B.O.S. Better Online Solutions .(BOSC) - 2021 Q4 - Annual Report

Part I Item 1: Identity of Directors, Senior Management and Advisors This section states that information regarding directors, senior management, and advisors is not applicable - The information for this item is explicitly stated as 'Not applicable'[22] Item 2: Offer Statistics and Expected Timetable This section indicates that offer statistics and the expected timetable are not applicable - The information for this item is explicitly stated as 'Not applicable'[23] Item 3: Key Information Regarding BOS This section provides key information about BOS, including capitalization, indebtedness, offer reasons, and comprehensive risk factors 3A: [Reserved] This sub-item is reserved and contains no specific information - This sub-item is reserved and not applicable[25] 3B. Capitalization and Indebtedness This sub-item details the company's capitalization and indebtedness - This sub-item is not applicable[25] 3C. Reasons for the Offer and Use of Proceeds This sub-item outlines the reasons for the offer and the intended use of proceeds - This sub-item is not applicable[26] 3D. Risk Factors This sub-item details various risks impacting the company's financial results, operations, and share value - The Company faces risks related to its financial results and capital structure, including significant debt obligations, a history of losses, and dependence on a single bank for credit facilities. As of December 31, 2021, the Company had $1.4 million in long-term bank debt[29][33][37] - Operational risks include reliance on key suppliers (e.g., 17% of Supply Chain Solutions purchases from Positronics in 2021), dependence on key personnel, challenges in managing growth and integrating acquisitions (Imdecol impairment losses of $988k in 2019 and $970k in 2020), and potential product defects or intellectual property infringements[43][47][48][55][58][68][70] - External factors such as U.S. Government laws (e.g., FCPA), future changes in industry standards, Israeli labor law changes (minimum wage increase), and inflation/currency fluctuations (NIS appreciated against USD by 3.3% in 2021) could adversely affect the business[72][74][75][78][80] - The COVID-19 pandemic has caused disruptions in the global supply chain, delays in shipments, and potential negative impacts on customer payments and overall economic activity[91][92][93] - Risks related to Ordinary Shares include price volatility (ranging from $2.27 to $2.43 from Jan 2021 to Mar 2022), potential delisting from Nasdaq due to non-compliance, and dilution from future share sales[115][116][117][118][119] - Geopolitical risks due to the Company's location in Israel, including armed conflicts and political instability, could disrupt operations. Additionally, Israeli laws regarding anti-takeover effects and the enforceability of civil liabilities against non-U.S. resident directors/officers pose risks[121][122][123][125][126][127][130] - The Company's status as a foreign private issuer allows it to follow Israeli corporate governance practices, which may offer less protection to shareholders compared to Nasdaq's rules[133] Item 4: Information on the Company This section details the Company's history, business operations across its three divisions, organizational structure, property, and equipment 4A. History and Development of the Company This sub-item outlines the company's incorporation, listing, and key acquisitions across its divisions - B.O.S. Better Online Solutions Ltd. was incorporated in Israel in 1990 and is listed on the Nasdaq Capital Market under 'BOSC'[140] - The Company operates through three divisions: Intelligent Robotics, RFID, and Supply Chain. Key acquisitions include Imdecol Ltd. (June 2019) for Intelligent Robotics, iDnext Ltd. (Jan 2016) and Dagesh Inventory Counting and Maintenance Ltd. (March 2022) for the RFID Division[143][145][146][147] Dagesh Acquisition Payment Terms | Payment Type | Amount (NIS) | Approx. USD | Payment Date | |:-------------|:-------------|:------------|:-------------| | Initial | 1,500,000 | 450,000 | Closing | | Installment | 700,000 | 210,000 | April 2022 | | Installment | 100,000 | 30,000 | March 2023 | | Earn-out | 3%-6% of revenues > NIS 2.5M | Variable | March 2023 | | Retention Bonus | 100,000 | 30,000 | March 2023 | 4B. Business Overview This sub-item describes the company's three business segments, their offerings, and market dynamics - BOS manages its business in three reportable segments: Intelligent Robotics, RFID, and Supply Chain, serving diverse industries including avionics, defense, retail, and government[150][151] - The Intelligent Robotics Division focuses on custom-made machines for industrial automation, with a shift towards the Israeli market, securing $1.06 million in orders from Israeli customers between December 2021 and February 2022[152][155] - The RFID Division offers comprehensive turn-key solutions for Automatic Identification and Data Collection (AIDC), including hardware (printers, scanners, tags) and software (Warehouse Management System - WMS), along with on-site inventory count services[157][159][160][168] - The Supply Chain Solutions Division provides electro-mechanical components, primarily to aerospace and defense industries, offering consolidation, kitting, and inventory management services[171][172] - The Company's sales are subject to seasonality, with revenues in the first and fourth quarters typically higher due to inventory counting services[178] Sales by Division (2019-2021) | Division | 2021 Revenue ($) | 2021 % of Total | 2020 Revenue ($) | 2020 % of Total | 2019 Revenue ($) | 2019 % of Total | |:--------------------------|:-----------------|:----------------|:-----------------|:----------------|:-----------------|:----------------| | Intelligent Robotics | 1,576 | 5% | 2,502 | 8% | 826 | 3% | | RFID | 13,192 | 39% | 12,523 | 37% | 13,241 | 39% | | Supply Chain | 19,008 | 57% | 18,594 | 55% | 19,750 | 58% | | Intercompany | (142) | -1% | (68) | -% | - | -% | | Total Revenues | 33,634 | 100% | 33,551 | 100% | 33,817 | 100% | Sales by Major Geographic Areas (2019-2021) | Geographic Area | 2021 Revenue ($) | 2021 % | 2020 Revenue ($) | 2020 % | 2019 Revenue ($) | 2019 % | |:------------------|:-----------------|:-------|:-----------------|:-------|:-----------------|:-------| | Israel | 25,662 | 77% | 24,369 | 73% | 23,493 | 69% | | Far East | 3,494 | 10% | 3,831 | 11% | 5,055 | 15% | | India | 1,701 | 5% | 2,375 | 7% | 3,624 | 11% | | America | 2,032 | 6% | 2,449 | 7% | 901 | 3% | | Europe | 555 | 2% | 527 | 2% | 744 | 2% | | Rest of the world | 190 | - | - | - | - | - | | Total Revenues| 33,634 | 100%| 33,551 | 100%| 33,817 | 100%| 4C. Organizational Structure This sub-item outlines the company's wholly-owned subsidiaries and their respective divisions - The Company's wholly-owned subsidiaries include BOS-Dimex (Intelligent Robotics and RFID divisions), BOS-Odem (Supply Chain Solutions division), and Ruby-Tech Inc. (U.S. subsidiary, part of Supply Chain Solutions)[190] 4D. Property, Plants and Equipment This sub-item describes the company's main operational facilities and associated rental costs - The Company's main offices, shipping, and service operations are located in Rishon LeZion/Rosh Ha'ain, Israel, occupying 2,831 square meters under a lease through April 2023[188] Average Monthly Rental Fees | Year | Average Monthly Rental Fees ($) | |:-----|:--------------------------------| | 2021 | 28,000 | | 2020 | 29,000 | Item 4A: Unresolved Staff Comments This section refers to Item 10D for exchange controls, indicating no specific unresolved staff comments - This item cross-references to 'Item 10D. Exchange Controls' for relevant information[188] Item 5: Operating and Financial Review and Prospects This section provides management's discussion and analysis of the Company's financial condition, operations, liquidity, and critical accounting estimates Overview This sub-item provides a general overview of BOS's business and its operational segments - BOS is a global provider of comprehensive solutions aimed at improving inventory control and increasing productivity in production and logistics processes, operating through three divisions: Intelligent Robotics, RFID, and Supply Chain[193] COVID-19 Impact and Business Strategy This sub-item discusses the disruptions caused by the COVID-19 pandemic and its potential business impacts - The COVID-19 pandemic has caused disruptions in the global supply chain, decreased transportation, and imposed travel/work restrictions, leading to delays in goods receipt and shipment[195] - The Company relies on manufacturers in China for some products, and COVID-19 effects may hinder production/shipment, adversely impacting trading, operations, sales, and customer debt collection[196] Key measures of our performance This sub-item outlines the key metrics and factors influencing BOS's financial performance - BOS's performance is driven by its three divisions providing products and services to improve inventory production and control efficiency[198] - Revenue is influenced by end-user capital expenditure budgets (affected by macroeconomic factors) and product lead times, especially amidst global component shortages[202] - Costs of revenues primarily consist of product purchases, labor costs (Intelligent Robotics, RFID technicians, warehouse staff), rent, and depreciation[203] - Gross profit and margin are influenced by product mix and the Intelligent Robotics division's gross loss, which the Company aims to bring to breakeven[206] Operating expenses This sub-item details the composition of operating expenses and significant legal contingencies - Operating expenses mainly comprise selling, general, and administrative (SG&A) expenses, including employee compensation, commissions, advertising, professional service fees, and allocated facilities costs[207](index=207