B.O.S. Better Online Solutions .(BOSC) - 2023 Q2 - Quarterly Report

Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Balance Sheets As of June 30, 2023, B.O.S. Better Online Solutions Ltd. reported total assets of $32.53 million, an increase from $30.60 million at the end of 2022, driven by increases in current assets (inventories) and non-current assets (intangible assets), with total liabilities slightly increasing to $14.50 million and total shareholders' equity growing to $18.03 million from $16.63 million Balance Sheet Summary (in thousands USD) | Account | June 30, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--- | :--- | :--- | | Total Current Assets | $21,920 | $20,574 | | Total Non-Current Assets | $10,609 | $10,021 | | Total Assets | $32,529 | $30,595 | | Total Current Liabilities | $11,848 | $11,195 | | Total Non-Current Liabilities | $2,647 | $2,766 | | Total Equity | $18,034 | $16,634 | | Total Liabilities and Equity | $32,529 | $30,595 | - Inventories increased to $7.67 million from $6.43 million, while trade receivables remained relatively stable at $11.01 million[20] - Intangible assets, net, significantly increased to $1.17 million from $486 thousand at the end of 2022[91] Condensed Interim Consolidated Statements of Operations For the six months ended June 30, 2023, the company reported revenues of $23.48 million, an 11% increase year-over-year, with net income growing significantly to $1.27 million, or $0.22 per diluted share, compared to $472 thousand, or $0.09 per diluted share, in the same period of 2022, driven by higher gross profit and lower financial expenses Statement of Operations Highlights (in thousands USD, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenues | $23,478 | $21,138 | | Gross Profit | $5,069 | $4,471 | | Operating Income | $1,609 | $1,001 | | Net Income | $1,266 | $472 | | Diluted Net Income Per Share | $0.22 | $0.09 | Condensed Interim Consolidated Statements of Comprehensive Income For the six months ended June 30, 2023, the company's comprehensive income was $1.27 million, equal to its net income, with no other comprehensive income or loss items during the period, marking an increase from $472 thousand in the prior-year period Comprehensive Income (in thousands USD) | Period | Net Income | Other Comprehensive Gain/Loss | Comprehensive Income | | :--- | :--- | :--- | :--- | | Six Months Ended June 30, 2023 | $1,266 | $0 | $1,266 | | Six Months Ended June 30, 2022 | $472 | $0 | $472 | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from $16.63 million at the beginning of 2023 to $18.03 million as of June 30, 2023, primarily driven by a net income of $1.27 million and proceeds from the exercise of stock options, which added $85 thousand to additional paid-in capital - Total shareholders' equity increased by $1.4 million during the first six months of 2023, reaching $18.03 million[54] - Key changes in equity for the six months ended June 30, 2023 include net income of $1,266 thousand, share-based compensation of $49 thousand, and proceeds from option exercises of $85 thousand[54] Condensed Interim Consolidated Statements of Cash Flows For the six months ended June 30, 2023, the company generated $876 thousand in cash from operating activities, a significant turnaround from the $331 thousand used in the same period of 2022, while cash used in investing activities was $581 thousand, primarily for asset acquisitions, and financing activities used $113 thousand, resulting in cash and cash equivalents increasing by $182 thousand to end the period at $2.08 million Cash Flow Summary (in thousands USD) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $876 | $(331) | | Net Cash used in Investing Activities | $(581) | $(1,050) | | Net Cash (used in) provided by Financing Activities | $(113) | $514 | | Change in Cash and Cash Equivalents | $182 | $(867) | | Cash at End of Period | $2,075 | $1,250 | Notes to Condensed Interim Consolidated Financial Statements The notes provide additional details on the company's accounting policies, business segments, and specific financial statement line items, including the composition of inventories and intangible assets, lease obligations, segment performance, and shareholder equity transactions, with the company operating in three segments: Intelligent Robotics, RFID, and Supply Chain Solutions Note 1: General This note describes the company's corporate structure as an Israeli NASDAQ-listed corporation (BOSC) and its three operating segments: Intelligent Robotics, RFID (through BOS-Dimex Ltd.), and Supply Chain Solutions (through BOS-Odem Ltd. and Ruby-Tech Inc.) - The company operates through three main segments: Intelligent Robotics, RFID, and Supply Chain Solutions[58] - The RFID segment (BOS-Dimex) provides turn-key Automatic Identification and Data Collection (AIDC) solutions and inventory count services[33] - The Supply Chain Solutions segment (BOS-Odem) distributes electronic components, primarily to the aerospace and defense industries[59] Note 2: Significant Accounting Policies The financial statements are prepared under U.S. GAAP, requiring management to make significant estimates regarding inventory valuation, goodwill impairment, allowance for doubtful accounts, and revenue recognition, with 570,000 outstanding options and warrants excluded from the diluted EPS calculation as they were anti-dilutive for the six months ended June 30, 2023 - Financial statements are prepared under U.S. GAAP, requiring management to make significant estimates for items like inventory value, goodwill, and revenue recognition[37] - For the first half of 2023, 570,000 weighted average outstanding options and warrants were excluded from diluted EPS calculation due to being anti-dilutive[62] - The company states that no recently issued accounting pronouncements are expected to have a significant impact on its financial statements[64] Note 4: Inventories Total net inventories increased to $7.67 million as of June 30, 2023, from $6.43 million at year-end 2022, with the increase primarily in finished goods, which rose to $6.97 million, while inventory in progress decreased Inventory Composition (in thousands USD) | Component | June 30, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--- | :--- | :--- | | Raw materials | $31 | $177 | | Inventory in progress | $955 | $1,750 | | Finished goods | $6,973 | $5,788 | | Net – advances from customers | $(292) | $(1,282) | | Total | $7,667 | $6,433 | Note 5: Intangible Assets, Net Net intangible assets increased to $1.17 million from $486 thousand, mainly due to new acquisitions, including Proteus's share in a joint activity for $723 thousand in April 2023 and distribution rights from Microwave Ltd. for $38 thousand in May 2023 - On April 2, 2023, the company acquired Proteus's share in a joint activity for $723 thousand, recognized as a 'Suppliers relationship' intangible asset[44] - On May 31, 2023, the company purchased distribution rights for certain products from Microwave Ltd. for $38 thousand[45] - Amortization expense for intangible assets was $73 thousand for the six months ended June 30, 2023[68] Note 6: Leases The company has non-cancellable operating leases for offices and vehicles with terms expiring between 2023 and 2034, with total operating lease cost of $198 thousand for the first half of 2023 and a present value of total future lease liabilities of $909 thousand as of June 30, 2023 Operating Lease Costs - H1 2023 (in thousands USD) | Category | Cost | | :--- | :--- | | Vehicles | $91 | | Facilities rent | $107 | | Total | $198 | Maturities of Operating Lease Liabilities (in thousands USD) | Period | Lease Payments | | :--- | :--- | | Remainder of 2023 | $178 | | 2024 | $206 | | 2025 | $140 | | 2026-2034 | $627 | | Total Payments | $1,151 | | Present Value | $909 | Note 7: Segments and Geographical Information The Supply Chain Solutions segment is the largest contributor to both revenue and operating income, generating $15.35 million in revenue and $1.39 million in operating income for H1 2023, while the RFID segment contributed positively with $6.95 million in revenue and $699 thousand in operating income, and Israel is the largest geographical market accounting for $19.77 million (84%) of total revenue Segment Performance - H1 2023 (in thousands USD) | Segment | Revenues | Gross Profit | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | RFID | $6,948 | $1,796 | $699 | | Supply Chain Solutions | $15,351 | $3,253 | $1,394 | | Intelligent Robotics | $1,257 | $20 | $(110) | | Consolidated | $23,478 | $5,069 | $1,609 | Segment Performance - H1 2022 (in thousands USD) | Segment | Revenues | Gross Profit | Operating Income (Loss) | | :--- | :--- | :--- | :--- | | RFID | $7,693 | $1,915 | $662 | | Supply Chain Solutions | $12,873 | $2,575 | $990 | | Intelligent Robotics | $572 | $(19) | $(290) | | Consolidated | $21,138 | $4,471 | $1,001 | Revenues by Customer Location (in thousands USD) | Region | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Israel | $19,765 | $16,686 | | United States | $1,080 | $1,733 | | India | $1,060 | $641 | | Europe | $838 | $399 | | Far East | $707 | $1,536 | | Others | $28 | $143 | | Total | $23,478 | $21,138 | Note 8: Shareholders' Equity This note details changes in shareholders' equity, including the exercise of 39,000 options for proceeds of $85 thousand in June 2023 and a May 2022 registered direct offering where the company sold 450,000 units at $2.20 each, raising net proceeds of $911 thousand - In June 2023, a total of 39,000 stock options were exercised, resulting in proceeds of $85 thousand[77] - In May 2022, the company completed a registered direct offering of 450,000 units (one share and one-half warrant) at $2.20 per unit, for net proceeds of $911 thousand[88] Note 9: Subsequent Events The company reports that subsequent to the reporting period, in July 2023, an additional 17,853 options were exercised for proceeds of $18 thousand - In July 2023, after the close of the reporting period, 17,853 options were exercised for proceeds of $18 thousand[79]