From Silicon to System
Innovative Connectivity and Security
Annual Report and Financial Statements
For the Year Ended 31 December 2024
Ethernity Networks Ltd
Company registration number: 51-347834-7
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Ethernity Networks, headquartered in Israel, Ethernity Networks (AIM: ENET.L OTCMKTS: ENETF)
provides innovative data processing and Passive Optical Network (“PON”) semiconductor technology
for networking appliances. The Company’s comprehensive networking and security solutions deliver a
Carrier Ethernet Switch Router data plane and control software, featuring a rich set of networking
capabilities, robust security, and a wide array of virtual function accelerations to optimize
telecommunications networks.
Ethernity’s semiconductor technology has been deployed in both FPGA and ASIC form factors and has
been integrated into over one million networking platforms worldwide. Its complete, flexible solutions
adapt rapidly to customers' evolving needs, reducing time-to-market and enabling efficient
deployment of 5G, edge computing, mobile backhaul, carrier Ethernet, broadband access networks,
and various NFV appliances including 5G UPF, vRouter, and vBNG.
Contents
Statutory and Other Information
02
Chairman’s Statement
04
Chief Executive’s Statement
05
Financial Review
09
Board of Directors
15
Corporate Governance Statement
17
Directors’ Report
22
Statement of Directors’ Responsibilities
23
Independent Auditor’s Report to the Members of Ethernity Networks Limited
26
Statement of Financial Position
30
Statement of Comprehensive Loss
31
Statement of Changes in Equity
32
Statement of Cash Flows
33
Notes to the Financial Statements
34
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Statutory and Other Information
Directors
Joseph (Yosi) Albagli
Independent Non-Executive Chairman
David Levi
Chief Executive Officer
Shavit Baruch
VP Research & Development
Richard Bennett
Independent Non-Executive Director
Aviva Banczewski
Independent Non-Executive Director**
Julie Kunstler
Independent Non-Executive Director**
**Appointed 16 April 2024
Secretary
Tomer Assis
Registered office
Beit Golan, 3rd Floor
1 Golan St., Corner HaNegev
Airport City 7019900
Israel
Auditor
Fahn Kanne & Co. Grant Thornton Israel
32 Hamasger Street
Tel Aviv 6721118
Israel
Registrars
MUFG Corporate Markets
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
-3-
Nominated Adviser
Allenby Capital Limited
and Joint Broker
5 St Helen's Place
London
EC3A 6AB
Joint Broker
CMC Markets UK plc
133 Houndsditch
London
EC3A 7BX
Joint Broker
Peterhouse Capital Limited
80 Cheapside
London
EC3A 6AB
UK Solicitors
Edwin Coe LLP
2 Stone Buildings
Lincoln’s Inn
London
WC2A 3TH
Israel Solicitors
Gornitzky & Co
20 HaHarash St.
Tel Aviv-Yafo 6761310, Israel
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Chairman’s Statement
I am pleased to present my report as Chairman of the Board.
2024 began under challenging circumstances as the Company continued to operate under a creditor arrangement.
Despite these difficulties, I am pleased to report that, as of the date of this report, the Company has successfully
fulfilled all of its obligations under the creditor settlement agreement. This marks an important milestone in restoring
stability and credibility to the business.
During this period, the Company experienced a decline in revenue, primarily due to external factors that impacted
potential new customers of the Company and, more significantly, the uncertainty associated with the Company
operating under creditor oversight. This uncertainty impacted customer confidence and limited our ability to execute
on new opportunities.
Despite these headwinds, I am encouraged by the $1.05m contract signed with a Tier-1 US Aerospace vendor in 2024,
which was subsequently extended to $1.3m following the year-end, and the significant interest we have received in
recent months—particularly in the final quarter of FY2024—regarding the potential fabrication of an ASSP (Application
Specific Standard Product) to be co-funded by an interested OEM. This initiative is based on the Company’s existing,
fully tested design currently operating on Ethernity’s Universal Edge Platform (UEP). The UEP has already been
evaluated and validated by several major OEMs, including a Tier-1 wireless backhaul vendor, underscoring its technical
robustness and market readiness.
Further strengthening Ethernity’s strategic position is the growing recognition of the Company’s Passive Optical
Network (PON) technology as a valuable asset within the industry. In parallel, whilst contracts have not been signed,
we are making substantial progress in our discussions with the Tier-1 wireless backhaul OEM around the development
of an ASSP solution that would not only meet their specific needs but also be offered to the broader market.
With these developments in mind, I am optimistic that the Company will secure the necessary funding to execute its
transformative five-year ASSP (Application-Specific Standard Product) business plan. This plan leverages our proven
technology, strategic IP, and customer relationships to position the Company as a key player in the evolving
semiconductor landscape.
I would like to thank our employees, partners, and shareholders for their continued support and commitment during
this transitional period. I look forward to the next phase of growth with renewed confidence.
Outlook
The Company is optimistic of securing a strategic agreement for the fabrication of an ASSP with a key OEM in the
coming months.
In parallel, the Company sees potential to generate short-term revenue from its FPGA-based solutions, including the
ENET Switch/Router and PON products, as outlined in the recent PON Strategy announcement released on 10 June
2025.
Subject to securing the necessary funding, I am confident that we can build a strong business built on the foundation
of our proven intellectual property and existing solutions.
Yosi Albagli
Chairman
29 June 2025
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Chief Executive’s Statement
By the end of January 2024, the Company successfully exited the temporary suspension of proceedings (“TSP”) process
and initiated a strategic transition aimed at leveraging the completion of the first UEP (Universal Edge Platform)
development as a fully integrated system product. This marks a key evolution beyond offering standalone FPGA SoCs
(systems on chips), as Ethernity now delivers comprehensive, end-to-end solutions that include the complete ENET
implementation on FPGA SoC, hardware platforms, and application software.
By moving to a system-based approach, Ethernity empowers customers to achieve faster time-to-market thereby
accelerating revenue generation. The all-integrated UEP appliances—combining advanced FPGA SoCs, Ethernity’s
semiconductor expertise, and robust application software, eliminate the need for extensive in-house product
development. This enables Ethernity’s customers, including those without significant in-house engineering resources,
to quickly bring high-performance solutions to the market.
This strategic shift positions Ethernity to strengthen its competitive market presence, expand its OEM customer base,
and attract new partners capable of contributing meaningfully to the Company’s future growth.
Ethernity Networks stands out for its cost-effective, patented routing data plane functionality implemented on FPGAs.
This technology provides our customers with a significant competitive advantage - they can deliver Carrier Ethernet
services using our base data processing engine at an attractive price point, while retaining the flexibility to unlock
advanced routing capabilities via software licensing. This unique routing engine offering embedded within the ENET
Data processor pipe line was the key reason a Tier-1 Aerospace OEM selected Ethernity as its supplier, entering into a
licensing agreement initially valued at $1.05 million, which was subsequently extended to approximately $1.35 million
in H1 2025.
Our patented routing solution, embedded within the UEP, was fully validated and has now been tested and integrated
successfully into this customer’s platform.
While we are encouraged by the contract signed with this Tier-1 U.S. Aerospace OEM, it is disappointing that we did
not secure the anticipated FPGA SoC orders from our U.S. fixed wireless customers, despite earlier discussions and
indications suggesting otherwise. This outcome was primarily due to a nearly 50% price increase in the specific FPGA
SoC compared to 2022, including a 20% price hike implemented in Q4 2024, which influenced the customer’s
procurement decision.
Additionally, we were unable to generate further FPGA-based business for the UEP during 2024. One potential
engagement was impacted by the customer’s financial difficulties, while another opportunity, centered around
licensing discussions and FPGA SoC procurement, did not materialize due to the customer’s preference to acquire a
complete end-product from Ethernity under a resale model, which did not align with the Company’s business strategy.
In addition, a third potential FPGA customer, a Tier-1 wireless backhaul OEM that evaluated our UEP platform during
2024, proposed transitioning the FPGA-based design directly into an ASSP solution. The OEM noted that the UEP
already encompasses all the required features for their platform, with the key advantage being its full integration with
software applications. This level of integration significantly reduces the development burden typically placed on OEMs
when adopting new silicon solutions. Recognizing the value of a ready-to-deploy, fully integrated system, the OEM has
expressed a potential willingness to co-fund the development and, in a request for information (RFI) submitted to the
Company, indicated that it would be willing to allow Ethernity to commercialize the resulting device as an ASSP for the
global market.
In parallel to the testing conducted by the aforementioned Tier-1 OEM, another leading wireless backhaul vendor
evaluated our product during 2024. Although the process was temporarily halted due to internal personnel team
changes, the evaluation later resumed under a different group within the company. Following this renewed
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engagement, the vendor has recently expressed strong interest in acquiring the current UEP as a turnkey solution to
support a unique wireless use case, one that Ethernity’s UEP is uniquely capable of addressing. Beyond their immediate
product interest, the vendor also demonstrated enthusiasm for our planned ASSP, highlighting a potential willingness
to co-fund its development in collaboration with other strategic partners (See Strategic Section for further details).
The ASSP opportunity, if realized, could represent a pivotal step in Ethernity’s transformation into a leading provider
of high-performance, cost-efficient ASSPs for the networking market.
As a result, management shifted the Company’s focus toward building a comprehensive development and financial
plan for the proposed ASSP device. This included obtaining detailed cost estimates from various sources to ensure an
accurate and sustainable execution strategy.
In parallel, the Company began transitioning its R&D efforts toward the implementation of the ASSP, aligning technical
resources with the strategic direction of the business.
The Board believes that Ethernity’s ASSP will offer a compelling value proposition for OEM customers by combining
the power of our cost-effective Data Processing Unit (DPU) SoC combining patented routing LPM (Longest Prefix
Match) algorithm, patented L1 bonding, and other long standing architectural patents, with our innovative low-latency
PON technology. This comprehensive suite provides a versatile umbrella of wired, fiber and wireless access solutions.
Therefore, with a clear ASSP roadmap the Company anticipates, based on the customer interactions as detailed in this
report, that there is an opportunity to build a strong business foundation going forward, serving the growing
addressable markets of:
•
Surging Bandwidth Demands: The ever-increasing demand for bandwidth, driven by cloud services and
artificial intelligence at the network edge, creates a significant opportunity for Ethernity's solutions.
•
IP-Based Network Expansion: The growth of IP-based next-generation networks is a key market driver for our
high-performance offerings.
•
Fiber Access Boom: The widespread deployment of fiber optics and the dominance of PON technology for
fiber access perfectly aligns with Ethernity's strengths.
•
Rise of Edge Computing: The growing adoption of edge computing deployments creates a strong demand for
our low-latency solutions.
•
5G Expansion: The global rollout of 5G networks fuels the need for innovative wireless backhaul solutions, a
core competency of Ethernity.
•
Carrier Ethernet Adoption: The increasing adoption of Carrier Ethernet for wireless backhaul applications
presents a significant growth opportunity.
Current trading
As reported in the trading update dated 23 April 2025 the Company anticipated collecting $700,000 during the first
four months of 2025, of which $400,000 was received at the beginning of January 2025. The Company also announced
receipt of an additional purchase order valued at $290,000 from the Tier-1 U.S. Aerospace OEM.
The majority of this order was successfully delivered and recognized in the second quarter of 2025, along with
completion of the original $1.05 million base licensing agreement following completion of testing and porting of the
deliveries on the customer platform. As part of this Completion $160,000 was regcognised as revenue. As a result,
total revenue recognized from this customer during First Half of 2025 (H1 2025) amounted to approximately $498,000.
In addition to the Aerospace contract, the Company also generated recurring income from royalties and maintenance
services provided to other customers.
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Recap on ASIC opportunity, strategy and outlook
Following extensive testing throughout 2024 by Tier-1 OEM vendors, the Company’s UEP solution, featuring its
patented Layer 1 (L1) link bonding technology and a fully integrated L2/L3 networking stack, demonstrated strong
performance and market fit. As a result, in Q4 2024, one of the leading vendors approached the Company with a
request to obtain a quote for the development of an ASSP specifically tailored for mobile backhaul over microwave
and E-Band networks which would also be made available to the global market.
In response, the Company developed a comprehensive business and development plan for the proposed ASSP. This
initiative has since attracted significant interest, with four major wireless OEMs, collectively representing
approximately 49% of the global wireless backhaul market, expressing an interest to potentially adopt the device.
The Board believes that these vendors collectively recognize the strategic value of the Company’s integrated
intellectual property portfolio, comprising the production-ready RTL code currently running on FPGA, the fully
integrated L2/L3 networking software stack, and the complete, operational UEP platform that forms the basis for the
proposed ASSP. Based on internal evaluations and industry benchmarks, Ethernity estimates that the value of these
combined technology assets to a wireless vendor of Ethernity’s existing FPGA based UEP offering ranges between $16
million and $25 million compared to developing the ASIC solution from scratch. Furthermore, the Company estimates
that should OEMs decide to develop such an ASIC from scratch, it would take them approximately three years to reach
the level of a production-ready platform that the Company has already achieved, after which they could only begin
the ASIC development process, which would result in ASIC availability in approximately five years. This underscores
not only the commercial potential of the ASSP initiative but also the broader market recognition of the Company’s
differentiated and mature technology.
In response, subject to securing the funding that would be required to develop the ASSP, the Company plans to
transition its business operations, with the strategic objective of becoming a semiconductor vendor.
The planned ASSP will address key requirements across the wireless backhaul, carrier switch/router (CSR), Carrier
Ethernet, and broadband markets—positioning the Company to deliver high-performance, cost-effective
semiconductor solutions to leading global OEMs.
A number of wireless OEMs have indicated that they would be willing to participate in joint funding of the ASSP with
other vendors, however this approach may create complications in future pricing and gross margin for the ASSP
opportunity. Therefore, with the expanded ASSP business into Broadband market with the inclusion of PON, the
Company is aiming to bring in one strategic partner from the wireless domain and one from the PON domain.
Discussions regarding co-funding with one of the leading global Wireless Backhaul OEMs are progressing well. The
OEM has allocated additional internal resources to support the engagement, which is expected to help facilitate its
execution and contribute significantly to the successful implementation of the device.
Whilst no contracts have been signed to date, the business scope between Ethernity and this leading wireless backhaul
OEM, has been largely agreed in principal, subject to final alignment and contract. This business scope forms the
foundation for the ongoing business and technical discussions and the Company hopes to sign a letter of intent with
this partner in the near future.
The scope being finalised with the OEM includes terms which would result in a significant NRE to partially fund the
development of the ASSP/ASIC, along with an extensive commitment for device orders following availability. Given
the strategic importance of volume production in fabricating an ASSP/ASIC, the device will also be offered to other
Wireless Backhaul OEMs which could generate significant further revenue for the Company once available.
Furthermore, by integrating PON capabilities into the ASSP, the same device would be extended to serve the
Broadband market—potentially generating revenue on par with the wireless backhaul segment.
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Furthermore, the Company is currently focusing its technical and commercial discussion with other vendors that are
familiar with Ethernity’s offerings and value what we offer for the PON market. We anticipate that one of the OEMs
that generates significant revenue in the remote OLT market, will partially co-fund the ASSP.
Should these opportunities progress as expected, the Company is confident that it would be able to secure the
required funding to be able to develop the ASSP alongside the co-funding from its lead wireless backhaul OEM
partners.
While the development of the ASSP is expected to take approximately 18–20 months from project initiation, the
majority of the Company’s revenue during this period would be derived from the NRE associated with the co-funding
of the ASSP, along with additional revenue that the Company expects to generate in the short-term from its FPGA-
based solutions, including the ENET Switch/Router and PON products, from licensing and selling customed FPGA based
hardware solution.
Once the ASSP is available, it is anticipated that the Company's revenue will primarily come from supplying the device
at a higher gross margin, along with associated services related to the new ASSP.
Subject to securing the necessary funding, I am confident that we can establish a transformative business operation
built on the foundation of our proven intellectual property and existing solutions, which, along with the future
availability of the ASSP, has the potential to generate significant revenue for the Company and as a leader in the
semiconductor telecom access networking and broadband market.
David Levi
Chief Executive Officer
29 June 2025
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Financial Review
Financial Performance
I am pleased to present my first Annual Report as CFO of the Company. I took over the CFO role in the midst of a
challenging period with a goal to maneuver the financial planning for the Company that was operating under a Creditor
arrangement.
During this period the Company focused on pure 100% gross margin revenue resulting from licensing fees, or royalties
and refrained from taking any commitment that would require pre-purchasing of components or pre-production based
on future orders, with its main goal to reduce to the minimum any cash flow risks.
Furthermore, the Company operated in cooperation with the settlement manager to complete the creditors payments
to the first priority creditors and support the Company in converting short terms liabilities to long term liabilities.
Key Highlights:
•
FY 2024 revenue of $1.38 million represents 63% decrease vs. 2023 revenues (2023: $3.78 million), while gross
profit decreased by 46% to $1.3m (2023: $2.3m), however, the gross margin percentage increased to 92.1%
in 2024 from 61.9% in 2023 reflecting an increase of 30.2%
•
Operating loss decreased from $5.3 million in 2023 to $5.1 million in 2024, reflecting a decrease of 4%
•
EBIDTA loss decreased by 10% to $3.48 million (2023: $3.86 million)
•
Net cash funds raised during the year amounted to $1.86 million
•
Cash and cash equivalents at 31 December 2024 of $0.05 million ($0.1million restricted cash in other long term
assets) (31 December 2023: $1.99 million). During January 2025 the Company collected $0.39 million from its
customers.
Key financial results
EBITDA
Although EBITDA is not a recognised reportable accounting measure, it provides a meaningful insight into the
operations of the Company when removing the non-cash or intangible asset elements from trading results along with
recognising actual costs versus various IFRS adjustments, in this case being the amortisation and non-cash items
charged in operating income and the effects of IFRS 16 treatment of operational leases.
The EBITDA for the financial year ended 31 December 2024 is presented as follows:
EBITDA
US Dollar
Increase
(Decrease)
%
For the year ended
31 December
2024
2023
Revenues
1,383,565
3,777,919
(2,394,354)
(63%)
Gross Profit
1,274,826
2,340,142
(1,065,316)
(46%)
Gross Margin %
92.1%
61.9%
30.2%ppts
Operating loss
(5,089,505)
(5,280,652)
191,147
(4%)
Adjusted for:
Amortisation of Intangible Assets
961,380
961,380
-
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Depreciation charges on fixed assets
315,532
138,782
176,750
Depreciation in respect of IFRS16
334,400
315,884
18,516
EBITDA
(3,478,193)
(3,864,606)
386,413
(10%)
Add back Share based compensation charges
212,680
72,287
140,393
Add back vacation accrual charges
27,954
(109,026)
136,980
Add back impairments
140,843
220,220
(79,377)
Adjust IFRS16 rent expense reversals
(216,479)
(398,033)
181,554
Adjusted EBITDA
(3,313,195)
(4,079,158)
765,963
(19%)
The EBITDA losses decreased during the year 2024 by 10% from $3.86 million in 2023 to $3.48 million in 2024. The
decrease is attributed to the decrease in revenues as well as the cost savings which have been implemented across
the board in the various operating department expenses.
The adjusted EBITDA measure which adds back various non-cash items improved by 19% in comparison to the previous
year from an adjusted EBITDA loss of $4.1 million in 2023 to $3.3 million in 2024.
The EBITDA comparison of the first six months of 2024 with the latter six months of 2024 is presented as follows:
EBITDA
US Dollar
Increase
(Decrease)
%
For the 6 months ended
31-Dec-24
30-Jun-24
Revenues
801,557
582,008
219,549
38%
Gross Profit as presented
708,224
566,602
141,622
25%
Gross Margin %
88.36%
97.35%
(9.2%)ppts
Operating loss as presented
(2,692,503)
(2,397,002)
(295,501)
12%
Adjusted for:
Amortisation of Intangible Assets
480,690
480,690
-
Depreciation charges on fixed assets
156,962
158,570
(1,608)
Depreciation in respect of IFRS16
167,200
167,200
-
EBITDA
(1,887,651)
(1,590,542)
(297,109)
19%
Add back Share based compensation charges
71,780
140,900
(69,120)
Add back vacation accrual charges
27,954
0
27,954
Add back impairments
131,303
9,540
121,763
Adjust IFRS16 rent expense reversals
513
(216,992)
217,505
Adjusted EBITDA
(1,656,101)
(1,657,094)
993
(0%)
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The EBITDA losses increased during the latter half of 2024 by 19% from $1.59 million in the first six months of 2024 to
$1.89m in the latter half of 2024.
The adjusted EBITDA losses of $1.66 million during the latter half of 2024 is equal to the adjusted EBITDA of the first
six months of 2024.
Summarised trading results
Summarised Trading Results
US Dollar
Increase
(Decrease)
%
Audited
For the year ended
31 December
2024
2023
Revenues
1,383,565
3,777,919
(2,394,354)
(63%)
Gross Profit
1,274,826
2,340,142
(1,065,316)
(46%)
Gross Margin %
92.1%
61.9%
30.2%ppts
Operating Loss
(5,089,505)
(5,280,652)
191,147
(4%)
Financing costs
(770,645)
(1,267,906)
497,261
(39%)
Financing income
27,441
183,811
(156,370)
(85%)
Net comprehensive loss for the year
(5,832,709)
(6,364,747)
532,038
(8%)
Basic and Diluted earnings per ordinary share
(0.01)
(0.04)
0.03
(76%)
Weighted average number of ordinary shares for basic
earnings per share
550,797,251
143,876,859
Revenue Analysis
Revenues for the twelve months ended 31 December 2024 decreases by 63% to $1.38 million (2023: $3.78 million).
The revenue mix will continue to evolve as the Company progresses in achieving the desired mix of the revenue
streams from the sale of products and solutions in addition to software revenue and NRE from IP licenses and services.
Margins
The gross margin percentage increased to 92.1% in 2024 from 61.9% in 2023 reflecting an increase of 30.2%
percentage points which is mainly attributed to the increased licensing revenues which carry a 100% profit margin
compared to sales of hardware and FPGA SoC.
Operating Costs and Research & Development Costs
After adjusting for the amortisation of the capitalised Research and Development Costs, Depreciation, IFRS Share
Based Compensation and payroll non-cash accruals adjustments, the resultant increases (decreases) in Operating
costs, as adjusted would have been:
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Operating Costs
US Dollar
Increase
(Decrease)
%
For the year ended
31 December
2024
2023
Total R&D Expenses
3,743,495
5,160,697
(1,417,202)
(27%)
R&D Intangible amortisation
(961,380)
(961,380)
-
0%
Vacation accrual reversals (expenses)
(25,919)
57,569
(83,488)
(145%)
Share Based Compensation IFRS adjustment
(208,631)
(58,755)
(149,876)
255%
Research and Development Costs net of amortisation, Share
Based Compensation, IFRS adjustments and Vacation accruals
2,547,565
4,198,131
(1,650,566)
(39%)
Total G&A Expenses
2,086,180
1,841,842
244,338
13%
Share Based Compensation IFRS adjustment
(4,049)
(17,710)
13,661
(77%)
Vacation accrual reversals (expenses)
129
21,196
(21,067)
(99%)
Impairment losses of financial assets
(140,843)
(220,220)
79,377
(36%)
Fixed Assets Depreciation Expense
(315,532)
(138,782)
(176,750)
127%
Depreciation in respect of IFRS16
(334,400)
(315,884)
(18,516)
6%
General and Administrative expenses, net of depreciation,
Share Based Compensation, IFRS adjustments, Vacation
accruals and impairments.
1,291,485
1,170,442
121,043
10%
Total Sales and Marketing Expenses
534,896
621,052
(86,156)
(14%)
Share Based Compensation IFRS adjustment
-
4,178
(4,178)
(100%)
Vacation accrual reversals (expenses)
(2,164)
30,261
(32,425)
(107%)
Salesa and Marketing expenses, net of Share Based
Compensation and Vacation accruals.
532,732
655,491
(122,759)
(19%)
Total
4,371,782
6,024,064
(1,652,282)
(27%)
Research and Development costs after reducing the costs for the amortisation of the capitalised Research and
Development intangible asset, share based compensation and adding back for vacation accrual adjustment have
decreased by 39% from $4.2 million in 2023 to $2.5 million in 2024. This is mainly attributed to the employees cost
savings during 2024.
An increase of 10% is noted in the General and Administrative costs over 2024 to $1.3 million after adjusting for
depreciation, share based compensation, IFRS adjustments, impairments and vacation accrual adjustments. This
increase is attributable to the professional fees.
A decrease in the Sales and Marketing costs during the 2024 financial year is mainly due to decrease in employee
remuneration and related costs resulted in a decrease of 19% of the Sales and Marketing costs net of the non-cash
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item adjustments of IFRS share based compensation adjustment as well as the vacation accrual adjustment from $0.66
million in 2023 to $0.53 million in 2024.
Recognition of Research and Development Costs
In line with the change in policy adopted by the Company from 1 July 2019, the Company continues to no longer
recognise the Research and Development costs as an intangible asset and is recognising them as an expense and
charged against income in the year incurred.
For the years ended 31 December 2021, 2022, and 2023 management performed their own internal assessment of
the fair value of the intangible asset and concluded that the value of the asset is fair and no impairment of the
intangible asset on the balance sheet is required. This process was repeated by management for the financial year
under review, the year ended 31 December 2024, and the company believes it is close to executing a major NRE
business deal related to the ASIC opportunity based on the Company's integrated Intellectual property portfolio, as
described in the Chief Executive's Statement, and the assertion that the underlying value of the intangible asset
exceeds the carrying value on the balance sheet remains unchanged.
Balance Sheet
Although it was a challenging year, due to the Temporary Suspension of Proceedings order ("TSP"), the Company
continued to undertake its business and operations as usual with no restrictions. The Company completed three
fundraisings during the year which resulted in net cash inflows amounting to $1.9 million. As of 31 December 2024,
the Company had fully repaid its guaranteed creditors and partially paid the priority creditors, all in compliance with
the settlement plan.
Furthermore, there have been other changes on balance sheet items as follows:
• Increase in Trade receivables due to issue of invoices during December 2024.
• Inventories reduced as the Company no longer stocks up on high-cost inventory following the ease of the global
components shortage and reduction in inventory lead-times.
• Intangible asset on the balance sheet continues to reduce in carrying value due to the annual amortisation with an
approximate 3.5 years of amortisation remaining. The current carrying value of $3.5 million is a result of the
Company historically adopting the provisions of IAS38 relating to the recognition of Development Expenses, which
methodology as noted in the 2019 Annual Report has ceased from 1 July 2019.
• Operating lease right of use asset and the lease liability – in October 2021 the Company committed to a five-year
agreement for its primary offices in Airport City Israel. At the termination of the lease, the Company has an option
to renew it for a further five years. As at 31 December 2022 such renewal option was considered as reasonably
certain to be exercised according to IFRS16. As at 31 December 2023, the Company’s assessment was that such the
option for the five year extension may not be exercised due to the decline in rental prices within the premises
market. In light of the reassessment, the lease asset as well as the lease liability have been adjusted to reflect the
current state of the Company’s asset and commitment given the end of lease in November 2026. Under the signed
contract, the remaining liability as at 31 December 2024 is $0.76 million.
• Trade payables and other liabilities increased in light of the signing of the settlement plan following the Company’s
exit of the Temporary Suspension of Proceedings (“TSP”). According to the settlement plan, the Company will repay
in full all debts outstanding as of 16 October 2023 (date at which the Company entered into the TSP) in quarterly
instalments in the order of the debts’ seniority and in compliance with the settlement plan. In May 2025, the
Company completed all the payments due to all the creditors under the settlement plan. Following the conclusion
of the TSP, and the settlement plan, the Company continues to undertake its business and operations as usual with
no restrictions.
-14-
Summary of Fundraising Transactions and related Liabilities in respect of fundraising transactions
During the twelve-month period ended on 31 December 2024, the Company has completed the following fundraisings:
•
May 2024 – Gross proceeds of £0.8 million (approximately $1.01 million)
•
September 2024 – Gross proceeds of £0.57 million (approximately $0.76 million)
•
December 2024 – Gross proceeds of £0.13 million (approximately $0.17 million)
The Company holds a liability for the outstanding warrants it has issued as part of January 2023 placing amounting to
£15,353.
Going Concern
In the presentation of the annual financial statements for the year ended 31 December 2024, the Company makes
reference to going concern within the audit report. Reference to this is further made in Note 2 to the Annual Financial
Statements presented herein.
Tomer Assis
Chief Financial Officer
29 June 2025
-15-
Board of Directors
Joseph (Yosi) Albagli (Non-Executive Chairman)
Yosi was formally appointed as the Independent Non-executive Director and Chairman on 10 March 2021. Yosi comes
from an engineering background, and has over 30 years of experience in engineering, business strategy, management,
and entrepreneurship in the communications high-tech industry. Yosi co-founded and served as President and CEO of
Tdsoft Ltd in 1994, driving the company toward becoming the leader in V5 solutions. In 2005, he led a reverse merger
with VocalTec (NASDAQ: VOCL) becoming President, CEO and a board member, growing the company’s market share,
and establishing it as a leader in Voice-over-IP technology. Yosi also served as President and CEO of CTWARE Ltd., as a
board member of ITGI Medical (TASE), and as President of the Satellite Communications division for Orbit
Communication Systems (TLV: ORBI). Yosi is currently serving as the Co-Founder and Chairman of Over-Sat Ltd, a
satellite communications company and as CTO of Cassiopeia Space Systems Inc. Yosi is a Cum Laude graduate of The
Technion – Israel Institute of Technology with a BSc degree in Civil Engineering, a graduate of Computer science of the
Tel Aviv University and a veteran of the Israeli navy, in which he taught electronics.
David Levi (Chief Executive Officer)
David has over 28 years in the telecom industry, with vast technical and business experience in ATM, voice, TDM,
SONET/SDH, Ethernet and PON. Prior to founding Ethernity, David was the founder of Broadlight, a semiconductor
company that developed BPON and GPON components and was acquired by Broadcom (BRCM) for $230 million. David
invented the GPON protocol with two US patents registered in his name. Prior to this, David worked as Director of
Product Marketing at ECI Telecom in the Broadband Access division, and Senior Product Line Manager at RAD,
responsible for $50 million product line sales, a product manager at Tadiran Communication, sales manager at
Dynamode Ltd. David holds an BSc Degree in Electronic Engineering from The Jerusalem College of Technology and an
MBA from Bar Ilan University, and is a veteran officer (Major) of the Israeli Defense Forces, in which he served as a
Systems Engineer and project manager.
Shavit Baruch (VP Research and Development)
Shavit has over 28 years of experience in the telecom and datacom industry, with vast technical experience in ATM,
Ethernet and SONET/SDH, both at the components and system level. Prior to Ethernity Networks, Shavit served as
Chief Architect at Native Networks, a start-up company developing products for the Metro Ethernet market. Prior to
this, in 2002, Shavit established Crescendo Networks, a start-up company enhancing data center applications
performance. Prior to the venture at Crescendo, Shavit served as R&D Director at ECI Telecom, where he was in charge
of the development of all transmission cards for one of the world’s most successful broadband systems. Earlier, Shavit
worked at Lannet Data Communication, acquired by AVAYA, designing, together with Galileo, Ethernet Switch on
Silicon. Shavit holds an MSc. Degree in Electronic Engineering from Tel-Aviv University and is a veteran officer (Major)
of the Israeli Defense Forces, in which he developed Electronic Systems
Richard Bennett (Independent Non-Executive Director)
Richard Bennett has extensive business and listed company experience over a career spanning 30 years. During that
time, he has worked for General Electric in Asia and the US and co-founded and listed on NASDAQ J2Global, an internet
telecoms business currently valued at US$3.5 billion. He has worked in executive, chairman and non-executive roles
with a series of successful growth-focused technology and clean energy companies, currently including AIM-quoted
GETECH plc, Hong Kong-quoted China New Energy Ltd and previously AIM-quoted wireless technology company, MTI
Wireless Edge.
-16-
Aviva Baczewski (External Independent Non-Executive Director) (Appointed 16 April 2024)
Aviva Banczewski has over 30 years of varied finance experience including audit, consulting, regulatory and
compliance, business and strategic planning and acquisition due diligence assignments. She started her career working
for Andersen in both Australia and then Israel for a total of 15 years. Since then, she has held both finance and investor
relations roles in publicly traded companies, including ICL Group Ltd and Evogene Ltd, which are both listed on Nasdaq
and the Tel Aviv Stock Exchange (“TASE"). She currently acts as Director of Investor Relations for Pluri, Inc, a Nasdaq
and TASE listed company. Aviva has also been a board member of the Israel Australia Chamber of Commerce since
November 2022.
Julie Kunstler (External Independent Non-Executive Director) (Appointed 16 April 2024)
Julie Kunstler has over 30 years’ experience in the communications components, equipment, and software industry,
having served as an executive, venture-fund investor, analyst, and board member. Most recently, Julie held the
position of Chief Analyst - Broadband Access Intelligence Service for Omdia (a division of Informa Tech), covering the
fixed broadband access industry ecosystem. Prior to joining Omdia, Julie served as VP Business Development for
Teknovus, a venture-backed broadband access PON (Passive Optical Network) chip start-up, where she assisted with
fundraising, corporate strategy, OEM agreements, and its acquisition by Broadcom.
-17-
Corporate Governance Statement
Introduction
The Board is responsible to shareholders for the effective direction and control of the Company, with the aim of
generating long-term success for the Company.
The directors recognise the importance of high standards of corporate governance and in accordance with the AIM
Rules for Companies and their requirement to adopt a recognised corporate governance code, the Board has adopted
the Quoted Companies Alliance Corporate Governance Code (the “the Code”). The QCA Code was developed by the
QCA’s Corporate Governance Expert Group and a standalone Working Group comprising leading individuals from
across the small & mid-size quoted company ecosystem.
As a company incorporated in Israel the Company also complies with the corporate governance provisions of Israel’s
Companies Law, 5759-1999 (the “Companies Law”) as may be applicable, the more relevant of which relates to the
constitution of the Board of Directors, the Audit and Risk Committee and the Remuneration Committee. Whilst the
Israeli Law requirements are more onerous, these have been incorporated into the requirements and guidance under
the QCA Code.
The Board believes that good corporate governance reduces risks within the business, promotes confidence and trust
amongst stakeholders and is important in ensuring the effectiveness and efficiency of the Company’s management
framework.
The Code is based around ten broad principles of good corporate governance, aimed at delivering growth, maintaining
a dynamic management framework, and building trust. The application of the Code requires the Company to apply
these ten principles and to publish certain related disclosures on its website and in its Annual Report. The Company
addresses the key governance principles defined in the QCA Code as outlined on the Company website.
Further details of the Company’s approach to the 10 principles of the Code and how it applies these principles, which
is updated at least annually as required, with the most recent Company update being 5 May 2024, can be found on
the Company`s Website section for Investors at https://ethernitynet.com/investors/#1454056723887-bab53599-
82b7
The Directors and the Board
The Board is currently comprised of two executive directors, David Levi and Shavit Baruch, and four non-executive
directors, Joseph (Yosi) Albagli (Chairman), Richard Bennett, Aviva Banczewski, and Julie Kunstler. The balance
between executive and non-executive directors encourages a diversity of views, and ensures the independence of the
directors, not allowing any group to dominate the Board’s decision making.
In accordance with Israel Companies Law, the Board must always have at least two external directors who meet certain
statutory requirements of independence (the “External Directors”). The Company’s External Directors are currently
Aviva Banczewski and Julie Kunstler. The two external directors were appointed on 16 April 2024. The term of office
of an External Director is three years, which can be extended for two additional three-year terms. Under the
Companies Law, External Directors are elected by shareholders by a special majority and may be removed from office
only in limited cases. Any committee of the Board must include at least one External Director and the Audit and Risk
Committee and Remuneration Committee must each include all of the External Directors (including one External
Director serving as the chair of the Audit and Risk Committee and Remuneration Committee), and a majority of the
members of each of the Audit and Risk Committee and Remuneration Committee must comply with the director
independence requirements prescribed by the Companies Law.
The detailed composition of the board is as follows:
-18-
Joseph (Yosi) Albagli
Independent Non-Executive Chairman
Chairman of the Nomination Committee
(Companies Law precludes the Chairman from being a member of the Audit and Remuneration
Committees)
David Levi
Chief Executive Officer
Nomination Committee member
Shavit Baruch
Vice President R&D
Richard Bennett
Independent Non-Executive director
Audit and Risk Committee member
Remuneration Committee member
Nomination Committee member
Aviva Banczewski*
External Director (appointed 16 April 2024)
Audit and Risk Committee Chair
Remuneration Committee member
Julie Kunstler*
External Director (appointed 16 April 2024)
Remuneration Committee Chair
Audit and Risk Committee member
*Aviva Banczewski and Julie Kunstler were appointed on 16 April 2024.
Operation of the Board
The Board is responsible for the overall strategy and financial performance of the Company and has a formal schedule
of matters reserved for its approval. In order to lead the development of the strategy of the Company and the progress
of financial performance, the Board is provided with timely information that enables the Board to review and monitor
the performance of the Company and to ensure it is in line with the Company’s objectives in order to achieve its
strategic goals.
The CFO and Company Secretary, Tomer Assis, is responsible for ensuring that the Company complies with the
statutory and regulatory requirements and maintains high standards of corporate governance.
-19-
During 2024, the Board met formally on fourteen occasions. Board members also hold ad hoc discussions amongst
themselves between formal Board meetings to discuss governance, financial, operational, and other business matters.
A majority of the Board members constitute the legal quorum for a board meeting. All Directors receive a board pack
comprising an agenda and all relevant operational information in advance of each meeting.
Attendance at Board and Committee meetings by members of the Board during the year ended 31 December 2024
was as follows:
Board
Audit & Risk
Committee
Remuneration
Committee
Nominations
Committee
Number of meetings
14
4
1
1
Yosi Albagli
14
2
1
1
David Levi
14
2
1
1
Ayala Deutsch (note 1)
11
4
0
0
Shavit Baruch
14
2
0
0
Julie Kunstler
14
4
1
0
Aviva Banczewski
14
4
1
0
Richard Bennett
14
4
1
1
Note.
1. Ceased to act as director on 9 Oct 2024.
Re-election of Directors
In accordance with the Company’s Articles, Directors are required to serve for a period of no less than three years
from the date of their appointment, or, in the case of Admission, for three years from the date of the Company’s
admission to AIM.
Following the General Meeting of the Company held on 14 August 2023, the terms of David Levi and Shavit Baruch, in
their capacities as directors, were extended until 22 June 2026.
Yosi Albagli was formally appointed as the Independent Non-Executive Chairman on 10 March 2021 for an initial term
of three years. On 8 March 2024, the Board re-appointed Yosi as Non-Executive Chairman on an interim basis, which
was subsequently approved by the Remuneration Committee. Thereafter, his reappointment as a Board member and
his remuneration as Chairman of the Board were approved by the shareholders during the Annual General Meeting
held on 18 August 2024.
Richard Bennett was appointed as an Independent Non-Executive Director on 7 April 2022 for an initial term of three
years and, as such, becomes eligible for re-election in 2025.
Ayala ceased to serve as Chief Financial Officer and as a member of the Board on 9 October 2024. Tomer Assis was
nominated to serve as Chief Financial Officer, without Board membership.
-20-
Board Committees
The Board has established properly constituted Audit and Risk, Remuneration and Nomination Committees of the
Board with formally delegated duties and responsibilities.
Audit and Risk Committee
The QCA Corporate Governance Code recommends that an Audit and Risk Committee should comprise at least three
members who are independent non-executive directors, and that at least one member should have recent and
relevant financial experience. The Israel Companies Law requires that at least two the External Directors and one other
non-executive director are members of the Committee, and that the Chairman of the Company may not be a member
of the Committee.
The Audit and Risk Committee, which comprises the Independent Non-Executive and External Directors (excluding the
Chairman) and by permanent invite the CFO. The Committee is chaired by Aviva Banczewski with the remaining
members being Julie Kunstler and Richard Bennett. The Committee invites other members of the Board as well as the
Independent and Internal Auditors of the Company to attend meetings as appropriate. The Audit and Risk Committee
has responsibilities which include the review of:
• The Company’s internal control environment;
• Financial risks and Internal Audit;
• Financial statements, reports, and announcements, including the Board’s responsibility to present an annual report
that is fair, balanced, and understandable. The Committee evidences this review in a report to the Board following
its meeting with the auditors to discuss their Report to the Committee and includes an assessment of the
information provided in support of the Board’s statement on going concern and on any significant issues and how
those issues were addressed;
• Independence of auditors, including a review of the non-audit services provided and the level of such fees relative
to the audit fee. In reviewing the Annual Financial Statements, discussions take place with the Auditor`s without
executive management present and discussions are also held on the effectiveness of external audit; and
• Ensuring the Company has a policy which allows any member of staff to raise, in confidence, any concern about
possible impropriety in matters of financial reporting or other matters, and to ensure that suitable arrangements
are in place for a proportionate independent investigation of such matters including any follow-up action required.
During the year ended 31 December 2024, the Committee met on four occasions and the matters considered included
the following:
• Consideration of the Company`s annual audited financial statements for the year ended 31 December 2023, review
of going concern, treatment of the equity and finance transactions undertaken in the financial statements and
recommendation to the Board for publication thereof.
• Review of the Interim Unaudited Financial Statements as at 30 June 2024, review of going concern and reporting,
treatment of the equity and finance transactions undertaken, and formal recommendation to the Board for the
Issuance of the Interim Unaudited Financial Statements as at 30 June 2023.
Remuneration Committee
The Israel Companies Law requires that at least two of the External Directors and one other non-executive director
are members of the committee, and that the Chairman of the Company may not be a member of the Committee.
The Remuneration Committee comprising the Independent Non-Executive and External Directors (excluding the
Chairman) is chaired by Ms. Julie Kunstler, with the remaining members Aviva Banczewski and Richard Bennett.
The Remuneration Committee has responsibility for reviewing and recommending to the Board the remuneration and
incentive arrangements for the executive and non-executive directors, and delegated authorities to the chief executive
relating to senior staff. The Remuneration Committee also has responsibility for:
-21-
• Recommending to the Board the adoption of or variations to a Compensation Policy for Office Holders and
monitoring its implementation.
• Recommending to the Board any changes to the remuneration and incentive arrangements in accordance with the
policy, for each executive and non-executive director (excluding the External directors), and senior executives.
The remuneration of all External Directors is fixed in terms of Israel Companies Law.
During the year ended 31 December 2024, the Remuneration Committee met formally on three occasion to finalise
for recommendation to the Board of Directors the executive director remuneration and incentive packages.
Furthermore, the Remuneration Committee formally recommended to the board the option grants to employees .
Nominations Committee
The Committee’s responsibilities include ensuring that the size and composition of the Board is appropriate for the
needs of the Company including an assessment of the diversity profile, selecting the most suitable candidate or
candidates for the Board and to oversee succession planning aspects for the Board.
During the year under review, the Committee comprised the Non-Executive Chairman Yosi Albagli, the Chief Executive
Officer David Levi, and Independent Non-Executive Director, Richard Bennett.
During the year ended 31 December 2024, the Nominations Committee met formally on one occasion in order to
formalize and recommend the appointment of Tomer Assis as CFO.
Other board members participate as required.
Internal Control
The Board considers on an ongoing basis the process for identifying, evaluating, and managing significant risks faced
by the Company. This has been in place throughout the year and up to the date of approval of the Financial Statements.
The process is regularly reviewed by the Board. The Directors are responsible for the Company’s system of internal
control and for reviewing its effectiveness. However, such a system can only provide reasonable, but not absolute,
assurance against material misstatement or loss. The Company’s system of internal control includes appropriate levels
of authorisation and segregation of duties. Financial information is presented to the Board regularly comprising
management accounts and other financial data which allows for regular reviews of performance.
The Company’s key internal financial control procedures include:
• A review by the Board of actual results compared with budget and current forecasts;
• Reviews by the Board of year end forecasts; and
• The establishment of procedures for capital expenditure and expenditure incurred in the ordinary course of
business.
The external auditors are engaged to express an opinion on the financial statements. They discuss with management
the reporting of operational results and the financial condition of the Company, to the extent necessary to express
their audit opinion.
Internal Audit
The Internal Auditors presented their 2024 review report to the Audit and Risk Committee in September 2024. Their
report focused on the Insurance array as was outlined in the Annual Report of 2024.
• Review of the business, identify key high risk areas and review controls.
• Identify risks.
• Assess risks and present findings.
• Preparation and agreement of an implementation plan addressing the high risk recommendations.
-22-
Directors’ Report
The Directors present their Annual Report and the audited Financial Statements for the financial year ended 31
December 2024.
Principal Activities
Ethernity Networks is a technology solutions provider that develops and delivers data processing technology and
solutions used in high-end Carrier Ethernet applications across the telecom, mobile, security and data center markets.
The Company’s core technology, which is populated on programmable logic, enables delivering data offload
functionality at the pace of software development, improves performance and reduces power consumption and
latency, therefore facilitating the deployment of virtualisation of networking functionality.
The Company is headquartered in Israel.
Results and Dividends
The Consolidated Statement of Comprehensive Income for the year is set out on page 36. No dividend is proposed for
the year.
Risk Management
The Company’s policies for managing risk arising from activities are set out in Note 26 of the Financial Statements.
Directors
The current Directors of the Company are:
Joseph Albagli Independent Non-Executive Chairman
David Levi Chief Executive Officer
Shavit Baruch VP R&D
Richard Bennett Independent Non-Executive Director
Aviva Banczewski External Director*
Julie Kunstler External Director*
* An independent director appointed as an External Director in terms of Israel Companies Law. Appointed on 16 April 2024.
Directors of the Company who served during 2024 but ceased to act to date:
Ayala Deutsch Chief Financial Officer*
*Ceased to act as director on 9 October 2024.
Directors’ Interests
The interests of current Directors in shares and options are disclosed in the Directors’ Remuneration Report set out in
Note 28C of the financial statements.
-23-
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report (including the Director’s Reports) and the financial
statements in accordance with applicable laws and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union. Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies whose securities are trading on the AIM
market.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRS as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a
website. Financial statements are published on the Company's website in accordance with legislation in the Israel and
the United Kingdom governing the preparation and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the
Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained
therein.
-24-
ETHERNITY NETWORKS LTD.
Financial Statements
as at 31 December 2024
-25-
ETHERNITY NETWORKS LTD.
Financial Statements
as at 31 December 2024
Table of Contents
Page
Independent Auditor's Report
26-29
Financial Statements
Statement of Financial Position
30
Statement of Comprehensive Loss
31
Statement of Changes in Equity
32
Statement of Cash Flows
33
Notes to the Financial Statements
34-79
Fahn Kanne & Co.Head Office32
Hamasger Street
Tel-Aviv 6721118, ISRAEL
PO Box 36172, 6136101
T +972 3 7106666
F +972 3 7106660
www.grantthornton.co.il
- 26 -
Commercial in Confidence
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Ethernity Networks Ltd.
Opinion
We have audited the financial statements of Ethernity Networks Ltd. (the "Company"), which comprise
the Statement of financial position as at 31 December 2024 and the Statement of comprehensive loss,
Statement of changes in equity and Statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as at 31 December 2024 and its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs
Accounting Standards).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report. We are independent of the Company in
accordance with the International Ethics Standards Board for Accountants' International Code of Ethics
for Professional Accountants (including International Independence Standards) (IESBA Code) together
with the ethical requirements that are relevant to our audit of the financial statements in Israel, and
we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 in the financial statements, which indicates that the Company has an
accumulated deficit of $48.4 million and during the year ended December 31, 2024 (2023: $42.8
million), the Company incurred a net comprehensive loss of $5.8 million (2023: $6.4 million) and
negative cash flows from operating activities of $3.2 million (2023: $1.5 million). Note 2 also details that
the Company depends on potential growing interest of original equipment manufacturers (OEM) to
adopt the Company’s offerings and solutions, as well as on the successful execution of new contracts
with new and existing customers, and income from existing contracts, and that the success of the
Company’s plans is not assured. As stated in Note 2, these events or conditions, along with other
matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt
on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this
matter.
- 27 -
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. In addition to the matter described in the
Material uncertainty related to going concern section, we have determined the matters described
below to be key audit matters to be communicated in our report.
Key audit matter
Description of Key audit matter and
why it is a matter of most
significance in the audit
Description of auditor's response and key
observations
Impairment of
intangible assets
As detailed in Note 10, as of 31
December 2024, the remaining
balance of intangible assets was
$3.5 million.
As described in Note 2G, 2L and 4
the intangible assets include
development costs that were
directly attributable to a project’s
development phase. Such
intangible assets are required to be
tested for impairment when there
is any indication of impairment. The
impairment analysis of intangible
assets involves significant
management judgement and
therefore we identified the
impairment analysis of intangible
assets as a significant risk, which
was one of the most significant
assessed risks of material
misstatement due to error.
Our audit work included, but was not
restricted to:
Assessing the recoverability of intangible
assets by evaluating management's estimation
of the value in use. Such assessment included:
- evaluating the competence of management
in accordance with ISA 500 (Audit Evidence).
- testing agreement to evidence obtained from
various areas of the audit including cash flows
forecasts of revenue, expenses and
profitability,
- reviewing the appropriateness of discount
rates used relating to the capitalised intangible
assets and assessing the reasonableness of the
key assumptions used
- inquiring of management regarding future
expectations and including the likelihood of
securing a significant contract with a third
party which is in negotiation phase,
- Using our internal valuation specialists to
review the most recent and updated
management expectations and forecasts,
valuation model, working capital, useful life
and the compliance with the requirements of
International Accounting Standard 36 (IAS 36),
Impairment of assets.
Information other than the financial statements and auditor’s report thereon
Management is responsible for the other information. The other information comprises the
information included in the annual report other than the financial statements and our auditor’s report
- 28 -
thereon. Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
- 29 -
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of management and the board of directors for the financial
statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRSs Accounting Standards, and for such internal control as management determines
is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
- 30 -
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Yasmin Levi.
FAHN KANNE & CO. GRANT THORNTON ISRAEL
Tel-Aviv, Israel, June 29, 2025
- 31 -
STATEMENT OF FINANCIAL POSITION
US dollars
31 December
Notes
4
202
2023
ASSETS
Current
Cash
5
50,713
1,993,808
Trade receivables
6
385,000
186,145
Inventories
7
218,168
535,689
Other current assets
8
132,836
427,875
Current assets
786,717
3,143,517
Non-Current
Property and equipment
9
605,895
820,310
Intangible asset
10
3,540,040
4,501,420
Right -of -use asset
11
841,550
1,175,950
Other long term assets
12
110,678
35,144
Non-current assets
5,098,163
6,532,824
Total assets
5,884,880
9,676,341
LIABILITIES AND EQUITY
Current
Short Term Borrowings
13
-
96,306
Trade payables
1,361,112
1,237,113
Warrants liability
16.E.[1]
15,353
2,841
Other current liabilities
12,14
1,333,174
1,607,897
Current liabilities
2,709,639
2,944,157
Non-Current
Other non-current liabilities
15
430,862
815,011
Non-current liabilities
430,862
815,011
Total liabilities
3,140,501
3,759,168
Equity
16
Share capital
271,255
103,417
Share premium
49,255,030
47,299,358
Shares to be allotted
323,725
-
Other components of equity
1,547,211
1,334,531
Accumulated deficit
(48,652,842) (42,820,133)
Total equity
2,744,379
5,917,173
Total liabilities and equity
5,884,880
9,676,341
The accompanying notes are an integral part of the financial statements.
- 32 -
STATEMENT OF COMPREHENSIVE LOSS
US dollars
For the year ended
31 December
Notes
2024
2023
Revenue
18,28
1,383,565
3,777,919
Cost of sales
108,739
1,437,777
Gross margin
1,274,826
2,340,142
Research and development expenses
19
3,743,495
5,160,697
General and administrative expenses
20
2,086,180
1,841,842
Marketing expenses
21
534,896
621,052
Other income
22
(240)
(2,797)
Operating loss
(5,089,505)
(5,280,652)
Financing costs
23
(770,645)
(1,267,906)
Financing income
24
27,441
183,811
Loss before tax
(5,832,709)
(6,364,747)
Tax expense
25
-
-
Net comprehensive loss for the year
(5,832,709)
(6,364,747)
Basic and diluted loss per ordinary share
26
(0.01)
(0.04)
Weighted average number of ordinary shares for basic loss per
share
550,797,251
143,876,859
The accompanying notes are an integral part of the financial statements.
- 33 -
Notes
Number of
shares
Share
Capital
Share
premium
Other
components
of equity
Accumulated
deficit
Total
equity
Shares to
be
allotted
Balance at 31 December 2022
78,084,437
21,904 40,786,623
-
1,225,391
(36,455,386)
5,578,532
Employee share-based
compensation
-
-
-
-
72,287
-
72,287
Net proceeds allocated to the
issuance of ordinary shares
16.E.[1]
127,188,097
35,441
3,530,205
-
-
-
3,565,646
Shares issued pursuant to share
subscription agreement
16.E.[2]
168,933,439
45,331
2,762,249
-
-
-
2,807,580
Expenses paid in shares and
warrants
16.E.[3]
2,515,118
741
220,281
-
36,853
-
257,875
Net comprehensive loss for the
year
-
-
-
-
-
(6,364,747)
(6, 364,747)
Balance at 31 December 2023
376,721,091
103,417 47,299,358
-
1,334,531
(42,820,133)
5,917,173
Employee share-based
compensation
-
-
-
212,680
-
212,680
Net proceeds allocated to the
issuance of ordinary shares
16.E.[1]
286,941,090
88,397
856,022
-
-
-
944,419
Shares issued pursuant to share
subscription agreement
16.E.[3]
333,750,000
78,745
1,074,592
-
-
-
1,153,337
Shares to be allotted
-
-
-
323,725
323,725
Expenses paid in shares and
warrants
16.E.[4]
2,587,819
696
25,058
-
-
-
25,754
Net comprehensive loss for the
year
-
-
-
-
-
(5,832,709)
(5,832,709)
Balance at 31 December 2024
1,000,000,000
271,255
49,255,030
323,725
1,547,211
(48,652,842)
2,744,379
STATEMENT OF CHANGES IN EQUITY
- 34 -
STATEMENT OF CASH FLOWS
US dollars
For the year ended 31 December
2024
2023
Operating activities
Net comprehensive loss for the year
(5,832,709)
(6,364,747)
Non-cash adjustments
Depreciation of property and equipment
315,530
138,129
Depreciation of right of use asset
334,400
315,884
Share-based compensation
212,680
72,287
Amortisation of intangible assets
961,380
961,380
Amortisation of liabilities due to foreign exchange movements
(11,988)
(113,078)
Lease liability Interest
98,098
200,261
Foreign exchange losses on cash balances
14,134
3,377
Capital Loss
160
-
Revaluation of financial instruments, net
576,015
818,521
Expenses paid in shares and options
25,754
257,875
Net changes in working capital
Decrease (increase) in trade receivables
(198,855)
1,112,927
Decrease in inventories
317,521
237,387
Decrease (increase) in other current assets
295,039
(84,003)
Decrease (increase) in other long-term assets
(75,534)
545
Increase in trade payables
123,999
451,530
Increase (decrease) in other liabilities
(293,046)
422,658
Increase (decrease) in IIA royalty liability
(19,019)
73,645
Net cash used in operating activities
(3,156,441)
(1,495,422)
Investing activities
Purchase of property and equipment
(101,275)
(148,113)
Net cash used by investing activities
(101,275)
(148,113)
Financing activities
Proceeds allocated to ordinary shares
1,027,982
3,756,391
Proceeds allocated to warrants
913,559
132,544
Issuance costs
(83,561)
(262,444)
Proceeds from short term borrowings
41,055
1,239,657
Repayment of short-term borrowings
(136,809)
(1,543,210)
Repayment of lease liability
(433,471)
(398,033)
Net cash provided by financing activities
1,328,755
2,924,905
Net change in cash
(1,928,961)
1,281,370
Cash beginning of year
1,993,808
715,815
Exchange differences on cash
(14,134)
(3,377)
Cash end of year
50,713
1,993,808
Supplementary information:
Interest paid during the year
4,655
64,239
Interest received during the year
1,613
226
Supplementary information on non-cash activities:
Shares issued pursuant to share subscription agreement
767,848
1,778,468
Expenses paid in shares and options
25,754
257,875
Non-cash issuance costs
-
26,757
Update of lease liability
-
1,324,807
The accompanying notes are an integral part of the financial statements.
- 35 -
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1
- NATURE OF OPERATIONS AND GENERAL
ETHERNITY NETWORKS LTD. (hereinafter: the "Company"), was incorporated in Israel on the 15th
of December 2003 as Neracore Ltd. The Company changed its name to ETHERNITY NETWORKS LTD.
on the 10th of August 2004.
Ethernity Networks provides innovative data processing and Passive Optical Network (“PON”)
semiconductor technology for networking appliances. The Company’s comprehensive networking
and security solutions deliver a full Carrier Ethernet Switch Router data plane and control software,
featuring a rich set of networking capabilities, robust security, and a wide array of virtual function
accelerations to optimize telecommunications networks.
Ethernity’s semiconductor technology has been deployed in both FPGA and ASIC form factors and
has been integrated into over one million networking platforms worldwide. Its complete, flexible
solutions adapt rapidly to customers' evolving needs, reducing time-to-market and enabling
efficient deployment of 5G, edge computing, mobile backhaul, carrier Ethernet, broadband access
networks, and various NFV appliances including 5G UPF, vRouter, and vBNG.
In June 2017, Ethernity completed its Initial Public Offering (“IPO”) and was admitted to trading on
the AIM Market of the London Stock Exchange under the symbol “ENET.” The Company initially
targeted the Open RAN (Radio Access Network) market—an initiative promoted by service providers
to encourage multi-vendor interoperability—by developing a programmable FPGA SmartNIC to
accelerate 5G data plane functions such as 5G UPF and vRouter.
However, the Open RAN market has not yet matured as expected. Operators continue to deploy
mobile networks using end-to-end solutions from single vendors, limiting multi-vendor adoption. In
response, Ethernity repurposed its FPGA NIC designs to run on its standalone hardware platform
(UEP) and integrated its patented Layer 1 (L1) wireless link bonding technology. This innovation has
garnered significant interest from leading wireless backhaul OEMs, positioning the Company to
pursue new high-value opportunities.
Following extensive testing during 2024 by Tier 1 OEM vendors of the Company’s UEP solution,
featuring its patented Layer 1 (L1) link bonding technology. These vendors approached the Company
in Q4 2024 with a request to develop an Application-Specific Standard Product (ASSP) specifically
designed for mobile backhaul transmission over microwave and E-Band.
In response, the Company is transitioning its business operations with the strategic objective of
becoming a dedicated semiconductor vendor. This shift builds on the Company’s existing integrated
appliance, which combines proprietary semiconductor intellectual property for Layer 2/Layer 3
packet processing, advanced PON technologies, and embedded software applications.
The planned ASSP will address key requirements across the wireless backhaul, carrier switch/router
(CSR), Carrier Ethernet, and broadband markets—positioning the Company to deliver high-
performance, cost-effective semiconductor solutions to leading global OEMs.
On 12 October 2023, the Company voluntarily applied to the court in Tel Aviv, Israel for a Temporary
Suspension of Proceedings order ("TSP") and the convening of a meeting of creditors in accordance
with the Israeli Insolvency and Economic Rehabilitation Law. This TSP order, which was granted by
the court, was requested by the Company to protect the Company’s business, as the Company
experienced liquidity issues from the delay in payments from expected debtors. At the time of this
- 36 -
application, the Company’s cash balance was approximately $107,000, while the creditors amounts
due approximated $1.6 million. The TSP order prevented the creditors of the Company from
enforcing any payments due to them.
Following an equity raise in December 2023 and the collection of funds from the Company’s debtors,
the Company was able to make a settlement proposal, whereby valid creditors at the time of the
TSP order, will be repaid in full per the timetable and conditions of the TSP court approved
settlement plan over a period of 12 months. Guaranteed and priority creditors would have priority
for repayment, followed by general creditors. The creditors approved this proposal which was
endorsed by the court on 4 February 2024 and the Company exited the TSP process. As at 31
December 2024 the Company has fully repaid its guaranteed creditors and partially paid the priority
creditors, all in compliance with the settlement plan. In May 2025, the Company completed all the
payments due to all the creditors under the settlement plan. Following the conclusion of the TSP,
and the settlement plan, the Company continues to undertake its business and operations as usual
with no restrictions.
NOTE 2 - GOING CONCERN
As of December 31, 2024 the Company has an accumulated deficit of $48.6 million and during the
year ended December 31, 2024, the Company incurred a net comprehensive loss of $5.8 million
(2023: $6.4 million) and negative cash flows from operating activities of $3.2 million (2023: $1.5
million). The financial statements have been prepared assuming that the Company will continue as
a going concern. Under this assumption, an entity is ordinarily viewed as continuing in business for
the foreseeable future unless management intends or has no realistic alternative other than to
liquidate the entity or to stop trading for at least, but not limited to, 12 months from the reporting
date. The assessment has been made of the Company’s prospects, considering all available
information about the future, which has been included in the financial budget, from managing
working capital and among other factors such as debt repayment schedules. Consideration has been
given inter alia to values of funds raised ($1.9 million). Furthermore, the R&D expenses excluding
non-cash expenses of amortization and share based compensation, decreased by 37% from $4.1
million in 2023 to $2.6 million in 2024
The Company depends on potential growing interest of original equipment manufacturers (OEM) to
adopt the Company’s offerings and solutions, as well as on the successful execution of new contracts
with new and existing customers, and income from existing contracts. Furthermore, the Company
anticipates advancing its ASIC business, including securing a significant NRE (Non-Recurring
Engineering) payment to support the ASIC development. This is expected to generate additional
interest from new potential customers and significantly enhance the Company’s profile. In addition,
the Company is confident that, subject to the successful execution of the ASIC contract, it will be
able to secure further funding. Considering the outlined factors, including reduction in expenses,
and based on experience, the directors have an expectation that the Company will have access to
adequate resources to continue in operational existence for the foreseeable future.
However, the success of the Company’s plans as outlined above is not assured and thus a material
uncertainty exists that may cast a significant doubt on the Company’s ability to continue as a going
concern and fulfil its obligations and liabilities in the normal course of business in the future. The
financial statements do not include any adjustments relating to recoverability and classification of
the recorded asset amounts, and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE 3
- MATERIAL ACCOUNTING POLICIES
- 37 -
The following accounting policies have been consistently applied in the preparation and
presentation of these financial statements for all of the periods presented, unless otherwise stated.
In 2024, no new standards that had a material effect on these financial statements become
effective.
A. Basis of presentation of the financial statements and statement of compliance with IFRS
These financial statements have been prepared in accordance with International Financial
Reporting Standards (hereinafter – “IFRS”), as issued by the International Accounting
Standards Board ("IASB").
The financial statements have been prepared on an accrual basis and under the historical cost
convention, except for financial instruments measured at fair value through profit and loss.
The Company has elected to present profit or loss items using the function of expense method.
Additional information regarding the nature of the expenses is included in the notes to the
financial statements.
The applicable law jurisdiction in which the Company operates is in Israel.
The financial statements for the year ended 31 December were approved and authorised for
issue by the board of directors on 29 June 2025.
B.
Use of significant accounting estimates, assumptions, and judgements
The preparation of financial statements in conformity with IFRS requires management to make
accounting estimates and assessments that involve use of judgment and that affect the
amounts of assets and liabilities presented in the financial statements, the disclosure of
contingent assets and liabilities at the dates of the financial statements, the amounts of
revenues and expenses during the reporting periods and the accounting policies adopted by
the Company. Actual results could differ from those estimates.
Estimates and judgements are continually evaluated and are based on prior experiences,
various facts, external items and reasonable assumptions in accordance with the
circumstances related to each assumption.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in
any future periods affected.
Regarding significant judgements and estimate uncertainties, see Note 4.
C.
Functional and presentation currency
The Company prepares its financial statements on the basis of the principal currency and
economic environment in which it operates (hereinafter - the "functional currency").
The Company's financial statements are presented in US dollars ("US$") which constitutes the
functional currency of the Company and the presentation currency of the Company.
- 38 -
D. Foreign currency transactions and balances
Specifically identifiable transactions denominated in foreign currency are recorded upon initial
recognition at the exchange rates prevailing on the date of the transaction. Exchange rate
differences deriving from the settlement of monetary items, at exchange rates that are
different than those used in the initial recording during the period, or than those reported in
previous financial statements, are recognised in the statement of comprehensive income in
the year of settlement of the monetary item. Other profit or loss items are translated at
average exchange rates for the relevant financial year.
Assets and liabilities denominated in or linked to foreign currency are presented on the basis
of the representative rate of exchange as of the date of the statement of financial position.
Exchange rate differentials, are primarily related to cash balances and financing transactions
and as such are recognised in the financial statements when incurred, as part of financing
expenses or financing income, as applicable.
The exchange rates as at the 31st of December, of one unit of foreign currency to each US
dollar, were:
2024
2023
New Israeli Shekel (“NIS”)
0.274
0.276
Great British Pound (“GBP”)
1.254
1.274
Euro
1.041
1.106
E.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses
directly attributable to the manufacturing process as well as suitable portions of related
production overheads, based on normal operating capacity. Costs of ordinarily
interchangeable items are assigned using the first in, first out cost formula. Net realisable value
is the estimated selling price in the ordinary course of business less any directly attributable
selling expenses.
F.
Property and equipment
Property and equipment items are presented at cost, less accumulated depreciation and net
of accrued impairment losses. Cost includes, in addition to the acquisition cost, all of the costs
that can be directly attributed to the bringing of the item to the location and condition
necessary for the item to operate in accordance with the intentions of management.
The residual value, useful life span and depreciation method of fixed asset items are tested at
least at the end of the fiscal year and any changes are treated as changes in accounting
estimate.
Depreciation is calculated on the straight‑line method, based on the estimated useful life of
the fixed asset item or of the distinguishable component, at annual depreciation rates as
follows:
%
Computers
33
Testing equipment
15-33
Furniture and equipment
6-15
- 39 -
Leasehold improvements
Over period
of lease
Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease
term (including any extension option held by the Company and intended to be exercised) and
the expected life of the improvement.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for
sale and the date that the asset is derecognised. An asset is derecognised on disposal or when
no further economic benefits are expected from its use.
G. Research and development expenses
Expenditures on the research phase of projects to develop new products and processes are
recognised as an expense as incurred.
Development activities involve a plan or a design for the production of new or substantially
improved products and processes. Development costs that are directly attributable to a
project’s development phase are recognised as intangible assets, provided they meet all of the
following recognition requirements:
• the technical feasibility of completing the intangible asset so that it will be available for use
or sale.
• intention to complete the intangible asset and use or sell it.
• ability to use or sell the intangible asset.
• ability to demonstrate how the intangible asset will generate probable future economic
benefits. Among other things, the entity can demonstrate the existence of a market for the
output of the intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset.
• the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset.
• ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Development costs not meeting these criteria for capitalisation are expensed as incurred.
Directly attributable costs include (if relevant) employee costs incurred on software
development along with an appropriate portion of relevant overheads and borrowing costs.
The Company maintained the policy of recognising as an intangible asset, the costs arising from
the development of its solutions, specifically the directly associated costs of its Research and
Development center.
The Company periodically reviews the principles and criteria of IAS 38 as outlined above. Up to
and until June 2019, the Company has determined that all the above criteria were met.
Effective as from 1 July 2019 and thereafter, the Company concluded that it would no longer
continue recognising these costs as an intangible asset due to the fact that the criteria in IAS38
was not met.
Regarding impairment analysis, see Note 2L.
- 40 -
The amortisation of an intangible asset begins when the asset is available for use, i.e., it is in
the location and condition needed for it to operate in the manner intended by management.
The development asset is amortised on the straight-line method, over its estimated useful life,
which is estimated to be ten years.
The useful life and the amortisation method of each of the intangible assets with finite lives
are reviewed at least at each financial year end. If the expected useful life of an asset differs
from the previous estimate, the amortisation period is changed accordingly. Such a change is
accounted for as a change in accounting estimate in accordance with IAS 8.
H. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
1. Classification and measurement of financial assets and financial liabilities
Initial recognition and measurement
The Company initially recognises trade receivables on the date that they originated. All
other financial assets and financial liabilities are initially recognised on the date on which
the Company becomes a party to the contractual provisions of the instrument. A financial
asset or a financial liability are initially measured at fair value with the addition, for a
financial asset or a financial liability that are not presented at fair value through profit or
loss, of transaction costs that can be directly attributed to the acquisition or the issuance
of the financial asset or the financial liability. Trade receivables that do not contain a
significant financing component are initially measured at the price of the related
transaction.
Financial assets - subsequent classification and measurement
A financial asset is measured at amortised cost if it meets the two following cumulative
conditions and is not designated for measurement at fair value through profit or loss:
•
The objective of the entity's business model is to hold the financial asset to collect the
contractual cash flows; and
•
The contractual terms of the financial asset create entitlement on specified dates to
cash flows that are solely payments of principal and interest on the principal amount
outstanding.
On initial recognition, financial assets that do not meet the above criteria are classified to
measurement at fair value through profit or loss (FVTPL). Further, irrespective of the
business model, financial assets whose contractual cash flows are not solely payments of
principal and interest are accounted for at FVTPL. All derivative financial instruments fall
into this category.
Financial assets are not reclassified in subsequent periods, unless, and only to the extent
that the Company changes its business model for the management of financial debt
assets, in which case the affected financial debt assets are reclassified at the beginning of
the reporting period following the change in the business model.
Financial assets at amortised cost
The Company has balances of trade and other receivables and deposits that are held
under a business model, the objective of which is collection of the contractual cash flows.
- 41 -
The contractual cash flows in respect of such financial assets comprise solely payments of
principal and interest that reflects consideration for the time-value of the money and the
credit risk. Accordingly, such financial assets are measured at amortised cost.
In subsequent periods, these assets are measured at amortised cost, using the effective
interest method and net of impairment losses. Interest income, currency exchange gains
or losses and impairment are recognised in profit or loss. Any gains or losses on
derecognition are also carried to profit or loss.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial
position at fair value with all gains and losses and net changes in fair value recognised in
the statement of comprehensive loss as financing income or cost. This category includes
derivative instruments (including embedded derivatives that were separated from the
host contract).
Financial liabilities - classification, subsequent measurement and gains and losses
Financial liabilities are classified to measurement at amortised cost or at fair value
through profit or loss. All financial liabilities are recognised initially at fair value and, in the
case of loans, borrowings, and payables, net of directly attributable transaction costs.
Financial liabilities are measured at amortised cost
This category includes trade and other payables, loans and borrowings including bank
overdrafts. These financial liabilities are measured at amortised cost in subsequent
periods, using the effective interest method. Interest expenses and currency exchange
gains and losses are recognised in profit or loss. Any gains or losses on derecognition are
also carried to profit or loss.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the effective interest method.
The effective interest method amortisation is included as finance costs in profit or loss.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are measured at fair value, and any
net gains and losses, including any interest expenses, are recognised in profit or loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss, including derivative financial instruments entered into by the Company,
including warrants derivative liability related to warrants with an exercise price
denominated in a currency other than the Company's functional currency and also
including the Company’s liability to issue a variable number of shares, which include
certain embedded derivatives (such as prepayment options) under a share subscription
agreement or under a structured investment deed - see Note 16.
Separated embedded derivatives are classified as held for trading.
Financial liabilities designated upon initial recognition at fair value through profit or loss
are designated at the initial date of recognition, and only if the criteria in IFRS 9 are
satisfied.
- 42 -
2. Derecognition of financial liabilities
Financial liabilities are derecognised when the contractual obligation of the Company
expires or when it is discharged or cancelled.
3. Impairment
Financial assets
The Company creates a provision for expected credit losses in respect of Financial assets
measured at amortised cost.
Expected credit losses are recognised in two stages. For credit exposures for which there
has not been a significant increase in credit risk since initial recognition, expected credit
losses are provided for credit losses that result from default events that are possible
within the next 12 months. For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for
credit losses expected over the remaining life of the exposure, irrespective of the timing
of the default (a lifetime expected credit losses).
The Company measures, if relevant, the provision for expected credit losses in respect of
trade receivables at an amount that is equal to the credit losses expected over the life of
the instrument.
In assessing whether the credit risk of a financial asset has significantly increased since
initial recognition and in assessing expected credit losses, the Company takes into
consideration information that is reasonable and verifiable, relevant and attainable at no
excessive cost or effort. Such information comprises quantitative and qualitative
information, as well as an analysis, based on the past experience of the Company and the
reported credit assessment, and contains forward-looking information.
Measurement of expected credit losses
Expected credit losses represent a probability-weighted estimate of credit losses. Credit
losses are measured at the present value of the difference between the cash flows to
which the Company is entitled under the contract and the cash flows that the Company
expects to receive.
Expected credit losses are discounted at the effective interest rate of the financial asset.
4. Derivative financial instruments
Derivative financial instruments are accounted for at FVTPL.
Embedded derivatives
A derivative embedded in a hybrid contract, with a financial liability or non-financial host,
is separated from the host and accounted for as a separate derivative if: the economic
characteristics and risks are not closely related to the host; a separate instrument with
the same terms as the embedded derivative would meet the definition of a derivative;
and the hybrid contract is not measured at fair value through profit or loss. Embedded
derivatives are measured at fair value with changes in fair value recognised in profit or
loss. Reassessment only occurs if there is either a change in the terms of the contract that
significantly modifies the cash flows that would otherwise be required or a reclassification
of a financial asset out of the fair value through profit or loss category.
- 43 -
As described in Note 16.E., the Company has designated its liability with respect to various
issuances of warrants and shares, which include several embedded derivatives, as part of
the FVTPL category.
I.
Share-based compensation
Share-based compensation transactions that are settled by equity instruments that were
executed with employees or others who render similar services, are measured at the date of
the grant, based on the fair value of the granted equity instrument. This amount is recorded as
an expense in profit or loss with a corresponding credit to equity, over the period during which
the entitlement to exercise or to receive the equity instruments vests.
For the purpose of estimating the fair value of the granted equity instruments, the Company
takes into consideration conditions which are not vesting conditions (or vesting conditions that
are performance conditions which constitute market conditions). Non-market performance
and service conditions are included in assumptions about the number of options that are
expected to vest. The total expense is recognised over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the end of each
reporting period, an estimate is made of the number of instruments expected to vest. No
expense is recognised for awards that do not ultimately vest because of service conditions
and/or if non-market performance conditions have not been met. As an expense is recognised
over the vesting period, when an expense has been recorded in one period and the options are
cancelled in the following period, then the previously recorded expenses for options that never
vested, as reversed. Grants that are contingent upon vesting conditions (including
performance conditions that are not market conditions) which are not ultimately met are not
recognised as an expense. A change in estimate regarding prior periods is recognised in the
statement of comprehensive income over the vesting period. No expense is recognised for
award that do not ultimately vest because service condition and/or non-market performance
condition have not been made.
Share-based payment transactions settled by equity instruments executed with other service
providers are measured at the date the services were received, based on the estimated fair
value of the services or goods received, unless their value cannot be reliably estimated. In such
a case, the transaction is measured by estimating the fair value of the granted equity
instruments. This amount is carried as an expense or is capitalised to the cost of an asset (if
relevant), based on the nature of the transaction.
J.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in the
asset's or the liability's principal market, or in the absence of a principal market in the most
advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value. Maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.
- 44 -
All assets and liabilities measured at fair value or for which fair value is disclosed are
categorised into levels within the fair value hierarchy based on the lowest level input that is
significant to the entire fair value measurement:
•
Level 1 - unadjusted quoted prices are available in active markets for identical assets
or liabilities that the Company has the ability to access as of the measurement date.
•
Level 2 – pricing inputs are other than quoted prices in active markets that are directly
observable for the asset or liability or indirectly observable through corroboration with
observable market data.
•
Level 3 – pricing inputs are unobservable for the non-financial asset or liability and only
used when there is little, if any, market activity for the non-financial asset or liability
at the measurement date. The inputs into the determination of fair value require
significant management judgment or estimation. Level 3 inputs are considered as the
lowest priority within the fair value hierarchy.
For assets and liabilities that are recognised in the financial statements at fair value on a
recurring basis, the Company determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy, as explained above.
Fair-value related disclosures for financial instruments that are measured at fair value or where
fair values are disclosed, are summarised in Note 27.
K.
Revenue recognition
The Company generates revenues mainly from:
•
Sales of solutions-based product offerings
•
sales of programmable devices ("FPGA") with embedded intellectual property ("IP")
developed by the Company,
•
IP developed by the Company together with software application tools to assist its
customers to design their own systems based on the Company IP and
•
maintenance and support services provided to customers.
The Company recognises revenue when the customer obtains control over the promised goods
or when the Company has delivered the products or services. The revenue is measured
according to the amount of the consideration to which the Company expects to be entitled in
exchange for the goods or services provided to the customer.
Identification of the contract
The Company treats a contract with a customer only where all of the following conditions are
fulfilled.
1. The parties to the contract have approved the contract (in writing, orally or according to
other customary business practices) and they are committed to satisfying their obligations
thereunder;
- 45 -
2. The Company is able to identify the rights of each party in relation to the goods or services
that are to be transferred;
3. The Company is able to identify the payment terms for the goods or services that are to be
transferred;
4. The contract has commercial substance (i.e., the entity's risk, timing and amount of future
cash flows are expected to change as result of the contract); and
5. It is probable that the consideration to which the Company is entitled to in exchange for
the goods or services transferred to the customer will be collected.
Identification of performance obligations
On the contract's inception date, the Company assesses the goods or services committed to in
the contract with the customer and identifies, as a performance obligation, any promise to
transfer to the customer one of the following:
•
Goods or services that are distinct; or
•
A series of distinct goods or services that are substantially the same and have the same
pattern of transfer to the customer.
The Company identifies goods or services promised to the customer as being distinct when the
customer can benefit from the goods or services on their own or in conjunction with other
readily available resources and the Company's promise to transfer the goods or services to the
customer separately identifiable from other promises in the contract. In order to examine
whether a promise to transfer goods or services is separately identifiable, the Company
examines whether it is providing a significant service of integrating the goods or services with
other goods or services promised in the contract into one integrated outcome that is the
purpose of the contract.
Contracted revenues attached to milestone performance in a contract are recognised by the
Company when it has completed a milestone requirement and the Company has delivered the
goods and/or services connected to such milestone.
Determination of the transaction price
The transaction price is the amount of the consideration to which the Company expects to be
entitled in exchange for the goods or services promised to the customer, other than amounts
collected for third parties. The Company takes into account the effects of all the following
elements when determining the transaction price; variable consideration (see below), the
existence of a significant financing component, non-cash consideration, and consideration
payable to the customer.
Variable consideration
The transaction price includes fixed amounts and amounts that may change as a result of
discounts, credits, price concessions, incentives, penalties, claims and disputes and contract
modifications where the consideration in their respect has not yet been agreed to by the
parties.
In accordance with the requirements in IFRS 15 on constraining estimates of variable
consideration, the Company includes the amount of the variable consideration, or part of it, in
the transaction price at contract inception, only when it is considered highly probable that its
inclusion will not result in a significant revenue reversal in the future when the uncertainty has
been subsequently resolved. At the end of each reporting period and if necessary, the
Company revises the amount of the variable consideration included in the transaction price.
- 46 -
Satisfaction of performance obligations
Revenue is recognised when the Company satisfies a performance obligation, or by transferring
control over promised goods or having provided services to the customer, as applicable.
Sales of goods
Revenues from the sale of programmable devices are recognised at the point in time when
control of the asset is transferred to the customer, which is generally upon delivery of the
devices.
Contracts with milestone payments
Certain contracts with major customers are structured to provide the Company with payment
upon the achievements of certain predefined milestones which might include, delivery of
existing schematics, prototypes, software drivers or design kit, or development of new product
offerings or new features of existing products such as programmable devices ("design tools").
Management has determined that the performance obligations under such arrangements
which are generally based on separate milestones, are recognised at the point in time when
such separate milestone is transferred to the customer, generally upon completion of the
related milestone.
Amounts received (including specific up-front payments), which relate to milestones that were
not yet achieved, are deferred and are presented as deferred revenues.
Multiple element transactions
Some of the Company's contracts with customers contain multiple performance obligations.
For these contracts, the Company accounts for individual performance obligations separately
if they are distinct. The transaction price is allocated to the separate performance obligations
on a relative standalone selling price basis. The Company determines the standalone selling
prices based on an overall pricing objectives, taking into consideration market conditions and
other factors.
Revenues are then recognised for each separate performance obligations - sales of goods or
designed tools, based on the criteria described in the above paragraph.
Revenue from royalties
The Company is entitled to royalties based on sales performed by third parties of products
which contain IP developed by the Company.
For arrangements that include such sales-based royalties, including milestone payments based
on the level of sales, and the license of the IP developed by the Company is deemed to be the
predominant item to which the royalties relate, the Company recognises revenue at the later
of (i) when the performance obligation to which some or all of the royalty has been allocated
has been satisfied (or partially satisfied), or (ii) when the related sales occur.
Accordingly, revenues from royalties that are reported by the customer are recognised based
on the actual sales of products as reported to the Company.
Revenues from maintenance and support
- 47 -
Revenue from maintenance and support is recognised over the term of the maintenance and
support period.
L.
Impairment testing of non-financial assets
At the end of each reporting period, the Company reviews the carrying amount of its tangible
and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any).
For impairment assessment purposes, assets are grouped at the lowest levels for which there
are largely independent cash inflows (cash-generating units). As a result, some assets are
tested individually for impairment, and some are tested at the cash-generating unit level.
An impairment loss is recognised for the amount by which the asset’s (or cash-generating
unit’s) carrying amount exceeds its recoverable amount, being the value in use. To determine
the value in use, management estimates expected future cash flows from each asset or cash-
generating unit and determines a suitable discount rate, in order to calculate the present value
of those cash flows. The data used for impairment testing procedures are linked to the
Company’s latest approved budget, see also Note 10.
M. Leased assets
The Company considers whether a contract is or contains a lease. A lease is defined as ‘a
contract, or part of a contract, which conveys the right to use an asset (the underlying asset)
for a period of time in exchange for consideration.’ To apply this definition the Company
assesses whether the contract meets three key evaluations which are whether:
•
the contract contains an identified asset, which is either explicitly identified in the
contract or implicitly specified by being identified at the time the asset is made available
to the Company
•
the Company has the right to obtain substantially all of the economic benefits from use
of the identified asset throughout the period of use, considering its rights within the
defined scope of the contract
•
the Company has the right to direct the use of the identified asset throughout the period
of use. The Company assesses whether it has the right to direct ‘how and for what
purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At the lease commencement date, the Company recognises a right-of-use asset and a lease
liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of
the initial measurement of the lease liability, any initial direct costs incurred by the Company,
an estimate of any costs to dismantle and remove the asset at the end of the lease, and any
lease payments made in advance of the lease commencement date (net of any incentives
received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of the right-of-use asset or the
end of the lease term. The Company also assesses the right-of-use asset for impairment when
such indicators exist.
- 48 -
At the lease commencement date, the Company measures the lease liability at the present
value of the lease payments unpaid at that date, discounted using the interest rate implicit in
the lease if that rate is readily available or the Company’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed
payments (including in substance fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and payments arising from options
reasonably certain to be exercised.
Subsequent to initial measurement, the liability is reduced for payments made and increased
for interest. It is re-measured to reflect any reassessment or modification, or if there are
changes in in-substance fixed payments.
When the lease liability is re-measured, the corresponding adjustment is reflected in the right-
of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using
the practical expedients. Instead of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in profit or loss on a straight-line
basis over the lease term.
On the statement of financial position, right-of-use assets have been included under non-
current assets and the current portion of lease liabilities have been included in other current
liabilities.
N. Standards, amendments and interpretations to existing standards that are not yet effective
and have not been adopted early by the Company .
Standards and amendments that are not yet effective and have not been adopted early by the
Company are not expected to have a significant impact on the financial statements in the
period of initial application and therefore the disclosures have not been made.
NOTE 4
- SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND
ESTIMATION UNCERTAINTY
When preparing the financial statements, management makes a number of judgements, estimates
and assumptions about the recognition and measurement of assets, liabilities, income and
expenses.
Significant management judgement
• Leases – determination of the appropriate lease period to measure lease liabilities
The Company enters into leases with third-party landlords and in order to calculate the lease
liability, the Company assess if any lease option extensions will be exercised. The lease for the
Company’s offices was for 5 years with an option to extend it for a further 5 years. The Company
initially expected this lease to be extended for an additional 5 years. At the end of 2023, the
Company’s assessment was that it may not exercise the additional 5-year option given the decline
in rental prices within the premises market - see Note 11.
Estimation uncertainty
- 49 -
• Impairment of non-financial assets
In assessing impairment of non-financial assets (primarily, internally developed intangible assets),
management estimates the recoverable amount of each asset or cash generating units (if
relevant) based on expected future cash flows and uses an interest rate to discount them (i.e. the
value in use). Estimation uncertainty and significant management judgement are involved with
the assumptions about future operating results and the determination of a suitable discount rate.
The company believes it is close to executing a major NRE business deal related to the ASIC
opportunity which is in negotiation phase based on the Company's integrated Intellectual
property portfolio. See Note 10 for assumptions used in determining the recoverable amount of
intangible assets.
• Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of
financial position cannot be measured based on quoted prices in active markets, Management
uses various valuation techniques to determine the fair value of such financial instruments and
non-financial assets. This involves developing estimates and assumptions consistent with how
market participants would price the instrument. Management bases its assumptions on
observable data as far as possible but this is not always available. In that case, management uses
the best information available. Estimated fair values may vary from the actual prices that would
be achieved in an arm’s length transaction at the reporting date. Changes in assumptions relating
to these factors could affect the reported fair value of financial instruments (see Note 16).
NOTE 5 -
CASH
Cash consists of the following:
US dollars
31 December
2024
2023
In Great British Pounds
5,722
855,348
In U.S. Dollar
5,980
470,595
In New Israeli Shekel
39,011
667,865
50,713
1,993,808
The cash does not have any restrictions as to what it may be used for.
NOTE 6
- TRADE RECEIVABLES
Trade receivables consist of the following:
US dollars
31 December
2024
2023
Trade receivables and unbilled revenue
1,064,843
885,145
Less: provision for expected credit losses
(679,843)
(699,000)
Total receivables
385,000
186,145
- 50 -
All amounts are short-term. The net carrying value of these receivables is considered a reasonable
approximation of fair value. All of the Company's trade and other receivables have been reviewed
for the possibility of loss (an allowance for impairment losses). See also Note 27A.
NOTE 7
- INVENTORIES
US dollars
31 December
2024
2023
Components and raw materials
218,168
331,815
Finished cards and boards
-
203,874
Total inventories
218,168
535,689
NOTE 8
-
OTHER CURRENT ASSETS
Other current assets consist of the following:
US dollars
31 December
2024
2023
Prepaid Expenses
54,085
377,419
Government institutions
78,751
50,456
Total other current assets
132,836
427,875
NOTE 9
- PROPERTY AND EQUIPMENT
Details of the Company's property and equipment are as follows:
US dollars
Testing
equipment
Computers
Furniture and
equipment
Leasehold
improve-
ments
Total
Gross carrying amount
Balance 1 January 2024
1,269,807
176,909
55,397
11,193
1,513,306
Additions
101,275
-
-
-
101,275
Disposals
-
(2,138)
-
-
(2,138)
Balance 31
December 2024
1,371,082
174,771
55,397
11,193
1,612,443
Depreciation
Balance 1 January 2024
(499,906)
(167,454)
(22,933)
(2,703)
(692,996)
Disposals
-
1,978
-
-
1,978
Depreciation
(299,431)
(9,134)
(3,267)
(3,698)
(315,530)
Balance 31
December 2024
(799,337)
(174,610)
(26,200)
(6,401)
(1,006,548)
Carrying amount 31
December 2024
571,745
161
29,197
4,792
605,895
- 51 -
US dollars
Testing
equipment
Computers
Furniture and
equipment
Leasehold
improve-
ments
Total
Gross carrying amount
Balance 1 January 2023
1,122,474
176,129
55,397
11,193
1,365,193
Additions
147,333
780
-
-
148,113
Balance 31
December 2023
1,269,807
176,909
55,397
11,193
1,513,306
Depreciation
Balance 1 January 2023
(378,576)
(155,512)
(19,473)
(1,306)
(554,867)
Depreciation
(121,330)
(11,942)
(3,460)
(1,397)
(138,129)
Balance 31
December 2023
(499,906)
(167,454)
(22,933)
(2,703)
(692,996)
Carrying amount 31
December 2023
769,901
9,455
32,464
8,490
820,310
NOTE 10
- INTANGIBLE ASSET
Details of the Company’s intangible asset (R&D) is as follows:
US dollars
Total
Gross carrying amount
Balance 1 January 2024
9,550,657
Additions
-
Balance 31 December 2024
9,550,657
Amortisation
Balance 1 January 2024
5,049,237
Amortisation
961,380
Balance 31 December 2024
6,010,617
Carrying amount 31 December 2024
3,540,040
- 52 -
US dollars
Total
Gross carrying amount
Balance 1 January 2023
9,550,657
Additions
-
Balance 31 December 2023
9,550,657
Amortisation
Balance 1 January 2023
4,087,857
Amortisation
961,380
Balance 31 December 2023
5,049,237
Carrying amount 31 December 2023
4,501,420
The Company tested the capitalised intangible assets for impairment as of 31 December 2024. Such
analysis revealed a similar calculation as that determined as at 31 December 2023 and therefore
no impairment is warranted.
Having given due consideration to the following, the Company believes that no impairment is
required.
•
Considering the past and future expected revenues from the capitalized R&D assets;
•
The anticipated outcomes of current discussions and engagements with customers;
•
The customer projections and where the customer believes engagement, testing, field trials
and deployment will take place;
•
Signed engagements or commercial discussion phases and anticipated outturns;
•
Revenues recognised and collected to date which are attributed to the intangible asset
technology.
•
The company believes it is close to executing a major NRE business deal related to the ASIC
opportunity which is in negotiation phase based on the Company's integrated Intellectual
property portfolio.
The valuation method determined, to best reflect the fair value of the intangible assets, was the
Discounted Cash Flow (“DCF”) to be generated from such assets between 2025 through 2033.
The primary assumptions used in determining the value-in-use of these intangible assets are as
follows:
•
Corporate tax rate for the Company remains at 23%.
•
The pre-tax discount rate used to value future cash flows is 28.3% (post-tax 23.5%).
•
Securing a major deal with a third party which is in the negotiation phase.
The possibility exists that there could be a change in these key assumptions used to calculate the
value-in-use of the intangible assets, which could cause the balance recorded in these financial
statements to exceed such value-in-use. As at 31 December 2024 the value-in-use of the intangible
assets exceeds the amount shown in these financial statements.
- 53 -
NOTE 11
- LEASES
A. Details of the Company's right of use assets are as follows:
US dollars
Buildings
Gross carrying amount
Balance 1 January 2024
1,834,042
Balance 31 December 2024
1,834,042
Accumulated depreciation
Balance 1 January 2024
(658,092)
Depreciation expense
(334,400)
Balance 31 December 2024
(992,492)
Total right-of-use assets as at 31 December 2024
841,550
US dollars
Buildings
Gross carrying amount
Balance 1 January 2023
3,158,849
Expectation change, of option to exercise the lease
(1,324,807)
Balance 31 December 2023
1,834,042
Accumulated depreciation
Balance 1 January 2023
(342,208)
Depreciation expense
(315,884)
- 54 -
Balance 31 December 2023
(658,092)
Total right-of-use assets as at 31 December 2023
1,175,950
B. Lease liabilities are presented in the statement of financial position as follows:
US dollars
31 December
2024
2023
Current
377,287
341,991
Non-current
382,263
764,366
759,550
1,106,357
C.
In October 2021, the Company committed to a five-year lease agreement for its primary
offices in Airport City Israel. At the termination of the lease, the Company has an option to
renew it for a further five years. As at 31 December 2022 such renewal option was considered
as reasonably certain to be exercised according to IFRS 16. At 31 December 2023, the
Company’s assessment was that it may not exercise the additional 5-year option given the
change in the Company’s needs and the decline in rental market prices. As such the Company
recalculated the lease liability using an updated discount rate. The amount of such reduction
in the liability, was accordingly reduced from the right-of-use asset value.
Each lease generally imposes a restriction that, the right-of-use asset can only be used by the
Company. Leases are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. Some leases contain an option to extend the lease for a further
term or for the employee who used the leased item to purchase the underlying leased asset
outright at the end of the lease term. The Company is prohibited from selling or pledging the
underlying leased assets as security. For leases over office buildings and factory premises the
Company must keep those properties in a good state of repair and return the properties in
their original condition at the end of the lease. Further, the Company must insure items of
property, plant and equipment and incur maintenance fees on such items in accordance with
the lease contracts.
D.
The lease liabilities are secured by the related underlying assets. Future minimum lease
payments at 31 December 2024 were as follows:
- 55 -
Minimum lease payments due
US dollars
2025
202
-
2026
7
Total
Lease payments
439,225
402,623
841,848
Finance charges
(61,938)
(20,360)
(82,298)
Net present values
377,287
382,263
759,550
NOTE 12
- OTHER LONG TERM ASSETS
Other long term assets consist of:
US dollars
31 December
4
202
2023
Restricted cash
100,340
24,806
Other
10,338
10,338
Total other long term assets
110,678
35,144
NOTE 13
- SHORT- TERM BORROWINGS
Borrowings include the following financial liabilities:
Annual %
Interest
US dollars
rate(1)
31 December
2023
2024
2023
Bank borrowings
P+4.5%
-
96,306
Total short- term borrowings
-
96,306
(1)
The loans bore variable interest of prime + 4.5%. The loans were fully repaid by February
2024.
NOTE 14
-
OTHER CURRENT LIABILITIES
Other short-term liabilities consist of:
US dollars
31 December
4
202
2023
Salaries, wages and related costs
282,599
458,435
Provision for paid vacation due to employees
146,549
118,955
Current portion of IIA royalty liability (see Note 15)
6,027
23,000
Accrued expenses and other
373,897
127,691
Deferred revenue
39,722
250,200
Short term lease liability
377,287
341,991
Related parties *
107,093
287,625
- 56 -
Total other short-term liabilities
1,333,174
1,607,897
*
Relates to compensation from prior years and the outstanding preferred loan to the Company
(see Note 29.A.). These amounts do not bear interest.
NOTE 15
- OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consist of:
US dollars
31 December
4
202
2023
IIA royalty liability *
48,599
50,645
Lease liability
382,263
764,366
Total other long term assets
430,862
815,011
* During the years 2005 through 2012, the Company received grants from the Israel Innovation
Authority ("IIA") totaling approximately $3.1 million, to support the Company's various research
and development programs. The Company is required to pay royalties to the IIA at a rate of 3.5%,
of the Company’s revenue attributable to the technology funded by the IIA, up to an amount equal
to the grants received plus interest from the date of the grant, which after having repaid
approximately $0.58 million (2023: 0.54 million) of these grants over numerous years, as at 31
December 2024 the amount still due is approximately $4.5 million. Such contingent obligation has
no expiration date. All products, and IP sales from 2016 and later are based on newer architecture
which is not funded by the IIA therefore, the IIA is not eligible for any royalty from revenue
associated with product or IPs generated from deals after 2016.
NOTE 16
- EQUITY
A.
Details regarding share capital and number of shares at 31 December 2024 and at 31
December 2023 are:
Share capital:
US dollars
31 December
2024
2023
Ordinary shares of NIS 0.001 par value
271,255
103,417
Total share capital
271,255
103,417
Number of shares:
31 December
2024
2023
Ordinary shares of NIS 0.001 par value - authorised
1,600,000,000
600,000,000
Ordinary shares of NIS 0.001 par value - issued and paid up
1,000,000,000 376,721,091
B.
Description of the rights attached to the Ordinary Shares
All ordinary shares have equal rights including voting rights, rights to dividends and to
distributions upon liquidation. They confer their holder the rights to receive notices, attend
and vote at general meetings.
- 57 -
C.
Share premium
Share premium includes proceeds received from the issuance of shares, after allocating the
nominal value of the shares issued to share capital. Transaction costs associated with the
issuance of shares are deducted from the share premium, net of any related income tax
benefit. The costs of issuing new shares charged to share premium during the year ended 31
December 2024 was $83,561 (2023: $262,484).
D.
Other components of equity
Other components of equity include the value of equity-settled share and option-based
payments provided to employees and consultants. When employees and consultants forfeit
their options, the costs related to such forfeited options are reversed out to other components
of equity – see Note 17.A.
E.
Shares issued during the accounting periods
During the year ended 31 December 2024 the amount of 623,278,909 (2023: 298,636,654)
ordinary shares were issued, as follows:
Number of shares issued during year
ended 31 December
Note
2024
2023
Issuance of ordinary shares )issued together
with warrants (
[1]
286,941,090
127,188,097
Shares issued pursuant to share
subscription agreement
[2]
-
168,933,439
Shares issued pursuant to structured
investment deed
[3]
333,750,000
-
Expenses paid for in shares
[4]
2,587,819
2,515,118
623,278,909
298,636,654
[1] Details of the equity raises are as follows:
January 2023 equity raise
In January 2023 the Company issued 23,571,430 shares attached to a corresponding
23,571,430 warrants. Each share with its attached warrant was issued for £0.07, realising
gross proceeds of $2.02 million (£1.65 million) and net proceeds after issuance expenses
of approximately $1.89 million (£1.54 million).
Each warrant was initially exercisable at £0.15 with a life term of approximately 24
months. The warrants are not transferable, are not traded on an exchange and have an
- 58 -
accelerator clause, whereby these warrants may be called by the Company if the closing
mid-market share price of the Company exceeded £0.20 over a 5-consecutive day period.
If such 5-consecutive day period condition is met, the Company may serve notice on the
warrant holders to exercise their relevant warrants within 7 calendar days, failing which,
such remaining unexercised warrants shall be cancelled.
As the exercise price of the warrants is denominated in GBP and not in the Company's
functional currency, it was determined that the Company's obligation under such
warrants cannot be considered as an obligation to issue a fixed number of equity
instruments in exchange for a fixed amount of cash. Accordingly, it was determined that
such warrants represent a derivative financial liability required to be accounted for at fair
value through the profit or loss category. Upon initial recognition the Company allocated
the gross proceeds as follows: an amount of approximately $133,000 was allocated as a
derivative warrants liability with the remainder of the proceeds amounting to $1.75
million (after deduction of the allocated issuance costs of $0.14 million) being allocated
to share capital and share premium. The issuance expenses were allocated in a consistent
manner to the above allocation. The expenses related to the warrant component were
carried to profit or loss as an immediate expense while the expenses related to the share
capital component were netted against the amount carried to equity. In subsequent
periods the company measures the derivative financial liability at fair value and the
periodic changes in fair value are carried to profit or loss under financing costs or financing
income, as applicable. The fair value of the derivative warrant liability is categorized as
level 3 of the fair value hierarchy.
The fair value valuation of the warrants was based on the Black-Scholes option pricing
model, calculated in two stages. Initially, the fair value of these call warrants issued to
investors were calculated, assuming no restrictions applied to such call warrants. As the
Company, under certain circumstances, has a right to force the investors to either exercise
their warrants or have them cancelled, the second calculation calculates the value of the
warrants as call warrants that were issued by the investor to the company. The net fair
value results from reducing the call investor warrants fair value from the call warrants fair
value, as long as the intrinsic value of the call warrants (share price at the period end less
exercise price of the warrants) is not greater than such value. Should the intrinsic value of
the warrants be higher than the Black-Scholes two stage method described above, then
the intrinsic value of the warrants is considered to be a more accurate measure to use in
determining the fair value. The following factors were used in calculating the fair value of
the warrants at their issuance:
Risk free rate
4.2%
Volatility
82.3%
In May 2023, the Company changed the terms of the warrants as follows:
Changed:
From
To
Exercise price of warrants
£ 0.15
£ 0.060
Share price at which accelerator clause may be activated
£ 0.20
£ 0.075
David Levi and Shavit Baruch hold 3,028,571 and 668,771 warrants respectively, by virtue
of their participation in the January 2023 fundraise as outlined below. The terms of the
- 59 -
warrants David Levi and Shavit Baruch holder were varied alongside the other warrants
issued as detailed above.
Of the 23,571,430 shares and 23,571,430 warrants subscribed for, the director’s
participation in this issuance was 3,697,342 shares and 3,697,342 warrants, on the same
terms that outside investors participated as detailed below:
•
David Levi subscribed for 3,028,571 placing shares for an aggregate sum of
£212,000.
•
Shavit Baruch subscribed for 668,771 placing shares for an aggregate sum of
£46,814.
None of these warrants had been exercised by 31 December 2024 and their fair value of
$0 (2023: approximately $3,000) is disclosed as a warrants liability in the statement of
financial position.
Upon this successful equity raise being concluded, the brokers for this transaction
received 573,429 two year warrants exercisable at £0.07 per warrant. The fair-value of
these warrants at the time of issuance was approximately $23,000. As at 31 December
2024, none of these warrants have been exercised.
May 2023 equity raise
In May 2023 the Company issued 26,116,667 shares at £0.03 per share, realising gross
proceeds of $0.98 million (£0.78 million) and net cash proceeds after issuance expenses
of $0.92 million (£0.74 million).
Of the 26,116,667 shares subscribed for, the director’s participation in this issuance was
916,668 shares, on the same terms that outside investors participated as detailed below:
•
David Levi, subscribed for 833,334 Placing Shares for an aggregate sum of
£25,000.
•
Yosi Albagli, subscribed for 83,334 Placing Shares for an aggregate sum of £2,500.
The gross proceeds, after deduction of the issuance costs were allocated to share capital
and share premium.
Upon this successful equity raise being concluded, the brokers for this transaction
received 772,500 two year warrants exercisable at £0.03 per warrant. The fair-value of
these warrants at the time of issuance was approximately $14,000. As at 31 December
2024, none of these warrants have been exercised.
December 2023 equity raise
In December 2023 the Company issued 70,000,000 shares at £0.01 per share, realising
gross proceeds of $0.88 million (£0.70 million) and net cash proceeds after issuance
expenses of $0.83 million (£0.66 million).
Concurrent with this equity raise the Company’s CEO and director, David Levi, converted
$94,500 (£75,000) of loans owed to him, into 7,500,000 shares.
The gross proceeds, after deduction of the issuance costs were allocated to share capital
and share premium.
No warrants were issued in this equity raise.
September 2024 equity raise
- 60 -
In September 2024 the Company issued 189,174,999 shares attached to a corresponding
189,174,999 warrants. Each share with its attached warrant was issued for £0.003,
realising gross proceeds of $0.76 million (£0.57 million) and net cash proceeds after
issuance expenses of $0.70 million (£0.53 million).
David Levi, a director and CEO of the Company subscribed for 9,008,333 of these shares
and 9,008,333 corresponding warrants, on the same terms that outside investors
participated, for an aggregate sum of £27,025.
Each warrant is exercisable at £0.0075 with a life term of 18 months. The warrants are
not transferable, are not traded on an exchange and have an accelerator clause, whereby
these warrants may be called by the Company if the closing mid-market share price of the
Company equal or exceed £0.0150 over a 5-consecutive day period. If such 5-consecutive
day period condition is met, the Company may serve notice on the warrant holders to
exercise their relevant warrants within 7 calendar days, failing which, such remaining
unexercised warrants shall be cancelled.
As the exercise price of the warrants is denominated in GBP and not in the Company's
functional currency, it was determined that the Company's obligation under such
warrants cannot be considered as an obligation to issue a fixed number of equity
instruments in exchange for a fixed amount of cash. Accordingly, it was determined that
such warrants represent a derivative financial liability required to be accounted for at fair
value through the profit or loss category. Upon initial recognition the Company allocated
the gross proceeds as follows: an amount of approximately $30,000 was allocated as a
derivative warrants liability with the remainder of the proceeds amounting to $0.73
million (after deduction of the allocated issuance costs of approximately $60,000) being
allocated to share capital and share premium. The issuance expenses were allocated in a
consistent manner to the above allocation. The expenses related to the warrant
component were carried to profit or loss as an immediate expense while the expenses
related to the share capital component were netted against the amount carried to equity.
In subsequent periods the company measures the derivative financial liability at fair value
and the periodic changes in fair value are carried to profit or loss under financing costs or
financing income, as applicable. The fair value of the derivative warrant liability is
categorized as level 3 of the fair value hierarchy.
The fair value valuation of the warrants was based on the Black-Scholes option pricing
model, calculated in two stages. Initially, the fair value of these call warrants issued to
investors were calculated, assuming no restrictions applied to such call warrants. As the
Company, under certain circumstances, has a right to force the investors to either exercise
their warrants or have them cancelled, the second calculation calculates the value of the
warrants as call warrants that were issued by the investor to the company. The net fair
value results from reducing the call investor warrants fair value from the call warrants fair
value, as long as the intrinsic value of the call warrants (share price at the period end less
exercise price of the warrants) is not greater than such value. Should the intrinsic value of
the warrants be higher than the Black-Scholes two stage method described above, then
the intrinsic value of the warrants is considered to be a more accurate measure to use in
determining the fair value. The following factors were used in calculating the fair value of
the warrants at their issuance:
Risk free rate
5.5%
Volatility
319.0%
- 61 -
As at 31 December 2024, none of these warrants have been exercised.
Upon this equity raise being concluded, the brokers for this transaction received
1,666,667 shares with a fair value of approximately $7,000. No warrants were issued with
these shares.
December 2024 equity raise
In December 2024 the Company issued 97,766,091 shares at £0.00133 per share, realising
gross proceeds of $0.17 million (£0.13 million).
David Levi subscribed for 4,887,218 of these shares issued for an aggregate sum of £6,500.
The gross proceeds, after deduction of the issuance costs were allocated to share capital
and share premium.
No warrants were issued in this equity raise.
[2] Shares issued pursuant to share subscription agreement
In February 2022, an institutional investor (“Investor”) who had previously subscribed for
shares in the Company, signed a new $2.0 million share subscription agreement bearing
a face value of $2,060,000.
The Investor has the right, at its sole discretion to require the Company to issue shares in
relation to the subscription amount outstanding (or a part of it), under which, the number
of shares to be issued for such settlement, shall be determined by dividing the face value
of the subscription amount by the Settlement Price.
The Settlement Price is equal to the sum of (i) the Reference Price and (ii) the Additional
Price.
The Reference Price is the average of the 3 daily volume-weighted average prices
("VWAPs") of Shares selected by the Investor during a 15 trading day period immediately
prior to the date of notice of their issue, rounded down to the next one tenth of a penny.
The Additional Price is equal to half of the excess of 85% of the average of the daily VWAPs
of the Shares during the 3 consecutive trading days immediately prior to the date of notice
of their issue over the Reference Price.
Accounting treatment
As the company's obligation under the share subscription agreement with respect for
each subscription amount received by the Company, represent an obligation to be settled
through the issuance of a variable number of shares and as the agreements include
embedded derivatives (such as principal amounts indexed to an average price of equity
instrument) the Company has designated this obligation as financial liability at fair value
through profit or loss under "liability related to share subscription agreement".
Accordingly, upon initial recognition and at each reporting period the liability is measured
at fair value with changes carried to profit or loss under financing costs or financing
income, as applicable.
- 62 -
Upon settlement or a partial settlement of such liability, when the investor calls for the
settlement of the aggregate subscription amount outstanding (or any part of it), for a fixed
number of shares, as calculated upon such settlement notice, the fair value of the liability,
related to the settled portion is carried to equity.
The fair value of the liability related to share subscription agreement is categorised as
level 3 of the fair value hierarchy. See Note 27.B.
Activity for year ending 31 December 2023
All remaining outstanding subscription amounts were converted during 2023, thereby
bringing the relationship to a conclusion, without any balances remaining as at 31
December 2023:
The following subscription amounts were converted during 2023:
Notice date of conversion
Face value converted - USD
Shares Issued
22 May 2023
230,000
6,629,236
31 July 2023
100,000
4,897,352
29 September 2023
74,000
7,406,851
(*) 10 November 2023
1,336,000
150,000,000
168,933,439
(*) Per settlement deed, described below.
As mentioned above, the Investor converts subscription amounts into shares of the
Company at a discounted price. Upon each conversion, the difference between the actual
market value of shares issued to the Investor and the amounts converted amounted to
$22,771 in 2023, which is recorded as a reduction to finance income.
In November 2023 the Company and the Investor entered into a settlement deed,
whereby the Company would issue 150,000,000 shares to the Investor (the "Settlement
Shares") to terminate the Subscription Agreement and extinguish the Company's liability
to the Investor. The Settlement Shares would be issued in tranches, to comply with a
restriction that the Investor cannot hold an interest in more than 24.99% of the
Company's issued share capital. The Settlement Shares were issued in tranches. 44.9
million shares on 10 November 2023, 43.6 million shares on 29 November 2023 and 61.5
million shares on 14 December 2023. The resulting finance charges recognized from this
transaction was approximately $1,030,000.
[3] Shares issued pursuant to structured investment deed
In May 2024 the Company entered into a structured investment deed and issued
40,000,000 shares (“Subscription Shares”) and a contingent warrant in exchange for gross
proceeds of £800,000 ($1.01m). The net proceeds received after issuance expenses was
$0.94m.
- 63 -
The Warrant is initially exercisable at a price of 1 pence per share for a period of 44 days
from the closing. The exercise price is reset on the 45th day after closing, following which
it will be calculated as the average (in pounds Sterling, rounded down to three decimal
places) of the lowest five, daily Volume Weighted Average Price (“VWAP”) of the
Company’s share price on the stock-market, during the 20 trading days before the receipt
of a warrant exercise notice by the Company, less a 15% discount, rounded down to the
nearest decimal place.
The Warrant has an 8-month exercise period and can be exercised in full or in part. The
amount available to be exercised under the Warrant is £800,000, less the value of the
40,000,000 Subscription Shares, calculated by reference to the relevant exercise price,
such that the investor will be entitled to exercise the Warrant only for an amount
exceeding the difference between the maximum amount of £800,000 (or a lower amount
outstanding at the time following prior exercise of the Warrant) and the value of
40,000,000 Subscription Shares at the relevant exercise price. The exercise price of the
Warrant is prefunded by way of the £800,000 gross fundraise amount and, accordingly,
no additional payment will be made by the investor to the Company in connection with
the exercise of the Warrant.
Accounting treatment
As the exercise price of the warrants is denominated in GBP and not in the Company's
functional currency, it was determined that the Company's obligation under such
warrants cannot be considered as an obligation to issue a fixed number of equity
instruments in exchange for a fixed amount of cash. Accordingly, it was determined that
such warrants represent a derivative financial liability required to be accounted for at fair
value through the profit or loss category.
At issuance, the structured warrant is a hybrid instrument containing components which
feature in regular options and other components which are different to regular options.
The valuation method considered to be appropriate for such an instrument is the Naïve
approach, which is calculated by multiplying:
a. the share price of the Company at such date, by
b. the total number of shares that the warrant holder would have been issued if the
entire warrant was exercised at such issuance date, assuming that the 1 pence per
share exercise price had already expired.
Upon an exercise of the structured warrant or part thereof, the fair market value of the
shares issued are recorded in share capital and share premium, with the difference
between that amount and the principal warrant amount exercised, being carried through
to the profit or loss as finance expenses. The fair market value of the shares issued is
considered as the three day average closing share price, commencing from the date of
admission to the stock exchange.
The periodic change in the fair value is carried to profit or loss under financing costs or
financing income, as applicable. The fair value of the derivative warrant liability is
categorised as level 3 of the fair value hierarchy.
Initial warrant valuation
Upon initial recognition the Company allocated the gross investment amount of £800,000
($1.01 million) as follows:
- 64 -
a. $0.9 million as a derivative warrants liability.
b. The remainder of the proceeds being $0.1 million, to share capital and premium.
The issuance expenses of approximately $0.07m were allocated to the equity components
in the same proportion as they were initially recorded. These expenses were accounted
for as follows:
a.
The expenses related to the warrant component were carried to profit or loss
as an immediate expense.
b.
The expenses related to the share capital component were netted off against
the amount carried to equity.
Warrant exercises
During 2024, in addition to the issuance of 40,000,000 shares as mentioned above, the
following shares of the Company were issuable upon exercises of the warrant instrument:
Date of
exercise in
2024
Date of
Admission
Warrant
exercise
amount in GBP
Issue price
per share
in Pence
Number of
shares issued
12 July
17 July 2024
395,000
0.40
98,750,000
21 October
25 October 2024
195,000
0.10
195,000,000
Total
293,750,000
23 December
2 January 2025
178,000
0.08
222,500,000 *
768,000
516,250,000
* As these shares were issued in 2025, they are shown in the Statement of Changes in
Equity as shares to be allotted.
As at 31 December 2024, the entire warrant instrument had been exercised and as such
no balance related to this warrant is reflected in the Statement of Financial Position.
[4] Expenses paid for in shares
As part of the agreed remuneration as non-Executive Chairman for the period from 1
March 2022 to 28 February 2023, Joseph Albagli is entitled to receive shares equal to a
monthly amount of £1,250. In July 2023 the Company issued 126,347 shares in lieu of the
£15,000 owing to Joseph Albagli for the above-mentioned period. During March 2024 the
Company issued 921,152 shares in lieu of the compensation owing to Joseph Albagli for
the period from 1 March 2023 to 29 February 2024. See Note 29.C.
In January 2023, service providers to the Company agreed to receive 2,388,771 shares at
the January 2023 equity raise issue price of GBP 0.07 in satisfaction of £167,214 of
outstanding fees due to them. These shares were subject to a one-year lock-in period.
- 65 -
In September 2024, service providers to the Company agreed to receive 1,666,667 shares
at the September 2024 equity raise issue price of GBP 0.003 in satisfaction of £5,000 of
outstanding fees due to them.
NOTE 17
-
SHARE-BASED COMPENSATION
A.
In 2013 the Company's Board of Directors approved a share option plan for the grant of options
without consideration, to employees, service providers and directors of the Company, which
are exercisable into the Company's ordinary shares. The exercise price and vesting period
(generally four years) for each grantee of options, is determined by the Company's Board of
Directors and specified in such grantee's option agreement. In accordance with Section 102 of
the Israel tax code, the Israeli resident grantee's options, are held by a trustee. The options are
not cashless (they need to be paid for) and expire upon the expiration date determined by the
Board of Directors (generally ten years from the date of the grant). The expiration date may be
brought forward upon the termination of grantee's employment or services to the Company.
Options do not vest after the termination of employment or services to the Company.
The following table summarises the salient details and values regarding the options granted
(all amounts are in US Dollars unless otherwise indicated):
Option grant dates
29 Oct
2024
20 Feb
2024
22 Feb
2023
Number of options granted
63,600,000
33,200,000
590,000
Exercise price in $
0.0032
0.0189
0.1660
Recipients of the options
Employees
and sub
contractors
Employees
Employees
Approximate fair value at grant date (in $):
Total benefit
96,463
298,368
31,685
Per option benefit
0.0015
0.0090
0.0537
Assumptions used in computing value:
Risk-free interest rate
4.28%
4.33%
3.93%
Dividend yield
0.00%
0.00%
0.00%
Expected volatility
70%
70%
70%
Expected term (in years)
10.0
10.0
10.0
Expensed amount recorded for year ended:
31 December 2023
-
-
7,296
31 December 2024
15,953
166,752
(264)
The remaining value of these options at 31 December 2024, which have yet to be recorded as
expenses, amount to $180,938 (2023: $45,045).
As some of these employees left the employ of the company prior to 31 December 2024, their
options were cancelled.
- 66 -
Share based compensation was treated in these financial statements as follows:
US dollars
Year ended 31 December
2024
2023
Total expensed amount recorded
212,680
72,287
Total
212,680
72,287
The following tables present a summary of the status of the employee option grants by the
Company as of 31 December 2024 and 2023:
Weighted
average
exercise
Number
price (US$)
Year ended 31 December 2024
Balance outstanding at beginning of year
1,757,000
0.37
Granted
96,800,001
0.01
Exercised
-
-
Forfeited
(1,622,000)
0.02
Balance outstanding at end of the year
96,935,001
0.01
Balance exercisable at the end of the year
9,250,915
Weighted
average
exercise
Number
price (US$)
Year ended 31 December 2023
Balance outstanding at beginning of year
3,691,920
0.31
Granted
590,000
0.17
Exercised
-
-
Forfeited
(2,524,920)
(0.26)
Balance outstanding at end of the year
1,757,000
0.37
Balance exercisable at the end of the year
1,177,333
B.
The option pool was increased to 50,000,000 options by a resolution passed on 14 January
2024 and was increased to 113,600,000 options by a resolution passed on 29 October 2024
and approved by the tax authorities.
C.
The following table summarises information about employee options outstanding at 31
December 2024:
Weighted
Weighted
Outstanding
average
Weighted
Exercisable
average
at 31
remaining
average
at 31
remaining
Exercise
December
contractual
exercise
December
contractual
price
2024
life (years)
price (US$)
2024
life (years)
$0.20
20,000
2.2
0.20
20,000
2.2
- 67 -
£0.002
63,600,000
9.2
0.003
-
9.2
£0.02
31,800,001
9.2
0.02
7,949,997
9.2
£0.12
11,000
5.6
0.16
11,000
5.6
£0.14
35,000
5.3
0.17
17,500
5.3
£0.20
230,000
5.9
0.26
230,000
5.9
£0.21
20,000
5.5
0.26
20,000
5.5
£0.21
200,000
5.9
0.27
200,000
5.9
£0.29
174,000
5.9
0.39
87,000
5.9
£0.29
400,000
7.1
0.39
366,668
7.1
£0.33
30,000
5.6
0.46
22,500
5.6
£0.40
130,000
4.4
0.54
97,500
4.4
£0.45
225,000
5.6
0.60
168,750
5.6
£1.00
20,000
4.6
1.25
20,000
4.6
£1.05
40,000
2.2
1.28
40,000
2.2
96,935,001
9,250,915
The following table summarises information about employee options outstanding at 31
December 2023:
Weighted
Weighted
Outstanding
average
Weighted
Exercisable
average
at 31
remaining
average
at 31
remaining
Exercise
December
contractual
exercise
December
contractual
price
2023
life (years)
price (US$)
2023
life (years)
$0.20
20,000
3.2
0.20
20,000
3.2
£0.12
33,000
6.6
0.16
33,000
6.6
£0.14
130,000
6.3
0.17
50,000
6.3
£0.20
230,000
6.9
0.26
230,000
6.9
£0.21
70,000
6.5
0.26
70,000
6.5
£0.21
200,000
6.9
0.27
200,000
6.9
£0.29
164,000
8.1
0.39
41,000
8.1
£0.29
400,000
8.1
0.39
233,333
8.1
£0.33
65,000
6.6
0.46
32,500
6.6
£0.40
130,000
5.0
0.54
65,000
5.0
£0.45
225,000
6.6
0.60
112,500
6.6
£1.05
40,000
3.2
1.28
40,000
3.2
£1.00
30,000
4.5
1.32
30,000
4.5
£1.00
20,000
5.6
1.25
20,000
5.6
1,757,000
1,177,333
The fair value of options granted to employees was determined at the date of each grant. The
fair value of the options granted are expensed in the profit and loss, except for those that were
allocated to capitalised research and development costs (up to and including 30 June 2019).
D.
Shares and equity instruments issued in lieu of payment for services provided
a. Upon the successful equity raise concluded in January 2023, as described in Note 16.E.[1],
the brokers responsible for this transaction received 573,429 two year warrants exercisable
at £0.07 per warrant. The fair-value of these warrants at the time of issuance was
approximately $23,000.
- 68 -
b. In January 2023, service providers to the Company agreed to receive 2,388,771 shares at
the January 2023 equity raise issue price of GBP 0.07 in satisfaction of £167,214 of
outstanding fees due to them. See Note 16.E.[4].
c. Upon the successful equity raise concluded in May 2023, as described in Note 16.E.[1], the
brokers responsible for this transaction received 772,500 two year warrants exercisable at
£0.03 per warrant. The fair-value of these warrants at the time of issuance was
approximately $14,000.
d. During 2024 the Company issued 921,152 (2023: 126,347) shares to the Company’s non-
executive chairman in lieu of $19,000 (2022: $19,000) owing as part of his agreed
remuneration. See also Note 16.E.[4] and Note 29.C.
e. In September 2024, service providers to the Company agreed to receive 1,666,667 shares
at the September 2024 equity raise issue price of GBP 0.003 in satisfaction of £5,000 of
outstanding fees due to them. See Note 16.E.[1].
NOTE 18
- REVENUE
US dollars
Year ended 31 December
4
202
2023
Sales
1,043,600
3,386,583
Royalties
210,473
231,344
Maintenance and support
129,492
159,992
Total revenue
1,383,565
3,777,919
NOTE 19
- RESEARCH AND DEVELOPMENT EXPENSES
US dollars
Year ended 31 December
2024
2023
Employee remuneration, related costs and subcontractors (*)
2,538,025
3,845,860
Maintenance of software and computers
52,815
151,473
Insurance and other expenses
191,275
120,719
Amortisation
961,380
961,380
Grant procurement expenses
-
81,265
Total research and development expenses
3,743,495
5,160,697
(*) Including share based compensation.
208,631
58,755
NOTE 20
- GENERAL AND ADMINISTRATIVE EXPENSES
US dollars
Year ended 31 December
2024
2023
Employee remuneration and related costs (*)
188,946
459,345
Professional fees
957,872
488,198
Rentals and maintenance
148,587
220,066
- 69 -
Depreciation
649,932
454,013
Impairment losses of trade receivables
140,843
220,220
Total general and administrative expenses
2,086,180
1,841,842
(*) Including share based compensation.
4,049
17,710
NOTE 21
- MARKETING EXPENSES
US dollars
Year ended 31 December
2024
2023
Employee remuneration and related costs (*)
408,417
541,674
Marketing expenses
118,921
66,669
Travel expenses
7,558
12,709
Total marketing expenses
534,896
621,052
(*) Including share based compensation.
-
(
4,178
)
NOTE 22
- OTHER INCOME
This is a government grant related to an expense item and is recognised as other income.
NOTE 23
- FINANCING COSTS
US dollars
Year ended 31 December
2024
2023
Bank fees, interest and others
13,874
82,570
Lease liability financial expenses
98,098
200,260
Revaluation of liability related to share subscription agreement and
structured investment deed, measured at FVTPL
588,721
974,980
Expenses allocated to issuing warrants
69,952
10,096
Total financing costs
770,645
1,267,906
NOTE 24
- FINANCING INCOME
US dollars
Year ended 31 December
2024
2023
Revaluation of warrant derivative liability
12,706
129,703
Interest received
1,613
226
Exchange rate differences, net
13,122
53,882
Total financing income
27,441
183,811
NOTE 25
- TAX EXPENSE
A.
The Company is assessed for income tax in Israel - its country of incorporation. The Israeli
corporate tax rates for the relevant years is 23%.
B.
As of 31 December 2024, the Company has carry-forward losses for Israeli income tax purposes
of approximately $40 million (2023: $35 million). These tax losses have no expiry date.
- 70 -
According to management’s estimation of the Company’s future taxable profits, it is no longer
probable in the foreseeable future, that future taxable profits would utilise all the tax losses.
C.
Theoretical tax reconciliation
For the years ended 31 December 2024 and 2023, the following table reconciles the expected
tax expense (benefit) per the statutory income tax rate to the reported tax expense in profit or
loss as follows:
US dollars
Year ended 31 December
2024
2023
Loss before tax
5,832,709
6,364,747
Tax expense (benefit) at statutory rate
23%
23%
Expected tax expense (benefit) at statutory rate
(1,341,523)
(1,463,892)
Changes in taxes from permanent differences in share-based
compensation
48,916
16,626
Increase in loss carryforwards
1,292,607
1,447,266
Income tax expense
-
-
NOTE 26
- BASIC AND DILUTED LOSS PER ORDINARY SHARE
A.
The earnings and the weighted average number of shares used in computing basic loss per
ordinary share, are as follows:
US dollars
Year ended 31 December
2024
2023
Loss for the year attributable to ordinary shareholders
5,832,709
6,364,747
Number of shares
Year ended 31 December
2024
2023
Weighted average number of ordinary shares used in the
computation of basic loss per ordinary share
550,797,251
143,876,859
B.
As the Company has losses attributable to the ordinary shareholders, the effect on diluted loss
per ordinary share is anti-dilutive and therefore the outstanding warrants and employee
options have not been taken into account – see Note 17.
NOTE 27
- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A.
Financial risk and risk management
The activity of the Company exposes it to a variety of financial risks and market risks. The
Company re-assesses the financial risks in each period and makes appropriate decisions
regarding such risks. The risks are managed by Company management which identifies,
assesses and hedges against the risks.
•
Exposure to changes in exchange rates
- 71 -
The Company is exposed to risks relating to changes in the exchange rate of the NIS and
other currencies versus the U.S. dollar (which constitutes the Company's functional
currency). Most of the revenues of the Company are expected to be denominated in US
dollars, while the substantial majority of its expenses are in shekels (mainly payroll
expenses). Therefore, a change in the exchange rates may have an impact on the results
of the operations of the Company.
Currency basis of financial instruments
US dollars
31 December
4
202
NIS
GBP
Euro
US $
Total
Assets
Cash
39,011
5,722
-
5,980
50,713
Trade receivables
54,843
-
-
330,157
385,000
93,854
5,722
-
336,137
435,713
Liabilities
Trade payables
1,008,594
73,396
-
279,122
1,361,112
Warrants liability
-
15,353
-
-
15,353
IIA royalty liability
-
-
-
48,599
48,599
Non-current lease liabilities
382,263
-
-
-
382,263
1,390,857
88,749
-
327,721
1,807,327
(1,297,003)
(83,027)
-
8,416
(1,371,614)
US dollars
31 December 2023
NIS
GBP
US $
Total
Assets
Cash
667,865
855,348
470,595
1,993,808
Trade receivables
31,145
-
155,000
186,145
699,010
855,348
625,595
2,179,953
Liabilities
Short term borrowings
96,306
-
-
96,306
Trade payables
899,920
22,417
314,776
1,237,113
Warrants liability
-
2,841
-
2,841
IIA royalty liability
-
-
50,645
50,645
Non-current lease liabilities
764,366
-
-
764,366
1,760,592
25,258
365,421
2,151,271
(1,061,582)
830,090
260,174
28,682
•
Sensitivity to changes in exchange rates of the NIS and other currencies to the US
dollar
- 72 -
A change in the exchange rate of the NIS and other currencies to the USD as of the dates
of the relevant statement of financial position, at the rates set out below, which according
to Management are reasonably possible, would increase (decrease) the profit and loss by
the amounts set out below. The analysis below was performed under the assumption that
the rest of the variables remained unchanged.
US dollars
Sensitivity to changes in exchange rates
of the non US dollar currencies to the US dollar
Effect on profit
(loss)/equity (before tax)
from the changes caused
by the market factor
Book value
Effect on profit
(loss)/equity (before tax)
from the changes caused
by the market factor
Increase at the rate of 31 December
Decrease at the rate of
10%
5%
2024
5%
10%
Cash
(4,473)
(2,237)
44,733
2,237
4,473
Trade receivables
(5,484)
(2,742)
54,843
2,742
5,484
Trade payables
108,199
54,100 (1,081,990)
(54,100)
(108,199)
Warrants liability
1,535
768
(15,353)
(768)
(1,535)
Non-current lease liabilities
38,226
19,113
(382,263)
(19,113)
(38,226)
Total
138,003
69,002 (1,380,030)
(69,002)
(138,003)
US dollars
Sensitivity to changes in exchange rates
of the non US dollar currencies to the US dollar
Effect on profit
(loss)/equity (before tax)
from the changes caused
by the market factor
Book value
Effect on profit
(loss)/equity (before tax)
from the changes caused
by the market factor
Increase at the rate of 31 December
Decrease at the rate of
10%
5%
2023
5%
10%
Cash
(152,321)
(76,161)
1,523,213
76,161
152,321
Trade receivables
(3,115)
(1,557)
31,145
1,557
3,115
Short term borrowings
9,631
4,815
(96,306)
(4,815)
(9,631)
Trade payables
92,234
46,117
(922,337)
(46,117)
(92,234)
Warrants liability
284
142
(2,841)
(142)
(284)
Non-current lease liabilities
76,437
38,218
(764,366)
(38,218)
(76,437)
Total
23,150
11,574
(231,492)
(11,574)
(23,150)
•
Credit risk
All of the cash and cash equivalents and other short-term financial assets as of 31
December, 2024 and 2023 were deposited with one of the major banks in Israel.
Trade receivables as of 31 December 2024 and 2023 were from customers in Israel, the
U.S., Europe, and Asia, which included the major customers as detailed in Note 28. The
Company performs ongoing reviews of the credit worthiness of customers, the amount
of credit granted to customers and the possibility of loss therefrom. The Company
includes an adequate allowance for impairment losses (expected credit loss).
- 73 -
•
Trade receivables
IFRS 9 provides a simplified model of recognising lifetime expected credit losses for all
trade receivables as these items do not have a significant financing component.
In measuring the expected credit losses, the trade receivables have been assessed by
management on a collective basis as well as on a case by case basis. Trade receivables are
written off when there is no reasonable expectation of recovery. Management have
indicated a concern regarding the receivable from a few customers, for which a provision
has been made. As at 31 December 2024, the provision for expected credit losses was
$679,843 (2023: $699,000) - see Note 6 for more details.
US dollars
Balance at 1 January 2023
579,000
Additions
150,000
Reductions
(30,000)
Balance at 31 December 2023
699,000
Additions
Reductions
(19157)
Balance at 31 December 2024
679,843
Liquidity risk
The Company financed its activities from its operations, issuing shares and warrants,
shareholders' loans and short and long-term borrowings from the bank. For further details on
the Company’s liquidity, refer to Note 2. All the non-current liabilities at 31 December 2024
and 2023 were lease liabilities which are serviced monthly. The short-term borrowings at 31
December 2024 and 2023 and the trade payables and other current liabilities are expected to
be paid within 1 year. It is therefore not expected that the Company will encounter difficulty
in meeting its obligations associated with financial liabilities that are settled by delivering cash
or another financial asset.
The Company’s non-derivative financial liabilities have contractual maturities as summarized
below:
US dollars
31 December 2024
Within 6
months
6 to 12
months
1 to 3
years
More than
3 years
Trade payables
1,361,112
-
-
-
Other short-term liabilities
952,874
3,014
-
-
IIA royalty liability
2,682
2,700
15,000
47,118
Lease liabilities including future interest
costs
219,613
219,613
841,849
-
Total
2,536,281
225,327
856,849
47,118
US dollars
31 December 2023
Within 6
months
6 to 12
months
1 to 3
years
More than
3 years
Short term borrowings
96,306
-
-
-
Trade payables
123,711
1,113,402
-
-
Other short-term liabilities
1,033,123
232,783
-
-
IIA royalty liability
11,500
11,500
15,000
60,000
- 74 -
Lease liabilities including future interest
costs
221,005
221,005
884,020
405,176
Total
1,485,645
1,578,690
899,020
465,176
B.
Fair value of financial instruments
General
The financial instruments of the Company include mainly trade receivables and debit balances,
credit from banking institutions and others, trade payables and credit balances, IIA liability,
and balances from transactions with shareholders.
The principal methods and assumptions used in calculating the estimated fair value of the
financial instruments are as follows (fair value for disclosure purposes):
Financial instruments included in current asset items
Certain instruments (cash and cash equivalents, other short-term financial assets, trade
receivables and debit balances) are of a current nature and, therefore, the balances as of 31
December, 2024 and 2023, approximate their fair value.
Financial instruments included in current liability items
Certain instruments (credit from banking institutions and others, trade payables and credit
balances, suppliers and service providers and balances with shareholders) - in view of the
current nature of such instruments, the balances as at 31 December, 2024 and 2023
approximate their fair value. Other instruments are measured at fair value through profit or
loss.
Financial instruments’ fair value movements
The reconciliation of the carrying amounts of financial instruments classified within Level 3
(based on unobservable inputs) is as follows:
US dollars
Financial liabilities
Liability related
to share
subscription
agreement
Warrants
liability
Balance at 1 January 2023
(1,836,555)
-
Recognition in asset (liability)
-
(132,544)
Proceeds received for shares issued
1,778,468
-
Warrants exercised
58,087
129,703
Fair Value at 31 December 2023
-
(2,841)
Recognition in asset (liability)
-
(913,559)
Liability exchanged for shares issued
991,107
Revaluation Adjustment
-
(90,060)
Fair Value at 31 December 2024
-
(15,353)
Both the financial assets and the two types of financial liabilities are measured at fair value
through profit and loss.
Measurement of fair value of financial instruments
- 75 -
The following valuation techniques are used for instruments categorised in Level 3:
Liability related to share subscription agreement
The fair value of the liability related to share subscription agreement is categorised as level 3
of the fair value hierarchy.
The liability is valued by adding:
• the number of shares that the Investor would receive from a unilateral exchange for his
outstanding subscription amount, multiplied by the current share price of the Company,
and
• the outstanding subscription amount that the Company may choose to repay in cash
amount.
Pursuant to the February 2022 share subscription agreement, the investor has the right, at its
sole discretion to require the Company to issue shares in relation to the subscription amount
outstanding (or a part of it), under which, the number of shares to be issued for such
settlement, shall be determined by dividing the face value of the subscription amount by the
Settlement Price. The Settlement Price is equal to the sum of (i) the Reference Price and (ii)
the Additional Price. The Reference Price is the average of the 3 daily volume-weighted
average prices ("VWAPs") of Shares selected by the Investor during a 15 trading day period
immediately prior to the date of notice of their issue, rounded down to the next one tenth of
a penny. The Additional Price is equal to half of the excess of 85% of the average of the daily
VWAPs of the Shares during the 3 consecutive trading days immediately prior to the date of
notice of their issue over the Reference Price. As at 31 December 2023, this liability had been
extinguished - see Note 16.E.[2].
Warrants liability
This liability is valued at the fair value of the Warrants as described in detail in Note 16.E.[1]
regarding the January 2023 equity raise and the September 2024 equity raise. Should the
Company’s share price increase, then the warrants’ fair value will increase by a lower amount,
as is inherent in the Black Scholes option pricing model. In addition, as the Company has a
“put” warrant which is triggered under certain circumstances when the Company’s share price
reaches a certain share price, the value of the Warrants will not increase indefinitely for the
period that the “put” option is in place.
C.
Capital management
The objectives of the Company's policy are to maintain its ability to continue operating as a
going concern with a goal of providing the shareholders with a return on their investment and
to maintain a beneficial equity structure with a goal of reducing the costs of capital. The
Company may take different steps toward the goal of preserving or adapting its equity
structure, including a return of equity to the shareholders and/or the issuance of new shares
for purposes of paying debts and for purposes of continuing the research and development
activity conducted by the Company. For the purpose of the Company's capital management,
capital includes the issued capital, share premium and all other equity reserves attributable to
the equity holders of the Company.
- 76 -
NOTE 28
-
SEGMENT REPORTING
A. The Company has implemented the principles of IFRS 8 ('Operating Segments'), in respect of
reporting segmented activities. In terms of IFRS 8, the management has determined that the
Company has a single area of business, being the development and delivery of high-end network
processing technology.
The Company's revenues from customers are divided into the following geographical areas:
US dollars
Year ended 31 December
2024
2023
Asia
-
154,700
Europe
-
12,390
Israel
244,073
758,445
United States
1,139,492
2,852,384
1,383,565
3,777,919
%
Year ended 31 December
2024
2023
Asia
-
4.1%
Europe
-
0.3%
Israel
17.6%
20.1%
United States
82.4%
75.5%
100.0%
100.0%
Revenue from customers in the Company's domicile, Israel, as well as its major market, the
United States and Asia, have been identified on the basis of the customer's geographical
locations.
The Company's revenues from major customers as a percentage of total revenue was:
%
Year ended 31 December
2024
2023
Customer A
56%
54%
Customer B
20%
19%
Customer C
15%
15%
Customer D
7%
5%
Customer E
2%
3%
100%
96%
B. All of the Company’s non-current assets are located in the Company’s country of domicile.
- 77 -
NOTE 29
-
RELATED PARTIES
A. Founders
In April 2017, the employment agreement of the two founders of the Company, Mr. David Levi
and Mr. Shavit Baruch, was amended, in terms of which each of them, in addition to their salary,
is entitled to a performance bonus of 5% of the Company's annual profit before tax. For each
year, the bonus shall be capped at $250,000 each. Such bonus is dependent on their continual
employment by the Company.
Shavit Baruch had an amount due to him for compensation originating in prior years. As at 31
December 2024, the Company owed him in this regard a balance of $107,093 (2023: $106,683)
– see Note 14.
In October 2023, David Levi, a co-founder of the Company provided a non-interest bearing loan
to the Company of 1,000,000 NIS (approx. £200,000 or $250,000), This loan was approved by
the court and, entitles David Levi to be repaid as a priority creditor in any event, by the end of
the Temporary Suspension of Proceedings (“TSP”) process.
In December 2023, David Levi subscribed for 7,500,000 shares at the same price as outside
investors paid in the Company's equity raise of £700,000 ($880,000). David Levi settled the
purchase price for these shares in exchange for the satisfaction of 347,350 NIS (£75,000 or $
94,500) of his non-interest bearing priority loan.
The 652,650 NIS remaining amount of the non-interest bearing loan was repaid to David Levi on
6 February 2024.
On 26 September 2024, David Levi subscribed for 9,008,333 new ordinary shares in the Company
(the "Subscription Shares") at a price of 0.3p per share. David Levi was also granted one warrant
for every Subscription Share subscribed for, exercisable at a price of 0.75p per share. The
warrants are exercisable for a period of 18 months.
On 4 December 2024, David Levi subscribed for 4,887,218 new ordinary shares of the Company
at a price of 0.133p per share.
B. Chief Financial Officer
Mark Reichenberg stepped down from the board on 31 July 2023, when his tenure as CFO
terminated and the 209,000 ESOP options he held were cancelled.
From August 2023, Ayala Deutsch took over the CFO duties and was formally appointed as
permanent CFO in February 2024, when she was also appointed to the board of directors. Ayala
Deutsch stepped down from her position as CFO and board member on 9 October 2024.
Tomer Assis was appointed as CFO on 9 October 2024 and received 1,500,000 ESOP options with
a fair value of $2,275, vesting quarterly over a 3 year period.
C. Remuneration of key management personnel including directors for the year ended 31
December 2024
US dollars
Name
Position
Salary and
benefits
Share
based
- 78 -
Pension
benefits
compe-
nsation
Total
David Levi
Chief Executive Officer
226,817
39,447
75,158
341,422
Shavit Baruch
VP R&D
212,628
42,882
31,026
286,536
Tomer Asiss (4)
Chief Financial Officer
34,825
-
412
35,237
Ayala Deutsch (3)
Chief Financial Officer
93,421
22,378
(
1,304
)
114,495
Joseph Albagli (1)
Non Executive Chairman
27,990
-
3,360
31,350
Richard Bennett
Non Executive Director
23,449
-
-
23,449
Julie Kunstler (2)
Non Executive Director
8,115
-
-
8,115
Aviva Banczewski (2)
Non Executive Director
7,964
-
-
7,964
635,209
104,707
108,652
848,568
(1) As part of the agreed compensation, monthly shares equal to the value of £1,250 are
accrued. In March 2024 - 921,152 shares accrued have been allotted. The accrued shares
as of March 2025, amounting to 6,936,578 shares will be allotted during 2025.
(2) Appointed 16 April 2024.
(3) Ceased to act as CFO and director on 9 October 2024.
(4) Appointed as CFO on 9 October 2024.
Remuneration of key management personnel including directors for the year ended 31
December 2023
US dollars
Name
Position
Salary and
benefits
Pension
benefits
Share
based
compe-
nsation
Total
David Levi
Chief Executive Officer
222,157
38,543
17,177
277,877
Mark Reichenberg (2) Chief Financial Officer
100,146
16,262
-
116,408
Shavit Baruch
VP R&D
208,022
41,886
17,177
267,085
Chen Saft-Feiglin (3)
Non Executive Director
17,959
-
-
17,959
Zohar Yinon (3)
Non Executive Director
16,712
-
-
16,712
Joseph Albagli (1)
Non Executive Chairman
31,493
-
18,655
50,148
Richard Bennett
Non Executive Director
24,864
-
-
24,864
621,353
96,691
53,009
771,053
(1) As part of the agreed compensation, monthly shares equal to the value of £1,250 are
accrued. In July 2023 - 126,347 shares accrued have been allotted. The remaining accrued
shares as of year-end were allotted in March 2024, amounting to 921,152 shares.
(2) Terminated employment and ended directorship on 31 July 2023.
(3) Ceased to act as directors on 14 November 2023.
D. Directors' equity interests in the Company as at 31 December 2024
Shares
Options and warrants
Name
Direct
holdings
Unexercised
vested options
Unvested
options
Total options
and warrants
David Levi
41,704,616
12,053,493
30,391,372
42,444,865
- 79 -
As set out further in Note 16, some of the above directors have participated in certain of the
placings during the year ended 31 December 2024.
Directors' equity interests in the Company as at 31 December 2023
As set out further in Note 16, the above directors have participated in certain of the placings
and the variation of the warrant instruments during the year ended 31 December 2023.
NOTE 30
-
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Lease
Liabilities
Short Term
Borrowings
Warrants
liability
Total
1 January 2024
1,106,357
96,306
2,841
1,205,504
Cashflow
-
Repayments
(335,373)
(136,807)
-
(472,180)
-
Proceeds
-
41,055
913,559
954,614
Non-cash movement
-
Liability exchanged for shares
issued
-
- (991,107)
(991,107)
-
Revaluation Adjustment
-
-
90,060
90,060
-
Exchange rate differences
(11,434)
(554)
-
(11,988)
31 December 2024 (*)
759,550
-
15,353
774,903
(*) Including current maturities of $377,287.
Lease
Liabilities
Short Term
Borrowings
Warrants
liability
Total
1 January 2023
2,712,938
428,935
-
3,141,873
Cashflow
-
Repayments
(197,772)
(1,543,210)
-
(1,740,982)
-
Proceeds
-
1,239,657
132,544
1,372,201
Non-cash movement
-
Terminations
(1,324,807)
-
-
(1,324,807)
-
Revaluation Adjustment
-
-
(129,703)
(129,703)
Shavit Baruch
5,760,438
1,242,145
9,767,263
11,009,408
Joseph Albagli
1,177,939
123,666
2,625,789
2,749,455
48,642,993
13,419,304
42,784,424
56,203,728
Shares
Options and warrants
Name
Direct
holdings
Unexercised
vested
options
Unvested
options
Unexercised
6p
warrants
Total
options
and
warrants
David Levi
20,949,065
177,379
83,331
3,028,571
3,289,281
Shavit Baruch
5,760,438
177,379
83,331
668,771
929,481
Joseph Albagli
256,787
-
-
-
-
26,966,290
354,758
166,662
3,697,342
4,218,762
- 80 -
-
Exchange rate differences
(84,002)
(29,076)
-
(113,078)
31 December 2023 (*)
1,106,357
96,306
2,841
1,205,504
(*) Including current maturities of $341,991.
For financial liabilities to be settled through issuance of ordinary shares see notes 16.E and 27B.
NOTE 31
- SUBSEQUENT EVENTS
1.
In January 2025, the Company came to an agreement with a supplier, that the NIS 2.75 million
(approximately $0.76 million) owed, would convert into a loan payable over 22 months. The
first 3 payments payable would each be NIS 0.36 million (approximately $0.1 million), with the
balance of the amounts spread out until the last payment in November 2026. Once all the
payments have been completed, a total amount of NIS 3.06 million (approximately $0.84
million) would have been paid.
2.
In February 2025 the Company extended the 24 month expiry date of 19,874,088 warrants
issued in conjunction with the January 2023 share issuance, by a further 24 months to 8
February 2027. See Note 16.E.[1]. The 3,028,571 and 668,771 warrants held by the directors
David Levi and Shavit Baruch respectively were not extended and expired on 8 February 2025.
3.
In March 2025, the Company raised further equity capital of £88,750 before expenses, by
issuing 177,500,000 shares at 0.05 pence per share.
4.
In April 2025, at an Extraordinary General Meeting, the Company’s authorized share capital
was increased to 6,400,000 NIS.
5.
In May 2025, the Company raised further equity capital of £800,000 before expenses, by
issuing 3,636,363,633 shares and 3,636,363,633 associated warrants (together, a “unit”), at
0.022 pence per unit. The warrants may be exercised within 12 months from 7 May 2025 at a
price per share of 0.022 pence. These warrants have an identical accelerator clause as those
warrants issued in the January 2023 equity raise, excepting for the accelerator price which is
set at 0.045 pence per share - see Note 16.E.[1]. The directors David Levi and Yosi Albagli also
subscribed for some of these shares and associated warrants. A further 163,409,086 warrants
with the same terms as the warrants issued in this equity raise, were issued as payment of fees
to the brokers who arranged this equity raise.
6.
As of the date of issuance of these financial statements, the amount due to Shavit Baruch for
compensation originating in prior years is $46,000. See Notes: 14 and 29.A
~~~~~~~~~~~~~~