
Gross profit  $3,623   $2,722   $-   $6,345 
Operating Income  $591   $495   $-   $1,086 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $780   $229   $-   $1,009 

  

b.The following presents total revenues for the years 2019, 2018 and 2017 based on the location of customers and long- lived assets based on major geographic areas in which the Company operates:

 

   Year ended December 31, 
   2019   2018   2017 
   Total   Long-lived   Total   Long-lived   Total   Long-lived 
   revenues   assets *   revenues   assets *   revenues   assets * 
                         
Israel  $23,493   $1,257   $22,990   $1,108   $21,870   $651 
Far East   5,055    -    3,800    -    1,416    - 
India   3,624    -    4,209    -    4,497    - 
America   901    -    1,189    -    918    - 
Europe   744    -    462    -    231    - 
                               
   $33,817   $1,257   $32,650   $1,108   $28,932   $651 

 

(*)Long-lived assets are comprised of property and equipment (intangible assets and goodwill are not included).

 

c.There were no major customer during the reported periods.

 

F-40

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 19:- LEASES

 

We have operating leases for office space, warehouses and car leases. We determine if a contract contains a lease at inception or modification of a contract. Our leases generally do not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. Many of our leases contain rental escalation, renewal options and/ or termination options that are factored into our determination of lease payments as appropriate. Variable lease payment amounts that cannot be determined at the commencement of the lease are not included in the right-to-use assets or liabilities.

 

The following table presents the lease balances within the Consolidated Balance Sheet as of December 31, 2019:

 

  

Classification on the Balance Sheet

  Year ended
December 31,
2019
 
Assets :        
Operating lease asstes  Operating lease right of use asstes, net   720 
Liabilities:        
current        
Operating lease liabilities  Operating lease liabilities, current   551 
Long term        
Operating lease liabilities  Operating lease liabilities, non-current   289 
         
Remaining Lease Term        
Vehicles      .036 -2.33 years 
Facilities rent      1.33-3.33 years 
         
Weighted Average Discount Rate        
Vehicles      3.5%
Facilities rent      3.5%

 

The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under no cancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on our Consolidated Balance Sheet as of December 31, 2019:

 

future lease payments are:    
2020   509 
2021   250 
2022   35 
2023   10 
    804 

  

Expense under operating leases was $0.9 million for the year ended December 31, 2019. Operating lease costs are included within Operating loss in the Consolidated Statement of Operations. Short-term lease costs were not material. Supplemental cash flow information is as follows:

 

   Year ended December 31,
2019
 
Operating cash out flows from operating lease   120 

 

F-41

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 20:- RELATED PARTIES

 

Agreements with iDnext:

 

On January 1, 2016 the Company, through its wholly owned subsidiary BOS-Dimex, consummated the acquisition of the business operations of iDnext Ltd. (“iDnext”) and its subsidiary Next-Line Ltd. (“Next-Line”). iDnext is controlled by Mr. Moti Harel, who was a member of the Company’s Board of Directors until December 12, 2017.

 

Pursuant to a Management Services Agreement entered into as part of the acquisition agreement, iDnext was paid a monthly fee of NIS 33,000 (approximately $8.5) through December 31, 2017. The Management Services Agreement expired on December 31, 2017.

 

On June 2018 a new agreement was signed with the following terms:

 

1.iDnext monthly fee of NIS increased from NIS 33,000 to NIS 53,000 and bonus of 15% from the net profit of certain product line, effective from January 1, 2018.

 

2.Three employees of BOS Dimex transferred to be employed by iDnext for a monthly consideration of 35,000 NIS.

 

3.Mr. Harel was appointed as a director to BOS-Dimex’s Board of Directors in June 2018.

 

On February 10, 2019, the Company terminated the agreement with iDnext.

 

Expenses incurred according to the agreement with iDnext are as follows:

 

  

Year ended December 31,

 
   2019   2018   2017 
             
Monthly fees  $49   $183   $125 
Bonus   10    49    - 
Payments for employees   33    39    - 
                
Total  $92   $271   $125 

 

F-42

 

 

B.O.S. BETTER ONLINE SOLUTIONS LTD.

AND ITS SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

 

NOTE 21:- SUBSEQUENT EVENTS

 

1)On February 2, 2020 the Company filed a claim against Imdecol, requesting to enforce the pledges it has made for the benefit of the Company, due to Imdecol’s inability the repay its debts to the Company. On February 25, 2020, the District court of Tel-Aviv ruled in favor of the Company and determined that the pledges are to be enforced.

 

2)On February 19, 2020, the Company, through its wholly owned subsidiary, Ruby Tech Inc. entered into an agreement for a loan from YA II PN, LTD (“YA II”) in the principal amount of $600,000.

 

The principal loan amount bears an interest rate of 8% per annum and is not secured and is guaranteed by BOS-Odem and by the company. The loan will be paid in 12 monthly installments of principal and interest starting from March 2020. BOS issued to the lender warrants to purchase up to 100,000 ordinary shares of the Company at an exercise price of $3.00 per ordinary share. If following six months from the issuance of the warrants the shares underlying the warrants are not subject to an effective registration statement, the warrants may be exercised on a cashless basis. The warrants are exercisable for a period of two years from issuance. The Company paid to the lender a commitment fee of $15,000.

 

3)In March 2020, the Company increased its credit facilities from Bank Beinleumi in the amount of $180,000 in interest rate of Prime+1.5%. The loans will be paid from June 2020, in monthly equal installments for a period of 2 years.

 

4)In December 2019, a new strain of coronavirus (“COVID-19”) was reported to have surfaced in Wuhan, Hubei Province, China. During January, February and March of 2020, COVID-19 has spread globally, including in Israel. In response to the COVID-19 virus, countries have taken different measures in relation to prevention and containment including lock-down and quarantine. The COVID-19 virus continues to impact worldwide economic activity and pose the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities or otherwise elected by companies as a preventive measure. The Company relies, with respect to some of its products, on manufacturers in China. The effects of the COVID-19 may result in such products not being produced and/or shipped to the Company. In addition, mandated government authority measures or other measures elected by companies as preventive measures may lead to our consumers being unable to complete purchases or other activities. COVID-19 may have an adverse effect on trading, on our operations, collection of our client debt and, its continuous spread and protective measures taken by the authorities may adversely affect our future results of operations, cash flows and financial condition.

 

 

F-43

 

 

Exhibit 99.2

 

5A. Operating Results

 

Change in Reportable Segments

 

Effective January 1, 2020, the Company has realigned its reporting structure to include three reportable segments: RFID, Supply Chain Solutions and Intelligent Robotics. During the first six months of 2020, the Company experienced a worsening in its Intelligent Robotics business, which was previously reported as part of the RFID segment. In order to remedy the problems associated with the Intelligent Robotics’ business, management determined that it would be advisable to review its operating results on a stand-alone basis. The discussion of our results of operations that follows has been revised to reflect our new reportable segments.

 

Comparison of 2019 to 2018

 

Consolidated revenues increased by 3.4% to $33.8 million in the year 2019 from $32.7 million in the year 2018. The growth is attributed to our supply chain division which increased by 8.5% due primarily to increased sales in the Far East.

 

Gross profit for 2019 was $6.66 million (a gross margin of 19.6%) as compared to $6.75 million (a gross margin of 20.6%) for 2018. The decrease is attributed to the Intelligent Robotics segment.

 

Sales and Marketing expenses increased to $4.06 million in 2019 from $3.7 million in 2018. The increase in expenses was primarily due to sales and marketing expenses in the amount of $350,000 attributed to the Intelligent Robotics division that was acquired from Imdecol on June 1, 2019.

 

General and administrative expenses increased to $2.25 million in 2019 from $1.84 million in 2018. The increase in expenses was primarily due to the following factors:

 

Acquisition expenses in the amount of $138,000 attributed to the Intelligent Robotics division that was acquired from Imdecol on June 1, 2019.

 

Costs of $88,000 related to special shareholder’s meeting.

 

Costs of $72,000 attributed to the resignation of the Co-CEO, Mr. Yuval Viner.

 

During 2019, the Company recorded an impairment loss of Goodwill and Intangible assets related to the acquisition of Imdecol’s business operation in the amount of $614 and $356, respectfully.

 

Financial expenses increased to $330,000 in year 2019 from $255,000 in year 2018. The increase in financial expenses is related to the new accounting standard 842 – “ Leases”. The Company adopted the new standard as of January 1, 2019 and it resulted in currency differences expenses in the amount of $120,000.

 

Net loss for year 2019 was $913,000 as compared to a net income of $990,000 in 2018. The basic and diluted net loss per share in 2019 was $0.23, compared to basic and diluted net income per share of $0.28 in 2018.

 

For a discussion on our financial statements for the year 2017 see item 5A included in our annual report on Form 20-F for the year ended December 31, 2018, which was filed with the U.S. Securities and Exchange Commission on April 1, 2019.

  

1

 

   

Variability of Quarterly Operating Results

 

Our revenues and profitability may vary in any given year, and from quarter to quarter, depending on the mix of products sold. In addition, due to potential competition and other factors, we may be required to reduce prices for our products and services in the future.

 

Our future results will be affected by a number of factors including our ability to:

 

  establish effective sales channels and manage them;
     
  introduce and deliver new products on a timely basis;
     
  anticipate accurately customer demand patterns;

 

  manage future inventory levels in line with anticipated demand; and
     
  successfully meet bank financial covenants.

 

These results may also be affected by currency exchange rate fluctuations and interest rate and economic conditions in the geographical areas in which we operate. There can be no assurance that our historical trends will continue, or that revenues, gross profit and net income in any particular quarter will not be lower than those of the preceding quarters, including comparable quarters.

 

Impact of Inflation and Currency Fluctuations

 

In 2019, the NIS depreciated against the dollar by approximately 7.8%. In 2018, the NIS depreciated against the dollar by approximately 8.1%, while in 2017 the NIS appreciated against the dollar by 9.8%. In 2016, the NIS appreciated against the dollar by 1.5%. In the years 2019, 2018 and 2017, the inflation rate in Israel was 0.6%, 0.8% and 0.4%, respectively. In 2016, annual deflation was 0.2%. Therefore, the U.S. dollar cost of our Israeli operations decreased in 2018 and 2015 and increased in 2019, 2017 and 2016. We cannot predict any future trends in the rate of inflation in Israel and whether the NIS will appreciate against the U.S. dollar or vice versa. Any increase in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS in relation to the U.S. dollar, will increase our labor and other costs, which will increase the U.S. dollar cost of our operations in Israel and harm our results of operations.

 

Effective Corporate Tax Rate

 

The Israeli corporate tax rate was 26.5% in 2015, 25% in 2016 and 24% in 2017. Effective as of January 1, 2018 the corporate tax rate is 23%.

 

Conditions in Israel

 

We are incorporated under the laws of the State of Israel, where we also maintain our headquarters and our research and development and manufacturing facilities. See Item 3D. “Risk Factors – Risks Relating to Our Location in Israel” for a description of governmental, economic, fiscal, monetary or political polices or factors that have materially affected or could materially affect our operations.

 

 

2

 

 

Exhibit 99.3

  

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

We hereby consent to the incorporation by reference in the Registration Statements of B.O.S. Better Online Solutions Ltd. on Forms F-3 (File No. 333-233113 and 333-223158) and Forms S-8 (File No. 333-228344, 333-179253, 333-160414, 333-148318, 333-136957 and 333-110696) of our report dated March 31, 2020 (except for notes 1b, 2j, 3 and 18, as to which the date is October 22, 2020), included in this current report on Form 6-K.

 

/s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL

 

Tel Aviv, Israel

October 22, 2020

v3.20.2
Document and Entity Information
12 Months Ended
Dec. 31, 2019
Document and Entity Information [Abstract]  
Entity Registrant Name BOS BETTER ONLINE SOLUTIONS LTD
Entity Central Index Key 0001005516
Amendment Flag false
Current Fiscal Year End Date --12-31
Document Type 6-K
Document Period End Date Dec. 31, 2019
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2019
Entity File Number 001-14184
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
CURRENT ASSETS:    
Cash and cash equivalents $ 339 $ 1,410
Restricted bank deposits 240 332
Trade receivables (net of allowance for doubtful accounts of $32 and $31 at December 31, 2019 and 2018, respectively) 10,063 8,624
Other accounts receivable and prepaid expenses 1,273 829
Inventories 5,407 2,874
Total current assets 17,322 14,069
LONG-TERM ASSETS 155 177
PROPERTY AND EQUIPMENT, NET 1,257 1,108
OPERATING LEASE RIGHT-OF-USE ASSETS, NET 720
OTHER INTANGIBLE ASSETS, NET 598 81
GOODWILL 5,147 4,676
Total assets 25,199 20,111
CURRENT LIABILITIES:    
Current maturities of long-term loans 664 467
Operating lease liabilities, current 551
Trade payables 6,503 4,106
Employees and payroll accruals 1,007 778
Deferred revenues 836 768
Advances net of inventory in progress 29
Accrued expenses and other liabilities 419 313
Total current liabilities 10,009 6,432
LONG-TERM LIABILITIES:    
Long-term loans, net of current maturities 2,041 1,867
Operating lease liabilities, non-current 289
Accrued severance pay 303 301
Total long-term liabilities 2,633 2,168
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:    
Ordinary Shares of NIS 80.00 nominal value: Authorized; 6,000,000 shares at December 31, 2019 and 2018, respectively; Issued and outstanding: 4,257,790 and 3,553,714 shares at December 31, 2019 and 2018, respectively 80,482 75,317
Additional paid-in capital 2,063 5,369
Accumulated other comprehensive loss (233) (333)
Accumulated deficit (69,755) (68,842)
Total shareholders' equity 12,557 11,511
Total liabilities and shareholders' equity $ 25,199 $ 20,111
v3.20.2
Consolidated Balance Sheets (Parenthetical)
$ in Thousands
Dec. 31, 2019
USD ($)
shares
Dec. 31, 2019
₪ / shares
Dec. 31, 2018
USD ($)
shares
Dec. 31, 2018
₪ / shares
Statement of Financial Position [Abstract]        
Trade receivables, allowance for doubtful accounts | $ $ 32   $ 31  
Ordinary shares, par value per share | ₪ / shares   ₪ 80.00   ₪ 80.00
Ordinary shares, shares authorized 6,000,000   6,000,000  
Ordinary shares, shares issued 4,257,790   3,553,714  
Ordinary shares, shares outstanding 4,257,790   3,553,714  
v3.20.2
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Revenues $ 33,817 $ 32,650 $ 28,932
Cost of revenues 27,159 25,907 22,587
Gross profit 6,658 6,743 6,345
Operating costs and expenses:      
Sales and marketing 4,064 3,705 3,389
General and administrative 2,255 1,834 1,870
Impairment of intangible assets 356
Impairment of Goodwill 614
Total operating costs and expenses 7,289 5,539 5,259
Operating income (loss) (631) 1,204 1,086
Financial expenses, net (330) (255) (297)
Income before taxes on income (loss) (961) 949 789
Taxes on income (tax benefit) (48) (41) 16
Net income (loss) $ (913) $ 990 $ 773
Basic and diluted net Income (loss) per share $ (0.23) $ 0.28 $ 0.24
Shares (in thousands) used in calculation of earnings per share:      
Basic 4,053 3,500 3,171
Diluted 4,059 3,500 3,171
v3.20.2
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Net income (loss) $ (913) $ 990 $ 773
Cash flow hedging instruments:      
Change in unrealized gains and losses 53 (76) (93)
Gain (loss) in respect of derivative instruments designated for cash flow hedge, net of taxes 47 (37) 148
Other comprehensive income (loss) 100 (113) 55
Comprehensive income (loss) $ (813) $ 877 $ 828
v3.20.2
Statements of Changes in Shareholders' Equity - USD ($)
$ in Thousands
Ordinary Shares
Share capital and additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total
Beginning Balance at Dec. 31, 2016   $ 79,464 $ (275) $ (70,605) $ 8,584
Beginning Balance, Shares at Dec. 31, 2016 2,935,286        
Issuance of Ordinary Shares   746 746
Issuance of Ordinary Shares, shares 421,403        
Other comprehensive income/ loss   55 55
Share-based compensation expense   60 60
Share-based compensation expense, Shares        
Net income 773 773
Ending Balance at Dec. 31, 2017   80,270 (220) (69,832) 10,218
Ending Balance, Shares at Dec. 31, 2017 3,356,689        
Issuance of Ordinary Shares   349 349
Issuance of Ordinary Shares, shares 197,025        
Other comprehensive income/ loss (113) (113)
Share-based compensation expense   67 67
Share-based compensation expense, Shares        
Net income 990 990
Ending Balance at Dec. 31, 2018   80,686 (333) (68,842) 11,511
Ending Balance, Shares at Dec. 31, 2018 3,553,714        
Issuance of Ordinary Shares   527 527
Issuance of Ordinary Shares, shares 178,881        
Exercise of options   316 316
Exercise of options, Shares 125,195        
Issuance of Ordinary shares related to securities purchase agreement, net   935 935
Issuance of Ordinary shares related to securities purchase agreement, net, shares 400,000        
Other comprehensive income/ loss   100 100
Share-based compensation expense   81 81
Share-based compensation expense, Shares        
Net income   (913) (913)
Ending Balance at Dec. 31, 2019   $ 82,545 $ (233) $ (69,755) $ 12,557
Ending Balance, Shares at Dec. 31, 2019 4,257,790        
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Jun. 01, 2019
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:        
Net income (loss)   $ (913) $ 990 $ 773
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation amortization and Impairment of Goodwill   1,327 289 245
Gain from sale and disposal of property and equipment   (10) (10)
Currency fluctuation of loans   213 (225) 264
Severance pay, net   2 15 92
Share-based compensation expense   81 67 60
Decrease (Increase) in trade receivables, net   (1,970) 1,180 (1,876)
Decrease (Increase) in other accounts receivable and other assets   (357) 84 58
Decrease (Increase) in inventories   (2,125) 366 (926)
Increase (decrease) in trade payables   2,397 (1,845) 1,350
Increase (decrease) in employees and payroll accruals,deferred revenues, accrued expenses and other liabilities   440 (178) 347
Net cash used in (provided by) operating activities   (915) 743 377
Cash flows from investing activities:        
Purchase of property and equipment   (335) (689) (368)
Proceeds from sale of property and equipment   10 53
Acquisition of Imdecol   (1,895)
Net cash used in investing activities   (2,220) (689) (315)
Cash flows from financing activities:        
Proceeds from issuance of shares, net   1,498 377 606
Proceeds from exercise of options   316
Proceeds from long-term loans   737 2,976
Repayment of long-term loans   (579) (469) (3,346)
Net cash provided by (used in) financing activities   1,972 (92) 236
Increase (decrease) in cash, cash equivalents and restricted cash   (1,163) (38) 298
Cash, cash equivalents and restricted cash at the beginning of the year   1,742 1,780 1,482
Cash, cash equivalents and restricted cash at the end of the year   579 1,742 1,780
(a) Net cash paid during the year for:        
Interest   98 91 161
Taxes   31 15 7
(b) Non-cash activities:        
Prepaid expenses related to 2017 SEDA (see Note 15a(1) 35 28
Operating lease right-of-use assets due to adoption of ASU No. 2016-02   1,176
Operating lease liabilities due to adoption of ASU No. 2016-02   $ 1,176
(c) Net cash used to pay for the Acquisition of Imdecol (see Note 3):        
Inventory 380      
Intangible assets , Net 953      
Property and equipment, Net 91      
Loss Contracts (614)      
Goodwill 1,085      
Net cash used to pay for the Acquisition $ 1,895      
v3.20.2
General
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
GENERAL

NOTE 1:- GENERAL

 

a.B.O.S. Better Online Solutions Ltd. ("BOS" or the "Company") is an Israeli corporation.

 

The Company's shares are listed on NASDAQ under the ticker BOSC.

 

  b. The Company has three operating segments: the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment (see Note 18).

 

The Company's wholly owned subsidiaries include:

 

  1. BOS-Dimex Ltd., ("BOS-Dimex"), is an Israeli company that comprises the RFID segment. BOS-DIMEX provides comprehensive turn-key solutions for Automatic Identification and Data Collection (AIDC), combining a mobile infrastructure with software application of manufacturers that we represent. In addition, BOS-Dimex offers on-site inventory count services in the fields of apparel, food, convenience and pharma, asset tagging and counting services for corporate and governmental entities.

 

2.BOS-Odem Ltd. ("BOS-Odem"), an Israeli company, that is a distributor of electro-mechanical components, mainly to customers in the aerospace, defense and other industries and a supply chain service provider for aviation customers that seek a comprehensive solution to their components-supply needs. BOS-Odem is part of the Supply Chain Solutions segment; and

 

3.Ruby-Tech Inc., a New York corporation, is a wholly-owned subsidiary of BOS-Odem and a part of the Supply Chain Solutions segment.
v3.20.2
Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated financial statements are prepared in accordance with the United States generally accepted accounting principles ("U.S. GAAP").

 

a.Use of estimates:

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions are used in determining values of goodwill and other identifiable intangible assets, revenues and the net realizable value of inventory. Actual results could differ from those estimates.

 

b.Financial statements in U.S. dollars:

 

A substantial portion of the Company's revenues is denominated in U.S. dollars ("dollars"). The Company's management believes that the dollar is the primary currency of the economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 830, Foreign Currency Matters. All transactions gains and losses from the measurement of monetary balance sheet items are reflected in the statement of operations as financial income or expenses as appropriate.

   

c.Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances, including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.

 

d.Cash equivalents:

 

Cash equivalents are short-term highly liquid investments with original maturities of less than three months from date of purchase.

 

e.Restricted bank deposits:

 

Restricted bank deposits are deposits related to forward contracts with banks. Restricted deposits are presented at their cost.

 

f.Inventories:

 

The inventory is valued at the lower of cost or net realizable value. Cost is determined using the moving average cost method. In 2019 and 2018, inventory write-offs amounted to $91 and $52, respectively.

 

Inventory write-offs and write-downs are provided to cover risks arising from slow-moving items or technological obsolescence.

 

g.Property and equipment, net:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

 

    %    
         
Computers and software   20 - 33   (Mainly 33)
Office furniture and equipment   6 - 15   (Mainly 6)
Leasehold improvements  

Over the shorter of the period

of the lease or the life of the assets

   
Motor vehicles   15    

 

h.Business combination:

 

The consolidated financial statements include the operations of an acquired business from the date of the acquisition's consummation. Acquired businesses are accounted for using the acquisition method of accounting in accordance with ASC 805, "Business Combinations", which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

 

Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. Contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at a probability weighted assessment of its fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings.

 

i.Impairment of long-lived assets and intangible assets subject to amortization:

 

The Company's long-lived assets are reviewed for impairment in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Asset, whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value.

 

Recoverability of intangible assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the asset. If intangible assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.

 

Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. As of December 31, 2019 the remaining intangible assets were comprised mainly of costumer relationship.

 

During the year ended December 31, 2019 the Company recognized an impairment loss related to intangible assets in an amount of $356. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

 

j.Goodwill:

 

Goodwill represents excess of the costs over the net assets of businesses acquired. Under ASC 350, Intangibles - Goodwill and Other ("ASC 350"), goodwill is not amortized but instead is tested for impairment at least annually or between annual tests in certain circumstances, and written-down when impaired.

 

The Company performs its annual impairment analysis of goodwill as of December 31 of each year, or more often if indicators of impairment are present. The provisions of ASC 350 require that the impairment test be performed on goodwill at the level of the reporting units As required by ASC 350, the Company chooses either to perform a qualitative assessment whether the two-step goodwill impairment test is necessary or proceeds directly to the two-step goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the two-step goodwill impairment test. If the Company determines otherwise, no further evaluation is necessary.

 

When the Company decides or is required to perform the two-step goodwill impairment test, in the first step, or "Step 1", the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or "Step 2", of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions. 

 

The Company operates in three operating-based segments: the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment. The Company's goodwill is related to the Intelligent Robotics segment and the RFID segment, which are both reporting units.

 

The Company determined the fair value of each of the reporting units using the Income Approach, which utilizes a discounted cash flow model, as it believes that this approach best approximates each of the reporting units fair value at this time. The impairment test was based on a valuation performed by management with the assistance of a third party appraiser. Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. The most significant assumptions used for the Income Approach for the 2019 impairment test were five years of projected net cash flows, WACC of 15% and a long-term growth rate of 2% for two reporting units. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record additional impairment charges for its remaining balance of goodwill.

 

The aggregate fair value of the reporting units tested for impairment depends on various factors, some of which are qualitative and involve management judgment, including stable backlog coverage and experience in meeting operating cash flow targets.

 

During the year ended December 31, 2019 the Company recognized an impairment loss of $614 related to its Intelligent Robotics segment. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

 

k.Severance pay:

 

The Company's liability for severance pay for its Israeli employees is calculated pursuant to the Israeli Severance Pay Law - 1963 (the "Israeli Severance Pay Law"), based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. Employees employed for a period of more than one year are entitled to one month's salary for each year of employment or a portion thereof. The Company's liability for its Israeli employees is mostly covered by insurance or pension policies designed solely for distributing severance pay.

 

Most of the Company's employees are subject to Section 14 of the Israeli Severance Pay Law. The Company's contributions towards severance pay, for Israeli employees subject to this section, have replaced its severance obligation. Upon contribution of the full amount of the employee's monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are required to be made by the Company to the employee in respect of severance pay. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.

 

Severance expenses for years 2019, 2018 and 2017 amounted to $315, $ 210 and $ 451, respectively.

 

l.Revenue recognition:

 

The Company derives its revenues mainly from the sale of products and supporting services.

 

In accordance with ASC Topic 605 "Revenue Recognition", until December 31, 2017 (prior to the adoption of ASC Topic 606) the Company recognized revenues from sale of products when the following fundamental criteria were met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.

 

Revenues from service contracts were recognized ratably over the service period.

 

The Company applied the provisions of ASC Topic 605-25, "Revenue Recognition - Multiple-Element Arrangements", as amended. ASC Topic 605-25 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products and services. For such arrangements, each element of the contract was accounted for as a separate unit when it provided the customer value on a stand-alone basis.

 

The Company followed the guidance in ASC 605-35, "Revenue Recognition - Construction-Type and Production-Type Contracts" ("ASC 605-35"), with respect to revenues from customized software solutions, whereby the Company applied the Completed contract method, since the Company was unable to obtain reasonable dependable estimates of the total effort required for completion. Under the completed contract method, all revenue and related costs of revenue were deferred and recognized upon completion. Provisions for estimated losses on contracts in process were recognized in the period such losses were determined.

 

Deferred revenues included unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts were recognized over the period of the contract and advances were recognized once the delivery of the products is done.

 

Revenue recognition accounting policy applied from January 1, 2018 (following the adoption of ASC Topic 606):

 

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective transition method to all contracts that were not completed on the effective date of ASC 606. Among others. The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The adoption of ASC 606 resulted in changes to the Company's accounting policies for revenue recognition previously recognized under ASC 605 as detailed below. However, there were no significant changes to the timing or pattern of revenue recognition to any of the revenue streams of the Company under ASC 606 and those that were previously reported under ASC 605. Accordingly, the adoption of ASC 606 did not have material effect on the consolidated statements of operations and balance sheets.

 

In accordance with ASC 606, The Company determines revenue recognition through the following five steps:

 

Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.

 

A contract with a customer exists when all of the following criteria are met: the parties to the contract have approved it (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the Company can identify each party's rights regarding the distinct goods or services to be transferred ("performance obligations"), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only if it is not considered constrained (i.e. it is considered probable that a significant reversal in the amount of cumulative revenue recognized will not occur).

  

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. A product is transferred when, or as, the customer obtains control of that product, and a service is considered transferred as the services are received and used by the customers.

 

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations such as different products or products and services the Company performs an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

 

The Company records revenues net of any value added or sales tax.

 

In accordance with ASC 606, the Company's revenues are recognized as follows:

 

1.The Company generates its revenues primarily from the sale of products such as electro mechanical components and Automatic Identification Data Capture hardware manufactured by third parties, through a direct sales to its customers. Revenues from sales of products are recognized at the point of time when the control of the product is passed on to the customer, mostly upon delivery to the customer, either at the Company premises by delivery to the customer carrier or upon delivery to the customer premises, as applicable to each contract.

 

2.Revenues from service contracts are recognized over the contract's period (for time-based services) or based on the amount of work performed (for on-site inventory count and similar services). Renewals of service support contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably over the period.

 

3.For arrangements that involve the delivery or performance of multiple products or products sold with service contracts, the Company analyzes whether the goods or services that were promised to the customer are distinct. A good or service promised to a customer is considered 'distinct' if both of the following criteria are met: 1. The customer can benefit from the goods or service, either on its own (i.e. without any professional services, updates or technical support) or together with other resources that are readily available to the customer; and, 2. The Company's promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract.

 

Revenues from service contracts sold to customers within a single contractually binding arrangement together with products, were determined to be distinct and therefore, are accounted for revenue recognition purposes, as a separate performance obligation. Accordingly, the amount attributed to the service contract is recognized over time, on a straight-line basis over the contract's period, as the services are mostly refer to time-based support services.

 

Revenues from operating services and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from robotics and automation projects are recognized using the percentage-of-completion method. When the Company is unable to recognize Revenues according to this method, the Revenues are recognized upon Completion of the projects.

 

Revenues are recognized based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenues, and are recognized in the period in which the revisions are determined.

 

In specific instances where there is a lack of dependable estimates or inherent risks that may cause the forecast to be doubtful, then the completed-contract method is followed. Revenue is recognized when the contract is substantially complete and when collectability is reasonably assured. Costs that are closely associated with the project are deferred as contract costs and recognized similarly to the associated revenues.

 

4.Deferred revenues include unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts are recognized over the period of the contract and advances are recognized once the delivery of the products is done. Deferred revenues include advanced payments from customers in the amount of $144 as of December 31, 2019. This amount is expected to be recognized during 2020, once the delivery of the products is done. In addition, deferred revenues include unearned amounts from service contracts, which are mostly for a period of three to five years, and the Company recognizes the revenues over the contract's period. As of December 31, 2019, the deferred revenues from service contracts amounted to $717. This amount will be mostly recognized in the years 2020 until 2022. The deferred revenues also include amounts related to software projects in the amount of $188.

 

m.Income taxes:

 

The Company and its subsidiaries account for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"). ASC 740 prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely than not to be realized. Interest expense and potential penalties related to income taxes are included in the tax expense line of the Company's Consolidated Statements of Operations.

 

Following the initial application of ASU 2015-17, which became effective on January 1, 2017, deferred tax balances are presented as non-current amounts.

 

The Company implements a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with ASC 740. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

  

n.Concentrations of credit risk and allowance for doubtful accounts:

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, trade receivables, other accounts receivable and foreign currency derivative contracts.

 

The trade receivables of the Company are derived from sales to customers located primarily in Israel, the Far East, Europe and America. The Company generally does not require collateral however a significant part of the Company's customers outside of Israel are insured against customer nonpayment, through the Israeli Credit Insurance Company Ltd.

 

In certain circumstances, the Company may require letters of credit, other collateral, additional guarantees or advanced payments. An allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection. The expenses (income) related to the allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017, is $1, $17 and $27, respectively.

 

  o. Contingencies

 

The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of their business and in connection with certain agreements with third parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.

 

p.Derivative financial instruments:

 

ASC 815, "Derivatives and Hedging", requires the presentation of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) the Company applied the following:

 

Until December 31, 2018, the effective portion of the changes in fair value of the derivative instruments designated for hedging purposes was reported as a component of other comprehensive income ("OCI"), net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, was recognized in current earnings during the period of change. During the reporting periods, up and until December 31, 2017, the gains or losses required to be recognized in earnings for hedge ineffectiveness were insignificant.

 

Commencing January 1, 2019, the entire changes in fair value of the derivative instruments designated for hedging purposes that were determined as qualifying for hedging purposes (including the ineffective components of the hedging relationship) were reported as a component of OCI, net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

 

For other derivatives which do not qualify for hedge accounting, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income as incurred in financing income (expenses), net.

 

See Note 11 for disclosure of the derivative financial instruments in accordance with ASC 815.

 

q.Basic and diluted net income per share:

 

Basic net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year. Diluted net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year, plus the potential dilution to Ordinary Shares considered outstanding during the year, in accordance with ASC 260, Earning per Share.

 

The total number of Ordinary Shares related to outstanding options and warrants that was excluded from the calculations of diluted net earnings per share, since they were determined to have an anti-dilutive effect, was 13,373, 196,750 and 314,125 for the years ended December 31, 2019, 2018, and December 31, 2017, respectively.

 

r.Accounting for share-based compensation:

 

The Company accounts for equity-based compensation in accordance with ASC 718, Stock Compensation ("ASC 718"), which requires the recognition of compensation expenses based on estimated fair values for all equity-based awards made to employees and directors.

 

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.

 

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures. The Company considers many factors when estimating forfeitures, including employee class and historical experience. 

 

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the date of grant, equal to the expected option terms. The expected option term represents the period that the Company's stock options are expected to be outstanding and was determined based on the simplified method permitted by the SEC's Staff Accounting Bulletin ("SAB") No.107 and extended by SAB 110 as the average of the vesting period and the contractual term.

 

The Company currently uses the simplified method as adequate historical experience is not available to provide a reasonable estimate.

 

The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

 

The fair value for options granted in years 2019, 2018 and 2017 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

 

   Year ended December 31, 
   2019   2018   2017 
             
Risk-free interest   1.52%   2.73%   2.05%
Dividend yields   0    0    0 
Volatility   55%   55%   57%
Expected option term   3.5 years    3.5 years    3.5 years 
Forfeiture rate   0%   0%   0%

  

Until December 31, 2018 the Company applies ASC 505-50, "Equity-Based Payments to Non-Employees" ("ASC 505") with respect to options and warrants issued to non-employees, which requires the use of option valuation models to measure the fair value of the options and warrants at the measurement date. Commencing January 1, 2019, following the adoption of ASU 2018-07, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees (with certain exceptions), share-based payments to non-employees are accounted in accordance with ASC 718.

 

s.Fair value of measurements:

 

The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities.

 

The Company also measures certain non-financial assets, consisting mainly of goodwill and intangible assets at fair value on a nonrecurring basis.  These assets are adjusted to fair value when they are considered to be impaired (see Note 8).  As of December 31, 2019 the Company measured the fair value of goodwill with a total carrying amount of US$ 5.76 million that was allocated to two reporting unit. The evaluation provided an impairment in an amount of $614, (see Note 8). The fair value measurement of the non-financial assets is classified as level 3.

 

The Company applies ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), pursuant to which fair value is defined as the price that would be received in consideration for the sale of an asset or paid for the transfer of a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

 

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

 

Unobservable inputs are inputs that the Company assumes market participants would use in pricing the asset or liability developed based on the best information available under the circumstances.

 

In accordance with ASC 820, derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

 

The Company's financial assets and liabilities measured at fair value on a recurring basis, consisted of derivatives (foreign currency forward contracts and hedging contracts) which were classified within Level 2 and amounted to $ 13 asset and $ 87 liability as of December 31, 2019 and 2018, respectively.

 

The fair value hierarchy is broken down into three levels based on the inputs as follows:

 

Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.  

 

Level 2 -Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.  

 

Level 3 -Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The carrying amounts of cash and cash equivalents, restricted cash, restricted bank deposits, other accounts receivable, trade payables, and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.

 

t.Accounting pronouncements adopted during the reported period:

 

Accounting Standards Update 2016-02, "Leases (Topic 842): Section A – Leases: Amendments to the FASB Accounting Standards Codification; Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification; Section C – Background Information and Basis for Conclusions".

 

Commencing January 1, 2019, the Company adopted ASC Update 2016-02, Leases (Topic 842).

 

Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1. A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and, 2. A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term.

 

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

 

As permitted under ASU 2018-11, which provides, a transition election to not restate comparative periods for the effects of applying the new standard, the Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, the effect of the adoption was reflected through a cumulative-effect adjustment. Financial information for comparative periods was not required to be updated and the disclosures required under the new standard were provided for dates and periods before January 1, 2019.

 

The new lease standard provides a number of optional practical expedients in transition. The Company elected to apply 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 the new standard. The Company also elected the practical expedient pertaining to the use of hindsight and the practical expedient to not separate lease and non-lease components for all leases, other than leases of real estate.

 

The Company also elected the short-term lease recognition exemption for all leases that qualify (leases with a term shorter than 12 months). This means, for those leases, right-of-use assets or lease liabilities are not recognized (including right-of-use assets or lease liabilities for existing short-term leases of those assets in transition).

 

Following adoption of the new standard, the Company recognized additional operating liabilities in an amount of $866, with corresponding right-of-use assets of approximately the same amount based on the present value of the remaining minimum rental payments for existing operating leases of facilities and vehicles. In addition, the Company is required to provide additional new disclosures regarding the leasing activities to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. However, the adoption of this standard did not have a significant impact on the Company's consolidated statements of operations and consolidated statements of cash flows.

 

See note 19 for further discussion.

 

Accounting Standards Update 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities"

 

Commencing January 1, 2019, the Company adopted ASC Update 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12).

 

ASU 2017-12, amends the hedge accounting recognition and presentation requirements in ASC 815 in order to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity's risk management activities by better aligning the entity's financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.

 

ASU 2017-12 eliminates the concept of separately recognizing periodic hedge ineffectiveness for cash flow and net investment hedges. Accordingly, the impact of both the effective and ineffective components of a hedging relationship will be recognized in the same financial reporting period and in the same income statement line item. Also, the guidance in ASU 2017-12 includes certain targeted improvements to existing guidance on quantitative and qualitative assessments of initial and ongoing hedge effectiveness.

 

The transition guidance in ASU 2017-12 requires an entity to apply the amendments using a modified retrospective approach to hedging relationships that exist as of the date of adoption by recording a cumulative-effect adjustment to the opening balance of retained earnings as of the most recent period presented. Entities must apply the new and modified disclosure requirements prospectively from the date of adoption.

 

For public business entities, the guidance in ASU 2017-12 became effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years.

 

The Company applied ASU 2017-12, using the modified retrospective approach to hedging relationships that exist as of the date of adoption. However, due to the limited hedging activities of the Company as of the date of adoption, the adoption did not affect the consolidated financial statements.

 

Accounting Standard Update 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

 

Commencing January 1, 2019, the Company adopted ASC Update 2018-07, "Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting" (ASU 2018-07). ASU 2018-07 aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions.

 

Consistent with the accounting requirement for employee share-based payment awards, awards within the scope of Topic 718 will be measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share-based payment awards will be measured at the grant date.

 

With respect to awards with performance conditions ASU 2018-07 concludes that, consistent with the accounting for employee share-based payment awards, an entity will consider the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions.

 

ASU 2018-07 also requires that the classification of equity classified nonemployee share-based payment awards will continue to be subject to the requirements of Topic 718 unless the award was modified after the good has been delivered, the service has been rendered, any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no longer providing goods or services. This eliminates the requirement to reassess classification of such awards upon vesting.

 

In addition, ASU 2018-07 includes certain Non-public Entity-Specific Amendments ASU 2018-07 became effective for Public entities in annual periods beginning after December 15, 2018, and interim periods within those years (first quarter of 2019 for the Company).

 

Based on the limited grants of share-based payments to nonemployees as of the adoption date, it was determined that the adoption of ASU 2018-07 did not have a significant impact on its consolidated financial statements.

 

u.Accounting pronouncements not yet adopted:

 

Accounting Standards Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"

 

In June 2016, the FASB issued ASC Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."

 

ASC Update 2016-13 revised the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning after December 15, 2019, including the interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods within those years.

 

The Company is in the process of evaluating the effect that ASU 2016-13 will have on the results of operations and financial statements, if any.

 

Accounting Standards Update 2017-04 "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment"

 

In January 2017, the FASB issued ASC Update 2017-4, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment."

 

To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

 

The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

 

The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

 

A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

 

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

The Company is evaluating the impact of ASU 2017-4 on its goodwill impairment valuation.

v3.20.2
Acquisition of Business
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
ACQUISITION OF BUSINESS

NOTE 3: ACQUISITION OF BUSINESS

 

On June 1, 2019, the Company completed the acquisition of the operational assets of Imdecol Ltd, a global integrator and manufacturer of automatic and robotic systems that enhance the productivity of production lines. The Company has determined that the acquired of assets and operations, represent a business and thus, the transaction was accounted for as a business combination transactions under ASC 805, "Bussiness Combinations" in accordance with the acquisition method.

 

The purchase price of Imdecol's business was based on a multiple of four times the average annual operating profit of Imdecol's business for the years 2017, 2018, 2019 and for the 12 months ended June 30, 2020 ("Formula of Consideration").

 

The purchase price was comprised as follows:

 

a.An advance of $276 was paid to Imdecol in cash upon signing the definitive agreement in March 2019;

 

b.An additional approximately $1,619 was paid to Imdecol in cash at closing, on June 1, 2019.

 

c.The final consideration will be paid by August 2020, according to the Formula of Consideration (the "Contingent Consideration"). Additional payment, if required, will be done in the following manner:

 

Up to $417 shall be paid to Imdecol, by way of issuance of BOS's ordinary shares. The value of the ordinary shares will be determined according to their market price prior to issuance and the shares will be subject to a lock-up period until June 2022.

  

The residual amount, if any, will be paid in cash.

 

The Imdecol' acquisition expenses amounted to approximately $138.

 

The purchase price allocation of the acquired business was as follows:

 

   June 01, 
   2019 
Cash paid   1,895 
Contingent Consideration(1)   - 
Total acquisition price  $1,895 
      
Recognized amounts of identifiable assets acquired:     
Intangible assets, net (2)   953 
Property and equipment, net   91 
Inventory   380 
Loss Contracts  (3)   (614)
Net assets acquired   810 
Goodwill(4)   1,085 

 

(1) Company's management expects that the acquired business performance by August 2020 will not meet the profitability goals for contingent payment. Accordingly, no Contingent Consideration was recorded.

 

(2) The fair value adjustment estimate of identifiable intangible assets were determined using the "income approach", which is valuation technique that estimates the fair value of an assets based on market participants' expectations of the cash flow an assets would generate over its remaining useful life.

 

(3) Loss contracts - management identified certain contracts of the acquired operations of Imdecol as loss contracts as it was determined that the unavoidable costs of meeting the obligations under such contracts (i.e. the expected manufacturing costs and service costs including labor expenses) exceed the expected future economic benefits to be received. Those loss contracts were recognized as a liability at fair value as of the acquisition date.

 

(4) As part of the purchase price allocation for the acquisition, the Company recorded goodwill for $1,085. Goodwill reflects the value or premium of the acquisition price in excess of the fair values assigned to specific tangible and intangible assets net of the fair value of. Goodwill has an indefinite useful life and therefore is not amortized as an expense (the goodwill balance is not deductible for income tax purposes), but is reviewed annually for impairment of its fair value to the Company. The purchase price intrinsically recognizes the benefits of the broadened depth of new markets and management team and is primarily attributable to expected synergies (See also Note 8B).

 

The Company filed pro-forma information regarding the acquisition and the acquired business operations was determined to be included in the Intelligent Robotics segment.

 

The Consolidated result of the operations do not include any revenue or expense related to Imdecol, prior to June 1, 2019, the closing date of the acquisitions.

 

The following table provides pro forma information as if the business acquisition had occurred on January 1, 2018:

 

   Year ended December 31 
   2018 
   Unaudited 
Revenues  $38,029 
Net Income  $987 
Basic and diluted net Income per share  $0.26 
v3.20.2
Other Accounts Receivable and Prepaid Expenses
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

NOTE 4:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES

 

   December 31 
   2019   2018 
         
Government authorities  $129   $96 
Advances to suppliers   568    268 
Derivatives (See Note 11)   13    - 
Prepaid expenses   482    377 
Accrued income   22    56 
Other   59    32 
           
   $1,273   $829 
v3.20.2
Inventories
12 Months Ended
Dec. 31, 2019
Inventory Disclosure [Abstract]  
INVENTORIES

NOTE 5:- INVENTORIES

 

   December 31 
   2019   2018 
         
Raw materials  $120   $83 
Inventory in progress   1,285    - 
Finished goods   4,906    2,791 
Net – advances from customers   (904)   - 
           
   $5,407   $2,874 
v3.20.2
Long Term Assets
12 Months Ended
Dec. 31, 2019
Long Term Assets [Abstract]  
LONG TERM ASSETS

NOTE 6:- LONG TERM ASSETS

 

   December 31 
   2019   2018 
         
Prepaid expenses related to SEDA (see Note 15a1)  $77   $112 
Other   78    65 
           
   $155   $177 
v3.20.2
Property and Equipment, Net
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET

NOTE 7:- PROPERTY AND EQUIPMENT, NET

 

  December 31, 
   2019   2018 
Cost:        
         
Computers and software  $1,396   $1,302 
Office furniture and equipment   893    733 
Leasehold improvements   1,100    1,064 
Motor Vehicles   456    302 
           
   $3,845   $3,401 
           
Accumulated Depreciation:          
           
Computers and software  $1,251   $1,099 
Office furniture and equipment   669    580 
Leasehold improvements   458    371 
Motor Vehicles   210    243 
           
   $2,588   $2,293 
           
Property and equipment, net  $1,257   $1,108 

 

Depreciation expenses amounted to $277, $232 and $ 188 for the years ended on December 31, 2019, 2018 and 2017, respectively.

v3.20.2
Goodwill and Other Intangible Assets, Net
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND OTHER INTANGIBLE ASSETS, NET

NOTE 8:- GOODWILL AND OTHER INTANGIBLE ASSETS, NET

 

A.Other Intangible Assets:

 

   December 31,
2019
   December 31,
2018
   Weighted average amortization period
            
Cost:             
Brand name   946    670   4.1
Customer list   2,450    2,450   2.5
Software   111    111   3
Customer relationship   728    141   7
Backlog   90    -    
              
    4,325    3,372    
Accumulated amortization:             
Brand name   946    670    
Customer list   2,450    2,450    
Software   111    111    
Customer relationship   130    60    
Backlog   90    -    
              
    3,727    3,291    
              
Amortized cost  $598   $81    

 

Intangible assets are amortized based on the straight-line method for their remaining useful life.

 

Amortization expenses amounted to $79, $ 57 and $ 57 for the years ended December 31, 2019, 2018 and 2017, respectively. In addition the Company recognized an impairment loss of the brand name and backlog related to the acquisition of Imdecol's business operation in the amount of $356.

 

B.The changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 are as follows:

 

   Goodwill 
Balance as of January 1and December 31,2018   4,676 
Changes during 2019     
Acquisition of Imdecol   1,085 
Impairment of Goodwill (See Note 2J)   (614)
Balance as of December 31,2019  $5,147 
v3.20.2
Current Maturities of Long Term Loans
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
CURRENT MATURITIES OF LONG TERM LOANS

NOTE 9:- CURRENT MATURITIES OF LONG TERM LOANS

 

   Loan 

Weighted

interest

rate as of December 31,

2019

  December 31 
Short term loans  currency  %  2019   2018 
               
Current maturities  NIS  3.5 (Prime+1.75%)   664    467 
                 
          664    467 

 

As of December 31, 2019, the Company and its subsidiaries had an unutilized short term credit line in the amount of $1,380, bearing an annual interest of 3.3%.

v3.20.2
Accrued Expenses and Other Liabilities
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
ACCRUED EXPENSES AND OTHER LIABILITIES

NOTE 10:- ACCRUED EXPENSES AND OTHER LIABILITIES

 

   December 31 
   2019   2018 
         
Derivatives (See Note 11)  $-   $87 
Professional services   149    97 
Accrued expenses related to  retirement cost of CO-CEO   72    - 
Tax accruals   3    10 
Other   195    119 
           
   $419   $313 
v3.20.2
Derivatives Instruments
12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES INSTRUMENTS

NOTE 11:- DERIVATIVES INSTRUMENTS

 

For time to time the Company uses derivative instruments primarily to manage exposure to foreign currency exchange rates. The Company's primary objective in holding derivatives is to reduce the volatility of earnings and cash flows due to changes in foreign currency exchange rates related to forecasted monthly payroll payments of employees which are paid in NIS.

 

Losses (gains) on designated derivatives reclassified from OCI into Consolidated Statement of Operations for the years ended:

 

   Year ended December 31, 
   2019   2018   2017 
             
Derivatives designated as cash flow hedging instruments:            
Cost of revenues  $(25)  $18   $(63)
Sales and marketing  $(16)  $13   $(61)
General and administrative  $(6)  $6   $(24)
                
Total expenses (income)  $(47)  $37   $(148)
v3.20.2
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 12:- FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018:

 

   December 31, 2019 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative asset  $13    -   $13    - 
                     
   $13    -   $13    - 

  

   December 31, 2018 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative liabilities  $87    -   $87    - 
                     
   $87    -   $87    - 
v3.20.2
Long-Term Loans, Net of Current Maturities
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
LONG-TERM LOANS, NET OF CURRENT MATURITIES

NOTE 13:- LONG-TERM LOANS, NET OF CURRENT MATURITIES

 

Classified by linkage terms and interest rates, the total amount of the loans is as follows:

 

Loan currency  Weighted interest
rate as of
December 31,
2019
  December 31, 
   %  2019   2018 
            
NIS  3.5 (Prime+1.75%)  $2,705   $2,334 
              
Less - current maturities      664    467 
              
      $2,041   $1,867 

 

(1)In October 2017, the Company and its Israeli subsidiaries entered into an agreement with Bank Beinleumi for the provision of credit facilities, which were used to pay Bank Leumi loans amounting to $2,976, Amounts drawn under the credit facilities in 2017 will be paid in monthly equal installments for a period of 6 years. In May 2019, the Company increased its credit facilities from Bank Beinleumi in the amount of $708, to pay for the acquisition of Imdecol business operations. The loan will be paid in monthly equal installments for a period of 5 years. See Note 3.

 

The Bank Beinleumi loan agreement includes covenants to maintain certain financial ratios related to shareholders' equity, EBITDA and operating results. The Bank Beinleumi credit facilities are secured by a first ranking fixed charge on any unpaid share capital of the Company, the goodwill of the Company, and any insurance entitlements in the Company's assets pledged thereunder, and a floating charges on all of the assets of the Company and its Israeli subsidiaries, owned now or in the future. As of December 31, 2019, the Company met the covenants set forth in the agreement.

 

2)The total amount to be paid by the Company is as follows:

 

Payment schedule  December 31,
2019
 
     
2020   664 
2021   664 
2022   662 
2023   655 
2024   60 
Total  $2,705 
v3.20.2
Commitments and Contingent Liabilities
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 14:- COMMITMENTS AND CONTINGENT LIABILITIES

 

a.Commitments:

 

1.Royalty commitments:

 

Under the Company’s research and development agreements with the Office of the Chief Scientist (“OCS”) and pursuant to applicable laws, the Company is required to pay royalties at the rate of 3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the research and development grants (dollar-linked) received from the OCS. The obligation to pay these royalties is contingent upon actual sales of the products. Royalties payable with respect to grants received under programs approved by the OCS after January 1, 1999, are subject to interest on the U.S. dollar-linked value of the total grants received at the annual rate of LIBOR applicable to dollar deposits at the time the grants are received. No grants were received since 2007.As of December 31, 2019, the Company has an outstanding contingent obligation to pay royalties to the OCS, including interest, in the amount of approximately $ 3,794, with respect to the grants. Since year 2012, the developed software for which the grant was received is no longer being sold and is not expected to be sold in the future, accordingly no royalty expenses were recorded during the respective years, and the Company anticipates that no royalties will be paid in the future.

 

2.Litigation:

 

1.As of December 31, 2019 The Company is a party to legal proceedings.

 

On December 4, 2018 the lessors of the Company’s facilities in Rishon Lezion filed a claim against the Company in the amount of NIS 1,800,000 (approximately $500,000). The Company was the previous owner of these facilities and had sold them to the Lessor in May 2013. The plaintiffs claim the Company misrepresented the physical status of the sold premises. The Company rejects the claim and has filed a counterclaim of NIS 850,000 (approximately $222,000) alleging breaches by the lessors of the lease agreement. In July 2019, the court dismissed the counterclaim as well as all of the allegations of the plaintiffs, excluding the claim regarding the depreciation of the facilities’ value for which an appraiser has been appointed by the court.

 

2.On April 9, 2017 D.D. Goldstein Properties and Investments Ltd., a shareholder of the Company (the “Plaintiff”) filed a claim against the Company’s prior Chairman Yosi Lahad, the Company’s prior Co-CEO, Yuval Viner, the Company’s Co-CEO and CFO, Eyal Cohen and Ms. Gabriela Jacobs, an (indirect) shareholder of the Company.

 

The Plaintiff claimed that the defendants, acting in bad faith, breached their duties of loyalty and care and several laws, by inducing the Plaintiff to purchase shares of the Company. The Plaintiff claimed that he was led to believe that the defendants shall facilitate his becoming a controlling shareholder of the Company. The claim was for a total amount of NIS 2,600,000 (approximately $750,000).

  

On February 17, 2019 the parties reached a settlement agreement, which received court approval, pursuant to which the claim was dismissed against a certain payment to the Plaintiff. The payment was made by the Company’s insurance company, and the Company contributed the deductible in the amount of $35,000.

v3.20.2
Shareholders' Equity
12 Months Ended
Dec. 31, 2018
Stockholders' Equity Note [Abstract]  
SHAREHOLDERS' EQUITY

NOTE 15:- SHAREHOLDERS' EQUITY

 

a.Ordinary Shares:

 

1.Issuance of Ordinary Shares in connection with Standby Equity Distribution Agreement:

 

On each of February 17, 2015 and May 8, 2017 the Company entered into a Standby Equity Distribution Agreement ("SEDA"), with YA Global Master SPV Ltd. ("YA Global") and with YA II PN Ltd., respectively (YA II PN together with YA Global, "YA"). The SEDAs were for the sale of up to $ 1,300 and $2,000, respectively, of the Company's Ordinary Shares to YA. The Company may affect the sale, at its sole discretion, during a forty-month period for the 2015 SEDA and a four-year period for the 2017 SEDA, beginning on the date on which the Securities and Exchange Commission first declares effective a registration statement registering the resale of the Company's Ordinary Shares by YA. For each Ordinary Share purchased under the SEDA, YA will pay 93% of the lowest daily VWAP (as defined below) of the Ordinary Shares during the five consecutive trading days (or, commencing June 2016, three consecutive trading days), following the date of an advance notice from the Company (provided such VWAP is greater than or equal to 90% of the last closing price of the Ordinary shares at the time of delivery of the advance notice). Notwithstanding the forgoing, the notice shall not exceed $500. "VWAP" is defined as of any date, to be such date's daily dollar volume-weighted average price of the Ordinary Shares as reported by Bloomberg, LP.  The Company may terminate the SEDA at any time upon prior notice to YA, as long as there are no advance notices outstanding and the Company has paid to YA all amounts then due.

 

In connection with the 2015 SEDA and 2017 SEDA, the Company issued Ordinary shares to YA as a commitment fee of 28,930 and 67,307, respectively. The commitment fee is recorded as prepaid expenses according to the consumption of the SEDA. As of December 31, 2019, the balance of those prepaid expenses was $77.

 

During the years 2017 until 2019, the Company issued to YA 709,144 Ordinary Shares, for a total amount of $1,448, net of $45 issuance expenses.

 

2.From February 19, 2019 until March 15, 2019, 125,195 options were exercised for $316.

 

3.On February 25, 2019 the Company issued 20,858 Ordinary Shares (equivalent to $62) to officers of the Company as year 2018 Bonus payments approved by the Board of Directors and shareholders.

 

4.On May 16, 2019 the Company entered into and closed a securities purchase agreement with several investors for the sale of 400,000 Ordinary Shares at a price of $2.50 per share, resulting in gross proceeds of $1,000 and $65 issuance expenses. In addition, the Company issued to the investors 240,000 warrants with an exercise price of $3.30 per Ordinary Share. The warrants shall be exercisable for 3.5 years and shall be subject to a three-year vesting period as follows: one third of the warrants shall vest annually (upon the lapse of 12 months, 24 months and 36 months from issuance), provided that on the applicable vesting date the investor did not sell any of the Ordinary Shares purchased on the private placement. Vesting of all of the warrants shall be accelerated in the event that any one or more shareholders acting together acquire a block of 40% of the Company's issued and outstanding share capital. In addition, the Company issued 60,000 warrants as fees to a placement agent.

 

5.On July 18, 2018, the Company's Board of Directors approved an increase of 2,000,000 Ordinary Shares in the Company's authorized share capital, from 4,000,000 authorized shares to 6,000,000 authorized shares.

  

    b. Warrants to shareholders

 

The Company's outstanding warrants to shareholders as of December 31, 2019 are as follows:

 

Outstanding and

exercisable

warrants

 

Weighted average

exercise price

of outstanding

warrants

 

Weighted

average Remaining contractual
life (years)

300,000  3.30  2.82

 

See Note 15(a) 4.

 

c.Stock option plans:

 

The term of Company's Israeli Stock Option Plan (the "Plan") is until May 31, 2023. On November 2016 , December 2017 and July 2018, the Company's shareholders approved an increase in the number of options for Ordinary Shares available for issuance under the Plan by 125,000 ,100,000 and 200,000, respectively, resulting in 700,000 options for Ordinary Shares available for issuance under the Plan. Any option which is canceled or forfeited before expiration will become available for future grants.

 

As of December 31, 2019 there are 238,381 options available for future grants under the Plan. Each option granted under the Plan expires five years from the date of the grant. The options vest gradually over a period of up to three years.

 

A summary of the Company's employee and director stock option activity and related information for the year ended December 31, 2019, is as follows:

 

   2019   2018   2017 
   Number
of
options
   Weighted-
average exercise price
   Number
of
options
   Weighted average exercise price   Number
of
options
   Weighted-
average exercise price
 
                         
Outstanding - beginning of year   320,875   $2.59    314,125   $3.39    252,670   $6.21 
Changes during the year:                              
Granted   95,000   $2.13    108,000   $2.39    75,000   $2.13 
Exercised   (125,195)  $2.52    -   $-    -   $- 
Forfeited   (43,806)  $3.65    (101,250)  $4.85    (13,545)  $49.09 
                               
Outstanding - year end   246,874   $2.26    320,875   $2.59    314,125   $3.39 
                               
Vested and expected to vest   148,498   $2.41    167,874   $2.90    192,584   $4.10 
Exercisable at year end   79,372   $2.38    157,874   $2.89    182,584   $4.17 

 

During the years 2019, 2018, and 2017, stock-based compensation expense related to employees and directors stock options amounted to $81, $67 and $60, respectively, and is included in general and administrative expenses within the statement of operations.

 

The weighted-average grant-date fair value of options granted during the years ended December 31, 2019, 2018 and 2017 was $1.97, $ 2.58 and $ 2.16, respectively. The weighted-average grant-date fair value of unvested options as of December 31, 2019 was $ 2.18. The aggregate intrinsic value of the outstanding options in each of the years ended December 31, 2019, 2018 and 2017 is $ 0. The aggregate intrinsic value represents the total intrinsic value (the difference between the fair market value of the Company's Ordinary Shares on December 31 of the respective year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on such date.

 

During the year ended December 31, 2019, 125,195 options were exercised. No options were exercised during the years ended on December 31, 2018 and December 31, 2017. As of December 31, 2019 and 2018, there were a total of $155 and $163, respectively, of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company's Plan. That cost is expected to be recognized through 2022.

 

Options granted to employees and directors that are outstanding as of December 31, 2019 broken into exercise prices, are as follows:

 

               Weighted average 
   Options   Weighted   Options   Remaining 
   outstanding   average   exercisable   Contractual 
   as of   remaining   as of   life of options 
Exercise  December 31,   contractual   December 31,   exercisable 
Price  2019   life (years)   2019   (years) 
                 
2.118   87,500    4.83    -    - 
2.126   9,999    1.86    9,999    1.86 
2.131   45,002    2.93    22,501    2.93 
2.287   7,500    4.08    -    - 
2.388   83,500    3.19    33,499    2.67 
2.960   13,373    0.81    13,373    0.81 
                     
Grand Total   246,874    3.02    79,372    1.93 

 

See also Note 2r regarding the assumptions utilized for the un measurement of the fair value of stock options at the grant date. 

v3.20.2
Taxes on Income
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
TAXES ON INCOME

NOTE 16:- TAXES ON INCOME

 

a.Corporate tax rates in Israel

 

On December 30, 2016, as part of the Economic Efficiency Law (Legislative Amendments for Accomplishment of Budgetary Targets for Budget Years 2017-2018), 5777-2016, the corporate tax rate was reduced to 24% for the 2017 tax year and to 23% in 2018 tax year and thereafter.

 

b.Loss carry forward:

 

The Company and its Israeli subsidiaries have accumulated losses for Israeli income tax purposes as of December 31, 2019, in the amount of approximately $ 33,204. These losses may be carried forward and offset against taxable income in the future for an indefinite period. In addition, the Company and its Israeli subsidiaries have accumulated capital loses in the amount of approximately $23,597.

 

c.Deferred income taxes:

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:

 

   December 31 
   2019   2018 
         
Net operating loss carry forward (1)  $7,658   $7,407 
Net capital loss carry forward (1)   5,427    5,427 
Allowances and provisions   129    120 
Intangible assets, net   (393)   (372)
           
    12,821    12,582 
           
Valuation allowance (2)  $(12,821)  $(12,582)
           
Net deferred tax Liability  $-   $- 

 

(1)See Note 16b.

 

(2)In years 2019 and 2018, the Company has provided valuation allowances on deferred tax assets that results from tax loss carry forward and other reserves and allowances due to its history of operating and capital losses and current uncertainty about the ability to realize these deferred tax assets in the future. Net change in valuation allowance during 2019 was due to a increase of net capital loss carry forward.

 

d.Taxes on income (tax benefit) are comprised as follows:

 

   Year ended December 31, 
   2019   2018   2017 
             
Current  $31   $19   $16 
Other   (79)   (60)   - 
                
   $(48)  $(41)  $16 
                
Domestic  $(52)  $(44)  $9 
Foreign   4    3    7 
                
   $(48)  $(41)  $16 

 

e.Income (loss) before taxes on income is comprised as follows:
   
   Year ended December 31, 
   2019   2018   2017 
             
Domestic  $(980)  $877   $750 
Foreign   19    72    39 
                
   $(961)  $949   $789 

  

f.Reconciliation of the theoretical tax expense to the actual tax expense:

 

The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating losses carry forward among the Company and various subsidiaries due to uncertainty of the realization of such tax benefits.

 

g.Tax assessments:

 

BOS-Odem, BOS-Dimex and BOS have final tax assessments through 2014.

 

Ruby-Tech Inc., a U.S. subsidiary, has final tax assessments through 2014 have all been assessed as final.

 

h.The Company and its subsidiaries file income tax returns in Israel and in the United States. BOS, BOS-Dimex and BOS-Odem may be subject to auditing by the Israel tax authorities for fiscal years 2015 and thereafter. Ruby-Tech Inc., a U.S. subsidiary, may be subject to auditing by the U.S. Internal Revenue Service for fiscal years 2015 and thereafter.

 

The Company believes that it has adequately provided for any reasonably foreseeable outcome related to tax audits and settlement. The final tax outcome of the Company's tax audits could be different from that which is reflected in the Company's income tax provisions and accruals. Such differences could have a material effect on the Company's income tax provision and net loss in the period in which such determination is made.

 

i.Uncertain tax positions:

 

As of December 31, 2019 and 2018, there is no balance of uncertain tax positions.

 

In accordance with the Company's accounting policy, interest expense and potential penalties related to income taxes are included in the tax expense line of the Company's Consolidated Statements of Operations.

v3.20.2
Supplementary Information to Statements of Operations
12 Months Ended
Dec. 31, 2019
Disclosure Text Block Supplement [Abstract]  
SUPPLEMENTARY INFORMATION TO STATEMENTS OF OPERATIONS

NOTE 17:- SUPPLEMENTARY INFORMATION TO STATEMENTS OF OPERATIONS

 

a.Financial expenses, net:

 

  

Year ended December 31,

 
   2019   2018   2017 
             
Financial income:               
Interest income  $-   $-   $1 
foreign currency differences gains   26    -    12 
                
    26    -    13 
Financial expenses:               
In respect of interest related to bank loans and bank fees   (245)   (192)   (259)
Other (mainly foreign currency differences)   (111)   (63)   (51)
                
    (356)   (255)   (310)
                
   $(330)  $(255)  $(297)

 

The following table sets forth the computation of basic and diluted net income per share:

 

b.Net earnings per share:

 

       Year ended December 31, 
       2019   2018   2017 
1.   Numerator:       
    Income (loss)  $(913)  $990   $773 
                    
    Net income (loss) available to Ordinary shareholders  $(913)  $990   $773 
                    
2.   Denominator (in thousands):               
                    
    Basic weighted average Ordinary shares outstanding (in thousands)   4,053    3,500    3,171 
    Diluted weighted average Ordinary shares outstanding (in thousands)   4,059    3,500    3,171 
                    
    Basic and diluted income (loss) per share  $(0.23)  $0.28   $0.24 
v3.20.2
Segments and Geographical Information
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
SEGMENTS AND GEOGRAPHICAL INFORMATION

NOTE 18:- SEGMENTS AND GEOGRAPHICAL INFORMATION

  

The Company manages its business in three reportable segments, consisting of the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment.

  

The Company's management makes financial decisions and allocates resources, based on the information it receives from its internal management system. The Company allocates resources and assesses performance for each operating segment using information about revenues and gross profit. The Company applies ASC 280, Segment Reporting.

 

a.Revenues, gross profit and assets for the operating segments for the years 2019, 2018 and 2017 were as follows:

 

   RFID  

Supply Chain Solutions

   Intelligent Robotics   Consolidated 
2019                
Revenues  $13,240   $19,750   $827   $33,817 
Gross profit  $2,906   $3,750   $2   $6,658 
Impairment of Goodwill and intangible assets  $-   $-   $(970)  $(970)
Operating Income (loss)  $(126)  $1,137   $(1,642)  $(631)
Goodwill  $4,676   $-   $471   $5,147 
Long Term assets related to segment (excluding Goodwill)  $786   $1,063   $881   $2,730 
                     
2018                    
Revenues  $14,445   $18,205   $-   $32,650 
Gross profit  $3,371   $3,372   $-   $6,743 
Operating Income  $306   $898   $-   $1,204 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $649   $717   $-   $1,366 
                     
2017                    
Revenues  $13,666   $15,495   $-   $28,932 
Gross profit  $3,623   $2,722   $-   $6,345 
Operating Income  $591   $495   $-   $1,086 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $780   $229   $-   $1,009 

  

b.The following presents total revenues for the years 2019, 2018 and 2017 based on the location of customers and long- lived assets based on major geographic areas in which the Company operates:

 

   Year ended December 31, 
   2019   2018   2017 
   Total   Long-lived   Total   Long-lived   Total   Long-lived 
   revenues   assets *   revenues   assets *   revenues   assets * 
                         
Israel  $23,493   $1,257   $22,990   $1,108   $21,870   $651 
Far East   5,055    -    3,800    -    1,416    - 
India   3,624    -    4,209    -    4,497    - 
America   901    -    1,189    -    918    - 
Europe   744    -    462    -    231    - 
                               
   $33,817   $1,257   $32,650   $1,108   $28,932   $651 

 

(*)Long-lived assets are comprised of property and equipment (intangible assets and goodwill are not included).

 

c.There were no major customer during the reported periods.
v3.20.2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
LEASES

NOTE 19:- LEASES

 

We have operating leases for office space, warehouses and car leases. We determine if a contract contains a lease at inception or modification of a contract. Our leases generally do not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. Many of our leases contain rental escalation, renewal options and/ or termination options that are factored into our determination of lease payments as appropriate. Variable lease payment amounts that cannot be determined at the commencement of the lease are not included in the right-to-use assets or liabilities.

 

The following table presents the lease balances within the Consolidated Balance Sheet as of December 31, 2019:

 

  

 

Classification on the Balance Sheet

  Year ended
December 31,
2019
 
Assets :        
Operating lease asstes  Operating lease right of use asstes, net   720 
Liabilities:        
current        
Operating lease liabilities  Operating lease liabilities, current   551 
Long term        
Operating lease liabilities  Operating lease liabilities, non-current   289 
         
Remaining Lease Term        
Vehicles      0.36 -2.33 years 
Facilities rent      1.33-3.33 years 
         
Weighted Average Discount Rate        
Vehicles      3.5%
Facilities rent      3.5%

 

The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under no cancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on our Consolidated Balance Sheet as of December 31, 2019:

 

future lease payments are:    
2020   509 
2021   250 
2022   35 
2023   10 
    804 

  

Expense under operating leases was $0.9 million for the year ended December 31, 2019. Operating lease costs are included within Operating loss in the Consolidated Statement of Operations. Short-term lease costs were not material. Supplemental cash flow information is as follows:

 

   Year ended December 31,
2019
 
Operating cash out flows from operating lease   120 
v3.20.2
Related Parties
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
RELATED PARTIES

NOTE 20:- RELATED PARTIES

 

Agreements with iDnext:

 

On January 1, 2016 the Company, through its wholly owned subsidiary BOS-Dimex, consummated the acquisition of the business operations of iDnext Ltd. ("iDnext") and its subsidiary Next-Line Ltd. ("Next-Line"). iDnext is controlled by Mr. Moti Harel, who was a member of the Company's Board of Directors until December 12, 2017.

 

Pursuant to a Management Services Agreement entered into as part of the acquisition agreement, iDnext was paid a monthly fee of NIS 33,000 (approximately $8.5) through December 31, 2017. The Management Services Agreement expired on December 31, 2017.

 

On June 2018 a new agreement was signed with the following terms:

 

1.iDnext monthly fee of NIS increased from NIS 33,000 to NIS 53,000 and bonus of 15% from the net profit of certain product line, effective from January 1, 2018.

 

2.Three employees of BOS Dimex transferred to be employed by iDnext for a monthly consideration of 35,000 NIS.

 

3.Mr. Harel was appointed as a director to BOS-Dimex's Board of Directors in June 2018.

 

On February 10, 2019, the Company terminated the agreement with iDnext.

 

Expenses incurred according to the agreement with iDnext are as follows:

 

  

Year ended December 31,

 
   2019   2018   2017 
             
Monthly fees  $49   $183   $125 
Bonus   10    49    - 
Payments for employees   33    39    - 
                
Total  $92   $271   $125 
v3.20.2
Subsequent Events
12 Months Ended
Dec. 31, 2019
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 21:- SUBSEQUENT EVENTS

 

1)On February 2, 2020 the Company filed a claim against Imdecol, requesting to enforce the pledges it has made for the benefit of the Company, due to Imdecol's inability the repay its debts to the Company. On February 25, 2020, the District court of Tel-Aviv ruled in favor of the Company and determined that the pledges are to be enforced.

 

2)On February 19, 2020, the Company, through its wholly owned subsidiary, Ruby Tech Inc. entered into an agreement for a loan from YA II in the principal amount of $600,000.

 

The principal loan amount bears an interest rate of 8% per annum and is not secured and is guaranteed by BOS-Odem and by the company. The loan will be paid in 12 monthly installments of principal and interest starting from March 2020. BOS issued to the lender warrants to purchase up to 100,000 ordinary shares of the Company at an exercise price of $3.00 per ordinary share. If following six months from the issuance of the warrants the shares underlying the warrants are not subject to an effective registration statement, the warrants may be exercised on a cashless basis. The warrants are exercisable for a period of two years from issuance. The Company paid to the lender a commitment fee of $15,000.

 

3)In March 2020, the Company increased its credit facilities from Bank Beinleumi in the amount of $180,000 in interest rate of Prime+1.5%. The loans will be paid from June 2020, in monthly equal installments for a period of 2 years.

 

4)In December 2019, a new strain of coronavirus ("COVID-19") was reported to have surfaced in Wuhan, Hubei Province, China. During January, February and March of 2020, COVID-19 has spread globally, including in Israel. In response to the COVID-19 virus, countries have taken different measures in relation to prevention and containment including lock-down and quarantine. The COVID-19 virus continues to impact worldwide economic activity and pose the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities or otherwise elected by companies as a preventive measure. The Company relies, with respect to some of its products, on manufacturers in China. The effects of the COVID-19 may result in such products not being produced and/or shipped to the Company. In addition, mandated government authority measures or other measures elected by companies as preventive measures may lead to our consumers being unable to complete purchases or other activities. COVID-19 may have an adverse effect on trading, on our operations, collection of our client debt and, its continuous spread and protective measures taken by the authorities may adversely affect our future results of operations, cash flows and financial condition.
v3.20.2
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Use of estimates
a.Use of estimates:

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions are used in determining values of goodwill and other identifiable intangible assets, revenues and the net realizable value of inventory. Actual results could differ from those estimates.

Financial statements in U.S. dollars
b.Financial statements in U.S. dollars:

 

A substantial portion of the Company's revenues is denominated in U.S. dollars ("dollars"). The Company's management believes that the dollar is the primary currency of the economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the dollar. Accordingly, monetary accounts maintained in currencies other than the dollar are re-measured into dollars in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 830, Foreign Currency Matters. All transactions gains and losses from the measurement of monetary balance sheet items are reflected in the statement of operations as financial income or expenses as appropriate.

Principles of consolidation
c.Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances, including profits from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.

Cash equivalents
d.Cash equivalents:

 

Cash equivalents are short-term highly liquid investments with original maturities of less than three months from date of purchase.

Restricted bank deposits
e.Restricted bank deposits:

 

Restricted bank deposits are deposits related to forward contracts with banks. Restricted deposits are presented at their cost.

Inventories
f.Inventories:

 

The inventory is valued at the lower of cost or net realizable value. Cost is determined using the moving average cost method. In 2019 and 2018, inventory write-offs amounted to $91 and $52, respectively.

 

Inventory write-offs and write-downs are provided to cover risks arising from slow-moving items or technological obsolescence.

Property and equipment, net
g.Property and equipment, net:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

 

    %    
         
Computers and software   20 - 33   (Mainly 33)
Office furniture and equipment   6 - 15   (Mainly 6)
Leasehold improvements  

Over the shorter of the period

of the lease or the life of the assets

   
Motor vehicles   15  
Business combination
h.Business combination:

 

The consolidated financial statements include the operations of an acquired business from the date of the acquisition's consummation. Acquired businesses are accounted for using the acquisition method of accounting in accordance with ASC 805, "Business Combinations", which requires, among other things, that most assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

 

Transaction costs are expensed as incurred. Any excess of the consideration transferred over the assigned values of the net assets acquired is recorded as goodwill. Contingent consideration incurred in a business combination is included as part of the acquisition price and recorded at a probability weighted assessment of its fair value as of the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, with any adjustments in fair value recognized in earnings.

Impairment of long-lived assets and intangible assets subject to amortization
i.Impairment of long-lived assets and intangible assets subject to amortization:

 

The Company's long-lived assets are reviewed for impairment in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Asset, whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value.

 

Recoverability of intangible assets is measured by a comparison of the carrying amount of the asset to the undiscounted future cash flows expected to be generated by the asset. If intangible assets are considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.

 

Intangible assets with finite lives are amortized using the straight-line basis over their useful lives, to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up. As of December 31, 2019 the remaining intangible assets were comprised mainly of costumer relationship.

 

During the year ended December 31, 2019 the Company recognized an impairment loss related to intangible assets in an amount of $356. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

Goodwill
j.Goodwill:

 

Goodwill represents excess of the costs over the net assets of businesses acquired. Under ASC 350, Intangibles - Goodwill and Other ("ASC 350"), goodwill is not amortized but instead is tested for impairment at least annually or between annual tests in certain circumstances, and written-down when impaired.

 

The Company performs its annual impairment analysis of goodwill as of December 31 of each year, or more often if indicators of impairment are present. The provisions of ASC 350 require that the impairment test be performed on goodwill at the level of the reporting units As required by ASC 350, the Company chooses either to perform a qualitative assessment whether the two-step goodwill impairment test is necessary or proceeds directly to the two-step goodwill impairment test. Such determination is made for each reporting unit on a stand-alone basis. The qualitative assessment includes various factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, earnings multiples, gross margin and cash flows from operating activities and other relevant factors. When the Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value, then the Company proceeds to the two-step goodwill impairment test. If the Company determines otherwise, no further evaluation is necessary.

 

When the Company decides or is required to perform the two-step goodwill impairment test, in the first step, or "Step 1", the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or "Step 2", of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions. 

 

The Company operates in three operating-based segments: the RFID segment, the Supply Chain Solutions segment and the Intelligent Robotics segment. The Company's goodwill is related to the Intelligent Robotics segment and the RFID segment, which are both reporting units.

 

The Company determined the fair value of each of the reporting units using the Income Approach, which utilizes a discounted cash flow model, as it believes that this approach best approximates each of the reporting units fair value at this time. The impairment test was based on a valuation performed by management with the assistance of a third party appraiser. Judgments and assumptions related to revenue, operating income, future short-term and long-term growth rates, weighted average cost of capital, interest, capital expenditures, cash flows, and market conditions are inherent in developing the discounted cash flow model. The most significant assumptions used for the Income Approach for the 2019 impairment test were five years of projected net cash flows, WACC of 15% and a long-term growth rate of 2% for two reporting units. The Company considered historical rates and current market conditions when determining the discount and growth rates to use in its analyses. If these estimates or their related assumptions change in the future, the Company may be required to record additional impairment charges for its remaining balance of goodwill.

 

The aggregate fair value of the reporting units tested for impairment depends on various factors, some of which are qualitative and involve management judgment, including stable backlog coverage and experience in meeting operating cash flow targets.

 

During the year ended December 31, 2019 the Company recognized an impairment loss of $614 related to its Intelligent Robotics segment. For further information see Note 8 below.

 

For each of the two years ended on December 31, 2018 and 2017, no impairment losses were identified.

Severance pay
k.Severance pay:

 

The Company's liability for severance pay for its Israeli employees is calculated pursuant to the Israeli Severance Pay Law - 1963 (the "Israeli Severance Pay Law"), based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. Employees employed for a period of more than one year are entitled to one month's salary for each year of employment or a portion thereof. The Company's liability for its Israeli employees is mostly covered by insurance or pension policies designed solely for distributing severance pay.

 

Most of the Company's employees are subject to Section 14 of the Israeli Severance Pay Law. The Company's contributions towards severance pay, for Israeli employees subject to this section, have replaced its severance obligation. Upon contribution of the full amount of the employee's monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are required to be made by the Company to the employee in respect of severance pay. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.

 

Severance expenses for years 2019, 2018 and 2017 amounted to $315, $ 210 and $ 451, respectively.

Revenue recognition
l.Revenue recognition:

 

The Company derives its revenues mainly from the sale of products and supporting services.

 

In accordance with ASC Topic 605 "Revenue Recognition", until December 31, 2017 (prior to the adoption of ASC Topic 606) the Company recognized revenues from sale of products when the following fundamental criteria were met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.

 

Revenues from service contracts were recognized ratably over the service period.

 

The Company applied the provisions of ASC Topic 605-25, "Revenue Recognition - Multiple-Element Arrangements", as amended. ASC Topic 605-25 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products and services. For such arrangements, each element of the contract was accounted for as a separate unit when it provided the customer value on a stand-alone basis.

 

The Company followed the guidance in ASC 605-35, "Revenue Recognition - Construction-Type and Production-Type Contracts" ("ASC 605-35"), with respect to revenues from customized software solutions, whereby the Company applied the Completed contract method, since the Company was unable to obtain reasonable dependable estimates of the total effort required for completion. Under the completed contract method, all revenue and related costs of revenue were deferred and recognized upon completion. Provisions for estimated losses on contracts in process were recognized in the period such losses were determined.

 

Deferred revenues included unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts were recognized over the period of the contract and advances were recognized once the delivery of the products is done.

 

Revenue recognition accounting policy applied from January 1, 2018 (following the adoption of ASC Topic 606):

 

On January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective transition method to all contracts that were not completed on the effective date of ASC 606. Among others. The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The adoption of ASC 606 resulted in changes to the Company's accounting policies for revenue recognition previously recognized under ASC 605 as detailed below. However, there were no significant changes to the timing or pattern of revenue recognition to any of the revenue streams of the Company under ASC 606 and those that were previously reported under ASC 605. Accordingly, the adoption of ASC 606 did not have material effect on the consolidated statements of operations and balance sheets.

 

In accordance with ASC 606, The Company determines revenue recognition through the following five steps:

 

Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies a performance obligation.

 

A contract with a customer exists when all of the following criteria are met: the parties to the contract have approved it (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations, the Company can identify each party's rights regarding the distinct goods or services to be transferred ("performance obligations"), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

 

The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only if it is not considered constrained (i.e. it is considered probable that a significant reversal in the amount of cumulative revenue recognized will not occur).

 

Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. A product is transferred when, or as, the customer obtains control of that product, and a service is considered transferred as the services are received and used by the customers.

 

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations such as different products or products and services the Company performs an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

 

The Company records revenues net of any value added or sales tax.

 

In accordance with ASC 606, the Company's revenues are recognized as follows:

 

1.The Company generates its revenues primarily from the sale of products such as electro mechanical components and Automatic Identification Data Capture hardware manufactured by third parties, through a direct sales to its customers. Revenues from sales of products are recognized at the point of time when the control of the product is passed on to the customer, mostly upon delivery to the customer, either at the Company premises by delivery to the customer carrier or upon delivery to the customer premises, as applicable to each contract.

 

2.Revenues from service contracts are recognized over the contract's period (for time-based services) or based on the amount of work performed (for on-site inventory count and similar services). Renewals of service support contracts create new performance obligations that are satisfied over the term with the revenues recognized ratably over the period.

 

3.For arrangements that involve the delivery or performance of multiple products or products sold with service contracts, the Company analyzes whether the goods or services that were promised to the customer are distinct. A good or service promised to a customer is considered 'distinct' if both of the following criteria are met: 1. The customer can benefit from the goods or service, either on its own (i.e. without any professional services, updates or technical support) or together with other resources that are readily available to the customer; and, 2. The Company's promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract.

 

Revenues from service contracts sold to customers within a single contractually binding arrangement together with products, were determined to be distinct and therefore, are accounted for revenue recognition purposes, as a separate performance obligation. Accordingly, the amount attributed to the service contract is recognized over time, on a straight-line basis over the contract's period, as the services are mostly refer to time-based support services.

 

Revenues from operating services and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from robotics and automation projects are recognized using the percentage-of-completion method. When the Company is unable to recognize Revenues according to this method, the Revenues are recognized upon Completion of the projects.

 

Revenues are recognized based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and revenues, and are recognized in the period in which the revisions are determined.

 

In specific instances where there is a lack of dependable estimates or inherent risks that may cause the forecast to be doubtful, then the completed-contract method is followed. Revenue is recognized when the contract is substantially complete and when collectability is reasonably assured. Costs that are closely associated with the project are deferred as contract costs and recognized similarly to the associated revenues.

 

4.Deferred revenues include unearned amounts received from customers (mostly for service contracts and advances from customers) but not yet recognized as revenues. Deferred revenues from service contracts are recognized over the period of the contract and advances are recognized once the delivery of the products is done. Deferred revenues include advanced payments from customers in the amount of $144 as of December 31, 2019. This amount is expected to be recognized during 2020, once the delivery of the products is done. In addition, deferred revenues include unearned amounts from service contracts, which are mostly for a period of three to five years, and the Company recognizes the revenues over the contract's period. As of December 31, 2019, the deferred revenues from service contracts amounted to $717. This amount will be mostly recognized in the years 2020 until 2022. The deferred revenues also include amounts related to software projects in the amount of $188.
Income taxes
m.Income taxes:

 

The Company and its subsidiaries account for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"). ASC 740 prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely than not to be realized. Interest expense and potential penalties related to income taxes are included in the tax expense line of the Company's Consolidated Statements of Operations.

 

Following the initial application of ASU 2015-17, which became effective on January 1, 2017, deferred tax balances are presented as non-current amounts.

 

The Company implements a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with ASC 740. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

Concentrations of credit risk and allowance for doubtful accounts
n.Concentrations of credit risk and allowance for doubtful accounts:

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, trade receivables, other accounts receivable and foreign currency derivative contracts.

 

The trade receivables of the Company are derived from sales to customers located primarily in Israel, the Far East, Europe and America. The Company generally does not require collateral however a significant part of the Company's customers outside of Israel are insured against customer nonpayment, through the Israeli Credit Insurance Company Ltd.

 

In certain circumstances, the Company may require letters of credit, other collateral, additional guarantees or advanced payments. An allowance for doubtful accounts is determined with respect to specific debts that are doubtful of collection. The expenses (income) related to the allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017, is $1, $17 and $27, respectively.

Contingencies
o. Contingencies

 

The Company and its subsidiaries are involved in certain legal proceedings that arise from time to time in the ordinary course of their business and in connection with certain agreements with third parties. Except for income tax contingencies, the Company records accruals for contingencies to the extent that the management concludes that the occurrence is probable and that the related liabilities are estimable. Legal expenses associated with contingencies are expensed as incurred.

Derivative financial instruments
p.Derivative financial instruments:

 

ASC 815, "Derivatives and Hedging", requires the presentation of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) the Company applied the following:

 

Until December 31, 2018, the effective portion of the changes in fair value of the derivative instruments designated for hedging purposes was reported as a component of other comprehensive income ("OCI"), net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, was recognized in current earnings during the period of change. During the reporting periods, up and until December 31, 2017, the gains or losses required to be recognized in earnings for hedge ineffectiveness were insignificant.

 

Commencing January 1, 2019, the entire changes in fair value of the derivative instruments designated for hedging purposes that were determined as qualifying for hedging purposes (including the ineffective components of the hedging relationship) were reported as a component of OCI, net of tax and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

 

For other derivatives which do not qualify for hedge accounting, or which have not been designated as hedging instruments, are recognized in the balance sheet at their fair value, with changes in the fair value carried to the statements of income as incurred in financing income (expenses), net.

 

See Note 11 for disclosure of the derivative financial instruments in accordance with ASC 815.

Basic and diluted net income per share
q.Basic and diluted net income per share:

 

Basic net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year. Diluted net income per share is calculated based on the weighted average number of Ordinary Shares outstanding during each year, plus the potential dilution to Ordinary Shares considered outstanding during the year, in accordance with ASC 260, Earning per Share.

 

The total number of Ordinary Shares related to outstanding options and warrants that was excluded from the calculations of diluted net earnings per share, since they were determined to have an anti-dilutive effect, was 13,373, 196,750 and 314,125 for the years ended December 31, 2019, 2018, and December 31, 2017, respectively.

Accounting for share-based compensation
r.Accounting for share-based compensation:

 

The Company accounts for equity-based compensation in accordance with ASC 718, Stock Compensation ("ASC 718"), which requires the recognition of compensation expenses based on estimated fair values for all equity-based awards made to employees and directors.

 

ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.

 

The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures. The Company considers many factors when estimating forfeitures, including employee class and historical experience. 

 

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over the most recent periods ending on the date of grant, equal to the expected option terms. The expected option term represents the period that the Company's stock options are expected to be outstanding and was determined based on the simplified method permitted by the SEC's Staff Accounting Bulletin ("SAB") No.107 and extended by SAB 110 as the average of the vesting period and the contractual term.

 

The Company currently uses the simplified method as adequate historical experience is not available to provide a reasonable estimate.

 

The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

 

The fair value for options granted in years 2019, 2018 and 2017 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

 

   Year ended December 31, 
   2019   2018   2017 
             
Risk-free interest   1.52%   2.73%   2.05%
Dividend yields   0    0    0 
Volatility   55%   55%   57%
Expected option term   3.5 years    3.5 years    3.5 years 
Forfeiture rate   0%   0%   0%

  

Until December 31, 2018 the Company applies ASC 505-50, "Equity-Based Payments to Non-Employees" ("ASC 505") with respect to options and warrants issued to non-employees, which requires the use of option valuation models to measure the fair value of the options and warrants at the measurement date. Commencing January 1, 2019, following the adoption of ASU 2018-07, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees (with certain exceptions), share-based payments to non-employees are accounted in accordance with ASC 718.

Fair value of measurements
s.Fair value of measurements:

 

The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities.

 

The Company also measures certain non-financial assets, consisting mainly of goodwill and intangible assets at fair value on a nonrecurring basis.  These assets are adjusted to fair value when they are considered to be impaired (see Note 8).  As of December 31, 2019 the Company measured the fair value of goodwill with a total carrying amount of US$ 5.76 million that was allocated to two reporting unit. The evaluation provided an impairment in an amount of $614, (see Note 8). The fair value measurement of the non-financial assets is classified as level 3.

 

The Company applies ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), pursuant to which fair value is defined as the price that would be received in consideration for the sale of an asset or paid for the transfer of a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.

 

In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

 

Unobservable inputs are inputs that the Company assumes market participants would use in pricing the asset or liability developed based on the best information available under the circumstances.

 

In accordance with ASC 820, derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.

 

The Company's financial assets and liabilities measured at fair value on a recurring basis, consisted of derivatives (foreign currency forward contracts and hedging contracts) which were classified within Level 2 and amounted to $ 13 asset and $ 87 liability as of December 31, 2019 and 2018, respectively.

 

The fair value hierarchy is broken down into three levels based on the inputs as follows:

 

Level 1 -Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.  

 

Level 2 -Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.  

 

Level 3-Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The carrying amounts of cash and cash equivalents, restricted cash, restricted bank deposits, other accounts receivable, trade payables, and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.

Accounting pronouncements adopted during the reported period

t.Accounting pronouncements adopted during the reported period:

 

Accounting Standards Update 2016-02, "Leases (Topic 842): Section A – Leases: Amendments to the FASB Accounting Standards Codification; Section B – Conforming Amendments Related to Leases: Amendments to the FASB Accounting Standards Codification; Section C – Background Information and Basis for Conclusions".

 

Commencing January 1, 2019, the Company adopted ASC Update 2016-02, Leases (Topic 842).

 

Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1. A lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and, 2. A right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term.

 

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

 

As permitted under ASU 2018-11, which provides, a transition election to not restate comparative periods for the effects of applying the new standard, the Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, the effect of the adoption was reflected through a cumulative-effect adjustment. Financial information for comparative periods was not required to be updated and the disclosures required under the new standard were provided for dates and periods before January 1, 2019.

 

The new lease standard provides a number of optional practical expedients in transition. The Company elected to apply 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 the new standard. The Company also elected the practical expedient pertaining to the use of hindsight and the practical expedient to not separate lease and non-lease components for all leases, other than leases of real estate.

 

The Company also elected the short-term lease recognition exemption for all leases that qualify (leases with a term shorter than 12 months). This means, for those leases, right-of-use assets or lease liabilities are not recognized (including right-of-use assets or lease liabilities for existing short-term leases of those assets in transition).

 

Following adoption of the new standard, the Company recognized additional operating liabilities in an amount of $866, with corresponding right-of-use assets of approximately the same amount based on the present value of the remaining minimum rental payments for existing operating leases of facilities and vehicles. In addition, the Company is required to provide additional new disclosures regarding the leasing activities to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. However, the adoption of this standard did not have a significant impact on the Company's consolidated statements of operations and consolidated statements of cash flows.

 

See note 19 for further discussion.

 

Accounting Standards Update 2017-12 "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities"

 

Commencing January 1, 2019, the Company adopted ASC Update 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12).

 

ASU 2017-12, amends the hedge accounting recognition and presentation requirements in ASC 815 in order to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity's risk management activities by better aligning the entity's financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.

 

ASU 2017-12 eliminates the concept of separately recognizing periodic hedge ineffectiveness for cash flow and net investment hedges. Accordingly, the impact of both the effective and ineffective components of a hedging relationship will be recognized in the same financial reporting period and in the same income statement line item. Also, the guidance in ASU 2017-12 includes certain targeted improvements to existing guidance on quantitative and qualitative assessments of initial and ongoing hedge effectiveness.

 

The transition guidance in ASU 2017-12 requires an entity to apply the amendments using a modified retrospective approach to hedging relationships that exist as of the date of adoption by recording a cumulative-effect adjustment to the opening balance of retained earnings as of the most recent period presented. Entities must apply the new and modified disclosure requirements prospectively from the date of adoption.

 

For public business entities, the guidance in ASU 2017-12 became effective for fiscal years beginning after December 15, 2018 and for interim periods within those fiscal years.

 

The Company applied ASU 2017-12, using the modified retrospective approach to hedging relationships that exist as of the date of adoption. However, due to the limited hedging activities of the Company as of the date of adoption, the adoption did not affect the consolidated financial statements.

 

Accounting Standard Update 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

 

Commencing January 1, 2019, the Company adopted ASC Update 2018-07, "Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting" (ASU 2018-07). ASU 2018-07 aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions.

 

Consistent with the accounting requirement for employee share-based payment awards, awards within the scope of Topic 718 will be measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Equity-classified nonemployee share-based payment awards will be measured at the grant date.

 

With respect to awards with performance conditions ASU 2018-07 concludes that, consistent with the accounting for employee share-based payment awards, an entity will consider the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions.

 

ASU 2018-07 also requires that the classification of equity classified nonemployee share-based payment awards will continue to be subject to the requirements of Topic 718 unless the award was modified after the good has been delivered, the service has been rendered, any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no longer providing goods or services. This eliminates the requirement to reassess classification of such awards upon vesting.

 

In addition, ASU 2018-07 includes certain Non-public Entity-Specific Amendments ASU 2018-07 became effective for Public entities in annual periods beginning after December 15, 2018, and interim periods within those years (first quarter of 2019 for the Company).

 

Based on the limited grants of share-based payments to nonemployees as of the adoption date, it was determined that the adoption of ASU 2018-07 did not have a significant impact on its consolidated financial statements.

Accounting pronouncements not yet adopted

u.Accounting pronouncements not yet adopted:

 

Accounting Standards Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"

 

In June 2016, the FASB issued ASC Update 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."

 

ASC Update 2016-13 revised the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning after December 15, 2019, including the interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018, including interim periods within those years.

 

The Company is in the process of evaluating the effect that ASU 2016-13 will have on the results of operations and financial statements, if any.

 

Accounting Standards Update 2017-04 "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment"

 

In January 2017, the FASB issued ASC Update 2017-4, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment."

 

To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

 

The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

 

The amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition.

 

A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

 

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

 

The Company is evaluating the impact of ASU 2017-4 on its goodwill impairment valuation.

v3.20.2
Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Schedule of property, plant and equipment depreciation rates
  %    
         
Computers and software   20 - 33   (Mainly 33)
Office furniture and equipment   6 - 15   (Mainly 6)
Leasehold improvements  

Over the shorter of the period

of the lease or the life of the assets

   
Motor vehicles   15    
Schedule of weighted average assumptions used in valuation of stock option
  Year ended December 31, 
   2019   2018   2017 
             
Risk-free interest   1.52%   2.73%   2.05%
Dividend yields   0    0    0 
Volatility   55%   55%   57%
Expected option term   3.5 years    3.5 years    3.5 years 
Forfeiture rate   0%   0%   0%
v3.20.2
Acquisition of Business (Tables)
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Schedule of purchase price allocation
  June 01, 
   2019 
Cash paid   1,895 
Contingent Consideration(1)   - 
Total acquisition price  $1,895 
      
Recognized amounts of identifiable assets acquired:     
Intangible assets, net (2)   953 
Property and equipment, net   91 
Inventory   380 
Loss Contracts  (3)   (614)
Net assets acquired   810 
Goodwill(4)   1,085 

 

(1) Company's management expects that the acquired business performance by August 2020 will not meet the profitability goals for contingent payment. Accordingly, no Contingent Consideration was recorded.

 

(2) The fair value adjustment estimate of identifiable intangible assets were determined using the "income approach", which is valuation technique that estimates the fair value of an assets based on market participants' expectations of the cash flow an assets would generate over its remaining useful life.

 

(3) Loss contracts - management identified certain contracts of the acquired operations of Imdecol as loss contracts as it was determined that the unavoidable costs of meeting the obligations under such contracts (i.e. the expected manufacturing costs and service costs including labor expenses) exceed the expected future economic benefits to be received. Those loss contracts were recognized as a liability at fair value as of the acquisition date.

 

(4) As part of the purchase price allocation for the acquisition, the Company recorded goodwill for $1,085. Goodwill reflects the value or premium of the acquisition price in excess of the fair values assigned to specific tangible and intangible assets net of the fair value of. Goodwill has an indefinite useful life and therefore is not amortized as an expense (the goodwill balance is not deductible for income tax purposes), but is reviewed annually for impairment of its fair value to the Company. The purchase price intrinsically recognizes the benefits of the broadened depth of new markets and management team and is primarily attributable to expected synergies (See also Note 8B).

Schedue of pro forma information

   Year ended December 31 
   2018 
   Unaudited 
Revenues  $38,029 
Net Income  $987 
Basic and diluted net Income per share  $0.26 

v3.20.2
Other Accounts Receivable and Prepaid Expenses (Tables)
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Schedule of other accounts receivable and prepaid expenses
   December 31 
   2019   2018 
         
Government authorities  $129   $96 
Advances to suppliers   568    268 
Derivatives (See Note 11)   13    - 
Prepaid expenses   482    377 
Accrued income   22    56 
Other   59    32 
           
   $1,273   $829 
v3.20.2
Inventories (Tables)
12 Months Ended
Dec. 31, 2019
Inventory Disclosure [Abstract]  
Schedule of inventories
   December 31 
   2019   2018 
         
Raw materials  $120   $83 
Inventory in progress   1,285    - 
Finished goods   4,906    2,791 
Net – advances from customers   (904)   - 
           
   $5,407   $2,874 
v3.20.2
Long Term Assets (Tables)
12 Months Ended
Dec. 31, 2019
Long Term Assets [Abstract]  
Schedule of long term assets
   December 31 
   2019   2018 
         
Prepaid expenses related to SEDA (see Note 15a1)  $77   $112 
Other   78    65 
           
   $155   $177 
v3.20.2
Property and Equipment, Net (Tables)
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment, net
  December 31, 
   2019   2018 
Cost:        
         
Computers and software  $1,396   $1,302 
Office furniture and equipment   893    733 
Leasehold improvements   1,100    1,064 
Motor Vehicles   456    302 
           
   $3,845   $3,401 
           
Accumulated Depreciation:          
           
Computers and software  $1,251   $1,099 
Office furniture and equipment   669    580 
Leasehold improvements   458    371 
Motor Vehicles   210    243 
           
   $2,588   $2,293 
           
Property and equipment, net  $1,257   $1,108 
v3.20.2
Goodwill and Other Intangible Assets, Net (Tables)
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of other intangible assets

   December 31,
2019
   December 31,
2018
   Weighted average amortization period
            
Cost:             
Brand name   946    670   4.1
Customer list   2,450    2,450   2.5
Software   111    111   3
Customer relationship   728    141   7
Backlog   90    -    
              
    4,325    3,372    
Accumulated amortization:             
Brand name   946    670    
Customer list   2,450    2,450    
Software   111    111    
Customer relationship   130    60    
Backlog   90    -    
              
    3,727    3,291    
              
Amortized cost  $598   $81    

Schedule of carrying amount of goodwill
   Goodwill 
Balance as of January 1and December 31,2018   4,676 
Changes during 2019     
Acquisition of Imdecol   1,085 
Impairment of Goodwill (See Note 2J)   (614)
Balance as of December 31,2019  $5,147 
v3.20.2
Current Maturities of Long Term Loans (Tables)
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Schedule of current maturities of long term loans

   Loan 

Weighted

interest

rate as of December 31,

2019

  December 31 
Short term loans  currency  %  2019   2018 
               
Current maturities  NIS  3.5 (Prime+1.75%)   664    467 
                 
          664    467 

v3.20.2
Accrued Expenses and Other Liabilities (Tables)
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Schedule of accrued expenses and other liabilities

   December 31 
   2019   2018 
         
Derivatives (See Note 11)  $-   $87 
Professional services   149    97 
Accrued expenses related to  retirement cost of CO-CEO   72    - 
Tax accruals   3    10 
Other   195    119 
           
   $419   $313 

v3.20.2
Derivatives Instruments (Tables)
12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of derivative instruments
   Year ended December 31, 
   2019   2018   2017 
             
Derivatives designated as cash flow hedging instruments :            
Cost of revenues  $(25)  $18   $(63)
Sales and marketing  $(16)  $13   $(61)
General and administrative  $(6)  $6   $(24)
                
Total expenses (income)  $(47)  $37   $(148)
v3.20.2
Fair Value of Financial Instruments (Tables)
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of assets and liabilities measured at fair value on a recurring basis
   December 31, 2019 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative asset  $13    -   $13    - 
                     
   $13    -   $13    - 

 

   December 31, 2018 
   Fair Value   Level 1   Level 2   Level 3 
                 
Description                
Derivative liabilities  $87    -   $87    - 
                     
   $87    -   $87    - 

 

v3.20.2
Long-Term Loans, Net of Current Maturities (Tables)
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Schedule of linkage and interest rates

Loan currency  Weighted interest
rate as of
December 31,
2019
  December 31, 
   %  2019   2018 
            
NIS  3.5 (Prime+1.75%)  $2,705   $2,334 
              
Less - current maturities      664    467 
              
      $2,041   $1,867 

Schedule of maturities of long-term debt

Payment schedule  December 31,
2019
 
     
2020   664 
2021   664 
2022   662 
2023   655 
2024   60 
Total  $2,705 

v3.20.2
Shareholders' Equity (Tables)
12 Months Ended
Dec. 31, 2018
Stockholders' Equity Note [Abstract]  
Schedule of outstanding warrants to shareholders

Outstanding and

exercisable

warrants

 

Weighted average

exercise price

of outstanding

warrants

 

Weighted

average Remaining contractual
life (years)

300,000  3.30  2.82
Schedule of stock option activity

   2019   2018   2017 
   Number
of
options
   Weighted-
average exercise price
   Number
of
options
   Weighted average exercise price   Number
of
options
   Weighted-
average exercise price
 
                         
Outstanding - beginning of year   320,875   $2.59    314,125   $3.39    252,670   $6.21 
Changes during the year:                              
Granted   95,000   $2.13    108,000   $2.39    75,000   $2.13 
Exercised   (125,195)  $2.52    -   $-    -   $- 
Forfeited   (43,806)  $3.65    (101,250)  $4.85    (13,545)  $49.09 
                               
Outstanding - year end   246,874   $2.26    320,875   $2.59    314,125   $3.39 
                               
Vested and expected to vest   148,498   $2.41    167,874   $2.90    192,584   $4.10 
Exercisable at year end   79,372   $2.38    157,874   $2.89    182,584   $4.17 

Schedule of options granted to employees and directors
               Weighted average 
   Options   Weighted   Options   Remaining 
   outstanding   average   exercisable   Contractual 
   as of   remaining   as of   life of options 
Exercise  December 31,   contractual   December 31,   exercisable 
Price  2019   life (years)   2019   (years) 
                 
2.118   87,500    4.83    -    - 
2.126   9,999    1.86    9,999    1.86 
2.131   45,002    2.93    22,501    2.93 
2.287   7,500    4.08    -    - 
2.388   83,500    3.19    33,499    2.67 
2.960   13,373    0.81    13,373    0.81 
                     
Grand Total   246,874    3.02    79,372    1.93 
v3.20.2
Taxes on Income (Tables)
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Schedule of deferred tax liabilities and assets
  December 31 
   2019   2018 
         
Net operating loss carry forward (1)  $7,658   $7,407 
Net capital loss carry forward (1)   5,427    5,427 
Allowances and provisions   129    120 
Intangible assets, net   (393)   (372)
           
    12,821    12,582 
           
Valuation allowance (2)  $(12,821)  $(12,582)
           
Net deferred tax Liability  $-   $- 

 

(1)See Note 16b.

 

(2)In years 2019 and 2018, the Company has provided valuation allowances on deferred tax assets that results from tax loss carry forward and other reserves and allowances due to its history of operating and capital losses and current uncertainty about the ability to realize these deferred tax assets in the future. Net change in valuation allowance during 2019 was due to a increase of net capital loss carry forward.
Schedule of taxes on income (tax benefit)
   Year ended December 31, 
   2019   2018   2017 
             
Current  $31   $19   $16 
Other   (79)   (60)   - 
                
   $(48)  $(41)  $16 
                
Domestic  $(52)  $(44)  $9 
Foreign   4    3    7 
                
   $(48)  $(41)  $16 
Schedule of income (loss) before taxes on income
   Year ended December 31, 
   2019   2018   2017 
             
Domestic  $(980)  $877   $750 
Foreign   19    72    39 
                
   $(961)  $949   $789 
v3.20.2
Supplementary Information to Statements of Operations (Tables)
12 Months Ended
Dec. 31, 2019
Disclosure Text Block Supplement [Abstract]  
Schedule of financial expenses, net
 

Year ended December 31,

 
   2019   2018   2017 
             
Financial income:               
Interest income  $-   $-   $1 
foreign currency differences gains   26    -    12 
                
    26    -    13 
Financial expenses:               
In respect of interest related to bank loans and bank fees   (245)   (192)   (259)
Other (mainly foreign currency differences)   (111)   (63)   (51)
                
    (356)   (255)   (310)
                
   $(330)  $(255)  $(297)
Schedule of net earnings per share
       Year ended December 31, 
       2019   2018   2017 
1.   Numerator:       
    Income (loss)  $(913)  $990   $773 
                    
    Net income (loss) available to Ordinary shareholders  $(913)  $990   $773 
                    
2.   Denominator (in thousands):               
                    
    Basic weighted average Ordinary shares outstanding (in thousands)   4,053    3,500    3,171 
    Diluted weighted average Ordinary shares outstanding (in thousands)   4,059    3,500    3,171 
                    
    Basic and diluted income (loss) per share  $(0.23)  $0.28   $0.24 

v3.20.2
Segments and Geographical Information (Tables)
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Schedule of revenues, gross profit and assets for the operating segments
   RFID  

Supply Chain Solutions

   Intelligent Robotics   Consolidated 
2019                
Revenues  $13,240   $19,750   $827   $33,817 
Gross profit  $2,906   $3,750   $2   $6,658 
Impairment of Goodwill and intangible assets  $-   $-   $(970)  $(970)
Operating Income (loss)  $(126)  $1,137   $(1,642)  $(631)
Goodwill  $4,676   $-   $471   $5,147 
Long Term assets related to segment (excluding Goodwill)  $786   $1,063   $881   $2,730 
                     
2018                    
Revenues  $14,445   $18,205   $-   $32,650 
Gross profit  $3,371   $3,372   $-   $6,743 
Operating Income  $306   $898   $-   $1,204 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $649   $717   $-   $1,366 
                     
2017                    
Revenues  $13,666   $15,495   $-   $28,932 
Gross profit  $3,623   $2,722   $-   $6,345 
Operating Income  $591   $495   $-   $1,086 
Goodwill  $4,676   $-   $-   $4,676 
Long Term assets related to segment (excluding Goodwill)  $780   $229   $-   $1,009 
Schedule of total revenues and long-lived assets
  Year ended December 31, 
   2019   2018   2017 
   Total   Long-lived   Total   Long-lived   Total   Long-lived 
   revenues   assets *   revenues   assets *   revenues   assets * 
                         
Israel  $23,493   $1,257   $22,990   $1,108   $21,870   $651 
Far East   5,055    -    3,800    -    1,416    - 
India   3,624    -    4,209    -    4,497    - 
America   901    -    1,189    -    918    - 
Europe   744    -    462    -    231    - 
                               
   $33,817   $1,257   $32,650   $1,108   $28,932   $651 

 

(*)Long-lived assets are comprised of property and equipment (intangible assets and goodwill are not included).
v3.20.2
Leases (Tables)
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Schedule of lease
  

 

Classification on the Balance Sheet

  Year ended
December 31,
2019
 
Assets :        
Operating lease asstes  Operating lease right of use asstes, net   720 
Liabilities:        
current        
Operating lease liabilities  Operating lease liabilities, current   551 
Long term        
Operating lease liabilities  Operating lease liabilities, non-current   289 
         
Remaining Lease Term        
Vehicles      0.36 -2.33 years 
Facilities rent      1.33-3.33 years 
         
Weighted Average Discount Rate        
Vehicles      3.5%
Facilities rent      3.5%
Schedule of future minimum lease payments
future lease payments are:    
2020   509 
2021   250 
2022   35 
2023   10 
    804 
Schedule of operating lease costs
   Year ended December 31,
2019
 
Operating cash out flows from operating lease   120 
v3.20.2
Related Parties (Tables)
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Schedule of expenses incurred according to the agreement with iDnext

 

  

Year ended December 31,

 
   2019   2018   2017 
             
Monthly fees  $49   $183   $125 
Bonus   10    49    - 
Payments for employees   33    39    - 
                
Total  $92   $271   $125 

v3.20.2
General (Details)
12 Months Ended
Dec. 31, 2019
Segments
General (Textual)  
Number of operating segments 2
v3.20.2
Significant Accounting Policies (Details)
12 Months Ended
Dec. 31, 2019
Computers and software [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life (Mainly 33)
Computers and software [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Annual rates 20.00%
Computers and software [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Annual rates 33.00%
Office furniture and equipment [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life (Mainly 6)
Office furniture and equipment [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Annual rates 6.00%
Office furniture and equipment [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Annual rates 15.00%
Motor vehicles [Member]  
Property, Plant and Equipment [Line Items]  
Annual rates 15.00%
Leasehold improvements [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life Over the shorter of the period of the lease or the life of the assets
v3.20.2
Significant Accounting Policies (Details 1)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Accounting Policies [Abstract]      
Risk-free interest 1.52% 2.73% 2.05%
Dividend yields 0.00% 0.00% 0.00%
Volatility 55.00% 55.00% 57.00%
Expected option term 3 years 6 months 3 years 6 months 3 years 6 months
Forfeiture rate 0.00% 0.00% 0.00%
v3.20.2
Significant Accounting Policies (Details Textual)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Segments
shares
Dec. 31, 2018
USD ($)
shares
Dec. 31, 2017
USD ($)
shares
Significant Accounting Policies (Textual)      
Inventory write-off $ 91 $ 52  
WACC 15.00%    
Long-term growth rate 2.00%    
Severance expenses $ 315 210 $ 451
Allowance for doubtful accounts $ 1 $ 17 $ 27
Number of operating segments | Segments 2    
Anti-dilutive securities | shares 13,373 196,750 314,125
Material assumptions used for income approach period 5 years    
Income tax likelihood percentage, description The tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.    
Fair value of goodwill $ 5,760    
Goodwill likehood percentage, description The Company chooses to perform a qualitative assessment and determines that it is more likely than not (more than 50 percent likelihood) that the fair value of the reporting unit is less than its carrying value.    
Impairment loss $ 614
Fair value impairment 614    
Deferred revenues $ 144    
Revenue recognition, description This amount is expected to be recognized during 2020, once the delivery of the products is done. In addition, deferred revenues include unearned amounts from service contracts, which are mostly for a period of three to five years, and the Company recognizes the revenues over the contract’s period. As of December 31, 2019, the deferred revenues from service contracts amounted to $717. This amount will be mostly recognized in the years 2020 until 2022. The deferred revenues also include amounts related to software projects in the amount of $188.    
Derivatives asset $ 13    
Derivative liabilities   $ 87  
Operating liabilities right-of-use assets 866    
Intelligent Robotics and RFID Division [Member]      
Significant Accounting Policies (Textual)      
Impairment loss $ 614    
v3.20.2
Acquisition of Business (Details)
$ in Thousands
Jun. 01, 2019
USD ($)
Acquisition of Business  
Cash paid $ 1,895
Contingent Consideration
Total acquisition price 1,895
Recognized amounts of identifiable assets acquired:  
Intangible assets, net 953
Property and equipment, net 91
Inventory 380
Loss Contracts (614)
Net assets acquired 810
Goodwill $ 1,085
v3.20.2
Acquisition of Business (Details 1)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
$ / shares
Business Combinations [Abstract]  
Revenues $ 38,029
Net Income $ 987
Basic and diluted net Income per share | $ / shares $ 0.26
v3.20.2
Acquisition of Business (Details Textual) - USD ($)
$ in Thousands
Jun. 01, 2019
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Acquisition of Business (Textual)        
Purchase price, description a. An advance of $276 was paid to Imdecol in cash upon signing the definitive agreement in March 2019; b. An additional approximately $1,619 was paid to Imdecol in cash at closing, on June 1, 2019. c. The final consideration will be paid by August 2020, according to the Formula of Consideration (the "Contingent Consideration").      
Goodwill $ 1,085 $ 5,147 $ 4,676 $ 4,676
Acquisition expenses 138      
Ordinary shares value issued for payment $ 417      
v3.20.2
Other Accounts Receivable and Prepaid Expenses (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Receivables [Abstract]    
Government authorities $ 129 $ 96
Advances to suppliers 568 268
Derivatives (See Note 11) 13
Prepaid expenses 482 377
Accrued income 22 56
Other 59 32
Other accounts receivable and prepaid expenses $ 1,273 $ 829
v3.20.2
Inventories (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Inventory Disclosure [Abstract]    
Raw materials $ 120 $ 83
Inventory in progress 1,285
Finished goods 4,906 2,791
Net- advances from customers (904)
Inventories $ 5,407 $ 2,874
v3.20.2
Long Term Assets (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Long Term Assets [Abstract]    
Prepaid expenses related to SEDA (see Note 15a1) $ 77 $ 112
Other 78 65
Long term assets $ 155 $ 177
v3.20.2
Property and Equipment, Net (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Property, Plant and Equipment [Line Items]    
Cost $ 3,845 $ 3,401
Accumulated Depreciation 2,588 2,293
Property and equipment, net 1,257 1,108
Computers and software [Member]    
Property, Plant and Equipment [Line Items]    
Cost 1,396 1,302
Accumulated Depreciation 1,251 1,099
Office furniture and equipment [Member]    
Property, Plant and Equipment [Line Items]    
Cost 893 733
Accumulated Depreciation 669 580
Leasehold improvements [Member]    
Property, Plant and Equipment [Line Items]    
Cost 1,100 1,064
Accumulated Depreciation 458 371
Motor Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Cost 456 302
Accumulated Depreciation $ 210 $ 243
v3.20.2
Property and Equipment, Net (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Property and Equipment, Net (Textual)      
Depreciation expense $ 277 $ 232 $ 188
v3.20.2
Goodwill and Other Intangible Assets, Net (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cost $ 4,325 $ 3,372
Accumulated amortization 3,727 3,291
Amortized cost $ 598 81
Brand name [Member]    
Weighted average amortization period 4 years 1 month 6 days  
Cost $ 946 670
Accumulated amortization $ 946 670
Customer list [Member]    
Weighted average amortization period 2 years 6 months  
Cost $ 2,450 2,450
Accumulated amortization $ 2,450 2,450
Software [Member]    
Weighted average amortization period 3 years  
Cost $ 111 111
Accumulated amortization $ 111 111
Customer relationship [Member]    
Weighted average amortization period 7 years  
Cost $ 728 141
Accumulated amortization 130 60
Backlog [Member]    
Cost 90
Accumulated amortization $ 90
v3.20.2
Goodwill and Other Intangible Assets, Net (Details 1)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
Balance $ 4,676
Changes during 2019  
Acquisition of Imdecol 1,085
Impairment of Goodwill (See Note 2J) (614)
Balance as of December 31,2019 $ 5,147
v3.20.2
Goodwill and Other Intangible Assets, Net (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2018
Dec. 31, 2017
Goodwill and Other Intangible Assets, Net (Textual)        
Amortization expenses $ 79   $ 57 $ 57
Impairment loss $ 614  
v3.20.2
Current Maturities of Long Term Loans (Details)
₪ in Thousands, $ in Thousands
Dec. 31, 2019
USD ($)
Dec. 31, 2019
ILS (₪)
Dec. 31, 2018
ILS (₪)
NIS [Member]      
Current maturities   ₪ 664  
Total | $ $ 664    
NIS [Member]      
Current maturities     ₪ 467
Total     ₪ 467
Minimum [Member]      
Weighted interest rate 1.75% 1.75%  
Maximum [Member]      
Weighted interest rate 3.50% 3.50%  
v3.20.2
Current Maturities of Long Term Loans (Details Textual)
$ in Thousands
Dec. 31, 2019
USD ($)
Current Maturities of Long Term Loans (Textual)  
Short term credit line, amount $ 1,380
Bearing annual interest rate 3.30%
v3.20.2
Accrued Expenses and Other Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Payables and Accruals [Abstract]    
Derivatives (See Note 11) $ 87
Professional services 149 97
Accrued expenses related to retirement cost of CO-CEO 72
Tax accruals 3 10
Other 195 119
Total accrued expenses and other liabilities $ 419 $ 313
v3.20.2
Derivatives Instruments (Details) - Foreign currency exchange [Member] - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Derivative [Line Items]      
Cost of revenues $ (25) $ 18 $ (63)
Sales and marketing (16) 13 (61)
General and administrative (6) 6 (24)
Total expenses (income) $ (47) $ 37 $ (148)
v3.20.2
Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Defined Benefit Plan Disclosure [Line Items]    
Financial assets $ 13  
Financial liabilities   $ 87
Level 1 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets  
Financial liabilities  
Level 2 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets 13  
Financial liabilities   87
Level 3 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets  
Financial liabilities  
Derivative liabilities [Member] | Level 1 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial liabilities  
Derivative liabilities [Member] | Level 2 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial liabilities   87
Derivative liabilities [Member] | Level 3 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial liabilities  
Derivative asset [Member] | Level 1 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets  
Derivative asset [Member] | Level 2 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets 13  
Derivative asset [Member] | Level 3 [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets  
Fair Value [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets 13  
Financial liabilities   87
Fair Value [Member] | Derivative liabilities [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial liabilities   $ 87
Fair Value [Member] | Derivative asset [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Financial assets $ 13  
v3.20.2
Long-Term Loans, Net of Current Maturities (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Debt Instrument [Line Items]    
Long-term loans, net of current maturities $ 2,705 $ 2,334
Less - current maturities 664 467
Total amount of the loans $ 2,041 $ 1,867
Maximum [Member]    
Debt Instrument [Line Items]    
Weighted interest rate 3.50%  
Minimum [Member]    
Debt Instrument [Line Items]    
Weighted interest rate 1.75%  
v3.20.2
Long-Term Loans, Net of Current Maturities (Details 1)
$ in Thousands
Dec. 31, 2019
USD ($)
Debt Disclosure [Abstract]  
2020 $ 664
2021 664
2022 662
2023 655
2024 60
Total $ 2,705
v3.20.2
Long-Term Loans, Net of Current Maturities (Details Textual)
1 Months Ended
Oct. 31, 2017
Long-Term Loans, Net of Current Maturities (Textual)  
Loan term, description The Company and its Israeli subsidiaries entered into an agreement with Bank Beinleumi for the provision of credit facilities, which were used to pay Bank Leumi loans amounting to $2,976, Amounts drawn under the credit facilities in 2017 will be paid in monthly equal installments for a period of 6 years. In May 2019, the Company increased its credit facilities from Bank Beinleumi in the amount of $708, to pay for the acquisition of Imdecol business operations. The loan will be paid in monthly equal installments for a period of 5 years.
v3.20.2
Commitments and Contingent Liabilities (Details)
₪ in Thousands, $ in Thousands
1 Months Ended 12 Months Ended
Dec. 04, 2018
USD ($)
Dec. 04, 2018
ILS (₪)
Apr. 09, 2017
USD ($)
Apr. 09, 2017
ILS (₪)
Feb. 17, 2019
USD ($)
Dec. 31, 2019
USD ($)
Dec. 31, 2019
ILS (₪)
Commitments and Contingent Liabilities (Textual)              
Royalty commitments, description           The Company is required to pay royalties at the rate of 3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the research and development grants (dollar-linked) received from the OCS The Company is required to pay royalties at the rate of 3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the research and development grants (dollar-linked) received from the OCS
Outstanding contingent obligation to pay royalties           $ 3,794  
Litigation settlement amount $ 500   $ 750     $ 222  
NIS [Member]              
Commitments and Contingent Liabilities (Textual)              
Litigation settlement amount | ₪   ₪ 1,800   ₪ 2,600     ₪ 850
Settlement Agreement [Member]              
Commitments and Contingent Liabilities (Textual)              
Contributed the deductible amount         $ 35    
v3.20.2
Shareholders' Equity (Details) - Warrant [Member]
12 Months Ended
Dec. 31, 2019
$ / shares
shares
Class of Warrant or Right [Line Items]  
Outstanding and exercisable warrants | shares 300,000
Weighted average exercise price of outstanding warrants | $ / shares $ 3.30
Weighted average Remaining contractual life (years) 2 years 9 months 25 days
v3.20.2
Shareholders' Equity (Details 1) - Stock Option [Member] - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Number of options      
Outstanding - beginning of year 320,875 314,125 252,670
Changes during the year:      
Granted 95,000 108,000 75,000
Exercised (125,195)
Forfeited (43,806) (101,250) (13,545)
Outstanding - year end 246,874 320,875 314,125
Vested and expected to vest 148,498 167,874 192,584
Exercisable at year end 79,372 157,874 182,584
Weighted-average exercise price      
Outstanding - beginning of year $ 2.59 $ 3.39 $ 6.21
Changes during the year:      
Granted 2.13 2.39 2.13
Exercised 2.52
Forfeited 3.65 4.85 49.09
Outstanding - year end 2.26 2.59 3.39
Vested and expected to vest 2.41 2.9 4.1
Exercisable at year end $ 2.38 $ 2.89 $ 4.17
v3.20.2
Shareholders' Equity (Details 2) - Stock Option [Member]
12 Months Ended
Dec. 31, 2019
$ / shares
shares
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Options outstanding 246,874
Weighted average remaining contractual life (years) 3 years 7 days
Options exercisable 79,372
Weighted average Remaining Contractual life of options exercisable (years) 1 year 11 months 4 days
Exercise Price 2.96 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.96
Options outstanding 13,373
Weighted average remaining contractual life (years) 9 months 22 days
Options exercisable 13,373
Weighted average Remaining Contractual life of options exercisable (years) 9 months 22 days
Exercise Price 2.388 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.388
Options outstanding 83,500
Weighted average remaining contractual life (years) 3 years 2 months 8 days
Options exercisable 33,499
Weighted average Remaining Contractual life of options exercisable (years) 2 years 8 months 2 days
Exercise Price 2.287 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.287
Options outstanding 7,500
Weighted average remaining contractual life (years) 4 years 29 days
Options exercisable
Weighted average Remaining Contractual life of options exercisable (years) 0 years
Exercise Price 2.131 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.131
Options outstanding 45,002
Weighted average remaining contractual life (years) 2 years 11 months 4 days
Options exercisable 22,501
Weighted average Remaining Contractual life of options exercisable (years) 2 years 11 months 4 days
Exercise Price 2.126 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.126
Options outstanding 9,999
Weighted average remaining contractual life (years) 1 year 10 months 10 days
Options exercisable 9,999
Weighted average Remaining Contractual life of options exercisable (years) 1 year 10 months 10 days
Exercise Price 2.118 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Exercise Price | $ / shares $ 2.118
Options outstanding 87,500
Weighted average remaining contractual life (years) 4 years 9 months 29 days
Options exercisable
Weighted average Remaining Contractual life of options exercisable (years) 0 years
v3.20.2
Shareholders' Equity (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
May 08, 2017
Feb. 17, 2015
May 16, 2019
Mar. 15, 2019
Feb. 25, 2019
Jul. 18, 2018
Nov. 30, 2016
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2015
Shareholders' Equity (Textual)                      
Issuance of ordinary shares               $ 527 $ 349 $ 746  
Trading description               For each Ordinary Share purchased under the SEDA, YA will pay 93% of the lowest daily VWAP (as defined below) of the Ordinary Shares during the five consecutive trading days (or, commencing June 2016, three consecutive trading days), following the date of an advance notice from the Company (provided such VWAP is greater than or equal to 90% of the last closing price of the Ordinary shares at the time of delivery of the advance notice). Notwithstanding the forgoing, the notice shall not exceed $500.      
Ordinary shares, shares authorized     400,000     4,000,000   6,000,000 6,000,000    
Increase in authorized share           2,000,000          
Increase in common shares authorized prior to amendment           6,000,000          
Stock option compensation expenses               $ 81 $ 67 60  
Shares issued, Price per share     $ 2.50                
Issuance expenses     $ 65                
Business acquisition, description         The Company issued 20,858 Ordinary Shares (equivalent to $62) to officers of the Company as year 2018 Bonus payments approved by the Board of Directors and shareholders.            
Gross proceeds     $ 1                
Warrant, description     The warrants shall be exercisable for 3.5 years and shall be subject to a three-year vesting period as follows: one third of the warrants shall vest annually (upon the lapse of 12 months, 24 months and 36 months from issuance), provided that on the applicable vesting date the investor did not sell any of the Ordinary Shares purchased on the private placement. Vesting of all of the warrants shall be accelerated in the event that any one or more shareholders acting together acquire a block of 40% of the Company’s issued and outstanding share capital. In addition, the Company issued 60,000 warrants as fees to a placement agent.                
Warrants issued     240,000                
Warrants exercise price     $ 3.30                
Standby Equity Distribution Agreement Two [Member]                      
Shareholders' Equity (Textual)                      
Agreement period, description                 Forty-month period.    
Standby Equity Distribution Agreement Three [Member]                      
Shareholders' Equity (Textual)                      
Agreement period, description                 Four-year.    
Stock Option [Member]                      
Shareholders' Equity (Textual)                      
Stock option compensation expenses               $ 81 $ 67 $ 60  
Options still available for future grants               238,381      
Vesting period               5 years      
Stock option plan expiration date             May 31, 2023        
Weighted-average grant-date fair value of options granted               $ 1.97 $ 2.58 $ 2.16  
Weighted-average grant-date fair value of unvested options               $ 2.18      
Total intrinsic value of options exercised               $ 0 $ 0 $ 0  
Unrecognized compensation cost related to non-vested share-based compensation arrangements               $ 155 $ 163    
Share based compensation options description             On November 2016 , December 2017 and July 2018, the Company’s shareholders approved an increase in the number of options for Ordinary Shares available for issuance under the Plan by 125,000 ,100,000 and 200,000, respectively, resulting in 700,000 options for Ordinary Shares available for issuance under the Plan. Any option which is canceled or forfeited before expiration will become available for future grants. Each option granted under the Plan expires five years from the date of the grant.      
Options exercised               (125,195)  
Ya Global [Member]                      
Shareholders' Equity (Textual)                      
Issuance of ordinary shares $ 2,000 $ 1,300                  
Number of ordinary shares issued, shares               709,144 709,144 709,144  
Number of ordinary shares issued               $ 1,448 $ 1,448 $ 1,448  
Ordinary shares issued for commitment fee                   67,307 28,930
Issuance expenses               $ 45 $ 45 $ 45  
Options exercised       (125,195)              
Exercise price of options       $ 316              
v3.20.2
Taxes on Income (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Components of Company's deferred tax liabilities and assets    
Net operating loss carry forward [1] $ 7,658 $ 7,407
Net capital loss carry forward [1] 5,427 5,427
Allowances and provisions 129 120
Intangible assets, net (393) (372)
Deferred tax assets, gross 12,821 12,582
Valuation allowance [2] (12,821) (12,582)
Net deferred tax Liability
[1] See Note 16b.
[2] In years 2019 and 2018, the Company has provided valuation allowances on deferred tax assets that results from tax loss carry forward and other reserves and allowances due to its history of operating and capital losses and current uncertainty about the ability to realize these deferred tax assets in the future. Net change in valuation allowance during 2019 was due to a increase of net capital loss carry forward.
v3.20.2
Taxes on Income (Details 1) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Tax Disclosure [Abstract]      
Current $ 31 $ 19 $ 16
Other (79) (60)
Provision for deferred income taxes (48) (41) 16
Domestic (52) (44) 9
Foreign 4 3 7
Taxes on income (tax benefit) $ (48) $ (41) $ 16
v3.20.2
Taxes on Income (Details 2) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Tax Disclosure [Abstract]      
Domestic $ (980) $ 877 $ 750
Foreign 19 72 39
Total income (loss) before taxes $ (961) $ 949 $ 789
v3.20.2
Taxes on Income (Details Textual) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Taxes on Income (Textual)      
Loss carry forward $ 33,204    
Accumulated capital losses $ 23,597    
Israel [Member]      
Taxes on Income (Textual)      
Corporate tax rate   23.00% 24.00%
Corporate tax rate, description On December 30, 2016, as part of the Economic Efficiency Law (Legislative Amendments for Accomplishment of Budgetary Targets for Budget Years 2017-2018), 5777-2016, the corporate tax rate was reduced to 24% for the 2017 tax year and to 23% in 2018 tax year and thereafter.    
v3.20.2
Supplementary Information to Statements of Operations (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Financial income:      
Interest income $ 1
foreign currency differences gains 26 12
Financial income 26 13
Financial expenses:      
In respect of interest related to bank loans and bank fees (245) (192) (259)
Other (mainly foreign currency differences) (111) (63) (51)
Financial expenses (356) (255) (310)
Financial income expenses, net $ (330) $ (255) $ (297)
v3.20.2
Supplementary Information to Statements of Operations (Details 1) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Numerator:      
Income (loss) $ (913) $ 990 $ 773
Net income (loss) available to Ordinary shareholders $ (913) $ 990 $ 773
Denominator (in thousands):      
Basic weighted average Ordinary shares outstanding (in thousands) 4,053 3,500 3,171
Diluted weighted average Ordinary shares outstanding (in thousands) 4,059 3,500 3,171
Basic and diluted income (loss) per share $ (0.23) $ 0.28 $ 0.24
v3.20.2
Segments and Geographical Information (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Jun. 01, 2019
Segment Reporting Information [Line Items]        
Revenues $ 33,817 $ 32,650 $ 28,932  
Gross profit 6,658 6,743 6,345  
Impairment of Goodwill and intangible assets (614)      
Operating Income (loss) (631) 1,204 1,086  
Goodwill 5,147 4,676 4,676 $ 1,085
Long Term assets related to segment (excluding Goodwill) 2,730 1,366 1,009  
RFID [Member] | Operating Segments [Member]        
Segment Reporting Information [Line Items]        
Revenues 13,240 14,445 13,666  
Gross profit 2,906 3,371 3,623  
Impairment of Goodwill and intangible assets      
Operating Income (loss) (126) 306 591  
Goodwill 4,676 4,676 4,676  
Long Term assets related to segment (excluding Goodwill) 786 649 780  
Supply Chain Solutions (BOS-Odem) [Member] | Operating Segments [Member]        
Segment Reporting Information [Line Items]        
Revenues 19,750 18,205 15,495  
Gross profit 3,750 3,372 2,722  
Impairment of Goodwill and intangible assets      
Operating Income (loss) 1,137 898 495  
Goodwill  
Long Term assets related to segment (excluding Goodwill) 1,063 717 229  
Intelligent Robotics [Member] | Operating Segments [Member]        
Segment Reporting Information [Line Items]        
Revenues 827  
Gross profit 2  
Impairment of Goodwill and intangible assets (970)      
Operating Income (loss) (1,642)  
Goodwill 471  
Long Term assets related to segment (excluding Goodwill) $ 881  
v3.20.2
Segments and Geographical Information (Details 1) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Segment Reporting Information [Line Items]      
Total revenues $ 33,817 $ 32,650 $ 28,932
Long-lived assets [1] 1,257 1,108 651
Far East [Member]      
Segment Reporting Information [Line Items]      
Total revenues 5,055 3,800 1,416
Long-lived assets [1]
America [Member]      
Segment Reporting Information [Line Items]      
Total revenues 901 1,189 918
Long-lived assets [1]
Europe [Member]      
Segment Reporting Information [Line Items]      
Total revenues 744 462 231
Long-lived assets [1]
Israel [Member]      
Segment Reporting Information [Line Items]      
Total revenues 23,493 22,990 21,870
Long-lived assets [1] 1,108 651
India [Member]      
Segment Reporting Information [Line Items]      
Total revenues 3,624 4,209 4,497
Long-lived assets [1]
[1] Long-lived assets are comprised of property and equipment (intangible assets and goodwill are not included).
v3.20.2
Leases (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Assets :    
Operating lease asstes $ 720
current    
Operating lease liabilities 551
Long term    
Operating lease liabilities $ 289
Weighted Average Discount Rate    
Vehicles 3.50%  
Facilities rent 3.50%  
Minimum [Member]    
Remaining Lease Term    
Vehicles 4 months 9 days  
Facilities rent 1 year 3 months 29 days  
Maximum [Member]    
Remaining Lease Term    
Vehicles 2 years 3 months 29 days  
Facilities rent 3 years 3 months 29 days  
v3.20.2
Leases (Details 1)
$ in Thousands
Dec. 31, 2019
USD ($)
future lease payments are:  
2020 $ 509
2021 250
2022 35
2023 10
Total $ 804
v3.20.2
Leases (Details 2)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Operating cash out flows from operating lease $ 120
v3.20.2
Leases (Details Textual)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Operating leases expenses $ 900
v3.20.2
Related Parties (Details) - Related Party [Member] - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Related Party Transaction [Line Items]      
Monthly fees $ 49 $ 183 $ 125
Bonus 10 49
Payments for employees 33 39
Total $ 92 $ 271 $ 125
v3.20.2
Related Parties (Details Textual)
₪ in Thousands, $ in Thousands
1 Months Ended 12 Months Ended
Jun. 01, 2019
USD ($)
Jun. 30, 2018
ILS (₪)
Dec. 31, 2017
Related Parties (Textual)      
Amount of monthly consideration | $ $ 417    
NIS [Member] | Services Agreement [Member] | Maximum [Member]      
Related Parties (Textual)      
Amount of monthly consideration   ₪ 53  
NIS [Member] | Services Agreement [Member] | Minimum [Member]      
Related Parties (Textual)      
Amount of monthly consideration   ₪ 33  
Related Party [Member]      
Related Parties (Textual)      
Bonus from net profit, Percentage   15.00%  
Acquisition agreement, description     Pursuant to a Management Services Agreement entered into as part of the acquisition agreement, iDnext was paid a monthly fee of NIS 33,000 (approximately $8.5) through December 31, 2017. The Management Services Agreement expired on December 31, 2017.
Related Party [Member] | NIS [Member]      
Related Parties (Textual)      
Amount of monthly consideration   ₪ 33  
Related Party [Member] | Three employees [Member] | NIS [Member]      
Related Parties (Textual)      
Amount of monthly consideration   ₪ 35  
v3.20.2
Subsequent Events (Details)
$ / shares in Units, $ in Thousands
1 Months Ended
Mar. 31, 2020
Feb. 19, 2020
USD ($)
shares
Feb. 19, 2020
₪ / shares
May 16, 2019
$ / shares
Subsequent Events (Textual)        
Warrant exercise price | $ / shares       $ 3.30
Subsequent Event [Member]        
Subsequent Events (Textual)        
Issuance of ordinary shares | shares   100,000    
Principal amount   $ 600,000    
Interest percentage   8.00%    
Warrant exercise price | ₪ / shares     ₪ 3.00  
Commitment fee   $ 15,000    
Subsequent event, Description The Company increased its credit facilities from Bank Beinleumi in the amount of $180,000 in interest rate of Prime+1.5%. The loans will be paid from June 2020, in monthly equal installments for a period of 2 years.