SatixFy(US:SATX)2024-03-29 12:00PART I Key Information This section details significant investment risks for SatixFy, including limited capital, historical losses, customer reliance, and geopolitical uncertainties Risk Factors SatixFy faces substantial risks including critical capital needs, historical losses, customer dependence, intense competition, supply chain disruptions, and geopolitical instability - SatixFy has limited available capital and requires additional financing to fund its operations and technology development; failure to raise sufficient capital could harm operating results and potentially lead to insolvency687071 - The company is an early-stage entity with a history of losses, having incurred net losses of approximately $29.7 million in 2023 and $397.8 million in 2022, and has not yet demonstrated a sustained ability to generate predictable revenue or cash flows7475 - A significant portion of revenue comes from a few key customers, with the three largest accounting for approximately 77% and 78% of revenue in 2023 and 2022, respectively, making the loss of any of these customers potentially impactful to business results90 - The company's headquarters and significant operations are in Israel, exposing it to risks from political, economic, and military instability, including the recent Israel-Hamas war which has led to employee military call-ups and potential operational disruptions203206208 - On November 30, 2023, SatixFy received a non-compliance notice from the NYSE American exchange for not meeting continued listing standards related to stockholders' equity and market capitalization, but its compliance plan was accepted, granting it a period through May 30, 2025, to regain compliance229230 Information on the Company SatixFy is a vertically integrated provider of digital satellite communications systems, designing proprietary chips for satellite payloads and user terminals, with substantial R&D funding Business Overview SatixFy provides end-to-end satellite communication solutions based on proprietary chips, targeting a $20 billion TAM, and strategically focuses on digital payload technology after a $60 million MDA transaction - SatixFy is a vertically integrated satellite communications systems provider, designing its own chips (ASICs and RFICs) for the entire satellite value chain, from payloads to user terminals254257 Company Financial Snapshot | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $10.7 million | $10.6 million | | R&D Investment (since inception) | > $243 million | - | - In August 2023, SatixFy announced a $60 million transaction with MDA Ltd., involving selling its subsidiary SatixFy Space Systems UK Ltd. for $40 million and receiving $20 million in advanced payments, strategically focusing the company on providing its unique digital payload chip technology to satellite payload design companies268269316 - The company estimates its total addressable market (TAM) for its products could exceed $20 billion by the end of the current decade, driven by the growth of LEO satellite constellations278 - SatixFy has received substantial R&D funding, including over $77.5 million from the European Space Agency (ESA) and $6.3 million from the Israel Innovation Authority (IIA) as of December 31, 2023352 Operating and Financial Review and Prospects This section analyzes SatixFy's financial performance, noting flat $10.7 million revenues in 2023, a reduced net loss of $29.7 million (due to no $333 million listing expense), and ongoing efforts to raise capital Results of Operations In 2023, total revenues were $10.7 million, gross profit decreased to $4.8 million, and operating loss increased to $41.8 million, but net loss significantly decreased to $29.7 million due to the absence of a $333 million 2022 listing expense Consolidated Statements of Operations (2023 vs. 2022) | Metric | 2023 (in thousands USD) | 2022 (in thousands USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 10,730 | 10,626 | 1% | | Development services and preproduction | 8,249 | 10,081 | (18)% | | Sale of products | 2,481 | 545 | 355% | | Gross Profit | 4,792 | 6,128 | (22)% | | Research and development expenses | 29,126 | 16,842 | 73% | | Selling and marketing expenses | 2,866 | 2,335 | 23% | | General and administrative expenses | 14,561 | 9,249 | 57% | | Listing Expenses | - | (333,326) | (100)% | | Loss from operations | (41,761) | (22,298) | 87% | | Loss for the period | (29,715) | (397,789) | (93)% | - The significant decrease in net loss for 2023 was primarily due to the absence of a $333 million non-recurring listing expense that was recorded in 2022 following the SPAC transaction406433436 - Research and development expenses increased by 73% to $29.1 million in 2023, mainly due to an $8.1 million net decrease in offsetting grants from ESA and tax credits compared to the prior year425 - Other income increased by 661% to $41.7 million in 2023, primarily due to the gain recognized from the MDA Agreement involving the sale of the SatixFy Space Systems UK subsidiary432 Liquidity and Capital Resources As of December 31, 2023, SatixFy had $14.0 million cash and $59.8 million debt, requiring additional capital for operations and R&D, supported by a $55 million credit agreement and a $77.25 million Equity Line of Credit Cash Flow Summary (2023 vs. 2022) | Cash Flow Activity | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | Net cash used in operating activities | (24,635) | (31,480) | | Net cash provided by (used in) investing activities | 17,341 | (582) | | Net cash provided by financing activities | 9,114 | 40,523 | - Net cash from investing activities was positive $17.3 million in 2023, primarily due to proceeds from the sale of its subsidiary to MDA464 - The company has a $55 million term loan under the 2022 Credit Agreement, which matures in February 2026 and contains various covenants, including a minimum cash requirement445446 - SatixFy has an Equity Line of Credit agreement that allows it to sell up to $77.25 million of its ordinary shares to CF Principal Investments, subject to market conditions and other limitations449 Directors, Senior Management and Employees This section details the company's leadership, including Executive Chairman Yoav Leibovitch and Acting CEO Nir Barkan, with $5.6 million aggregate compensation for executives and directors in 2023, and outlines the board's structure and committees - The leadership team includes Yoav Leibovitch as Executive Chairman of the Board and Nir Barkan as Acting Chief Executive Officer, who was appointed on June 1, 2023491495509 - The aggregate compensation paid to executive officers and directors for the year ended December 31, 2023, was approximately $5.6 million, excluding share-based compensation515 - As of December 31, 2023, the company had 135 full-time employees, with over 120 being engineers focused on R&D596 - The company has adopted a 2020 Share Award Plan for granting equity incentives like options and RSUs to employees, directors, and consultants598599 Major Shareholders and Related Party Transactions This section details SatixFy's ownership structure, including major shareholders like Yoav Leibovitch (27.4%), and significant related party transactions such as the issuance of 27.5 million Price Adjustment Shares and a $1 million bonus to the Executive Chairman Major Shareholders (as of March 28, 2024) | Shareholder | Percentage of Outstanding Shares | | :--- | :--- | | Yoav Leibovitch | 27.4% | | Simona Gat | 20.7% | | Endurance Antarctica Partners, LLC | 10.8% | | FP Credit Partners II, L.P. | 7.1% | - Following the Business Combination, 27.5 million Price Adjustment Shares were issued to founders and the Sponsor, which vest upon achieving specific stock price targets (VWAP of $12.50, $14.00, and $15.50)614 - Shareholders approved a one-time special success bonus of up to $1 million to Executive Chairman Yoav Leibovitch related to the successful completion of the MDA Agreement620 Financial Information This section presents the company's audited financial statements, discloses ongoing legal proceedings including a share ownership dispute and a $2.3 million warrant settlement, and confirms no future dividend payments - The company is involved in a legal proceeding in Israel where plaintiffs claim entitlement to an aggregate of two million Ordinary Shares based on their prior ownership in a predecessor company; SatixFy has placed sufficient shares in trust to cover the claim if the plaintiffs prevail and believes the proceedings will not have a material impact625 - In December 2023, the company settled a complaint with Alta Partners, LLC regarding public warrants by agreeing to pay a total of $2.3 million627 - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future, partly due to restrictions in its 2022 Credit Agreement628 Additional Information This section provides supplementary details on SatixFy's corporate structure and tax considerations, including potential Israeli tax benefits and U.S. federal income tax implications for U.S. holders, notably the risk of PFIC classification - The company may be eligible for tax benefits in Israel as a "Preferred Technological Enterprise" under the Law for the Encouragement of Capital Investments, which could result in reduced corporate tax rates of 12% or 7.5% on qualifying income656660 - For U.S. federal income tax purposes, there is a risk that SatixFy could be classified as a Passive Foreign Investment Company (PFIC) for the current or future taxable years, particularly due to its declined market capitalization, which could result in adverse tax consequences for U.S. investors188695 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023731 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework (2013)732 Cybersecurity The Board of Directors oversees the company's cybersecurity risk management program, integrated into overall risk processes, with no material incidents reported to date - The Board of Directors, supported by a Risk Management Team (RMT), oversees the company's cybersecurity risk management program752758 - The company's processes for managing cybersecurity risks are integrated into its overall risk management framework and include third-party assessments, vulnerability testing, and employee training751755756 - To date, the company is not aware of any material cybersecurity incidents that have affected its business strategy, operations, or financial condition757760 PART III Financial Statements This section presents SatixFy's audited consolidated financial statements for 2021-2023, reporting $54.7 million total assets, $113.5 million total liabilities, and a $58.8 million shareholders' deficit as of December 31, 2023 Consolidated Statements of Financial Position As of December 31, 2023, SatixFy reported total assets of $54.7 million, total liabilities of $113.5 million, and a widened shareholders' deficit of $58.8 million Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | Total Assets | 54,702 | 76,325 | | Cash and cash equivalents | 13,979 | 11,934 | | Promissory Notes | 20,000 | - | | Derivatives FPA | - | 40,852 | | Total Liabilities | 113,488 | 107,947 | | Long term loans from financial institutions, net | 59,792 | 54,926 | | Advanced payments from MDA | 28,138 | 8,875 | | Total Shareholders' Deficit | (58,786) | (31,622) | Consolidated Statements of Comprehensive Loss For 2023, SatixFy reported $10.7 million in revenues and a net loss of $29.7 million, a significant improvement from $397.8 million in 2022 due to the absence of a $333.3 million listing expense Consolidated Income Statement (Year Ended Dec 31) | Metric | 2023 (in thousands USD) | 2022 (in thousands USD) | 2021 (in thousands USD) | | :--- | :--- | :--- | :--- | | Total Revenues | 10,730 | 10,626 | 21,720 | | Gross Profit | 4,792 | 6,128 | 12,877 | | Loss from operations | (41,761) | (22,298) | (10,554) | | Listing Expenses | - | (333,326) | - | | Loss for the period | (29,715) | (397,789) | (17,050) | | Basic and diluted loss per share (USD) | (0.37) | (13.25) | (0.91) | Consolidated Statements of Cash Flows For 2023, net cash used in operating activities was $24.6 million, net cash provided by investing activities was $17.3 million, and net cash from financing activities was $9.1 million, increasing cash and equivalents to $14.0 million Consolidated Cash Flows (Year Ended Dec 31) | Activity | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | Net cash used in operating activities | (24,635) | (31,480) | | Net cash provided by (used in) investing activities | 17,341 | (582) | | Net cash provided by financing activities | 9,114 | 40,523 | | Increase in cash and cash equivalents | 1,820 | 8,461 | | Cash and cash equivalents at end of year | 13,979 | 11,934 |