SatixFy(SATX) - 2022 Q4 - Annual Report

PART I ITEM 3. KEY INFORMATION This section outlines critical investor information, detailing significant business, financial, and geopolitical risks, including the urgent need for capital Risk Factors The company faces substantial risks, including critical capital needs, a history of losses, supply chain disruptions, and intense competition - SatixFy has limited capital and requires immediate additional financing to fund operations and technology development; failure could lead to insolvency[63][65][66] - As an early-stage company, SatixFy has a history of losses and generated less revenue than projected, with revenue declining in 2022 due to delays and reduced sales[63][71][72] - The company faces supply chain disruptions and price volatility for components, with the semiconductor shortage causing manufacturing delays and price increases from GlobalFoundries[74][79][80] - A significant portion of revenue derives from few key customers, accounting for approximately 78% in 2022 and 64% in 2021; the loss of any could severely impact the business[87][101] - The company's stock price has been highly volatile, fluctuating from $79.21 to $0.88 between October 2022 and March 2023, potentially leading to litigation[231][210] ITEM 4. INFORMATION ON THE COMPANY This section provides a comprehensive overview of SatixFy's history, vertically integrated business model, technology, and market strategy History and Development of the Company SatixFy, incorporated in 2012, completed a SPAC business combination in October 2022, listing on NYSE American and securing financing - SatixFy Communications Ltd. was incorporated in June 2012 in Israel[255] - On October 27, 2022, SatixFy completed its business combination with Endurance Acquisition Corp., becoming a publicly traded company on the NYSE American[393] - In February 2022, SatixFy entered into a credit agreement for an aggregate principal amount of $55.0 million[258] Business Overview SatixFy is a vertically integrated satellite communications provider, designing proprietary chips for the entire value chain, with significant R&D and strategic partnerships - SatixFy is a vertically integrated satellite communications systems provider, designing its own proprietary semiconductor chips (ASICs and RFICs)[265][268] - The company has invested over $209 million in R&D from its inception in June 2012 through December 31, 2022, developing advanced chips for satellite payloads and ground terminals[265][306] - SatixFy's chip development has been substantially supported by over $75 million in grants from the European Space Agency (ESA) through December 31, 2022[276] - The company formed a joint venture, Jet Talk, with ST Engineering to commercialize its Aero/IFC satellite communications terminals for the commercial aviation market[270] - As of December 31, 2022, the company had a backlog of approximately $45 million from signed revenue contracts[354] Organizational Structure SatixFy Communications Ltd. is the parent company of the corporate group, with significant subsidiaries detailed in Exhibit 8.1 - SatixFy Communications Ltd. is the parent company of the SatixFy corporate group[384] Property, Plants and Equipment The company leases all facilities, with headquarters in Israel and R&D centers in the UK, Bulgaria, and US - SatixFy leases all its facilities, with its corporate headquarters in Rehovot, Israel[386] - The company maintains additional design, R&D, and operations centers in the United Kingdom, Bulgaria, and the United States[385] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section analyzes SatixFy's financial condition, detailing a significant 2022 revenue decrease, substantial net loss, liquidity, and capital resources Results of Operations SatixFy's 2022 revenue decreased by 51% to $10.6 million, resulting in a $397.8 million net loss primarily due to a non-cash listing expense Financial Performance (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenues | $10.6M | $21.7M | $10.6M | | Gross Profit | $6.1M | $12.9M | $7.6M | | Gross Margin | 58% | 59% | 71% | | Net Loss | ($397.8M) | ($17.1M) | ($17.6M) | - The 51% decrease in 2022 revenue was attributed to manufacturing delays, a strategic reduction in sales to China, and deferrals of customer orders[443] - The 2022 net loss of $397.8 million was primarily driven by a $333.3 million non-recurring listing expense (largely non-cash) from the SPAC transaction and a $37 million non-cash finance expense related to the Forward Purchase Agreement[417][456][454] Liquidity and Capital Resources SatixFy faces liquidity challenges with $11.9 million cash and $54.9 million debt, requiring additional capital to fund operations and R&D - As of December 31, 2022, the company held $11.9 million in cash and cash equivalents and had financial debt of $54.9 million[477] - The company plans to raise additional capital to fund its operations and has stated that failure to do so could force it to scale back operations or seek insolvency protection[478] - In February 2022, SatixFy secured a $55.0 million term loan, maturing in February 2026, which is secured by substantially all of the company's assets[483] - The company has a $75 million Equity Line of Credit with CF Principal Investments, allowing it to sell shares over a 36-month period, subject to conditions[486][487] Critical Accounting Policies and Estimates Critical accounting policies involve significant judgment, particularly in revenue recognition, R&D expense, and share-based payment valuation - Revenue from NRE (Non-Recurring Engineering) services is recognized over time based on the estimated progress of performance commitments, which requires significant judgment[522] - All R&D expenditures have been expensed as incurred because management concluded that the criteria for capitalization have not yet been met[523][524] - The fair value of share-based payments was determined using models like Black-Scholes, which involved significant estimates for the private company's share value, volatility (56.43%), and other inputs[526][527] ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details SatixFy's board and senior management, executive compensation, board practices, and employee count - As of the report date, the company's leadership includes Yoav Leibovitch as Chairman, Ido Gur as CEO (appointed January 2023), and Oren Harari as Interim CFO[534][535][536] - Aggregate compensation for executive officers and directors in 2022 was approximately $8.2 million, including salaries, bonuses, and benefits, but excluding the grant-date value of share-based compensation[556] - As of December 31, 2022, the company had 191 full-time employees, with over 160 being engineers focused on R&D[646] ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section discloses SatixFy's ownership structure, including major shareholders, and details significant related party transactions Major Shareholders (as of April 24, 2023) | Shareholder | Percentage of Outstanding Shares | | :--- | :--- | | Yoav Leibovitch (Co-founder, Chairman) | 27.1% | | Simona Gat (Co-founder) | 20.0% | | Endurance Antarctica Partners, LLC (Sponsor) | 11.7% | | Vellar Opportunities Fund Master, Ltd. | 7.6% | - Following the business combination, 27.5 million Price Adjustment Shares were issued to founders and the Sponsor, which vest based on achieving specific stock price targets ($12.50, $14.00, $15.50)[677] - The company has development agreements with its joint venture, Jet Talk, to develop an electronically steerable antenna array and modem for a total consideration of $33 million[689] ITEM 8. FINANCIAL INFORMATION This section presents financial statements, discusses ongoing legal proceedings, and confirms no dividend payments due to credit agreement restrictions - The company is involved in a lawsuit with plaintiffs claiming entitlement to 2 million ordinary shares based on prior ownership stakes in a predecessor company[705] - SatixFy filed a complaint against Sensegain for defaulting on its $9.1 million commitment in the PIPE financing associated with the business combination[706][501] - The company has never paid cash dividends and is currently prohibited from doing so under its Credit Agreement[708] ITEM 10. ADDITIONAL INFORMATION This section provides supplementary details on corporate structure, governance, share capital, and material tax considerations for shareholders - The company's authorized share capital is 250,000,000 ordinary shares, with 80,756,058 issued and outstanding as of April 24, 2023[719] - The board of directors is classified into three classes with staggered three-year terms, an anti-takeover measure[727] - For U.S. federal income tax purposes, the company believes it was not a Passive Foreign Investment Company (PFIC) for the 2022 taxable year, but notes a risk of becoming one in the future, particularly if its market capitalization remains low[856][192] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company's primary market risks are foreign currency exchange rates and interest rates, with limited interest rate exposure due to fixed-rate debt - The company is exposed to foreign currency exchange risk from its operations in Israel (NIS), the UK (GBP), and Bulgaria (EUR); a hypothetical 10% change in these currencies against the USD in 2022 would have impacted the operating loss by approximately $0.4 million[879] - Interest rate risk is limited as all outstanding debt bears fixed interest rates, although the rate on the 2022 Credit Agreement is subject to certain adjustments[881] ITEM 15. CONTROLS AND PROCEDURES Management concluded disclosure controls were effective; the report omits internal control attestation due to newly public company exemptions - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[888] - The report does not include management's assessment of internal control over financial reporting or an auditor's attestation report, due to transition period exemptions for newly public companies[889][891] ITEM 16. CORPORATE GOVERNANCE AND OTHER MATTERS This section covers corporate governance, including audit committee experts, code of conduct, auditor fees, and foreign private issuer governance practices Principal Accountant Fees (in thousands USD) | Service Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit fees | $343 | $258 | | Audit-related fees | $146 | $118 | | Tax fees | $12 | $7 | | Total | $501 | $383 | - The board has determined that Mr. Moshe Eisenberg and Ms. Mary P. Cotton are audit committee financial experts[893] - As a foreign private issuer, the company follows certain Israeli home country corporate governance practices, exempting it from some NYSE requirements, such as the need for a nominating committee and certain shareholder approval rules for equity plans[902][904] PART III ITEM 18. FINANCIAL STATEMENTS This section presents audited consolidated financial statements for 2020-2022, prepared under IFRS, including statements of financial position, comprehensive loss, and cash flows Consolidated Statement of Financial Position (As of Dec 31, 2022) | Metric | Amount (USD thousands) | | :--- | :--- | | Total Assets | $76,325 | | Total Current Assets | $41,831 | | Total Non-Current Assets | $34,494 | | Total Liabilities | $107,947 | | Total Current Liabilities | $29,329 | | Total Non-Current Liabilities | $78,618 | | Total Shareholders' Deficit | ($31,622) | Consolidated Statement of Comprehensive Loss (Year Ended Dec 31, 2022) | Metric | Amount (USD thousands) | | :--- | :--- | | Total Revenues | $10,626 | | Gross Profit | $6,128 | | Loss from Operations | ($22,298) | | Listing Expenses | ($333,326) | | Loss for the period | ($397,789) | | Total comprehensive loss | ($394,517) | Consolidated Statement of Cash Flows (Year Ended Dec 31, 2022) | Metric | Amount (USD thousands) | | :--- | :--- | | Net cash used in operating activities | ($31,480) | | Net cash used in investing activities | ($582) | | Net cash provided by financing activities | $40,523 | | Increase in cash and cash equivalents | $8,461 | | Cash and cash equivalents at end of period | $11,934 | ITEM 19. EXHIBITS This section lists all exhibits filed with Form 20-F, including corporate documents, material contracts, and required certifications - Key exhibits filed include the Second Amended and Restated Articles of Association, the Business Combination Agreement with its amendments, the Credit Agreement from February 2022, and the 2020 Share Award Plan[912][913]