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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 001-41427
MOBILICOM LIMITED
(Exact name of registrant as specified in its charter)
Translation of registrant’s name into English: Not applicable
| Australia |
1 Rakefet Street, Shoham, Israel 6083705 +972-77-7103060 |
|
| (Jurisdiction of incorporation or organization) | (Address of principal executive offices) |
Liad Gelfer
Director of Finance
1 Rakefet Street, Shoham, Israel 6083705
Tel: +972-52-5989900
Email: Liad.Gelfer@mobilicom.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class to be registered | Trading Symbol(s) | Name of each exchange on which each class is to be registered |
||
| American Depositary Shares, each representing 275 ordinary shares, no par value | MOB | Nasdaq Capital Market | ||
| Warrants to purchase American Depositary Shares, no par value | MOBBW | Nasdaq Capital Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2023: 1,326,676,693 ordinary shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | ||||
| Emerging Growth Company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
| U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company. Yes ☐ No ☒
TABLE OF CONTENTS
INTRODUCTION
Unless otherwise indicated or the context implies otherwise references in this Annual Report on Form 20-F to “we,” “us,” “our” or “Mobilicom” refers to Mobilicom Limited, an Australian corporation, and to Mobilicom Ltd., our Israeli subsidiary. All references to “shares” or “ordinary shares” refer to our ordinary shares. All references to “ADSs” refers to American Depositary Shares, each of which represents 275 ordinary shares; and “ADRs” refers to American Depositary Receipts, which evidence ADSs.
Our reporting and functional currency is the Australian dollar. Our Israeli subsidiary’s functional currency is the Israeli New Shekel, or NIS. Solely for the convenience of the reader, this Annual Report on Form 20-F contains translations of some Australian dollar amounts into U.S. dollars at specified rates on the date indicated. No representation is made that the Australian dollar amounts referred to in this Annual Report on Form 20-F could have been or could be converted into U.S. dollars at such rate.
Unless otherwise noted, all industry and market data in this Annual Report on Form 20-F, including information provided by independent industry analysts, is presented in U.S. dollars. Unless otherwise noted, all other financial and other data related to Mobilicom Limited in this Annual Report on Form 20-F is presented in Australian dollars. All references to “$” (other than in our audited and unaudited consolidated financial statements) or “US$” in this Annual Report on Form 20-F refer to U.S. dollars. All references to “AUD$” or “AUD” in this Annual Report on Form 20-F mean Australian dollars. All references to “NIS” in this Annual Report on Form 20-F mean Israeli New Shekels.
Our fiscal year end is December 31. References to a particular “fiscal year” are to our fiscal year ended December 31 of that calendar year.
Unless otherwise indicated, the consolidated financial statements and related notes included in this Annual Report on Form 20-F have been prepared in accordance with International Accounting Standards (IAS) and also comply with International Financial Reporting Standards, or IFRS, and interpretations issued by the International Accounting Standards Board, or IASB, which differ in certain significant respects from Generally Accepted Accounting Principles in the United States, or GAAP.
Certain figures included in this Annual Report on Form 20-F have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
EMERGING GROWTH COMPANY STATUS
We qualify as an “emerging growth company,” as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or JOBS Act, and we may take advantage of certain exemptions, including exemptions from various reporting requirements that are otherwise applicable to public traded entities that do not qualify as emerging growth companies. These exemptions include:
| ● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and |
| ● | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis). |
We will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion; (ii) the last day of the fiscal year following the fifth anniversary of the date of our initial public offering (i.e., December 31, 2027); (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the aggregate worldwide market value of our ordinary shares, including ordinary shares represented by warrants, held by non-affiliates is at least $700 million as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during any three-year period.
TRADEMARKS
MOBILICOM and our other registered or common law trademarks, trade names or service marks appearing in this Annual Report on Form 20-F are owned by us. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 20-F appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of any other company appearing in this Annual Report on Form 20-F is the property of its respective holder.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in this Annual Report on Form 20-F may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:
| ● | our ability to implement our growth strategies; | |
| ● | our competitive advantages; | |
| ● | the development of new products and services; | |
| ● | our ability to obtain and maintain financing on acceptable terms; | |
| ● | the impact of competition; | |
| ● | changes in laws, rules and regulations; | |
| ● | our ability to maintain our software licenses and product certifications; | |
| ● | general market, political, and economic conditions in the countries in which we operate; |
| ● | our ability to maintain good business relationships with our customers, suppliers and other strategic partners; | |
| ● | our ability to protect intellectual property; | |
| ● | our ability to retain key personnel; | |
| ● | the absence of material adverse changes in the industry or global economy, including as a result of a resurgence of the COVID-19 pandemic; | |
| ● |
security, political and economic instability in the Middle East that could harm our business, including due to the current war between Israel and Hamas; and |
|
| ● | those factors referred to in “Item 3.D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, as well as in this annual report on Form 20-F generally. |
Readers are urged to carefully review and consider the various disclosures made throughout this Annual Report on Form 20-F which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this annual report on Form 20-F are made as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, the section of this Annual Report on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry sources and other sources that we have not independently verified.
MARKET, INDUSTRY AND OTHER DATA
This Annual Report on Form 20-F includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we are responsible for all of the disclosures contained in this Annual Report on Form 20-F, including such statistical, market and industry data, we have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. In addition, while we believe the market opportunity information included in this Annual Report on Form 20-F is generally reliable and is based on reasonable assumptions, such data involves risks and uncertainties, including those discussed under the heading “Risk Factors.”
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks described below, together with all of the other information in this Annual Report on Form 20-F. The risks and uncertainties described below are those significant risk factors, currently known and specific to us, that we believe are relevant to an investment in our securities. Additional risks and uncertainties not currently known to us or that we now deem immaterial may also harm us. If any of these risks materialize our business, results of operations or financial condition could suffer, and the price of our ordinary shares could decline substantially.
Summary Risk Factors
Investing in our securities entails a high degree of risk as more fully described herein. You should carefully consider the risks described under the “Risk Factors” section beginning on page 1. Some of these risks include but are not limited to:
Risks Related to Our Financial Condition
| ● | We have a history of losses. |
| ● | We expect that we will need to invest significant time and raise substantial additional capital before we can expect to become profitable from sales of our products. This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations. |
| ● | Shortfalls in available external research and development funding could adversely affect us. | |
| ● | We may not accurately forecast revenues, profitability and appropriately plan our expenses. | |
| ● | Exchange rate fluctuations between multiple foreign currencies may negatively affect our earnings, operating cash flow. | |
| ● | We have commenced marketing and initial sales of our cloud-based software and cybersecurity solutions, which may be marketed and sold to customers using different sales models, including annual or monthly license or software as a service, any of which may not be profitable to us. |
Risks Related to Our Business and Industry
| ● | We expect to incur substantial research and development costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce our profitability and may never result in revenue to us. |
| ● | We will be affected by operational risks and may not be adequately insured for certain risks. |
| ● | We operate in evolving markets, which makes it difficult to evaluate our business and future prospects. |
| ● | We operate in a competitive market. |
| ● | The markets in which we compete are characterized by rapid technological change, which requires us to develop new products and product enhancements, and could render our existing products and technologies obsolete. |
| ● | Failure to obtain necessary regulatory approvals may prevent us from selling our hardware products. |
| ● | We may be prohibited from shipping our products to certain countries if we are unable to obtain certain governmental authorizations. | |
| ● | We may be subject to the risks associated with future acquisitions or strategic partnerships, which may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks. |
| ● | Our inability to assure retention of management and key employees could impair our future success. |
| ● | A significant growth in the number of personnel would place a strain upon our management and resources. |
| ● | We are subject to the risks associated with foreign operations in other countries. |
| ● | If critical components or raw materials used to manufacture our products become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products, which could damage our business. |
| ● | Our products may be subject to the recall or return. |
| ● | If we release defective products or services, our operating results could suffer. |
| ● | Our products and services are complex and could have unknown defects or errors, which may give rise to legal claims against us, diminish our brand or divert our resources from other purposes. |
| ● | We are a supplier for government programs, which subjects us to risks including early termination, audits, investigations, sanctions penalties and delayed sales. |
| ● | Negative customer perception regarding our products could have a material adverse effect on the demand for our products and the business, results of operations, financial condition and cash flows. |
| ● | If we fail to successfully promote our product and brand, it could have a material adverse effect on our business, prospects, financial condition and results of operations. |
| ● | We may be subject to cybersecurity attacks or electronic communication security risks. |
| ● | Failure to adhere to our financial reporting obligations and other public company requirements could adversely affect the market price of our ADSs. |
| ● | We may experience adverse effects on our reported results of operations as a result of adopting new accounting standards or interpretations. |
| ● | We are subject to certain Israeli, U.S. and foreign anticorruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations. |
| ● | Any resurgence of the COVID-19 pandemic could adversely affect our business, financial condition and results of operations. |
Risks Related to our Intellectual Property
| ● | If we fail to protect, or incur significant costs in defending, our intellectual property and other know-how or proprietary rights, our business, financial condition, and results of operations could be materially harmed. |
| ● | Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. |
| ● | We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future. |
| ● | We may not be able to protect our intellectual property rights throughout the world. |
Risks Related to Israeli Law and our Operations in Israel
| ● | Political, economic and military instability in Israel may impede our ability to operate and harm our financial results. |
| ● | Our operations may be disrupted by the obligations of personnel to perform military service. |
| ● | We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business. |
| ● | We received Israeli government grants, from the Israeli Innovation Authorization, or IIA, for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund some grants previously received. |
| ● | We may be subject to the risks associated with the Israeli Law for the Encouragement of Industrial Research and Development 5744-1984, or R&D Law. |
Risks Related to our ADSs
| ● | The market price and trading volume of our ADSs may be volatile and may be affected by economic conditions beyond our control. |
| ● | You may be subject to limitations on transfer of our ADSs. |
| ● | A shareholder’s holding may be diluted if we issue additional shares or other securities in the future. |
| ● | As a foreign private issuer, we are permitted and we expect to follow certain home country corporate governance practices in lieu of certain Nasdaq requirements applicable to domestic issuers. This may afford less protection to holders of our ADSs. |
| ● | As a foreign private issuer, we are permitted to file less information with the SEC than a company incorporated in the United States. Accordingly, there may be less publicly available information concerning us than there is for companies incorporated in the United States. |
| ● | We are an emerging growth company as defined in the JOBS Act and the reduced disclosure requirements applicable to emerging growth companies may make our ADSs less attractive to investors and, as a result, adversely affect the price of our ADSs and result in a less active trading market for our ADSs. |
| ● | If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate consolidated financial statements or comply with applicable regulations could be impaired. |
| ● | ADS holders may be subject to additional risks related to holding ADSs rather than ordinary shares. |
| ● | If we are classified as a “passive foreign investment company,” then our U.S. shareholders could suffer adverse tax consequences as a result. | |
| ● | Our Constitution and Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders. |
| ● | You will have limited ability to bring an action against us or against our directors and officers, or to enforce a judgment against us or them, because we are incorporated in Australia and certain of our directors and officers reside outside the United States. | |
| ● | Australian companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests. |
These and other risks described in this Annual Report on Form 20-F could materially and adversely impact our business, financial condition, operating results and cash flow, which could cause the trading price of our ADSs to decline and could result in a loss of your investment.
Risks Related to Our Financial Condition and Capital Requirements
We have a history of losses.
We have incurred net losses since our inception on February 2, 2017. Our net losses were AUD$6,872,000 (approximately $4,700,000) and AUD$341,000 for the fiscal years ended December 31, 2023 and 2022 respectively. We cannot assure that we can become profitable or avoid net losses in the future or that there will be any earnings or revenues in any future quarterly or other periods. We expect that our operating expenses will increase as we grow our business, including expending substantial resources for research, development, sales and marketing. As a result, any decrease or delay in generating revenues could result in material operating losses.
We expect that we will need to invest significant time and raise substantial additional capital before we can expect to become profitable from sales of our products. This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.
We expect that we will need to invest significant time and require substantial additional capital to commercialize our products. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including but not limited to production and manufacturing costs (which are dependent on the costs of mechanical and electronic components of our products), research and development activities, sales activities including compensation for salespersons, development of additional software and hardware products for our current smart solution offerings, and marketing costs related to expansion into the government and commercial drone and robotics markets in the United States and Europe.
Shortfalls in available external research and development funding could adversely affect us.
We depend on our research and development activities to develop the core technologies used in our cybersecurity and smart solutions and for the research and development of our future products. A portion of our research and development activities depends on funding from the IIA; in the future, we may seek additional funding from the IIA and other governmental organizations. These government organizations’ spending levels can be impacted by a number of variables, including general economic conditions, specific companies’ financial performance and competition for Israeli government funding with other Israeli government-sponsored programs in the budget formulation and appropriation processes. Any reductions in available research and development funding could harm our business, financial condition and operating results.
We may not accurately forecast revenues, profitability and appropriately plan our expenses.
We base our current and future expense levels on our operating forecasts and estimates of future income and operating results. Income and operating results are difficult to forecast because they generally depend on the volume sales and timing, which are uncertain. Additionally, our business is affected by general economic and business conditions around the world. A softening in income, whether caused by changes in customer preferences in the drones and robotics platform markets, or a weakening in global economies, may result in decreased net revenue levels, and we may be unable to adjust our expenses in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our (loss)/income after tax in a given quarter to be (higher)/lower than expected. We also make certain assumptions when forecasting the amount of expense we expect related to our share-based payments, which includes the expected volatility of our share price, and the expected life of share options granted. These assumptions are partly based on historical results. If actual results differ from our estimates, our operating results in a given period may be lower than expected.
Exchange rate fluctuations between multiple foreign currencies may negatively affect our earnings, operating cash flow.
Our reporting and functional currency is the Australian Dollar. Our Israeli subsidiary’s functional currency is the NIS. Our key expenses and revenues are currently primarily payable in NIS and US$. Certain amounts of our revenues and expenses are also in Euros. In addition, our recent equity raises were received in US$, and our research and development support program and grants are received in NIS.
As a result, we are exposed to the currency fluctuation risks relating to the recording of our expenses and revenues in US$, and potential cash flow shortage. We may, in the future, decide to enter into currency hedging transactions. These measures, however, may not adequately protect us from material adverse effects.
We have commenced marketing and initial sales of our cloud-based software and cybersecurity solutions, which may be marketed and sold to customers using different sales models, including annual or monthly license or software as a service, any of which may not be profitable to us.
Historically our revenues have been derived from the sales of our hardware products. We have recently commenced selling cloud based software and cybersecurity solutions. As our cloud based software and cybersecurity solutions are newly released and only at initial sales phase, we have not definitely determined the sales model for how we plan to market and sell these products. Forecasting our revenues and profitability for these product offerings is inherently uncertain and volatile. Our actual revenues and profits for these new products may be significantly less than our forecasts. Additionally, the new business models could fail for one or more of our products and/or services, resulting in the loss our investment in the development and infrastructure needed to support the new business models, and the opportunity cost of diverting management and financial resources away from more successful businesses.
Risks Related to Our Business and Industry
We expect to incur substantial research and development costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce its profitability and may never result in revenue to us.
Our future growth depends on penetrating new markets, expansion in current markets, adapting existing products to new applications, and introducing new products and services that achieve market acceptance. We plan to incur substantial research and development costs as part of our efforts to design, develop and commercialize new products for cybersecurity and cloud-based software and enhance our existing products and technology. Because we account for research and development costs as operating expenses, these expenditures will adversely affect our earnings in the future. Further, our research and development programs may not produce successful results, and our new products and services may not achieve market acceptance, create any additional revenue or become profitable, which could materially harm our business, prospects, financial results and liquidity.
We will be affected by operational risks and may not be adequately insured for certain risks.
We will be affected by a number of operational risks and we may not be adequately insured for certain risks, including: product liability litigation, as we do not have product liability insurance; labor disputes; further workforce reductions; catastrophic accidents; fires; blockades or other acts of social activism; changes in the regulatory environment; impact of non-compliance with laws and regulations; cyber-attacks and ransom requests; natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and hazards will not result in damage to, or destruction of, our technologies, personal injury or death, environmental damage, adverse impacts on our operation, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on our future cash flows, earnings and financial condition. Also, we may be subject to or affected by liability or sustain loss for certain risks and hazards against which we cannot insure or which we may elect not to insure because of the cost. This lack of insurance coverage could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.
We operate in evolving markets, which makes it difficult to evaluate our business and future prospects.
Our cybersecurity, smart solutions and services are sold in rapidly evolving markets. The commercial drones and robotics market is in early stages of customer adoption. Accordingly, our business and future prospects may be difficult to evaluate. We cannot accurately predict the extent to which demand for our products and services will increase, if at all. The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact our ability to do the following:
| ● | generate sufficient revenue to reach and maintain profitability; |
| ● | acquire and maintain market share; |
| ● | achieve or manage growth in operations; |
| ● | develop and renew contracts; |
| ● | attract and retain research and engineering personal and other highly-qualified personnel; |
| ● | successfully develop and commercially market new products and services; |
| ● | adapt to new or changing policies and spending priorities of governments and commercial enterprises; and |
| ● | access additional capital when required and on reasonable terms. |
If we fail to address these and other challenges, risks and uncertainties successfully, our business, results of operations and financial condition would be materially harmed.
We operate in a competitive market.
We face competition from companies such as Silvus, DTC, Persistent Systems, Creao, UXV Technologies, Skygrid and others and new competitors will continue to emerge throughout the world. Services offered by our competitors may take a larger share of our customers’ spending than anticipated, which could cause revenue generated from our products to fall below expectations. It is expected that competition in these markets will intensify.
If our competitors develop and market more successful products or offer competitive products at lower price points, or if we do not produce consistently high-quality and well-received products our revenues, margins, and profitability will decline.
Our ability to compete effectively will depend on, among other things, our pricing of products and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and any potential resale or distribution channels, and capital resources. Competition could lead to a reduction in the rate at which we add new customers, a decrease in the size of our market share and a decline in our customers. Examples include but are not limited to competition from other companies in our industry as well as providers of hardware and software technology components to the industry.
The markets in which we compete are characterized by rapid technological change, which requires us to develop new products and product enhancements, and could render our existing products and technologies obsolete.
Continuing technological changes in the market for our products could make our products less competitive or obsolete, either generally or for particular applications. Our future success will depend upon our ability to develop and introduce a variety of new technologies, innovations, capabilities and enhancements to our existing product and service offerings, as well as introduce a variety of new product offerings, to address the changing needs of the markets in which we offer products. Delays in introducing new products, technologies and enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative products or enhancements at competitive prices may cause existing and potential customers to purchase our competitors’ products.
If we are unable to devote adequate resources to develop new products or cannot otherwise successfully develop new products or enhancements that meet customer requirements on a timely basis, our products could lose market share, our revenue and profits could decline, and we could experience operating losses.
Failure to obtain necessary regulatory approvals from the United States Federal Communication Commission, or FCC, the European Telecommunications Standards Institute, or ETSI, Japan’s Telecom Engineering Center, or Telec, or other governmental agencies or the inability to obtain CE certification from the European Commission or certifications from various environmental organizations, electronics laboratories, software inspections organization, or aviation or vehicles and robotics authorities may prevent us from selling our hardware products.
The FCC, ETSI, Telec and other regulatory organization worldwide are responsible for establishing, managing, and developing safety and operation standards and regulations for electronics equipment usage in commercial and government market segments.
Failure to obtain necessary regulatory approvals from the FCC, ETSI and other regulatory organization worldwide may prevent us from marketing, demonstrating and selling our products in North America, Europe and other global markets which could have an adverse impact on our business, prospects, results of operations and financial condition.
Aviation, vehicular, government and militaries organizations and enterprises set certification standards and requirements for the use of products within their systems or organizations. Some of these requirements are based on internal testing and certification processes and other may requires formal verification and testing laboratories to ensure that products meet those requirements. Failure to pass such testing procedures or obtain necessary laboratories certificates or approval may prevent our products from being chosen, integrated, and sold to or used by government and enterprises customers, which could have an adverse impact on our business, prospects, results of operations and financial condition.
We may be prohibited from shipping our products to certain countries if we are unable to obtain Israeli or U.S. government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business.
We may be prohibited from shipping our products to certain countries if we are unable to obtain certain governmental authorizations required to comply with Israeli laws regulating the export of our products from Israel and U.S. federal regulation regulating the export of our products from the United States or Israel. The export regulations and the governing policies applicable to our business are subject to change. In some cases, explicit authorization from the U.S. or Israeli government may be needed to export our products. We have received International Traffic in Arms Regulations, or ITAR, and Civilian Jurisdictions, or CJ, certifications to allow exports from the United States, and, when exporting to certain countries from Israel, the Defense Export Controls Association, or DECA, regulations may apply, even though to date the DECA has determined that these regulations do not apply to our currently sold products. We cannot provide assurance that such export authorizations will be available in the future for our existing and newly developed products. Compliance with these laws has not significantly limited our operations or sales in the recent past, but could significantly limit them in the future. If and when our operations expand into other markets, we may have to comply with other governments’ regulations regarding the export of our products. Non-compliance with applicable export regulations could potentially expose us to fines, penalties and sanctions. If we cannot obtain required government approvals under applicable regulations, we may not be able to sell our products in certain international jurisdictions, which could adversely affect our financial condition and results of operations.
We may be subject to the risks associated with future acquisitions or strategic partnerships, which may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
As part of our overall business strategy, we may in the future pursue select strategic acquisitions or strategic partnership that would provide additional product or service offerings, additional industry expertise, and a stronger industry presence in both existing and new jurisdictions. As of the date of this Annual Report on Form 20-F we have no such agreement or understanding. Any such future acquisitions or strategic partnership, if completed, may expose us to additional potential risks, including risks associated with:
| ● | increased operating expenses and cash requirements; |
| ● | the assumption of additional indebtedness or contingent liabilities; |
| ● | the issuance of our equity securities; |
| ● | assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; |
| ● | the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition; |
| ● | retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; |
| ● | risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products; and |
| ● | our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. |
Our inability to assure retention of management and key employees could impair our future success.
Our future success depends substantially on the continued services of our executive officers and our key development, business and operation personnel. If one or more of our executive officers or key development personnel were unable or unwilling to continue in their present positions, we might not be able to replace them easily or at all. In addition, if any of our executive officers or key employees joins a competitor or forms a competing company, we may lose experience, know-how, key professionals and staff members as well as business partners. These executive officers and key employees could develop drone and robotics cybersecurity and smart solutions technology components and services that could compete with and take customers and market share away from us.
A significant growth in the number of personnel would place a strain upon our management and resources.
We may experience a period of significant growth in the number of personnel that could place a strain upon our management systems and resources. Our future will depend in part on the ability of our officers and other key employees to implement and improve financial and management controls, reporting systems and procedures on a timely basis and to expand, train, motivate and manage our workforce. Our current and planned personnel, systems, procedures and controls may be inadequate to support our future operations.
We face uncertainty and adverse changes in the economy.
Adverse changes in the economy could negatively impact our business. Future economic distress may result in a decrease in demand for our products, which could have a material adverse impact on our operating results and financial condition. Uncertainty and adverse changes in the economy could also increase costs associated with developing and producing products, increase the cost and decrease the availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse impact on our financial condition and operating results.
We are subject to the risks associated with foreign operations in other countries.
Our primary revenues are expected to be achieved in Israel, US and Europe. However, we may expand to additional markets and become subject to risks normally associated with conducting business and manufacturing in other countries. As a result of such expansion, we may be subject to the legal, political, social and regulatory requirements and economic conditions of foreign jurisdictions. We cannot predict government positions on such matters as foreign investment, intellectual property rights or taxation. A change in government positions on these issues could adversely affect our business.
If we expand our business and production to foreign markets, we will need to respond to rapid changes in market conditions, including differing legal, regulatory, economic, social and political conditions in these countries. If we are not able to develop and implement policies and strategies that are effective in each location in which we do business, then our business, prospects, results of operations and financial condition could be materially and adversely affected.
There are tax risks we may be subject to in carrying on business in the United States, Israel and Australia.
We are incorporated in Australia, with a fully owned subsidiaries in Israel and the United States. Since we are operating in a new and developing industry there is a risk that foreign governments may look to increase their tax revenues or levy additional taxes to level the playing field for perceived disadvantages to traditional brick and mortar businesses. There is no guarantee that governments will not impose such additional adverse taxes in the future.
If critical components or raw materials used to manufacture our products become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products, which could damage our business.
We obtain materials, mechanical parts, hardware and electronics components, various subsystems and manufacturing and assembly services from a limited group of suppliers and sub-contractors. We do not have long-term agreements with any of these suppliers or sub-contractors that obligate them to continue to sell materials, components, subsystems, or provide manufacturing services to us. Our reliance on these suppliers or sub-contractors involves significant risks and uncertainties, including whether our suppliers or sub-contractors will provide an adequate supply of required components, subsystems, or services of sufficient quality, will increase prices for the components, subsystems or services and will perform their obligations on a timely basis.
In addition, certain raw materials and components used in the manufacture of our products are periodically subject to supply shortages, and our business is subject to the risk of price increases and periodic delays in delivery. For example, between 2020 and 2022, the electronics components shortage crisis, a unique result of the COVID-19 pandemic, negatively affected our market segment by increased delivery lead time and increased purchase prices of components used under certain of our products, which resulted in delay in delivery time of our products to our customers, and had negative effect on our revenues and profitability. Please see Risk Factors – Risks Related to our Business and Industry – the resurgence of the COVID-19 pandemic had some negative effect on our business, operations and financial performance, and similar global health crises could have a negative effect on our business, operations and future financial performance. Similarly, the market for electronic components is subject to cyclical reductions in supply, outside of COVID-19. If we are unable to obtain components from third-party suppliers in the quantities and of the quality that we require, on a timely basis and at acceptable prices, then we may not be able to deliver our products on a timely or cost-effective basis to our customers, which could cause customers to terminate their contracts with us, increase our costs and seriously harm our business, results of operations and financial condition. Moreover, if any of our suppliers or sub-contractors become financially unstable, then we may have to find new suppliers or sub-contractors. It may take several months to locate alternative suppliers or sub-contractors, if required, or to redesign our products to accommodate components from different suppliers. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our products. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable cost, if at all.
Our products may be subject to the recall or return.
Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, safety concerns, packaging issues and inadequate or inaccurate labeling disclosure. If any of our products were to be recalled due to an alleged product defect, safety concern or for any other reason, we could be required to incur unexpected expenses of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management time and attention. Additionally, product recalls may lead to increased scrutiny of our products by our customers and regulators, requiring further management time and attention and potential legal fees, costs and other expenses.
If we release defective products or services, our operating results could suffer.
Products designed and released by us involve extremely complex software programs, hardware testing and verification, assembly processes, and quality and functionality inspection and are difficult to develop and manufacture. While we have quality controls in place to detect and prevent defects in our products and services before they are released, these quality controls are subject to human error, overriding, and reasonable resource constraints. Therefore, these quality controls and preventative measures may not be effective in detecting and preventing defects in our products before they have been released into the marketplace. In such an event, we could be required, or decide voluntarily, to suspend the availability of the product or services, which could significantly harm our business and operating results.
Our products and services are complex and could have unknown defects or errors, which may give rise to legal claims against us, diminish our brand or divert our resources from other purposes.
Our products are comprised of and rely on complex and sensitive electronic hardware, algorithms, software, user-friendly interfaces and tightly integrated, electromechanical designs. Despite testing, our products have contained defects and errors and may in the future contain defects, errors or performance problems when first introduced, when new versions or enhancements are released, or even after these products have been used by our customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance costs, exposure to liability for damages, damaged customer relationships and harm to our reputation, any of which could materially harm our results of operations and ability to achieve market acceptance. In addition, increased development and warranty costs could be substantial and could significantly reduce tour operating margins.
The existence of any defects, errors, or failures in our products or the misuse of our products could also lead to product liability claims or lawsuits against it. A defect, error or failure in one of our products could result in failure or damage to the products it is embedded in, or property damage, injury, death and/or significant damage our reputation and support for our services in general. We anticipate this risk will grow as more and more products using our products are deployed
We cannot provide any assurance that we have or will have insurance adequate to protect us from material judgments and expenses related to potential future claims or that such insurance will be available in the future at economical prices or at all. Even if we are fully insured as it relates to a particular claim, the claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and results of operations.
We are a supplier for government programs, which subjects us to risks including early termination, audits, investigations, sanctions, penalties and delayed sales.
We have entered into contracts with governments and government contractors, either directly or indirectly. As a result, we are and may in the future be subject to statutes and regulations applicable to companies doing business with the relevant government. Government contracts may contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts with private sector counterparts and which are unfavorable to the contractors. For example, many government agencies include provisions that allow the government to unilaterally terminate or modify contracts for convenience, and in that event, the counterparty to the contract may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination.
In addition, government contracts typically contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements may include, for example:
| ● | specialized disclosure and accounting requirements unique to government contracts; |
| ● | financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with government; |
| ● | public disclosures of certain contract and company information; and |
| ● | mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements. |
If we fail to comply with government contracting laws, regulations and contract requirements, our government contracts may be subject to termination, and we may become subject to financial and/or other liability under our contracts or criminal law. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.
We are also vulnerable to delayed sales to the Israeli government and related contractors as a result of the Israeli government’s repeated failures to timely approve its annual budgets.
Negative customer perception regarding our products could have a material adverse effect on the demand for our products and the business, results of operations, financial condition and cash flows.
We believe that our success is highly dependent upon perception regarding the security, effectiveness and quality of our products’ technology components and products used. Customer perception of these components and products can be significantly influenced by testing results or findings, regulatory investigations, litigation, media attention, and other publicity. There can be no assurance that future testing results, findings, regulatory proceedings, litigation, media attention, or other research findings will be favorable to our technology components and products or the drone and robotics market in general. Future testing reports, findings, regulatory proceedings, litigation, or media attention that are perceived as less favorable than, or that question, earlier testing reports, findings or publicity could have a material adverse effect on the demand for our products and the business, results of operations, financial condition and cash flows. The dependence upon customer perceptions means that adverse testing reports, findings, regulatory proceedings, litigation, or media attention, whether or not accurate or with merit, could have a material adverse effect on us, the demand for our products, and the business, our results of operations, financial condition and cash flows.
If we fail to successfully promote our product and brand, it could have a material adverse effect on our business, prospects, financial condition and results of operations.
We believe that brand recognition is an important factor to our success. If we fail to promote our brands successfully, or if the expenses of doing so are disproportionate to any increased net sales we achieve, it would have a material adverse effect on our business, prospects, financial condition and results of operations. This will depend largely on our ability to maintain trust, be a technology leader, and continue to provide high-quality and secure technologies, products and services. Any negative publicity about us or our industry, the quality and reliability of our technologies, products and services, our risk management processes, changes to our technologies, products and services, our ability to effectively manage and resolve customer complaints, our privacy and security practices, litigation, regulatory activity, and the experience of sellers and buyers with our products or services, could adversely affect our reputation and the confidence in and use of our technologies, products and services. Harm to our brand can arise from many sources, including; failure by us or our partners to satisfy expectations of service and quality; inadequate protection of sensitive information; compliance failures and claims; litigation and other claims; employee misconduct; and misconduct by our partners, service providers, or other counterparties. If we do not successfully maintain a strong and trusted brand, our business could be materially and adversely affected.
We may be subject to cybersecurity attacks or electronic communication security risks.
A significant potential vulnerability of electronic communications is the security of transmission of confidential information over public networks, including information pertaining to the identity of our customers, customer orders, customer fleet operations and information managed under our CONTROLiT cloud management software, customer data and information managed and secured by our ICE Cybersecurity solution, as well as current and future hardware and software solutions. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches, as well as the exposure of our sites, networks, computers and digital data assets to different cybersecurity attacks.
In addition, a significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access, or exposure to different cybersecurity attacks could negatively impact our business and operations. We could also experience business interruption, information theft and reputational damage from cyber-attacks, which may compromise our systems and lead to data leakage either internally or at our third-party providers. Our systems may be the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise or disruption of our information technology systems a data which could have a negative impact on our business, financial condition and results of operations.
Failure to adhere to our financial reporting obligations and other public company requirements could adversely affect the market price of our ADSs.
The reporting and other obligations related to being a public company will place significant demands on our management, administrative, operational and accounting resources. If we are unable to meet such demands in a timely and effective manner, our ability to comply with our financial reporting obligations and other rules applicable to reporting issuers could be impaired. Moreover, any failure to maintain effective internal controls could cause us to fail to satisfy our reporting obligations or result in material misstatements in our financial statements. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely affected which could also cause investors to lose confidence in our reported financial information, which could result in a reduction in the trading price of our ADSs.
In addition, we do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all errors or fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a control system, misstatements due to errors or fraud may occur and may not be detected in a timely manner or at all.
We may experience adverse effects on our reported results of operations as a result of adopting new accounting standards or interpretations.
Our implementation of and compliance with changes in accounting rules, including new accounting rules and interpretations, could adversely affect our reported financial position or operating results or cause unanticipated fluctuations in our reported operating results in future periods.
If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our securities, the trading price or trading volume of our securities could decline.
The trading market for our securities will be influenced in part by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If one or more of the analysts initiate research with an unfavorable rating or downgrade our securities, provide a more favorable recommendation about our competitors or publish inaccurate or unfavorable research about our business, the market prices of our securities would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price or trading volume of our securities to decline.
Possible force majeure events could impact our operations and the market price of our ADSs.
Events may occur within or outside the United States, Australia and Israel that could impact the American and/or Australian and/or Israeli economy, our operations and the market price of our ADSs. These events include acts of terrorism, an outbreak of international hostilities, such as the hostilities in Eastern Europe and Ukraine, fires, floods, earthquakes, labor strikes, civil wars, natural disasters, outbreaks of disease or other natural or manmade events or occurrences that can have an adverse effect on the demand for our products and our ability to conduct business. While we seek to maintain insurance in accordance with industry practice to insure against the risks we consider appropriate after consideration of our needs and circumstances, no assurance can be given as to our ability to obtain such insurance coverage in the future at reasonable rates or that any coverage arranged will be adequate and available to cover any and all potential claims. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine and in the Middle East. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from these conflicts or any other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in credit and capital markets.
Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and other terrorist organizations in parallel to their continued rocket and terror attacks, which included call-up reservists for active military duty in the Israel Defense Forces. To date, none of our member of management nor employees is in active military reserve duty. Nevertheless, our product, research and development and business development activities remain on track. See also “Item 3,D — Risk Factors — Risks Related to Israeli Law and our Operations in Israel — Political, economic and military instability in Israel may impede our ability to operate and harm our financial results” for additional information.
Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 20-F.
We are subject to certain Israeli, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations.
Among other matters, Israeli, U.S. and foreign anticorruption, anti-money laundering, export control, sanctions and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated entities. We can be held liable for the corrupt or other illegal activities of our personnel, agents or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
Our business, operating results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk.
Our business depends on the economic health of the global economies. If the conditions in the global economies remain uncertain or continue to be volatile, or if they deteriorate, including as a result of the impact of military conflict, such as the war between Russia and Ukraine, terrorism or other geopolitical events, our business, operating results and financial condition may be materially adversely affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity shortages and constrained capital spending have at times in the past resulted, and may in the future result, in challenging and delayed sales cycles, slower adoption of new technologies and increased price competition, and could negatively affect our ability to forecast future periods, which could result in an inability to satisfy demand for our products and a loss of market share.
In addition, increases in inflation raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, along with the uncertainties surrounding any resurgence of the COVID-19 pandemic, geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect to financial and operating covenants and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to alter our operating plans. In addition, there is a risk that one or more of our service providers, financial institutions, manufacturers, suppliers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability to attain our operating goals on schedule and on budget.
Increased attention to environmental, social, and governance, or ESG, matters and conservation measures may adversely impact our business or that of our manufacturers.
Public companies are facing increasing scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder groups. With this increased focus, public reporting regarding ESG practices is becoming more broadly expected. Such increased scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do not meet investor or other stakeholder expectations, which continue to evolve, we may be subject to investor or regulator engagement regarding such matters. In addition, new sustainability rules and regulations have been adopted and may continue to be introduced in various states and other jurisdictions. For example, the SEC has adopted rules that require companies to provide expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply and impose increased oversight obligations on our management and board of directors. Our failure to comply with any applicable rules or regulations could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts on our business, financial condition, or results of operations.
From time to time, we may become involved in legal proceedings, which could adversely affect us.
We may, from time to time in the future, become subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, and disruptive to normal business operations. In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, operating results, or financial condition.
Our directors and officers may have conflicts of interest in conducting their duties.
Because our directors and officers are or may become directors or officers of other reporting companies or have significant shareholdings in other technology companies, our directors and officers may have conflicts of interest in conducting their duties. We and our directors and officers will attempt to minimize such conflicts. In the event that such a conflict of interest arises at a meeting of the directors, a director who has such a conflict will abstain from voting for or against a particular matter in which the director has the conflict. In appropriate cases, we will establish a special committee of independent directors to review a particular matter in which several directors, or officers, may have a conflict. In determining whether or not we will participate in a particular program and the interest therein to be acquired by us, the directors will primarily consider the potential benefits to us, the degree of risk to which we may be exposed and our financial position at that time. Other than as indicated, we have no other procedures or mechanisms to deal with conflicts of interest.
Executive officers and directors may have rights to indemnification from us, including pursuant to directors’ and officers’ liability insurance policies that will survive termination of their agreements.
Any resurgence of the COVID-19 pandemic could adversely affect our business, financial condition and results of operations.
Public health epidemics or outbreaks could adversely impact our business. In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. Initially the outbreak was largely concentrated in China, but it rapidly spread to countries across the globe, including in Israel and the United States. Many countries around the world, including in Israel and the United States, implemented significant governmental measures to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. In response, for several months in 2020 and 2021, we implemented remote working and workplace protocols for our employees in accordance Israeli Ministry of Health requirements to ensure employee safety and all employees have been instructed on and encouraged to practice best social distancing behaviors.
If there is a resurgence of COVID-19 its spread may materially affect us economically. While the potential economic impact brought by, and the duration of, any future resurgence of the COVID-19 pandemic may be difficult to assess or predict, it has already caused, and could result in further, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position. In addition, the trading prices for other companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our ordinary shares or other securities and such sales may be on unfavorable terms. To the extent that future waves of COVID-19 disrupt normal business operations, we may face operational challenges with our services, and we likely will have to adopt remote working and workplace protocols for employees in accordance with government requirements and other measures to minimize such impact.
The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain COVID-19 or treat its impact. In particular, the extent to which any resurgence of the COVID-19 pandemic may impact our business and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
Risks Related to Our Intellectual Property
If we fail to protect, or incur significant costs in defending, our intellectual property and other know-how or proprietary rights, our business, financial condition, and results of operations could be materially harmed.
Our success depends, in large part, on our ability to protect our intellectual property, know-how and other proprietary rights. We rely primarily on patents, trademarks, copyrights, trade secrets other contractual provisions, to protect our intellectual property and other proprietary rights. However, a portion of our technology and know-how is not patented, and we may be unable or may not seek to obtain patent protection for this technology. Moreover, existing US legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide us with any competitive advantages, and may be challenged by third parties. The laws of countries other than US may be even less protective of intellectual property rights. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology. Unauthorized third parties may try to copy or reverse engineer our products or portions of our products or otherwise obtain and use our intellectual property. Moreover, many of our employees have access to our trade secrets and other intellectual property. If one or more of these employees leave to work for one of our competitors, then they may disseminate this proprietary information, which may as a result damage our competitive position. If we fail to protect our intellectual property and other proprietary rights, then our business, results of operations or financial condition could be materially harmed. From time to time, we may have to initiate lawsuits to protect our intellectual property and other proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact our results of operations.
In addition, affirmatively defending our intellectual property rights and investigating whether we are pursuing a product or service development that may violate the rights of others may entail significant expense. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to us and divert the attention and efforts of our management and technical employees, even if we prevail.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The United States Patent and Trademark Office, or USPTO, and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Periodic maintenance fees on any issued patent are due to be paid to the USPTO and various foreign national or international patent agencies in several stages over the lifetime of the patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our products, our competitors might be able to enter the market, which would have a material adverse effect on our business.
While a patent may be granted by a national patent office, there is no guarantee that the granted patent is valid. Options exist to challenge the validity of a patent which, depending upon the jurisdiction, may include re-examination, opposition proceedings before the patent office, and/or invalidation proceedings before the relevant court. Patent validity may also be the subject of a counterclaim to an allegation of patent infringement.
Pending patent applications may be challenged by third parties in protest or similar proceedings. Third parties can typically submit prior art material to patentability for review by the patent examiner. Regarding Patent Cooperation Treaty applications, a positive opinion regarding patentability issued by the International.
Searching Authority does not guarantee allowance of a national application derived from the Patent Cooperation Treaty application. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be modified after issuance. It is also possible that the scope of claims granted may vary from jurisdiction to jurisdiction.
The grant of a patent does not have any bearing on whether the invention described in the patent application would infringe the rights of earlier filed patents. It is possible to both obtain patent protection for an invention and yet still infringe the rights of an earlier granted patent.
We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.
We may become subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. Any claims, with or without merit, could be time-consuming and expensive, and could divert our management’s attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from these claims could require us to pay substantial amounts or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit our use of the technology. We cannot assure that we would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product. An adverse determination also could prevent us from offering our products to others. Infringement claims asserted against us may have a material adverse effect on our business, results of operations or financial condition.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents on all of our products throughout the world would be prohibitively expensive. Therefore, we have filed applications and/or obtained patents only in the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and their products may compete with our products.
Risks Related to Israeli Law and our Operations in Israel
Political, economic and military instability in Israel may impede our ability to operate and harm our financial results.
Although we are an Australian company, our fully owned subsidiary and main operational, including our principal research and development facilities and sole manufacturing facility, and certain of our key employees, officers and directors are located in Israel. Accordingly, political, economic and military conditions in the Middle East may affect our business directly. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region, including Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon).
In particular, in October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and these terrorist organizations in parallel continued rocket and terror attacks. As a result of the events of October 7, 2023, the Israeli government declared that the country was at war and the Israeli military began to call-up reservists for active duty. To date, none of our member of management nor employees is in active military reserve duty. Military service call ups that result in absences of personnel from us for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations.
In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and southern border (with the Houthi movement in Yemen). It is possible that hostilities with Hezbollah in Lebanon will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries, such as Iran, will join the hostilities. Such clashes may escalate in the future into a greater regional conflict. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any hostilities, armed conflicts, terrorist activities involving Israel or the interruption or curtailment of trade between Israel and its trading partners, or any political instability in the region could adversely affect business conditions and our results of operations and could make it more difficult for us to raise capital and could adversely affect the market price of our ordinary share. An escalation of tensions or violence might result in a significant downturn in the economic or financial condition of Israel, which could have a material adverse effect on our operations in Israel and our business. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
Since the war broke out on October 7, 2023, our operations have not been adversely affected by this situation, and we have not experienced disruptions to our business operations. As such, our product research and development and business development activities remain on track. However, the intensity and duration of Israel’s current war against Hamas is difficult to predict at this stage, as are such war’s economic implications on our business and operations and on Israel’s economy in general. If the war extends for a long period of time or expands to other fronts, such as Lebanon, Syria and the West Bank, our operations may be adversely affected.
Additionally, political uprisings, social unrest and violence in various countries in the Middle East, including Israel’s neighbor Syria, have affected the political stability of those countries. This instability may lead to deterioration of the political relationships that exist between Israel and certain countries and have raised concerns regarding security in the region and the potential for armed conflict. In addition, Iran has threatened to attack Israel. Iran is also believed to have a strong influence among the Syrian government, Hamas and Hezbollah. These situations may potentially escalate in the future into more violent events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian targets in various parts of Israel have in the past negatively affected business conditions in Israel.
Our insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Finally, political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and prior to October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. To date, these initiatives have been substantially put on hold. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.
Our operations may be disrupted by the obligations of personnel to perform military service.
As of March 22, 2024, we had 32 employees, 27 of whom were based in Israel. Some of our employees may be called upon to perform up to 36 days (and in some cases more) of annual military reserve duty until they reach the age of 40 (and in some cases, up to 45 or older) and, in emergency circumstances, could be called to immediate and unlimited active duty. In the event of severe unrest or other conflict, individuals could be required to serve in the military for extended periods of time. Since September 2000, in response to increased tension and hostilities, there have been occasional call-ups of military reservists, including in connection with the 2006 conflict in Lebanon, and the December 2008, November 2012 and, July 2014 conflicts with Hamas, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of a significant number of our employees related to military service or the absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect our business and results of operations. Additionally, the absence of a significant number of the employees of our Israeli suppliers and contractors related to military service or the absence for extended periods of one or more of their key employees for military service may disrupt their operations.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
A significant portion of our intellectual property and know-how has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, will determine whether the employee is entitled to remuneration for his inventions. Recent case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration (but rather uses the criteria specified in the Patent Law). Although we have entered into assignment-of-invention agreements with our current and former employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us, we may still face claims demanding remuneration in consideration for assigned inventions. If such claims are found to have merit despite our assignment of invention agreements, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
We received Israeli government grants, from the IIA for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund some grants previously received.
Our research and development efforts were financed in part through royalty-bearing grants from the IIA. With respect to such grants, we are committed to pay royalties at a rate of 3% to 3.5% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest at an annual rate of LIBOR applicable to U.S. dollar deposits.
Regardless of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation Law, 1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development. This may restrict our ability to move the production of our products outside of Israel, or to sell intellectual property and other know-how.
We may be subject to the risks associated with the Israeli Law for the Encouragement of Industrial Research and Development 5744-1984 (R&D Law).
While our products currently are not required to comply with any regulatory obligations in Israel, the R&D Law, as amended, and related regulations, may restrict our ability to move the production of products developed using grants received from the IIA. We received Israeli government grants from the IIA for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received. As of December 31, 2023, we have received grants of $2.27 million.
Risks Related to the Ownership of our ADSs or Our Ordinary Shares
The market price and trading volume of our ADSs may be volatile and may be affected by economic conditions beyond our control.
The market price of our ADSs may be highly volatile and subject to wide fluctuations. In addition, the trading volume of our ADSs may fluctuate and cause significant price variations to occur. If the market price of our ADSs declines significantly, you may be unable to resell your ADSs at or above the purchase price, if at all. We cannot assure you that the market price of our ADSs will not fluctuate or significantly decline in the future.
Some specific factors that could negatively affect the price of our ADSs or result in fluctuations in their price and trading volume include:
| ● | actual or expected fluctuations in our operating results; |
| ● | changes in market valuations of similar companies; |
| ● | changes in our key personnel; |
| ● | changes in financial estimates or recommendations by securities analysts; |
| ● | trading prices of our ADSs on the Nasdaq Capital Market, or Nasdaq; |
| ● | changes in trading volume of ADSs on Nasdaq; |
| ● | sales of our ADSs or ordinary shares by us, our executive officers or our shareholders in the future; and |
| ● | conditions in the financial markets or changes in general economic conditions. |
You may be subject to limitations on transfer of our ADSs.
Our ADSs are only transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the Deposit Agreement, or for any other reason.
A shareholder’s holding may be diluted if we issue additional shares or other securities in the future.
We may issue additional ordinary shares or other securities in the future, which may dilute your holding in us. Our Constitution permits the issuance of an unlimited number of securities, subject to certain capacity restrictions and security-holders have no pre-emptive rights in connection with further issuances of any securities. Our directors have the discretion to determine if an issuance of ordinary shares or other securities is warranted, the price at which any such securities are issued and the other terms of issue of such securities. In addition, we may issue additional ordinary shares upon the exercise of warrants to acquire ordinary shares under our share incentive plan, which will result in further dilution. In addition, the issuance of ordinary shares or other securities in any potential future acquisitions, if any, may also result in further dilution to your interests.
As a foreign private issuer, we are permitted and we expect to follow certain home country corporate governance practices in lieu of certain Nasdaq requirements applicable to domestic issuers. This may afford less protection to holders of ordinary shares and ADSs.
As a foreign private issuer with ADSs listed on the Nasdaq Capital Market, we are permitted to follow certain home country corporate governance practices in lieu of certain Nasdaq requirements. We follow home country practice with regard to the composition of the board of directors, quorum requirements applicable to shareholder meetings, shareholder approval prior to the issuance of securities in connection with certain acquisitions, private placements of securities, or the establishment or amendment of certain stock option, purchase or other compensation plans and the requirement that issuers must maintain charters for certain board committees. As a foreign private issuer we must disclose in our annual reports filed with the SEC the requirements with which it does not comply followed by a description of our applicable home country practice. The Australian home country practices described above may afford less protection to holders of ordinary shares and ADSs than that provided under Nasdaq rules.
As a foreign private issuer, we are permitted to file less information with the SEC than a company incorporated in the United States. Accordingly, there may be less publicly available information concerning us than there is for companies incorporated in the United States.
As a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as a company that files as a U.S. company whose securities are registered under the Exchange Act, nor are we required to comply with the SEC’s Regulation FD, which restricts the selective disclosure of material non-public information. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We are an emerging growth company as defined in the JOBS Act and the reduced disclosure requirements applicable to emerging growth companies may make our ADSs less attractive to investors and, as a result, adversely affect the price of our ADSs and result in a less active trading market for our ADSs.
We are an emerging growth company as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. For example, we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting, and we will not provide such an attestation from our auditors for so long as we qualify as an emerging growth company.
We may avail ourselves of these disclosure exemptions until we are no longer an emerging growth company. We cannot predict whether investors will find our ADSs less attractive because of our reliance on some or all of these exemptions. If investors find our ADSs less attractive, it may cause the trading price of the ADSs to decline and there may be a less active trading market for our ADSs.
We will cease to be an emerging growth company upon the earliest of:
| ● | the end of the fiscal year in which the fifth anniversary of completion of our initial public offering occurs; |
| ● | the end of the first fiscal year in which the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second quarter of such fiscal year; |
| ● | the end of the first fiscal year in which we have total annual gross revenues of at least $1.235 billion; and |
| ● | the date on which we have issued more than $1.0 billion in non-convertible debt securities in any rolling three-year period. |
If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate consolidated financial statements or comply with applicable regulations could be impaired.
Section 404(a) of the Sarbanes-Oxley Act requires that, beginning with our second annual report after the completion of our initial public offering, our management assess and report annually on the effectiveness of our internal controls over financial reporting and identify any material weaknesses in our internal controls over financial reporting. Although Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal controls over financial reporting, we have opted to rely on the exemptions provided in the JOBS Act, and consequently will not be required to comply with SEC rules that implement Section 404(b) of the Sarbanes-Oxley Act until such time as we are no longer an emerging growth company.
Our first Section 404(a) assessment will take place beginning with our second annual report after the completion of our initial public offering. The presence of material weaknesses could result in financial statement errors which, in turn, could lead to errors in our financial reports and/or delays in our financial reporting, which could require us to restate our operating results. We might not identify one or more material weaknesses in our internal controls in connection with evaluating our compliance with Section 404(a) of the Sarbanes-Oxley Act. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and provide significant management oversight. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management’s attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.
If we are unable to conclude that we have effective internal controls over financial reporting, investors may lose confidence in our operating results, the price of our ADSs could decline and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of Section 404 of the Sarbanes-Oxley Act, our ADSs may not be able to remain listed on Nasdaq.
ADS holders may be subject to additional risks related to holding ADSs rather than ordinary shares.
ADS holders do not hold ordinary shares directly and, as such, are subject to, among others, the following additional risks:
| ● | As an ADS holder, we will not treat you as one of our shareholders and you will not be able to exercise shareholder rights, except through the depositary as permitted by the deposit agreement. |
| ● | Distributions on the ordinary shares represented by your ADSs will be paid to the depositary, and before the depositary makes a distribution to you in respect of your ADSs, any withholding taxes that must be paid will be deducted. Additionally, if the exchange rate fluctuates during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution. |
| ● | We and the depositary may amend or terminate the deposit agreement without ADS holders’ consent in a manner that could prejudice ADS holders. |
You must act through the depositary to exercise your voting rights and, as a result, you may be unable to exercise your voting rights on a timely basis.
As a holder of ADSs (and not the ordinary shares underlying your ADSs), we will not treat you as one of our shareholders, and you will not be able to exercise shareholder rights. The depositary will be the holder of the ordinary shares underlying your ADSs, and ADS holders will be able to exercise voting rights with respect to the ordinary shares represented by their ADSs only in accordance with the deposit agreement. There are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders. For example, holders of our ordinary shares will receive notice of shareholders’ meetings by mail and will be able to exercise their voting rights by either attending the shareholders meeting in person or voting by proxy. ADS holders, by comparison, will not receive notice directly from us. Instead, in accordance with the deposit agreement, we will provide notice to the depositary of any such shareholders meeting and details concerning the matters to be voted upon at least 45 days in advance of the meeting date. If we so instruct, the depositary will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which voting instructions may be given by holders as soon as practicable after receiving notice from us of any such meeting. To exercise their voting rights, ADS holders must then instruct the depositary as to voting the ordinary shares represented by their ADSs. Due to these procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of ordinary shares. The ordinary shares represented by ADSs with to which the depositary receives no timely voting instructions will not be voted.
The deposit agreement expressly limits our obligations, the obligations of the depositary, and limits liability.
The deposit agreement relating to the ADSs limits the obligations and liability as we and the depositary are only obligated to take the actions specifically set forth in the deposit agreement, and we are not liable if performance of those obligations are prevented or delayed due to circumstances beyond our control. Neither we nor the depositary are liable if we or it exercise discretion as permitted under the deposit agreement. Further, we and the depositary are not liable for the inability of any holder of ADSs to benefit from any distribution or deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special consequential or punitive damages for any breach of the terms of the deposit agreement. Neither we nor the depositary have any obligation to become involved in a lawsuit or other proceeding relating to the ADSs or the deposit agreement on your behalf. We are not liable for the acts or omissions of any securities depository, clearing agency or settlement system and we may rely upon any documents we believe to be genuine and duly executed. As a holder of ADSs, your ability to take action, seek damages or otherwise make a claim against us or the depositary are limited.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs provides that holders and beneficial owners of ADSs, including those holders and owners who acquired ADSs in secondary transactions, irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including in respect of claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or the ADSs.
No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with such matters, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.
As the jury trial waiver relates to claims arising out of or relating to the ADSs or the deposit agreement, we believe that the waiver would likely continue to apply to ADS holders or beneficial owners who withdraw the ordinary shares from the ADS facility with respect to claims arising before the cancellation of the ADSs and the withdrawal of the ordinary shares, and the waiver would likely not apply to ADS holders or beneficial owners who subsequently withdraw the ordinary shares represented by ADSs from the ADS facility with respect to claims arising after the withdrawal. However, to our knowledge, there has been no case law on the applicability of the jury trial waiver to ADS holders or beneficial owners who withdraw the ordinary shares represented by the ADSs from the ADS facility.
We may be or may become classified as a passive foreign investment company. If we are or become classified as a passive foreign investment company, U.S. holders of our ordinary shares or ADSs may suffer adverse tax consequences as a result.
Generally, for any taxable year, if at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income (including amounts derived by reason of the temporary investment of funds raised in offerings of our shares) and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, U.S. holders of our ordinary shares or ADSs may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares or ADSs treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares or ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and gains from the sales of our shares.
Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which, assuming we are not a “controlled foreign corporation,” or a CFC, under Section 957(a) of the Internal Revenue Code of 1986, as amended, or the Code, for the year being tested, may be determined based on the fair market value of each asset, with the value of goodwill and going concern value determined in large part by reference to the market value of our ordinary shares, which may be volatile). Based primarily on the composition of our assets, it is possible that we were a PFIC for our tax year ending December 31, 2023, and for subsequent tax years. Further, because the determination of whether we are a PFIC for any taxable year is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC in any taxable year.
The tax consequences that would apply if we are classified as a PFIC would also be different from those described above if a U.S. holder of our ordinary shares or ADSs was able to make a valid qualified electing fund, or QEF election. If the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held our ADSs or our ordinary shares during a period when we were a PFIC will generally be subject to the foregoing rules unless we cease to be a PFIC and you make a “deemed sale” election with respect our ordinary shares. If we are a PFIC in any year, U.S. taxpayers may be subject to additional IRS filing requirements, including the filing of IRS Form 8621, as a result of directly or indirectly owning stock of a PFIC. We do not intend to notify U.S. taxpayers that hold our ADSs or our ordinary shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we are a PFIC. U.S. taxpayers that hold our ADSs or our ordinary shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to our ADSs or our ordinary shares in the event that we are a PFIC. If we are unable to provide this information, the QEF election will not be available to you. Prospective investors should assume that a QEF election will not be available. See also “Item 10.E.—Taxation—Certain Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies.”
If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions, and may be subject to tax reporting obligations. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult their own advisors regarding the potential application of these rules to its investment in our ordinary shares or ADSs.
We have never declared or paid dividends on our ordinary shares and we do not anticipate paying dividends in the foreseeable future.
We have never declared or paid cash dividends on our ordinary shares. For the foreseeable future, we currently intend to retain all available funds and any future earnings to support our operations and to finance the growth and development of our business. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with applicable laws and covenants under current or future credit facilities, which may restrict or limit our ability to pay dividends, and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. As a result, a return on your investment will only occur if the ADS price increases.
You may not receive distributions on our ordinary shares represented by ADSs or any value for such distribution if it is illegal or impractical to make it available to holders of ADSs.
While we do not anticipate paying any dividends on our ordinary shares in the foreseeable future, if such a dividend is declared, the depositary for our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
Australian takeover laws may discourage takeover offers being made for us or may discourage the acquisition of a significant position in our ordinary shares.
We are incorporated in Australia and are subject to the takeover laws of Australia. Among other things, we are subject to the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition of a direct or indirect interest in our issued voting shares if the acquisition of that interest will lead to a person’s voting power (either alone or in combination with their ‘associates’ as that term is defined in the Corporations Act) in us increasing to more than 20%, or increasing from a starting point that is above 20% and below 90%. Australian takeover laws may discourage takeover offers being made for us or may discourage the acquisition of a significant position in our ordinary shares. This may have the ancillary effect of entrenching our board of directors and may deprive or limit our shareholders’ or ADS holders’ opportunity to sell their ordinary shares or ADSs and may further restrict the ability of our shareholders and ADS holders’ ability to obtain a premium from such transactions. Our Constitution, which is included as an exhibit to this Annual Report on Form 20-F, also contains a requirement for our shareholders to approve any proportionate takeover bid (i.e. a bid for a specified proportion of a class of securities in us) without the approval of a majority of our shareholders voting at a general meeting. This may have the effect of discouraging proportionate takeover bids and limit our shareholders’ and ADS holders’ opportunity to obtain a premium for their securities from such a transaction.
Anti-takeover provisions in our Constitution and our right to issue preference shares could make a third-party acquisition of us difficult.
Some provisions of our Constitution may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that only require one-third of our board of directors to be elected annually and authorize our board of directors, subject to compliance with the Corporations Act, to issue an unlimited number of shares of capital stock and preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares by amending the Constitution (although it should be noted that the amendment of the Constitution requires the approval of shareholders by a majority of not less than 75% of votes cast (directly or by proxy) at a shareholder meeting).
Our Constitution and Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders.
As an Australian company, we are subject to different corporate requirements than a corporation organized under the laws of the states of the United States. Our Constitution, as well as the Australian Corporations Act, set forth various rights and obligations that are unique to us as an Australian company. These requirements may operate differently than those of many U.S. companies. You should carefully review the summary of these matters set forth in our Constitution, which is included as an exhibit to this Annual Report on Form 20-F, prior to investing in our ADSs.
You will have limited ability to bring an action against us or against our directors and officers, or to enforce a judgment against us or them, because we are incorporated in Australia and certain of our directors and officers reside outside the United States.
We are incorporated in Australia, the majority of our directors and officers reside outside the United States and substantially all of the assets of those persons are located outside the United States. As a result, it may be impracticable or at least more expensive for you to bring an action against us or against these individuals in Australia in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. In addition, as a company incorporated in Australia, the provisions of the Corporations Act regulate the circumstances in which shareholder derivative actions may be commenced, which may be different to the circumstances for companies incorporated in the United States.
Further, it may not be possible or practicable for you to effect service of process within the United States upon our officers or directors or to enforce against them or against us judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. Even if you are successful in bringing such an action, there is doubt as to whether Australian courts would enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in Australia or elsewhere outside the United States. An award for monetary damages under U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in Australia will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and Australia do not currently have a treaty or statute providing for recognition and enforcement of the judgments of the other country (other than arbitration awards) in civil and commercial matters. As a result, ADS holders may have more difficulty in protecting their interests through actions against us, our management or our directors than would shareholders of a corporation incorporated in a jurisdiction in the United States.
You may not be able to participate in rights offerings and may experience dilution of your holdings as a result.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we may not, and under the deposit agreement, the depositary will not, offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are registered under the Securities Act, or the distribution of them to ADS holders is exempted from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. In addition, we may not be able to rely on an exemption from registration under the Securities Act to distribute such rights and securities. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings as a result.
Australian companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.
Australian companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of an Australian company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. Australian courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law and to impose liabilities against us, in original actions brought in Australia, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in Australia of judgments obtained in the United States, although the courts of Australia may recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits, upon being satisfied about all the relevant circumstances in which that judgment was obtained.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
We were incorporated under the laws of Australia in 2017. We have an office at Level 21, 459 Collins Street, Melbourne, VIC, Australia, 3000. Our telephone number is +61 3 8630 3321. Our operational headquarters are located at 1 Rakefet Street, Shoham, Israel 6083705. Mobilicom Inc., incorporated in Delaware, is registered in 1000 N. West Street, Wilmington, Delaware under the registered agent MWE Corporate Services LLC.
Our Company commercial website address is https://mobilicom.com/ and our investors relations website address is https://ir.mobilicom.com/. Information contained on or accessible through our website is not a part of this Annual Report on Form 20-F, and the inclusion of our website address herein is an inactive textual reference only. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at www.sec.gov. Mobilicom Inc. serves as our authorized representative and agent for service of process in the United States for certain limited matters.
We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.
Our cash used in investing activities for 2021, 2022 and 2023 amounted to AUD$31,000, AUD$27,000 and AUD$1,000 (approximately $1,000), respectively. The cash was used primarily for purchases of fixed assets. Our purchases of fixed assets primarily include computers and lab equipment used for the development of our products, and we finance these expenditures primarily from cash on hand.
B. Business Overview
Overview
We are a provider of hardware products and software and cybersecurity solutions that we design, develop and manufacture and that are embedded into small-sized drones or small-sized unmanned aerial vehicles, or SUAVs, and into robotic systems, or robotics. We hold both patented technology and unique know-how. We are aiming to further develop our global customer base by increasing our number of design wins and targeted pilot projects and ultimately cross-sell our other solutions to those same customers in order to become a leading end-to-end provider to SUAV and robotics systems original equipment manufacturers, or OEMs, who, in turn, sell their systems into the security and surveillance, process industry (processing of bulk resources into other products), infrastructure inspection, first responders, homeland security, government and defense and courier market segments. By “design win” we are referring to the large-scale and adoption of our products by our OEM customers on an-ongoing basis. The “pilot projects” refer to initial small-scale sales and implementation. An “end-to-end” provider is one that provides all of the key components its customers need for their products.
We aim to penetrate and expand in the commercial segment of our markets by leveraging the experience we have gained in the defense segment of our markets. We believe that our key competitive advantages are our ability to provide a near end-to-end solution to our customers, which enables us to have an insider’s view of our customers’ needs as well as our holistic cybersecurity approach and highly secured offering, and outstanding performance in harsh environments. This is evidenced by our recent design wins and pilot projects, such as our cybersecurity solution being chosen by Israel’s Ministry of Defense for its small-sized drone program and the integration of our technology and offering into the U.S. Department of Defense for soldiers’ next-generation wearable tactical AI-enhanced mission kits. We further believe our products have performed well in harsh environmental conditions. Our solutions have been deployed by our various customers worldwide, including in the United States, Europe, Israel and other Asian countries. Historically we have generated most of our revenues from sales of our hardware products and have recently commenced marketing and initial sales of our cloud-based software and cybersecurity solutions.
Smart Robust Technology Solutions
SUAVs and robotic platforms are built from hundreds of products, yet there are only several key critical technology products solutions that make the drone or robot “smart”, and capable of performing its mission. We design, develop and deliver the “smart” robust solution part of the drone system to our customers. These “smart” robust solutions include cybersecurity, cloud management software, communication datalink and mobile mesh networking terminals, handheld control terminals and professional services and support. These solutions are “off-the-shelf” or can be tailored if needed to each customer.
Market Opportunity
SUAVs, which weigh under 150 kilograms, have rapidly evolved from a military origin to have commercial and civil government applications. Some of the leading factors for the recent upsurge in SUAV usage are (a) increased automation of SUAVs providing additional value to existing workflows, (b) an overall easing of regulatory restrictions, and (c) recent advances in technology that have enabled the use of SUAVs in small-scale, localized environments, whether by police or defense forces in open areas or in urban neighborhoods or for commercial applications such as surveying, aerial remote sensing, monitoring, mapping, precision agriculture, and product distribution. According to the Global Drone Market Report 2021-2026, published in August 2021, or the Global Drone Market Report, the SUAV drone market is set to grow at a 9.4% compound annual growth rate, and is expected to reach $41.3 billion by 2026. According to our estimates, our total addressable market is set to reach $8.5 billion of this $41.3 billion. We calculated our total addressable market based on data from Global Drone Market Report and Drone Industry Insights’ conclusion that 16.4% and 4.3%, respectively (and in total 20.7%), of the total $41.3 billion market will be allocated to the types of hardware products and software products, respectively, that we produce.
We do not seek to profit from conflict. We expect the current situation in the Ukraine and in the Middle East to accelerate demand for our products. In late February 2022, Russia launched a large-scale military attack on Ukraine. The war includes reliance by both sides on drone warfare, including the use of small-sized drones by ground forces either for intelligence, surveillance and reconnaissance, or ISR, or loitering, drones which are also known as Kamikaze drones. These drones are used to find, track, and kill or damage targets with strikes beyond the front lines.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets including launch of extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and other terrorist organizations in parallel to their continued rocket and terror attacks. This military campaign includes usage of small-sized drones for loitering and attack (kamikaze) as well as intelligence, surveillance and reconnaissance, or ISR.
Although these conflicts have not yet had an immediate impact on our business, we have seen a rise in inquiries that may result in orders from new customers and increased orders from current customers. In these conflicts, we are also seeing cyber-attacks which target drones and other platforms, rendering them ineffective. Therefore, we witness and expect increased interest from our customers and potential customers in the need for cybersecurity products to protect drone platforms, communications channels, data transmissions and weapons carried on the small drones. We expect to continue to sell to OEM customers mainly located in Israel, the U.S. and Western Europe that are leaders in the supply of small drones for ISR and loitering missions.
Our Products and Services
As per ResearchGate’s conclusion, SUAVs may have nine key smart components solutions, which are ground control systems, cybersecurity, cloud management software, datalink/networking hardware, flight missions, safety systems, flight computers, GPU/Edge computing processes, and payloads. We aim to provide our customers, who are SUAV and robotic systems OEMs, an end-to-end suite of smart solutions and services that include cybersecurity, cloud management software, datalink and networking, ground control systems and professional and support services. Our product portfolio is completely designed and developed in-house and based on our extensive know-how and experience gained over a decade. This enables us to design and develop every component of our solutions and technology while constantly adjusting to the ever-changing needs and challenges in the SUAVs and robotics industry. Each of our products is designed to allow utmost flexibility and scalability. Our current customers include eight (8) Tier-1 leading manufacturers of SUAVs. We currently have over 50 customers in 18 countries. Our partners and customers Israel Aerospace Industries, Airbus, Elbit Systems, Teledyne-Flir, Tomahawk Robotics, Rafael Technologies, ST Engineering, the Israeli Ministry of Defense, or MOD, and more.
ICE Cybersecurity
The ICE Cybersecurity Suite is our automated software designed to provide a “holistic” solution to prevent, detect, and respond in real-time to one or more cyber-attacks. Its ability to provide several multilayered tiers of protection (including, protecting the small drone platform itself, safeguarding its communication channels, and encrypting data received and shared during operations) is what we believe to be our key competitive advantage in our ability to provide a leading cybersecurity solution in the markets that we serve. To date, the ICE Cybersecurity Suite has started initial sales and delivery to the Israeli MOD for current surveillance and intelligence needs.
CONTROLiT Cloud Management Software
CONTROLiT is our cloud-based network management software solution for operators of SUAVs. We currently sell it as bundled with our SkyHopper Combo. We believe that our key competitive advantage over other management solutions is the ability to consolidate all relevant data into a single powerful software platform, thereby improving the configuration and real-time management and monitoring of devices, networks and operations, such as real-time flight logs and live mapping of operational devices and networks.
SkyHopper Datalinks
Our SkyHopper datalink family of products provides bi-directional data links that supports multiple transmission modes. Because of its communication capabilities through line of sight, or LOS, non-line of sight, or N-LOS, and urban areas we believe that the SkyHopper is uniquely positioned to provide high-end performance at a smaller size, lighter weight, and at a more attractive price point than our competitors. The SkyHopper datalinks provide superior communication in harsh environments through LOS, N-LOS and in urban areas, where it provides a robust, resilient and secured communication. The SkyHopper datalink family of products includes our, SkyHopper PRO, SkyHopper PROV, SkyHopper COMBO, SkyHopper lite, and SkyHopper micro.
Mobile Mesh Networking
Our Mobile Mesh Communication Unit, or MCU, family of products connects and acts as a relay to, and between, all units within the network. The MCU enables each unit to provide redundancy communication to all of the other units inits range such that a failure in one unit will not affect the operation of other units within the network. The Mesh networking enables fleet and swarm drones and robotics operation which is the cost-effective way to operate drones in the coming future. The mesh networking is strengthening our market position as a provider of superior connectivity performance in harsh conditions in the SUAV market. Configurations of the MCU can also be changed according to mesh network topology and surroundings. The MCU networking family includes the MCU-30 lite, MCU-30 Rugged, MCU-200 and MCU-70 (newly released) designed for mid-sized and long-ranged drone market.
Mobile Controller Systems
Our all-in-one ground control systems are responsible for controlling and transmitting video and data from the SUAV to the ground control system (controller systems).
We provide a wide range of handheld ruggedized controllers with multiple functionalities designed to support drone and robotics operation with variety of payloads. The controllers are compact, unified and rugged to operate with either an internal or external datalink unit, offer battery charging, an advanced tablet feature HD low-latency viewer and are designed to operate with a variety of payloads. The Mobile Controller System product portfolio includes: 7’’ mini-Controller PRO, 7’’ RVT, 10’’ Maxi-Controller PRO, 10’’ Extremer, 10’’ Touch-P and 10’’ Touch-G.
Professional Services and Support
We provide integrated logistic support, or ILS, services for SUAVs such as ILS operation, logistics, maintenance, and safety. Our services are available either onsite at the customer’s location or available remotely.
Key Growth Strategies
Key components of our growth strategy include the following:
| (1) | Achieving greater market penetration through increasing the number of our design wins and pilot projects. This is a crucial element of our strategy because they help deepen our working relationship with a customer, understand their overall needs and, in turn, allow us to better cross-sell other products and solutions. Most importantly, we have a stronger base from which to build additional revenue once our design win, which is built into our customers’ products, is certified by local regulators and marketed onwards to their customers, all with the expectation of increasing both the volume and value of customer orders. Finally, our customers continue to act as important references for future potential customers. |
| (2) | Achieving greater market exposure to potential customers in the markets that we serve. We are currently a leader in the Israeli market for the products we sell and are thoroughly expanding our marketing and sales activities in the U.S., Europe and several Asian countries, including increasing our in-house sales force, sponsoring trade shows, conferences, webinars and other online marketing campaigns. Our goal is to ensure that we are aware of every potential bidding process and request for proposal that exists in the markets that we serve. |
| (3) | In our aim to become an end-to-end solutions provider, we plan to either acquire or form strategic partnerships with other drone-related solutions and components manufacturers, service providers, or re-sellers that service our markets and who can complement our product offering. |
| (4) | Our research and development efforts are at the foundation of our Company and we intend to continue investing in our own innovations in order to pioneer new and enhanced products and solutions that enable us to satisfy the ever-evolving needs of the markets we serve with a focus on identifying opportunities where we can develop technology that can be sold in a SaaS software model. |
Supply
We purchase electronics component kits required in the manufacturing of our hardware products through authorized dealers who, in turn, buy them from component manufacturers. We are not reliant on any one authorized dealer or single source supplier such that we have alternative sources of supply if a specific component is “out of stock” or has a long lead-time to delivery.
Manufacturing and Assembly
We outsource the manufacturing of our products to third parties who receive our design plans together with the relevant electronic component kits which we purchase from our suppliers. Thereafter, we assemble the finished product in-house or through outsourced contractors. We are responsible for quality control.
We consistently monitor our inventory levels, our outsourced manufacturing and distribution capabilities, and maintain recovery plans to address potential disruptions that we may encounter. We have leveraged our manufacturing capabilities through subcontracting arrangement with a third-party manufacturer in the Asia-Pacific region and USA, in addition to the manufacturing managed in the Israeli company site. This subcontracting arrangement expands our manufacturing capabilities and is intended to enable us to deliver larger quantities of products upon demand and in a timely manner, on schedule, thus allowing for more consistent product delivery, by enabling us to utilize the manufacturer’s manpower and production equipment. We do not have a written agreement with this manufacturer and work with them on a statement-of-work and purchase order basis. We have trained the manufacturer to produce our materials and provide it with technical materials and support.
In the future, as we scale up our sales and production further, we may implement a turnkey operation with select manufacturers for our products. We may enter into agreements with our contractors. Pursuant to such agreements, the contractors will provide the components and/or perform the assembly of such components and/or service in accordance with specific terms of the mutually agreed work instructions and purchase orders. The agreements define the responsibilities of each party and the regulatory and compliance requirements that apply and contain industry-standard terms and guidelines.
Competition
The smart solutions market for SUAVs and robotics is characterized by intense competition, rapid change and constant innovation.
We believe that we face three different types of competition:
| ● | Companies, who, like us, seek to become an end-to-end provider of technology components and systems to the SUAV and robotics market. We consider UXV Technologies to be a key competitor in this segment. |
| ● | Companies that only provide, and thus only compete with us in, one portion of our product offering. We consider such competitors to include SkyGrid (in cybersecurity), Elsight Limited, MicroHard Systems, Inc. and Auterion AG (in cloud networking management software), UXV Technologies, Kuta, CTI Ltd. and Tomahawk Robotics (in mobile handheld controllers), Silvus Technologies, Inc., Microhard Communications, Domo Tactical Communications, Inc., Comtact Systems, CreoMegic LTD, DoodleLab and Persistent Systems (in datalinks and networking). |
| ● | Our customers’ in-house capabilities that compete with our offerings. We consider AeroVironment, Inc., Rafael Advanced Defense Systems, Ltd., Israel Aerospace Industries and Elbit Systems, Ltd to have such in-house capabilities. |
Key Strengths
We believe the following key attributes and capabilities provide us with long-term competitive advantages:
End-to-end smart solutions provider – We continue to develop our end-to-end smart solutions offerings in order to better serve the SUAV and robotics market:
| ● | Bundle together our solutions to organically provide better system performance, shorter time to market and cost-effective pricing for our customers. |
| ● | Enables us to cross-sell other smart solutions to our customers as part of their next design projects. |
| ● | Deeper customer relationships with SUAV manufacturers give us an insider’s view of current and future solutions requirements. |
| ● | Expand our contribution of software revenue thereby improving our overall margins. |
In Use and “Field Proven” by the Israel Ministry of Defense – Our solutions have been chosen by large well-known Israeli defense contractors including Elbit Systems, Ltd., Rafael Advanced Defense Systems and Israeli Aerospace Industries, Ltd. in design wins where our systems and solutions are embedded into their SUAVs and are currently in use “in the field” by the Israeli Ministry of Defense.
Design win with Top Tier SUAV Manufacturers – Recent design wins and pilot projects where our systems and solutions are embedded into SUAVs manufacturers across the U.S., Europe and Israel and are currently in use “in the field” and have performed well in harsh environmental conditions. These important customer references form the building blocks of future customer wins.
Certified and Validated Solutions – We have obtained multiple permits and certifications for our products and solutions for both the civil and defense markets that we serve.
Proprietary technologies, in-house capabilities and industry experience – We believe our decade of experience in providing solutions to the drone industry; in-house advanced research and development expertise across different fields and team members; our deep portfolio of innovative core proprietary technologies, intellectual property and know-how; our internal manufacturing, assembly and testing capabilities, together with international manufacturing capabilities based on subcontractors; all serve as high barrier of entry to our competitors and provide us with important competitive advantage.
Seasoned Leadership Team with Deep Industry Expertise and Proven Track Record of Innovation
Our management and leadership team has proven track record in research and development of innovative solutions in our field; establishing international marketing and sales infrastructure as well as leading business ramp-up with top-tier companies and manufacturers in the targeted markets; operation and manufacturing expertise to scale up production across the world to meet raising demands; comprehensive and holistic safety, security and cyber development and business implementation; as well as financing of high-tech private and public companies. Our seasoned leadership and board of directors are well equipped to support the company’s planned growth and ramp-up as we will reach to the tipping point of our business.
Intellectual Property
We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining intellectual property know-how intended to cover our methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.
Our approach to intellectual property has been to adopt a strategy of trade secrecy in relation to our know-how and software systems. We have, however, also applied, and been granted two patents in the US and may, in the future, file for additional patents in other jurisdictions or in respect of other aspects of our technology. The granted patents are related to our mesh networking modem technology. Our granted U.S. patents hold 34 claims that were approved and granted.
The key technology aspects covered by those patents are:
| ■ | The 2013 patent relates to the method through which our modem technology can coordinate disparate signals and reassemble those signals into a more efficient and useable communication, a process described as ‘joint beam formation and synchronization’. |
| ■ | The 2020 patent encompasses intellectual property that is part of the algorithm for the networking layer of our mobile mesh technology. |
| Filing Date | Status | Issue Date | Application No. | Patent No. | No. of Claims | Country/ Jurisdiction |
Owner/ Applicant |
Title | ||||||||
| 2008-12-30 | Granted | 2013-07-02 | 12/810,844 | US8477874B2 | 16 | U.S. | Mobilicom Ltd | Method, device and system of wireless communication | ||||||||
| 2016-11-28 | Granted | 2020-02-25 | 15/779,541 | US10575339B2 | 18 | U.S. | Mobilicom Ltd | Scalable Mobile Ad Hoc Networks |
Despite the patent strategy described above, we are largely reliant on know-how and trade-secrets which are not the subject of formal intellectual property registration. We have implemented various protective measures in connection with our strategy of trade secrecy in respect of our know-how and software systems. These measures include limiting knowledge and access to key aspects of our know-how and software systems to key management personnel, ensuring employees are engaged on terms that include provisions relating to confidentiality and postemployment restraints and the execution of nondisclosure and intellectual property ownership agreements with third-party contractors.
There can be no guarantee that the current, or any future, patent application will be granted or that third parties will not seek to claim an interest in the intellectual property. Nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology. There is also a risk that measures in place to protect our know-how and trade-secrets may not be adequate to protect against third parties obtaining the intellectual property (or parts of it) which may adversely affect our business.
Regulation
The FCC in the US, ETSI in Europe and Telec in Japan are the key regulatory organization worldwide which are responsible for establishing, managing, and developing safety and operation standards and regulations for electronics equipment usage in commercial market. Our products have a number of existing certifications, including FCC, ETSI, Telec and other safety and environmental certifications relating to shock, vibration and temperature ranges which are anticipated to provide us with a basis from which to meet the regulatory and certification requirements for our target markets. In some cases, explicit authorization from the US or Israeli government may be needed to export our products. We have received ITAR and CJ certifications to allow exports from the US, and, when exporting to certain countries from Israel, DECA regulations may apply, even though to date the DECA has determined that these regulations do not apply to our currently sold products. We cannot provide assurance that such export authorizations will be available in the future for our existing and newly developed products.
In the event we make sales to defense and other mission critical markets, the products may be required to pass certain testing or certifications including, radiofrequency emission, environmental conditions (IP67, low/high temperature, shocks, vibrations, etc.), as required in each individual instance. Additionally, we have obtained a license issued by Israel’s Ministry of Communication that is required for us to act as a radiofrequency communication equipment developer in Israel.
We are also subject to the provisions of the Research Law, which may restrict our ability to move the production of products or sell the intellectual property or know-how developed using grants received from the IIA (see “Item 3,D — Risk Factors — Risks Related to Israeli Law and our Operations in Israel — We received Israeli government grants from IIA for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received” for further information).
Employees
We currently employ 24 full time and 8 part-time employees across Israel, the United States, Europe and Australia. In addition, we retain third-party contractors and consultants.
Legal Proceedings
We are not party to any material legal proceedings.
C. Organizational Structure
We currently have two subsidiaries: Mobilicom Ltd, an Israeli company, and Mobilicom Inc., a Delaware corporation.
D. Property, Plant and Equipment
We do not own any real estate. Our registered office in Australia is located at Level 21, 459 Collins Street, Melbourne, VIC, Australia, 3000, for which we pay a nominal fee. Our operational headquarters in Israel are located at 1 Rakefet Street, Shoham, Israel 6083705.
We lease approximately 620 square meters of office premises in Shoham, Israel pursuant to a lease that expires in January 2024. We also hold an option to renew the lease for three consecutive lease periods, each of 24 months, subject to a four-month advance notice per period. We continued using the premises and are currently negotiating the terms of the extended lease.
Our monthly lease and facility management fees are approximately AUD$23,615 (approximately $16,072), based on December 31, 2023, exchange currency rates, as published by the Bank of Israel.
We believe our leased business locations are sufficient to meet our current needs.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this annual report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” elsewhere in this annual report. For the fiscal year ended December 31, 2023, the conversion from Australian dollars (AUD$) into U.S. dollars ($) was made at the exchange rate as of December 29, 2023, on which $1.00 equaled AUD$1.462. The use of $ is solely for the convenience of the reader. Our discussion and analysis for the year ended December 31, 2022, can be found in our prospectus dated March 30, 2023, filed with the SEC on March 30, 2023.
Overview
We are a provider of hardware products and software and cybersecurity solutions that we design, develop and manufacture and that are embedded into small drones or SUAVs, and into robotic systems, or robotics. We hold both patented technology and unique know-how. We are aiming to further develop our global customer base by increasing our number of design wins and targeted pilot projects and ultimately cross-sell our other solutions to those same customers in order to become a leading end-to-end provider to SUAV and robotics systems OEMs, who, in turn, sell their systems into the security and surveillance, process industry (processing of bulk resources into other products), infrastructure inspection, first responders, homeland security and courier market segments. By “design win” we are referring to the large-scale and exclusive adoption of our products by our OEM customers on an-ongoing basis. The “pilot projects” refer to initial small scale sales and implementation. An “end-to-end” provider is one that provides all of the key components its customers need for their products.
For more information regarding our business and operations, see “Item 4.B. Business Overview” above.
A. Operating Results
Comparison of the years ended December 31, 2023 and 2022
Revenue and Other income
| For the twelve months ended December 31, | ||||||||||||
| Revenue | 2023 | 2022 | Increase/Decrease | |||||||||
| Revenue | AUD$ | 3,301,887 | AUD$ | 2,327,058 | AUD$ | 974,829 | ||||||
| Other income: | ||||||||||||
| Government grants from IIA | 296,567 | 923,033 | (626,466 | ) | ||||||||
| Interest income | 441,715 | 168,843 | 272,872 | |||||||||
| Foreign exchange gains | 552,971 | 1,175,735 | (622,764 | ) | ||||||||
| Fair value gains from financial liability | - | 3,768,466 | (3,768,466 | ) | ||||||||
| Total Revenue and Other income | AUD$ | 4,593,140 | AUD$ | 8,363,135 | AUD$ | (3,769,995 | ) | |||||
Revenue
Revenues for the year ended December 31, 2023, were AUD$3,301,887 (approximately $2,258,491), compared to AUD$2,327,058 for the year ended December 31, 2022, an increase of AUD$974,829 or 42%. The increase is mainly due to entering initial scaled production by a few of our Tier-1 customers and increased orders and delivery primarily for defense purposes.
Government grants from IIA
Grants received under IIA research and development supported programs for the year ended December 31, 2023, were AUD$296,567 (approximately $202,852), compared to AUD$923,033 for the year ended December 31, 2022 a decrease of AUD$(624,211) or (68)%.
Interest income
Interest income from short-term bank deposits, for the year ended December 31, 2023, was AUD$441,715 (approximately $302,133), compared to AUD$168,843 for the year ended December 31, 2022, an increase of AUD$272,872 or 162%. The increase is mainly attributed to interest income received on the proceeds from our initial public offering in the United States in August 2022.
Foreign Exchange gains
Foreign exchange gains were AUD$552,971 (approximately $378,233) for the year ended December 31, 2023, compared to AUD$1,175,735 for the year ended December 31, 2022. Foreign exchange costs are mainly due to the effect of changes in currency exchange rates between the US$., the New Israeli Shekel (NIS) and the AUD$.
Fair value gains from financial liability
Fair value gains from financial liability were AUD$nil for the year ended December 31, 2023, compared to AUD$3,768,466 for the year ended December 31, 2022. Fair value gains from financial liability are attributed to revaluation gain/(loss) between measured periods related to the warrants issued in our initial public offering in the United States in August 2022.
Cost of Goods Sold and Gross Profit
| For the twelve months ended December 31, |
||||||||||||
| 2023 | 2022 | Increase/Decrease | ||||||||||
| Revenue | AUD$ | 3,301,887 | AUD$ | 2,327,058 | AUD$ | 974,829 | ||||||
| Cost of Goods Sold | (1,357,614 | ) | (883,483 | ) | (474,131 | ) | ||||||
| Gross Profit | AUD$ | 1,944,273 | AUD$ | 1,443,575 | AUD$ | 500,698 | ||||||
Cost of goods sold remained at the same pace as the increase in revenue. Gross margin for the year ended December 31, 2023, was 59%, compared to 62% for the year ended December 31, 2022. The continued high gross margins are mostly explained by our products being high-end IP based technology (beyond the hardware value), and ongoing effective costs-reduction planning and monitoring for components acquisitions.
Expenses
| For the twelve months ended December 31, |
||||||||||||
| 2023 | 2022 | Increase/Decrease | ||||||||||
| Expenses: | ||||||||||||
| Sales and Marketing | AUD$ | 2,484,905 | AUD$ | 2,464,936 | AUD$ | 19,969 | ||||||
| Research and Development | 2,936,825 | 2,585,307 | 351,518 | |||||||||
| General and Administrative | 4,032,454 | 2,690,920 | 1,341,534 | |||||||||
| Finance costs | 54,765 | 65,972 | (11,207 | ) | ||||||||
| Fair value losses from financial liability | 476,745 | - | 476,745 | |||||||||
| Total expenses | AUD$ | 9.985.694 | AUD$ | 7,807,135 | AUD$ | 2,178,559 | ||||||
Sales and Marketing expenses.
Sales and marketing expenses were AUD$2,484,905 (approximately $1,699,675) for the year ended December 31, 2023, compared to AUD$2,464,936 for the year ended December 31, 2021, an increase of AUD$19,969 or 1%. The slight increase was primarily result of costs related with continued expansion under our target markets (U.S., Israel and Europe).
Research and Development expenses.
Research and development expenses were AUD$2,936,825 (approximately $2,008,788) for the year ended December 31, 2023, compared to AUD$2,585,307 for the year ended December 31, 2022, an increase of AUD$351,518 or 14%. The increase is mainly due to higher materials and subcontractors’ costs related with release of new products for mid-sized long-range drones and research and development of future planned new products. Furthermore, the increase also resulted from an increase in share-based compensation costs related with options granted in 2023 under our employee share option plan.
General and Administrative expenses.
General and administrative expenses were AUD$4,032,454 (approximately $2,758,199) for the year ended December 31, 2023, compared to AUD$2,690,920 for the year ended December 31, 2022, an increase of AUD$1,341,534 or 50% The increase is primarily due to higher costs of operating as a public company following our listing on the Nasdaq in August 2022 following our initial public offering in the United States as well as increase in U.S. operations under our U.S. subsidiary and increase in share-based compensation costs related with options granted in 2023 under our employee share option plan.
Financial costs.
Financial costs were AUD$54,765 (approximately $37,460) for the year ended December 31, 2023, compared to AUD$65,972 for the year ended December 31, 2022, a decrease of AUD$(11,207) or (17)%. Financial costs are primarily related with interest paid under our lease agreements.
Fair value losses from financial liability
Fair value losses from financial liability were AUD$476,745 for the year ended December 31, 2023, compared to AUD$nil for the year ended December 31, 2022. Fair value losses from financial liability are attributed to revaluation gain/(loss) between measured periods related with the warrants issued in our initial public offering in the United States in August 2022.
B. Liquidity and Capital Resources
As of December 31, 2023, we have not achieved positive cash flow from operations and incurred a net loss of AUD$6.9 million (approximately $4.7 million) for the period ended December 31, 2023, and generated AUD$30.9 million (approximately $21.2) of accumulated losses since inception.
We have financed our operations to date primarily from the August 2022 $13.3 million (approximately AUD$19.4 million) initial public offering on Nasdaq Capital Market, public offerings on the Australian Securities Exchange, or ASX, and sales of our products.
As of December 31, 2023, we had cash and cash equivalents of AUD$12.3 million (approximately $8.4 million). Additionally, we also recognized a total of AUD$1.4 (approximately $977,578) as receivables. We estimate that we have adequate financial resources for at least 12 months from December 31, 2023, based on our current cash and trade receivable balances and our ongoing operations. The consolidated financial statements have been prepared on the assumption that we will continue as a going concern, meaning we will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.
In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds in the future. Our future capital requirements will depend on many factors, including:
| ● | the progress and costs of our research and development activities; |
| ● | the costs of manufacturing our products; |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
| ● | the costs of our expanding sales and marketing activities, as well as the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and |
| ● | the magnitude of our general and administrative expenses. |
Until we can generate significant recurring revenues, profit and cash flow provided by operating activity we expect to satisfy future cash needs through debt or equity financings as well as governmental grants. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.
Cash Flows
AUD$
| For the twelve months ended December 31, |
||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Net cash used in operating activities | (6,207,518 | ) | (4,468,304 | ) | (1,806,179 | ) | ||||||
| Net cash used in investing activities | (1,463 | ) | (26,628 | ) | (30,534 | ) | ||||||
| Net cash provided by/(used in) financing activities | (421,496 | ) | 19,475,174 | 3,368,358 | ||||||||
| (Decrease) Increase in cash and cash equivalents and restricted cash | (6,630,477 | ) | 14,980,242 | 1,531,645 | ||||||||
| Cash and cash equivalents and restricted cash, at the beginning of the year | 18,976,542 | 3,996,300 | 2,464,655 | |||||||||
| Cash and cash equivalents and restricted cash, at the end of the year | 12,346,065 | 18,976,542 | 3,996,300 | |||||||||
Net cash used in operating activities
For the years ended December 31, 2023 and 2022, net cash used in operating activities was AUD$6,207,518 and AUD$4,468,304, respectively. The increase between the periods is primarily due to a decrease in receipts from customers of AUD$135,774 and under government grants received of AUD$626,466, net by increase in interest received of $272,872, together with an increase in payments to suppliers of AUS $1,249,322 mainly related with increased research and development activities related with release on new products and additional features and enhancement to current products, continued sale and marketing activities mainly in the United States and Europe to support the sales and marketing of our cybersecurity and cloud-based products and increased public company related costs as a result of our listing on the Nasdaq following our initial public offering in the United States in August 2022.
For the years ended December 31, 2022 and 2021, net cash used in operating activities was AUD$4,468,304 and AUD$1,806,179, respectively. The increase between the periods is primarily due to decrease in receipts from customers, together with increase in payments to supplier mainly related with increased sale and marketing activities mainly in the USA and Europe to support the sales and marketing of our cybersecurity and cloud-based products and increase in costs as a result of our listing on the Nasdaq following our initial public offering in the United States in August 2022, and certain non-recurring general and administrative costs.
Net cash used in investing activities
For the years ended December 31, 2023 and 2022, the net cash used in investing activities was AUD$1,463 and AUD$26,628, respectively.
For the years ended December 31, 2022 and 2021, the net cash used in investing activities was approximately AUD$26,628 and AUD$30,534, respectively.
Net cash provided by financing activities
For the year ended December 31, 2023 net cash used in financing activities was AUD$421,496 compared to net cash provided by financing activities of AUD$19,475,174 for the year ended December 31, 2022. For the year ended December 31, 2023, net cash used in financing activities was mostly attributed to repayment of our lease liabilities. For the year ended December 31, 2021, net cash provided by financing activities was mostly attributed to net proceeds from issuance of shares under August 2022 initial public offering on Nasdaq.
For the years ended December 31, 2022, and 2021, the net cash provided by financing activities was AUD$19,475,174 and AUD$3,368,358, respectively. For the year ended December 31, 2022, net cash provided by financing activities was mostly attributed to net proceeds from issuance of shares under August 2022 initial public offering on Nasdaq. For the year ended December 31, 2021, net cash provided by financing activities was mostly attributed to net proceeds from issuance of shares under May 2021 equity investment.
Commitments and Contractual Obligations
Our material contractual obligations as of December 31, 2023 which are not reflected as liabilities in the Consolidated Balance Sheets include operating lease obligations related with our facilities and for motor vehicles, of AUD$696,800 ($476,611), and net employee benefits related with severance pay and retirement obligations of AUD$295,542 ($202,151)
Other than the foregoing commitments, legal contingencies incurred in the normal course of business and employment contracts for key employees, we do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned subsidiaries or any interests in or relationships with any variable-interest entities that are not included in our consolidated financial statements.
Recent Offering
On January 25, 2024, we entered into a definitive securities purchase agreement with investors in connection with the issuance and sale in a registered direct offering and concurrent private placement, or the January 2024 Offering, of (i) 486,871 ADSs, (ii) pre-funded warrants to purchase 1,416,354 ADSs and (iii) unregistered common warrants to purchase up to 1,903,225 ADSs. The pre-funded warrants are immediately exercisable at an exercise price of $0.001 (approximately AUD$0.001) per ADS and will not expire until exercised in full. The unregistered common warrants have an exercise price of $1.55 (approximately AUD$2.27) per ADS (subject to adjustments as set forth therein), are immediately exercisable, and expire five years from the date of issuance. These warrants include a cashless exercise provision and repricing provisions, under certain circumstances. The aggregate gross proceeds from the January 2024 Offering were $2.95 million (approximately AUD$4.3 million) prior to deducting offering expenses payable by us. The January 2024 Offering closed on January 30, 2024.
C. Research and development, patents and licenses, etc.
For a description of our research and development programs and the amounts that we have incurred over the last two years pursuant to those programs, please see “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Operating Expenses— Research and Development Expenses, net” and “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Comparison of the year ended December 31, 2023 to the year ended December 31, 2022— Research and Development Expenses.”
D. Trend Information
We continue to closely monitor macro-economic conditions, including the headwinds caused by supply chain problems, inflation, increased interest rates, geopolitical events, military conflicts and other trends that have been adversely impacting economic activity. We have been assessing, on an ongoing basis, the implications of those global conditions for our operations, supply chain, liquidity, cash flow and product orders, and will act in an effort to mitigate adverse consequences as needed. To the extent inflation increases our costs and expenses, we could consider price increases to offset those cost pressures. Other than as disclosed elsewhere in this annual report, we are not currently aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2023 to the present time that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue, and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results.
The critical judgments and significant estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are:
Share-based payments
We have a share-based remuneration scheme for employees. The fair value of share options is estimated by using the Black-Scholes option pricing model, on the date of grant based on certain assumptions. Those assumptions are described in the share-based payments note and include, among others, the dividend growth rate, expected share price volatility and expected life of the options. The fair value of the equity settled options granted is charged to statement of comprehensive income over the vesting period of each tranche and the credit is taken to equity, based on our estimate of shares that will eventually vest.
Governmental liabilities on grants received
The Company measures the value of its governmental liabilities on grants received, each period, based on discounted cash flows derived from the Company's future anticipated revenues.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Company’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Company reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.
Financial Liability
The Company measures the value of the investors warrants and representative warrants, or Warrants, issued under our August 2022 initial public offering. The fair value of the Warrants is estimated by using the Hull-White option pricing model (trinomial Lattice model), on the date of the issuance or grant and remeasured at end of each reporting period (December 31, 2023 and 2022) using certain assumptions. These assumptions include, among others, the dividend growth rate, expected share price, volatility and expected life of the warrants, early exercise / exercise multiple, capital structure effects and trinomial steps.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information covering our current directors and executive officers.
| Name | Age | Position | ||
| Oren Elkayam | 50 | Chairman and Chief Executive Officer | ||
| Yossi Segal | 50 | Vice President, Research and Development and Director | ||
| Liad Gelfer | 50 | Director of Finance of Mobilicom Ltd. ; Chief Accounting Officer | ||
| Campbell McComb | 47 | Director | ||
| Jonathan Brett | 66 | Director |
Oren Elkayam, serves as our Chairman and as Chief Executive Officer. Mr. Elkayam is a tech executive, founder, and public company CEO who has led growth and innovation at tech companies from inception through cashflow-positive commercialization. Having raised over $100 million in venture and public company investments, Mr. Elkayam has led IPOs, developed breakthrough cybersecurity and wireless communications, established international sales and marketing channels, sold products and solutions to top-tier companies, and built high-performing corporate organizations from the ground up. Mr. Elkayam has served on the boards of several venture-backed firms. Mr. Elkayam has been instrumental in building Mobilicom’s product portfolio and global Tier-1 customer base while guiding the establishment of industry standards and regulatory policy for drones. Prior to starting Mobilicom, Mr. Elkayam was CEO of Sortech, a nano-powder materials technology company which he led from incubation to fully commercialized products and strategic deals with the top tier companies in its field. As VP of Business Development of Runcom, a fabless silicon company that develops and sells solutions for the broadband mobile communications industry, Oren initiated and negotiated contracts with top carrier companies such as Alcatel-Lucent, Nortel, KDDI, Mitsubishi, and Motorola, as well as leading investment rounds with international venture capital funds. Mr. Elkayam served as an Officer in the Israeli Air Force, led an elite R&D unit for large cutting-edge technology projects, and was involved with the Israel Space Agency. He holds a B.Sc in Electrical Engineering and an MBA (magna cum laude) from Ben-Gurion University, Israel.
Yossi Segal, serves as our Vice President of Research and Development and as a member of our board of directors. Mr. Segal is also a co-founder of Mobilicom Ltd. Before joining us in December of 2006, Mr. Segal was the Chief Technology Officer and a founding member of Runcom Ltd. from August 2000 to August 2006. Mr. Segal is a worldwide expert in OFDM/A and has written essential patents for OFDM/A technology, being the first to implement OFDM/A in a working product. He has also previously led the design and development groups of three mobile integrated circuits (IC chip) and eight wireless broadband systems which are currently in operation and sold worldwide. Mr. Segal has taken a leading role in several international wireless standards (IEEE and ETSI) as a committee voting member, and served in the Israeli Army as an officer in an elite electronic warfare research and development unit. Mr. Segal holds a Bachelor of Science degree (magna cum laude) and Master of Science degree in Electrical Engineering and a Master of Business Administration degree all from Ben-Gurion University, Israel.
Liad Gelfer, serves as the Director of Finance of Mobilicom Ltd. since July 2021. Mr. Gelfer brings vast experience and background in various emerging and publicly-traded companies. He has extensive knowledge in financial reporting, financial modelling and forecasting, mergers and acquisitions and initial public offering procedures and internal controls. From January 2020 to June 2021, Mr. Gelfer served as the Chief Financial Officer of Schindler. From January 2018 to December 2019, he was the Chief Financial Officer at Safend. From June 2009 to December 2017, Mr. Gelfer was the Senior Corporate Controller at Compugen Ltd. a dual listed (TASE and Nasdaq: CGEN) biotech company. He also served as Director of Finance of Supercom (NASADQ: SPCB) a hi-tech company. Mr. Gelfer holds a bachelor's degrees in Business Management and Accounting, and a Master of Business Administration degree in Accounting and Finance, both from the College of Management Academic Studies.
Campbell McComb, serves as a member of our board of directors since February 2017. Mr. McComb has over 20 years’ experience in funds management and investment banking and has overseen or been actively involved in the development of a number of successful funds management businesses. Mr. McComb is currently the Managing Director of Auctus Investment Group Limited (ASX: AVC), an alternative investment manager. Mr McComb previously served as Managing Director of Easton Investments, an ASX-listed investment company, where he was responsible for overseeing the growth of the advisory business to approximately AUD$1bn of funds under advice and management. Mr. McComb holds a bachelor’s degree in Economics from La Trobe University and a post-graduate diploma in Applied Finance and Investment from the Securities Institute of Australia. In 2013 he completed the Asialink Leaders Program through the University of Melbourne. He is a Graduate Member of the Australian Institute of Company.
Jonathan Brett, serves as a member of our board of directors since 2018. Mr. Brett is a highly strategic senior director with a strong track record of driving transformational business performance and profitability across multiple geographies. He currently serves (i) as the Executive Chairman of Stridecorp Equity Partners (since March 2016), (ii) as a Non-Executive Director and Chair of Audit and Risk at Corporate Travel Management Limited (Since January 2020), and (iii) as Non-Executive Director at Soho Property App (since March 2018). From September 2018 to July 2019, he was the Non- Executive Chairman for Indoor Skydive Australia Group Ltd. From July 2010 to August 2018, Mr. Brett served as a Non-Executive Director of Vocus Group Limited. He holds a bachelor’s degree in Commerce, a bachelor’s degree in Accountancy and master’s degree in Commerce from the University of Witwatersrand and is a Chartered Accountant (South Africa).
Family Relationships
There are currently no family relationships between any members of our executive management and our directors.
B. Compensation
Principles used to determine the nature and amount of remuneration
The objective of our reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. Our board of directors ensures that executive reward satisfies the following key criteria for good reward governance practices:
| ● | Competitiveness and reasonableness |
| ● | Acceptability to shareholders |
| ● | Performance linkage / alignment of executive compensation |
| ● | Transparency |
The board of directors is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the company depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel.
The reward framework is designed to align executive reward to shareholders’ interests. The board of directors has considered that it should seek to enhance shareholders’ interests by:
| ● | having economic profit as a core component of plan design |
| ● | focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value |
| ● | attracting and retaining high calibre executives |
Additionally, the reward framework should seek to enhance executives’ interests by:
| ● | rewarding capability and experience |
| ● | reflecting competitive reward for contribution to growth in shareholder wealth |
| ● | providing a clear structure for earning rewards |
In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors’ fees and payments are reviewed annually by the board of directors. The board of directors may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line with the market.
On October 19, 2023, we voluntarily delisted our ordinary shares from the ASX and our ADS began trading exclusively on the Nasdaq on October 19, 2023. Our constitution (similar to articles of association) require that the aggregate maximum non-executive directors’ remuneration be determined by the Company in a general meeting. The most recent determination by shareholders in 2017 set the maximum annual aggregate collective remuneration of all non-executive directors of AUD$250,000.
Executive remuneration
We aim to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components.
The executive remuneration and reward framework has five components:
| ● | base pay and non-monetary benefits; |
| ● | short-term performance incentives; |
| ● | share-based payments; and |
| ● | other remuneration such as Israel social benefits, U.S. 401K plan and long service leave. |
The combination of these comprises the executive’s total remuneration.
Fixed remuneration, consisting of base salary, Israel social benefits, U.S. 401K plan, superannuation and non-monetary benefits, are reviewed annually by the board of directors based on individual and business unit performance, our overall performance and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to us and provides additional value to the executive.
The short-term incentives, or STI program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators, or KPI’s being achieved. KPI’s include profit contribution, customer satisfaction, leadership contribution and product management.
The long-term incentives include long service leave and share-based payments. Shares may be awarded to executives over a period of three years based on long-term incentive measures. These include increase in shareholders’ value relative to the entire market and the increase compared to our direct competitors.
Details of Remuneration for fiscal year 2023
The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended December 31, 2023. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.
All amounts reported in the tables below reflect the cost to us, in thousands of Australian dollars, for the year ended December 31, 2023.
| Salary, bonuses and Related Benefits |
Pension, Retirement and Other Similar Benefits |
Share Based Compensation |
Total | Total | ||||||||||||||||
| AUD$ | AUD$ | AUD$ | AUD$ | $ | ||||||||||||||||
| All directors and senior management as a group, consisting of 5 persons as of December 31, 2023 (1)(2)(3)(4)(5)(6)(7) | 1,044,284 | 253,199 | 698,900 | 1,996,383 | 1,365,526 | |||||||||||||||
| (1) | 9,500,000 options exercisable to ordinary shares, were granted on July 9, 2021, at an exercise price of AUD$0.08, vesting over 3 years. |
| (2) | 1,000,000 options exercisable to ordinary shares, were granted on April 14, 2022, at an exercise price of AUD$0.05, vesting over 4 years. |
| (3) | On May 31, 2023, Mr. McComb was granted 15,312,500 options exercisable to ordinary shares, at an exercise price of AUD$0.008, vesting over 3 years. |
| (4) | On May 31, 2023, Mr. Brett was granted 15,312,500 options exercisable to ordinary shares, at an exercise price of AUD$0.008, vesting over 3 years. |
| (5) | On May 31, 2023, Mr. Elkayam was granted 109,375,000 options exercisable to ordinary shares, at an exercise price of AUD$0.008, vesting over 3 years. |
| (6) | On May 31, 2023, Mr. Segal was granted 54,687,500 options exercisable to ordinary shares, at an exercise price of AUD$0.008, vesting over 3 years. |
| (7) | On August 3, 2023, Mr. Gelfer was granted 3,500,000 options exercisable to ordinary shares, at an exercise price of AUD$0.008, vesting over 3 years. |
C. Board Practices
Board of Directors
Our board of directors currently consists of four members.
Directors may be elected at each annual general meeting of our shareholders and, subject to any express contractual terms which may apply to executive Directors, serve until they retire or are removed by a majority vote of shareholders. In addition, our Constitution require that the number nearest to but not more than one-third of the directors (excluding the CEO) must retire at each annual general meeting – directors who retire in this manner are eligible for re-election at the same annual general meeting. We believe that each of our directors has relevant industry experience. The membership of our board of directors is directed by the following requirements:
| ● | our Constitution specifies that the number of directors must not be lower than that required by Australian law (being three directors) and not greater than twelve Directors and our board of directors may determine the number of directors within those limits; |
| ● | as set forth in our Board Charter, it is recommended that the membership of the board of directors should consist of a majority of independent directors who satisfy the independence criteria guidelines recommended by the ASX Corporate Governance Principles and Recommendations 4th Edition; |
| ● | our board of directors should, collectively, have the appropriate level of personal qualities, skills, experience, and time commitment to properly fulfill its responsibilities or have ready access to such skills where they are not available. |
Our board of directors has delegated responsibility for the conduct of our businesses to the Chief Executive Officer, but remains responsible for overseeing the performance of management. Our board of directors has established delegated limits of authority, which define the matters that are delegated to management and those that require board of directors’ approval. Under the Corporations Act, at least two of our directors must be resident Australians.
Committees
To assist our board of directors with the effective discharge of its duties, we have established a Remuneration and Nomination Committee and an Audit and Risk Committee, which committees operate under a specific charter approved by our board of directors.
Remuneration and Nomination Committee
The members of our Remuneration and Nomination Committee are Jonathan Brett and Campbell McComb. Mr. Brett acts as chairman of the committee.
The committee’s role involves:
| ● | identifying, evaluating and recommending qualified nominees to serve on our board of directors; |
| ● | evaluating, adopting and administering our compensation plans and similar programs advisable for us, as well as modifying or terminating existing plans and programs; |
| ● | establishing policies with respect to equity compensation arrangements; and |
| ● | overseeing, reviewing and reporting on various remuneration matters to our board of directors. |
Audit and Risk Committee
We established an Audit and Risk Committee, whose members consists of Campbell McComb and Jonathan Brett. Subject to applicable phase-in requirements, the members of the committee meet the criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable rules of the Nasdaq Capital Market. Each member of our audit committee meets the financial literacy requirements of the listing standards of the Nasdaq Capital Market. The principal duties and responsibilities of our audit committee will include, among other things:
| ● | overseeing and reporting on various auditing and accounting matters to our board of directors, including the selection of our independent accountants, the scope of our annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices; |
| ● | overseeing and reporting on various risk management matters to our board of directors; |
| ● | considering and approving or disapproving all related-party transactions; |
| ● | reviewing our annual and semi-annual financial statements and reports and discussing the statements and reports with our independent registered public accounting firm and management; |
| ● | reviewing and pre-approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services; |
| ● | evaluating the performance of our independent registered public accounting firm and deciding whether to retain their services; and |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters. |
Code of Conduct
We have established a Corporate Governance Statement, which includes a code of conduct. Our Corporate Governance Statement sets out the standards of behavior that apply to every aspect of our dealings and relationships, both within and outside Mobilicom. The following standards of behavior apply to all directors, executive officers and employees of Mobilicom:
| ● | comply with all laws that govern us and our operations; |
| ● | act honestly and with integrity and fairness in all dealings with others and each other; |
| ● | avoid or manage conflicts of interest; |
| ● | use our assets responsibly and in the best interests of Mobilicom; and |
| ● | be responsible and accountable for our actions. |
The Code of Conduct is available on our website at https://mobilicom-ltd.com.au/.
Board Diversity Matrix (As of March 22, 2024)
| Country of Principal Executive Offices | Israel | |||
| Foreign Private Issuer | Yes | |||
| Disclosure Prohibited under Home Country Law | No | |||
| Total Number of Directors | 4 |
| Part I: Gender Identity | Female | Male | Non- Binary | Did
Not Disclose Gender |
||||||||
| Directors | 0 | 3 | 0 | 1 | ||||||||
| Part II: Demographic Background | ||||||||||||
| Underrepresented Individual in Home Country Jurisdiction | 0 | |||||||||||
| LGBTQ+ | 0 | |||||||||||
| Did Not Disclose Demographic Background | 1 | |||||||||||
D. Employees.
See “Item 4.B. Business Overview—Employees.”
E. Share Ownership.
See “Item 7.A. Major Shareholders” below.
Employee Share Option Plan
Our employee stock ownership plan, or the Option Plan, was previously approved by the shareholders at our annual general meeting on May 31, 2023. Under the rules of the Option Plan, our board of directors may offer options to our employees and consultants. A summary of the Option Plan is set out below.
Eligible Employees
Means any of our full or part time employees or consultants of us or those of our associated bodies corporate, or other such persons that our board of directors see fit, excluding members of our board of directors (unless separate shareholder approval is obtained).
Option
Means an option to acquire a Share issued in accordance with the Option Plan.
Purpose
The Option Plan is intended to provide mechanisms through which we can incentivize key management, staff and contractors.
Option Plan Administration
The Option Plan shall be administered by the board of directors who shall have power to:
| (i) | determine appropriate procedures for administration of the Option Plan consistent with the Option Plan Terms and Conditions; |
| (ii) | resolve conclusively all questions of fact or interpretation or dispute in connection with the Option Plan and settle, as the directors in their absolute discretion determine expedient, any difficulties or anomalies howsoever arising with or by reason of the operation of the Option Plan; and |
| (iii) | delegate to any one or more persons for such period and on such conditions as it may determine the exercise of any of the directors’ powers or discretions arising under the Option Plan. |
Eligibility
Eligible Employees entitled to participate in the Option Plan shall be determined by the directors in their absolute discretion taking into account a person’s skills, experience, length of service, remuneration level and such other criteria as the directors consider appropriate in the circumstance.
Offer and Application
An application to be issued Options may be made by Eligible Employees invited to participate in the Option Plan using the acceptance form which will accompany the invitation to participate in the Option Plan.
The invitation to an Eligible Employee to participate in the Option Plan will include:
| (i) | whether the Options issued may incorporate performance related factors; |
| (ii) | the number of Options to be issued to an Eligible Employee under the Option Plan; |
| (iii) | the exercise price of the Options, subject to applicable laws; and |
| (iv) | the periods during which the Options may be exercised or will vest. |
Options not Transferrable
An Option may not be transferred or assigned except that a legal personal representative of a holder of an Option who has died or whose estate is liable to be dealt under the laws relating to mental health will be entitled to be registered as the holder of that Option after the production to the directors of such documents or other evidence as the directors may reasonably require to establish that entitlement.
Acquisition Price
Options will be issued free of charge to Eligible Employees.
Maximum Number of Options and Shares
The total number of securities that can be issued pursuant to the Option Plan without further shareholder approval on and from the Meeting is limited to 100,000,000.
Subject to compliance with the ‘20% issue limit’ set out in section 1100V(2)(b)(ii) of the Corporations Act, Options may be offered under the Option Plan without the issue of a disclosure document in accordance with Chapter 6D of the Corporations Act. The Company may also issue Options (whether under this Option Plan or otherwise) without the issue of a disclosure document in reliance on other exceptions to the disclosure requirement of the Corporations Act 2001 (Cth) including issued that did not need disclosure to investors because of section 708 of the Corporations Act.
Lapse of Options
Unless the directors in their absolute discretion determine otherwise, Options shall lapse upon the earlier of:
| (i) | the expiry of the exercise date; |
| (ii) | the expiry of 60 days after the Option holder ceases to be an Eligible Employee by reason of dismissal, resignation or termination of employment, office or services for any reason; |
| (iii) | the expiry of 60 days after the Option holder ceases to be an Eligible Employee by reason of retirement; or |
| (iv) | a determination by the directors acting reasonably that the Option holder has acted fraudulently, dishonestly or in breach of his or her obligations to us or an associated body corporate. |
Rights Attaching to Shares
Shares issued pursuant to the exercise of Options will in all respects, including bonus issues and new issues, rank equally and carry the same rights and entitlements as other Shares on issue.
Capital Event/Change of Control
Notwithstanding the Terms and Conditions, upon the occurrence of a Trigger Event the directors may determine:
| (i) | that the Options may be exercised at any time from the date of such determination, and in any number until the date determined by the directors acting bona fide so as to permit the holder to participate in any change of control arising from a Trigger Event provided that the directors will forthwith advise in writing each holder of such determination (thereafter, the Options shall lapse to the extent they have not been exercised); or |
| (ii) | to use their reasonable endeavors to procure that an offer is made to holders of Options on like terms (having regard to the nature and value of the Options) to the terms proposed under the Trigger Event in which case the directors shall determine an appropriate period during which the holder may elect to accept the offer and, if the holder has not so elected at the end of that period, the Options shall immediately become exercisable and if not exercised within 10 days, shall lapse. |
Trigger Event means:
| (i) | the dispatch of a notice of meeting to consider a scheme of arrangement us and its creditors or members or any class thereof pursuant to section 411 of the Corporations Act; |
| (ii) | the service of a bidder’s statement or a like document on us; or |
| (iii) | the date upon which a person or a group of associated person becomes entitled, subsequent to the date of issue of the Option, to sufficient Shares to give it or them the ability, in general meeting to replace all, or allow a majority, of directors in circumstances where such ability was not already held by a person associated with such person or group of associated persons. |
No Quotation of Options
The Options will not be quoted on Nasdaq. However, application will be made to Nasdaq for official quotation of the Shares issued on the exercise of the Options.
As of December 31, 2023, the Company has issued 255,850,000 options under the Option Plan to employees (including directors and/or their nominee(s)) and consultants of the Company at an exercise price of AUD$0.008 ($0.005). 70,000,000 options vest over a 1 year period following issue, 140,000,000 options vest equally quarterly over the period between 2 years from issue and 3 years from issue, 23,350,000 options are vested over 3 years period, and 22,500,000 options are vested over 4 years period.
Assessed fair value of options granted to personnel at their grant date is allocated equally over the period from grant date to vesting date, and the amount for the 2023 financial year is included in the remuneration table as set out above. Fair values at grant date are determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.
All options granted under the Option Plan are deemed to be granted for no consideration.
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
None.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table and accompanying footnotes present certain information regarding the beneficial ownership of our ordinary shares based on 1,460,566,218 ordinary shares outstanding as of March 22, 2024 by:
| ● | each person known by us to be the beneficial owner of more than 5% of our ordinary shares; |
| ● | each of our directors and executive officers individually; and |
| ● | all of our directors and executive officers as a group. |
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including options that are exercisable within 60 days of March , 2024. Information with respect to beneficial ownership has been furnished to us by each director, executive officer, or 5% or more shareholder, as the case may be. Ordinary shares subject to options currently exercisable or exercisable within 60 days of February 29, 2024 are deemed to be outstanding for computing the percentage ownership of the person holding these options and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for computing the percentage of any other person.
Unless otherwise indicated, to our knowledge each shareholder possesses sole voting and investment power over the ordinary shares listed subject to community property laws, where applicable. None of our shareholders have different voting rights from other shareholders. Unless otherwise indicated, the address for each of the persons listed in the table below is Level 21, 459 Collins Street, Melbourne, VIC, Australia, 3000.
| Number of Shares Beneficially Owned |
Percentage Owned |
|||||||
| Holders of more than 5% of our voting securities: | ||||||||
| AWM Investment Company, Inc. (1) | 117,727,500 | 7.5 | % | |||||
| Bard Associates, Inc. (2) | 121,075,625 | 8.0 | % | |||||
| Directors and senior management who are not 5% holders: | ||||||||
| Oren Elkayam | 40,929,775 | 2.8 | % | |||||
| Yossi Segal | 33,092,158 | 2.3 | % | |||||
| Campbell McComb | 5,145,120 | * | ||||||
| Jonathan Brett | 3,833,334 | * | ||||||
| Liad Gelfer | 500,000 | * | ||||||
| All directors and senior management as a group (5 persons) (3) | 83,500,387 | 5.7 | % | |||||
| * | Represents beneficial ownership of less than 1% of our outstanding ordinary shares. |
| (1) | Based on information contained in a Schedule 13G/A filed with the SEC on February 9, 2024 by AWM Investment Company, Inc. Consists of (i) 10,646 ADS held directly by AWM Investment Company, Inc, (ii) warrants to purchase 58,641 ADSs held by Special Situations Cayman Fund, L.P., (iii) 35,547 ADSs and warrants to purchase 196,074 ADSs held by Special Situations Fund III QP, L.P., (iv) 2,921 ADSs and warrants to purchase 17,247 ADSs held by Special Situations Technology Fund, L.P., and (v) 15,886 ADSs and warrants to purchase 91,138 ADSs held by Special Situations Technology Fund II, L.P. AWM Investment Company, Inc. is the investment adviser to Special Situations Cayman Fund, L.P., a Cayman Islands Limited Partnership, Special Situations Fund III QP, L.P., a Delaware limited partnership, Special Situations Technology Fund, L.P., a Delaware limited partnership and Special Situations Technology Fund II, L.P., a Delaware limited partnership. The warrants described above are subject to 4.99% blocker. Each ADS is represented by 275 ordinary shares. |
| (2) | Based on information contained in a Schedule 13G/A filed with the SEC on January 4, 2024, by Bard Associates, Inc. Consist of 225,475 ADSs and warrants to purchase 214,800 ADSs. Each ADS is represented by 275 ordinary shares. |
| (3) | Includes (i) a total of 74,667,053 ordinary shares held by directors and senior management, and (ii) a total of 8,833,334 shares subject to options that are beneficially owned by directors and senior management that are exercisable within 60 days after March 22, 2024, with a weighted average exercise price of AUD$0.09 ($0.06) per share and which expire between June 2025 and April 2027. Each ADS is represented by 275 ordinary shares. |
Record Holders
Based upon a review of the information provided to us by our previous registrar in Australia, as of March 15, 2024, there were a total of 253 holders of record of our ordinary shares, of which 215 record holders had registered addresses in Australia and 19 record holders had registered addresses in the United States. The Bank of New York Mellon, or BNY, is the holder of record for our American Depositary Receipt program, pursuant to which each ADS represents 275 ordinary shares. As of March 14, 2024, BNY held 1,375,443,300 ordinary shares representing approximately 94.2% of our issued share capital held at that date. Certain of these ordinary shares were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not representative of the number of beneficial holders or of the residence of beneficial holders.
We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to us which would result in a change in control of us at a subsequent date.
Changes in Percentage Ownership by Major Shareholders
To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder since January 1, 2021.
B. Related Party Transactions
Other than transactions related to compensation of our executive officers and directors as described under “Compensation” and “Employment Agreements with Executive Officers” sections above, we have not entered into any related party transaction.
Pursuant to our Constitution and deed of indemnity, insurance and access agreements, we have agreed to indemnify directors to the full extent permitted by law, and to maintain director and office insurance for our officers and directors. policy as expressed in the Securities Act and is therefore unenforceable.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION.
A. Statements and Other Financial Information.
See “Item 18. Financial Statements.”
Legal Proceedings
See “Item 4.B. Business Overview—Legal Proceedings.”
Dividends
We have not declared or paid any dividends on our ordinary shares, and we do not anticipate paying any dividends in the foreseeable future. Our board of directors presently intends to reinvest all earnings in the continued development and operation of our business.
Payment of dividends in the future, if any, will be at the discretion of our board of directors. If our board of directors elects to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial conditions, contractual restrictions and other factors that our board of directors may deem relevant.
B. Significant Changes
Other than as otherwise described in this Annual Report on Form 20-F and as set forth below, no significant change has occurred in our operations since the date of our financial statements included in this Annual Report on Form 20-F.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
On August 25, 2022, our ADSs and warrants commenced trading on the Nasdaq Capital Market under the symbol “MOB,” and “MOBBW,” respectively. The Company commenced trading on the ASX on May 2, 2017.
On October 19, 2023, the company ceased trading on the ASX. Our ADSs and warrants continue to be traded, now exclusively, on the Nasdaq Capital Market under the symbol “MOB,” and “MOBBW,” respectively.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs and warrants trade exclusively on the Nasdaq Capital Market under the symbol “MOB,” and “MOBBW,” respectively.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Articles of Association
A copy of our Constitution is attached as Exhibit 1.1 to this Annual Report on Form 20-F. Other than as disclosed below, the information called for by this Item is set forth in Exhibit 2.1 to this Annual Report on Form 20-F and is incorporated by reference into this Annual Report on Form 20-F.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4. “Information on Our Company,” Item 7B “Major Shareholders and Related Party Transactions - Related Party Transactions” or elsewhere in this Annual Report on Form 20-F.
D. Exchange Controls
There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.
E. Taxation.
The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, or other taxing jurisdiction.
The following is a summary of material U.S. federal and Australian income tax considerations to U.S. holders, as defined below, of the acquisition, ownership and disposition of ordinary shares, ADSs, and warrants. This discussion is based on the laws in force as of the date of this Annual Report on Form 20-F, and is subject to changes in the relevant income tax law, including changes that could have retroactive effect. The following summary does not take into account or discuss the tax laws of any country or other taxing jurisdiction other than the United States and Australia. Holders are advised to consult their tax advisors concerning the overall tax consequences of the acquisition, ownership and disposition of ordinary shares, ADSs and warrants in their particular circumstances. This discussion is not intended, and should not be construed, as legal or professional tax advice.
This summary does not address the effects of U.S. federal estate and gift tax laws, the alternative minimum tax, or any state and local tax considerations within the United States, and is not a comprehensive description of all U.S. federal or Australian income tax considerations that may be relevant to a decision to acquire or dispose of ordinary shares, ADSs, or warrants. Furthermore, this summary does not address U.S. federal or Australian income tax considerations relevant to holders subject to taxing jurisdictions other than, or in addition to, the United States and Australia, and does not address all possible categories of holders, some of which may be subject to special tax rules.
Certain Material U.S. Federal Income Tax Considerations
Subject to the limitations described in the next two paragraphs, the following discussion summarizes certain material U.S. federal income tax consequences to a “U.S. Holder” arising from the purchase, ownership and sale of our ordinary shares or ADSs. For this purpose, a “U.S. Holder” is a holder of our ordinary shares or ADSs that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.
This summary does not purport to be a comprehensive description of all of the U.S. federal income tax considerations that may be relevant to a decision to purchase our ordinary shares or ADSs. This summary generally considers only U.S. Holders that will own our ordinary shares or ADSs as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’s status as a U.S. Holder. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, and the Convention between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, as amended (the “Treaty”), all as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the Internal Revenue Service, or the IRS, with regard to the U.S. federal income tax treatment of an investment in our ordinary shares or ADSs by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with the conclusions set forth below.
This discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. Holder based on such holder’s particular circumstances and in particular does not discuss any estate, gift, generation-skipping transfer, state, local, excise or foreign tax considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank, life insurance company, regulated investment company, or other financial institution or “financial services entity;” (2) a broker or dealer in securities or foreign currency; (3) a person who acquired our ordinary shares or ADSs in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our ordinary shares or ADSs as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, ordinary shares or ADSs representing 10% or more of the stock of our Company. Additionally, the U.S. federal income tax treatment of partnerships (or other pass-through entities) or persons who hold ordinary shares or ADSs through a partnership or other pass-through entity are not addressed.
EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISER FOR THE SPECIFIC TAX CONSEQUENCES TO THAT INVESTOR OF PURCHASING, HOLDING OR DISPOSING OF OUR ORDINARY SHARES OR ADSs, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.
Taxation of Dividends Paid on Ordinary Shares or ADSs
We do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading “Passive Foreign Investment Companies” below and the discussion of “qualified dividend income” below, a U.S. Holder, other than certain U.S. Holders that are U.S. corporations, will be required to include in gross income as ordinary income the amount of any distribution paid on the ordinary shares or ADSs (including the amount of any tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis for the ordinary shares or ADSs to the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend income.
In general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders that are individuals, estates or trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” is a corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS has stated that the Treaty satisfies this requirement and we believe we are eligible for the benefits of the Treaty.
In addition, our dividends will be qualified dividend income if our ordinary shares or ADSs are readily tradable on the Nasdaq Capital Market or another established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under “—Passive Foreign Investment Companies.” A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has not held our ordinary shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend date, or (2) to the extent the U.S. Holder is under an obligation to make related payments with respect to positions in substantially similar or related property. Any days during which the U.S. Holder has diminished its risk of loss on our ordinary shares or ADSs are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the preferential rate of taxation.
The amount of a distribution with respect to our ordinary shares or ADSs will be measured by the amount of the fair market value of any property distributed, and for U.S. federal income tax purposes, the amount of any Australian taxes withheld therefrom. Cash distributions paid by us in Australian dollars will be included in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such Australian dollars for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts the Australian dollars into U.S. dollars or otherwise disposes of them, any subsequent gain or loss in respect of such Australian dollars arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.
Subject to certain significant conditions and limitations, including potential limitations under the Treaty, U.S. Holders may be entitled to a credit against their U.S. federal income tax liability or a deduction against U.S. federal taxable income in an amount equal to the non-refundable Australian tax withheld on distributions on our ordinary shares or ADSs. The election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Holder or withheld from a U.S. Holder that year. Distributions paid on our ordinary shares or ADSs will generally be treated as passive income that is foreign source for U.S. foreign tax credit purposes. As a result of recent changes to the U.S. foreign tax credit rules, a withholding tax generally will need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. Holder. We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any withholding tax on dividends paid by us will be creditable. U.S. Holders should consult their own tax advisors to determine whether and to what extent they would be entitled to such credit.
Taxation of the Sale, Exchange or other Disposition of Ordinary Shares or ADSs
Except as provided under the PFIC rules described below under “—Passive Foreign Investment Companies,” upon the sale, exchange or other disposition of our ordinary shares or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s tax basis for the ordinary shares or ADSs, determined in U.S. dollars, and the U.S. dollar value of the amount realized on the disposition (or its U.S. dollar equivalent determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on the sale, exchange or other disposition of ordinary shares or ADSs will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at the time of the disposition. For foreign tax credit limitation purposes, gain or loss recognized upon a disposition generally will be treated as from sources within the United States. However, in limited circumstances, the Treaty can re-source U.S. source income as Australian source income. Individuals who recognize long-term capital gains may be taxed on such gains at reduced rates of tax. The deduction of capital losses is subject to various limitations.
You should consult your own tax advisor regarding the availability of a foreign tax credit or deduction in respect of any Australian tax imposed on a sale or other disposition of ordinary shares or ADSs. See “Australian Tax Considerations—Tax on Sales or other Dispositions of Shares.”
Passive Foreign Investment Companies
Special U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income tax purposes for any taxable year that either:
| ● | 75% or more of our gross income (including our pro rata share of gross income for any company, in which we are considered to own 25% or more of the shares by value), in a taxable year is passive; or |
| ● | At least 50% of our assets generally determined on the basis of a quarterly average and based upon fair market value (including our pro rata share of the assets of any company in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income. |
For this purpose, passive income generally consists of rents, dividends, interest, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions. Cash is treated as generating passive income.
Based primarily on the composition of our assets, it is possible that we will be a PFIC for our tax year ending December 31, 2023, and for subsequent tax years. However, the determination of PFIC status is a factual determination that must be made annually at the close of each taxable year and therefore, there can be no certainty as to our PFIC status for a taxable year until the close of that taxable year. Our PFIC status could change depending upon, among other things, a decrease in the trading price of our ordinary shares or ADSs and how quickly we make use of the proceeds from the offering, as well as changes in the composition and relative values of our assets and the composition of our income. Moreover, the rules governing whether certain assets are active or passive are complex and in some cases their application can be uncertain. If we were a PFIC in any year during a U.S. holder’s holding period for the ordinary shares or ADSs, we generally would continue to be treated as a PFIC for each subsequent year during which the U.S. holder owned the ordinary shares or ADSs.
If we currently are or become a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain “excess distributions” by us and upon disposition of our ordinary shares or ADSs at a gain: (1) have such excess distribution or gain allocated ratably over the U.S. Holder’s holding period for the ordinary shares or ADSs, as the case may be; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. Distributions received by a U.S. Holder in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the ordinary shares or ADSs will be treated as excess distributions. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.
We may invest in the equity of foreign corporations that are PFICs or may own subsidiaries that are PFICs (any such entity, a “lower-tier PFIC”). If we are classified as a PFIC, under attribution rules, U.S. Holders will be subject to the PFIC rules with respect to their indirect ownership interests in such lower-tier PFICs, such that a disposition by us of the shares of the lower-tier PFIC or receipt by us of a distribution from the lower-tier PFIC generally will be treated as a deemed disposition of such shares or the deemed receipt of such distribution by the U.S. Holder, subject to taxation under the PFIC rules even though the U.S. Holder does not receive any proceeds from those dispositions or distributions. There can be no assurance that a U.S. Holder will be able to make a QEF election with respect to any lower-tier PFICs in which we invest. U.S. Holders are urged to consult their tax advisors about the application of the PFIC rules to an investment by us in a lower-tier PFIC.
The PFIC rules described above would not apply to a U.S. Holder who makes a qualified electing fund, or QEF election for all taxable years that such U.S. Holder has held the ordinary shares or ADSs while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinary income and such U.S. Holder’s pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the IRS. While we will make an effort to provide such information, we cannot assure you that we will be able to do so. If we are unable to provide this information, the QEF election will not be available to you.
In addition, in certain circumstances, in lieu of being subject to the PFIC rules discussed above, you may make an election – the “mark-to-market election” to include in your income each year the unrealized appreciation of your PFIC stock during the year. The mark-to-market election is available only if our stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election may be available to U.S. Holders of ADSs if our ADSs are listed on Nasdaq, which constitutes a qualified exchange, although there can be no assurance that our ADSs will be “regularly traded” for purposes of the mark-to-market election. Additionally, because a mark-to-market election cannot be made for equity interests in any lower-tier PFIC that we may own, a U.S. Holder that makes a mark-to-mark election with respect to us may continue to be subject to the PFIC rules with respect to any indirect investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.
If you make an effective mark-to-market election, you will include in each year that we are a PFIC as ordinary income the excess of the fair market value of your ordinary shares or ADSs at the end of your taxable year over your adjusted tax basis in the ordinary shares or ADSs. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the ordinary shares or ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, any gain you recognize upon the subsequent sale or other disposition of your ordinary shares or ADSs in a year that we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but your basis in your shares will have been adjusted, as described below, to reflect the amount of ordinary gain or loss that you realized as a result of each mark-to-market election. Any gain or loss you recognize upon the sale or other disposition of your ordinary shares or ADSs in a year when we are not a PFIC will be a capital gain or loss. See “Taxation of the Sale, Exchange or other Disposition of ordinary shares or ADSs” above for the treatment of capital gains and losses.
Your adjusted tax basis in the ordinary shares or ADSs will be increased by the amount of any income inclusion and decreased by the amount of any losses under the mark-to-market rules. If you make a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares or ADSs are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. You are urged to consult your tax advisors about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.
U.S. Holders who hold our ordinary shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules.
Tax on Net Investment Income
U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (including dividends on and gains from the sale or other disposition of our ordinary shares or ADSs), or in the case of estates and trusts on their net investment income that is not distributed to beneficiaries of the estate or trust. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.
Backup Withholding Tax and Information Reporting Requirements
Payments of dividends with respect to the ordinary shares or ADSs and proceeds from the sale, exchange or other disposition of the ordinary shares or ADSs, by a U.S. paying agent or other U.S. intermediary, or made into the United States, will be reported to the IRS and to the U.S. holder as may be required under applicable Treasury regulations. Backup withholding may apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to comply with applicable certification requirements. Certain U.S. Holders (including, among others, corporations) are not subject to backup withholding and information reporting. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a U.S. Holder will be refunded (or credited against such U.S. Holder’s U.S. federal income tax liability, if any), provided the required information is timely furnished to the IRS. Prospective investors should consult their own tax advisors as to their qualification for exemption from backup withholding and the procedure for establishing an exemption.
Certain individual U.S. Holders (and under Treasury regulations, certain entities) may be required to report to the IRS (on Form 8938), and/or on FinCEN Form 114 (Report of Foreign Bank and Financial Accounts (FBAR)) information with respect to their investment in the ordinary shares or ADSs not held through an account with a U.S. financial institution. U.S. Holders who fail to report required information could become subject to substantial penalties. U.S. Holders are encouraged to consult with their own tax advisors regarding foreign financial asset reporting requirements with respect to their investment in the ordinary shares or ADSs.
U.S. Holders who acquire any of the ordinary shares or ADSs for cash may be required to file an IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) with the IRS and to supply certain additional information to the IRS if (i) immediately after the transfer, the U.S. Holder owns directly or indirectly (or by attribution) at least 10% of our total voting power or value or (ii) the amount of cash transferred to us in exchange for the ordinary shares or ADSs when aggregated with all related transfers under applicable regulations, exceeds U.S.$100,000. Substantial penalties may be imposed on a U.S. Holder that fails to comply with this reporting requirement. Each U.S. Holder is urged to consult with its own tax advisor regarding this reporting obligation.
If we are treated as a PFIC, U.S. Holders generally are required to file to file annual tax returns (including on IRS Form 8621) containing such information as the U.S. Treasury requires (whether or not a mark-to-market election is or has been made). A U.S. Holder that is not otherwise required to file a U.S. tax return must still file IRS Form 8621 in accordance with the instructions for such form. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related taxable year may not close until three years after the date on which the required information is filed. U.S. Holders should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares in a PFIC, including IRS Form 8621.
Exercise and Expiration of Warrants
In general, a U.S. Holder will not recognize gain or loss for U.S. federal income tax purposes upon the exercise of warrants into ADSs. The U.S. federal income tax treatment of a cashless exercise of warrants into our ADSs is unclear. U.S. Holders should consult their tax advisors regarding the U.S. federal income tax consequences of a cashless exercise of warrants.
The expiration of a warrant will be treated as if the U.S. Holder sold or exchanged the warrant and recognized a capital loss equal to the U.S. Holder’s tax basis in the warrant.
Certain Adjustments to the Warrants
Under Section 305 of the Code, an adjustment to the number of ADSs issued on the exercise of the warrants, or an adjustment to the exercise price of the warrants, may be treated as a constructive distribution to a U.S. Holder of the warrants if, and to the extent that, such adjustment has the effect of increasing such U.S. Holder’s proportionate interest in our “earnings and profits” or assets, depending on the circumstances of such adjustment (for example, if such adjustment is to compensate for a distribution of cash or other property to our shareholders). An adjustment to the warrants that could result in a constructive distribution to a U.S. Holder would be treated as described under “Taxation of Dividends Paid on ordinary shares or ADSs” above, and the tax treatment of distributions on the warrants is unclear. Any resulting withholding tax attributable to deemed dividends would be collected from other amounts payable or distributable to the U.S. Holder. U.S. Holders should consult their tax advisors regarding the proper treatment of any adjustments to and distributions on the warrants.
The discussion above is not intended to constitute a complete analysis of all tax considerations applicable to an investment in ordinary shares, warrants, or ADSs. You should consult with your own tax advisor concerning the tax consequences to you in your particular situation.
AUSTRALIAN TAX CONSIDERATIONS
In this section, we discuss the material Australian income tax, stamp duty and goods and services tax considerations related to the acquisition, ownership and disposal by the absolute beneficial owners of the ordinary shares or ADSs. This discussion represents the opinion of Australian counsel to Mobilicom.
It is based upon existing Australian tax law as of the date of this Annual Report on Form 20-F, which is subject to change, possibly retrospectively. This discussion does not address all aspects of Australian tax law which may be important to particular investors in light of their individual investment circumstances, such as shares held by investors subject to special tax rules (for example, financial institutions, insurance companies or tax-exempt organizations). In addition, this summary does not discuss any foreign or state tax considerations, other than stamp duty and goods and services tax.
Prospective investors are urged to consult their tax advisors regarding the Australian and foreign income and other tax considerations of the acquisition, ownership and disposition of the shares. As used in this summary a “Non-Australian Shareholder” is a holder that is not an Australian tax resident and is not carrying on business in Australia through a permanent establishment.
Nature of ADSs for Australian Taxation Purposes
Ordinary shares represented by ADSs held by a U.S. holder will be treated for Australian taxation purposes as held under a “bare trust” for such holder. Consequently, the underlying ordinary shares will be regarded as owned by our ADS holder for Australian income tax and capital gains tax purposes. Dividends paid on the underlying ordinary shares will also be treated as dividends paid to our ADS holder, as the person beneficially entitled to those dividends. Therefore, in the following analysis we discuss the tax consequences to Non-Australian Shareholders of ordinary shares for Australian taxation purposes. We note that the holder of an ADS will be treated for Australian tax purposes as the owner of the underlying ordinary shares that are represented by such ADSs.
Taxation of Dividends
Australia operates a dividend imputation system under which dividends may be declared to be “franked” to the extent of tax paid on company profits. Fully franked dividends are not subject to dividend withholding tax. An exemption for dividend withholding tax can also apply to unfranked dividends that are declared to be conduit foreign income, or CFI, and paid to Non-Australian Shareholders. Dividend withholding tax will be imposed at 30%, unless a shareholder is a resident of a country with which Australia has a double taxation agreement and qualifies for the benefits of the treaty. Under the provisions of the current Treaty, the Australian tax withheld on unfranked dividends that are not declared to be CFI paid by us to a resident of the United States which is beneficially entitled to that dividend is limited to 15% where that resident is a qualified person for the purposes of the Treaty.
If a Non-Australian Shareholder is a company and owns a 10% or more interest, the Australian tax withheld on dividends paid by us to which a resident of the United States is beneficially entitled is limited to 5%. In limited circumstances the rate of withholding can be reduced to zero.
Tax on Sales or other Dispositions of Shares—Capital gains tax
Non-Australian Shareholders will not be subject to Australian capital gains tax on the gain made on a sale or other disposal of ordinary shares, unless they, together with associates, hold 10% or more of our issued capital, at the time of disposal or for 12 months of the last 2 years prior to disposal.
Non-Australian Shareholders who own a 10% or more interest would be subject to Australian capital gains tax if more than 50% of our direct or indirect assets, determined by reference to market value, consists of Australian land, leasehold interests or Australian mining, quarrying or prospecting rights. The Treaty is unlikely to limit Australia’s right to tax any gain in these circumstances. Net capital gains are calculated after reduction for capital losses, which may only be offset against capital gains.
Tax on Sales or other Dispositions of Shares—Shareholders Holding Shares on Revenue Account
Some Non-Australian Shareholders may hold shares on revenue rather than on capital account for example, share traders. These shareholders may have the gains made on the sale or other disposal of the shares included in their assessable income under the ordinary income taxing provisions of the income tax law, if the gains are sourced in Australia.
Non-Australian Shareholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for such gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 32.5%. This rate does not include the Temporary Budget Repair Levy of 2% that applies in certain circumstances. Some relief from Australian income tax may be available to Non-Australian Shareholders under the Treaty.
To the extent an amount would be included in a Non-Australian Shareholder’s assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the shareholder would not be subject to double tax on any part of the income gain or capital gain.
Dual Residency
If a shareholder is a resident of both Australia and the United States under those countries’ domestic taxation laws, that shareholder may be subject to tax as an Australian resident. If, however, the shareholder is determined to be a U.S. resident for the purposes of the Treaty, the Australian tax would be subject to limitation by the Treaty. Shareholders should obtain specialist taxation advice in these circumstances.
Stamp Duty
No stamp duty is payable by Australian residents or non-Australian residents on the issue and trading of shares that are quoted on Nasdaq at all relevant times and the shares do not represent 90% or more of all of our issued shares.
Australian Death Duty
Australia does not have estate or death duties. As a general rule, no capital gains tax liability is realized upon the inheritance of a deceased person’s shares. The disposal of inherited shares by beneficiaries may, however, give rise to a capital gains tax liability if the gain falls within the scope of Australia’s jurisdiction to tax.
Goods and Services Tax
The issue or transfer of shares to a non-Australian resident investor will not incur Australian goods and services tax.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.
I. Subsidiary Information.
Not applicable.
J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, some of our cash and cash equivalents is held in deposits that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of AUD$/NIS exchange rates, which is discussed in detail in the following paragraph.
Foreign Exchange Risk
Our results of operations and cash flow are subject to fluctuations due to changes in AUD$/NIS currency exchange rates. While our functional currency is AUD$ the vast majority of our expenses is denominated in NIS. For 2023, assuming a 10% devaluation of the AUD$ to the NIS, we would experience an increase in our net loss of approximately AUD$434,000, while assuming a 10% appreciation of the AUD$ against the NIS, we would experience a decrease in our net loss of approximately AUD$355,000. However, these historical figures may not be indicative of future exposure, as we expect that the percentage of our NIS denominated expenses will decrease in the near future as our operations expand globally, therefore reducing our exposure to exchange rate fluctuations. Currently, we do not hedge our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
Liquidity risk
We monitor forecasts of our liquidity reserve (comprising cash and cash equivalents). We generally carry this out based on our expected cash flows in accordance with practice and limits set by our management. We are in the process of expanding our operations and the expenses associated therewith and we are therefore exposed to liquidity risk. However, we believe that our existing funds will enable us to fund our operating expenses and capital expenditure requirements for the twelve months following the date of this Annual Report on Form 20-F.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There are no material modifications to the rights of security holders.
ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Director of Finance, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with international Financial Reporting Standards (“IFRS”) and includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction and dispositions of the assets of the company; |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that assessment, our management concluded that as of December 31, 2023, our internal control over financial reporting was effective.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Attestation Report of the Registered Public Accounting Firm
This Annual Report on Form 20-F does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption for emerging growth companies provided in the JOBS Act.
(d) Changes in Internal Control over Financial Reporting
During the year ended December 31, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The current members of our audit committee are Mr. Campbell McComb and Mr. Jonathan Brett, each meet the criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable rules of the Nasdaq Capital Market and each meet the financial literacy requirements of the listing standards of the Nasdaq Capital Market.
ITEM 16B. CODE OF ETHICS
We have established a Corporate Governance Statement, which includes a code of conduct. Our Corporate Governance Statement, sets out the standards of behavior that apply to every aspect of our dealings and relationships, both within and outside Mobilicom. The following standards of behavior apply to all directors, executive officers and employees of Mobilicom:
| ● | comply with all laws that govern us and our operations; |
| ● | act honestly and with integrity and fairness in all dealings with others and each other; |
| ● | avoid or manage conflicts of interest; |
| ● | use our assets responsibly and in the best interests of Mobilicom; and |
| ● | be responsible and accountable for our actions. |
The Code of Conduct is available on our website at https://mobilicom-ltd.com.au/.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ziv Haft, a Firm in the BDO Global Network, an independent registered public accounting firm, or BDO, has served as our principal independent registered public accounting firm for the years ended December 31, 2023, 2022, and 2021.
The following table provides information regarding fees paid or to be paid by us to BDO, an independent registered public accounting firm, for all services, including audit services, for the years ended December 31, 2023, and 2022:
| Year Ended December 31, |
||||||||
| (USD in thousands) | 2023 | 2022 | ||||||
| Audit fees (1) | 153 | 182 | ||||||
| Tax fees (2) | 9 | 11 | ||||||
| Other fees (3) | 16 | 127 | ||||||
| Total | 178 | 320 | ||||||
| (1) | Audit fees consist of professional services provided in connection with the audit of our annual financial statements. |
| (2) | Tax fees consist of fees for professional services for tax compliance, tax advice, and tax audits. |
| (3) | Other fees consist of our October 2023 F-3 (Shelf) registration related fees. |
Pre-Approval of Auditors’ Compensation
Our audit committee has a pre-approval policy for the engagement of our independent registered public accounting firm to perform certain audit and non-audit services. Pursuant to this policy, which is designed to assure that such engagements do not impair the independence of our auditors, the audit committee pre-approves annually a catalog of specific audit and non-audit services in the categories of audit services, audit-related services and tax services that may be performed by our independent registered public accounting firm. If a type of service, that is to be provided by our auditors, has not received such general pre-approval, it will require specific pre-approval by our audit committee. The policy prohibits retention of the independent registered public accounting firm to perform the prohibited non-audit functions defined in applicable SEC rules.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On June 28, 2023, we filed a report with the Australian Securities Exchange regarding the appointment of Hall Chadwick WA Audit Pty Ltd and the resignation of BDO Audit Pty Ltd (BDO) as our auditor in Australia. No change was made with respect to the appointment of BDO Member Firm, Ziv Haft, Certified Public Accountants, Isr., as our public accounting firm registered with the Public Company Accounting Oversight Board (United States).
ITEM 16G. CORPORATE GOVERNANCE
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with various corporate governance practices. In addition, following the listing of our ordinary shares and warrants on the Nasdaq Capital Market, we are required to comply with the Nasdaq Stock Market rules. Under those rules, we may elect to follow certain corporate governance practices permitted under the applicable laws in Australia (the Corporations Act) in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market rules for U.S. domestic issuers.
In accordance with Australian law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market rules, we have elected to follow the provisions of the applicable Australian law, rather than the Nasdaq Stock Market rules, with respect to the following requirements:
The Nasdaq listing rules allow for a foreign private issuer, such as us, to follow its home country practices in lieu of certain of the Nasdaq’s corporate governance standards. In connection with our Nasdaq Listing Application, we expect to rely on exemptions from certain corporate governance standards that are contrary to the laws, rules, regulations or generally accepted business practices in Australia. These exemptions being sought are described below:
| ● | We rely on an exemption from the requirement that our independent directors meet regularly in executive sessions under Nasdaq Listing Rules. The Corporations Act do not require the independent directors of an Australian company to have such executive sessions and, accordingly, we seek to claim this exemption. |
| ● | We rely on an exemption from the quorum requirements applicable to meetings of shareholders under Nasdaq Listing Rules. In compliance with Australian law, our Constitution provides that five shareholders present, in person or by proxy, attorney or a representative, shall constitute a quorum for a general meeting. Nasdaq Listing Rules require that an issuer provide for a quorum as specified in its by-laws for any meeting of the holders of ordinary shares, which quorum may not be less than 33% (1/3) of the outstanding shares of an issuer’s voting ordinary shares. Accordingly, because applicable Australian law and rules governing quorums at shareholder meetings differ from Nasdaq’s quorum requirements, we seek to claim this exemption. |
| ● | We rely on an exemption from the requirement prescribed by Nasdaq Listing Rules that issuers obtain shareholder approval prior to the issuance of securities in connection with certain acquisitions, private placements of securities, or the establishment or amendment of certain stock option, purchase or other compensation plans. Applicable Australian law provides for restrictions on us, as an Australian public company, issuing securities to related parties (including directors and their associates) other than in certain exceptions which include issues with shareholder approval, issues as reasonable remuneration or issues which are on arm’s length (or terms worse for the related party than arm’s length terms). We are also prohibited from issuing securities to investors without disclosure (by way of a prospectus or other Australian offer document under which disclosure is made in accordance with Australian law) unless an exemption applies to that investor or class of investors as provided for under Australian law (the exemptions included exceptions for defined professional and sophisticated investors). As we have more than 50 shareholders, an investor and their associates also must not acquire a relevant interest in 20% or more of our issued voting shares unless an exception applies under Australian law, which exceptions include shareholder approval and a regulated takeover offer. Due to differences between Australian law and rules and the Nasdaq shareholder approval requirements, we seek to claim this exemption. |
| ● | We rely on an exemption from the requirement that issuers must maintain charters for each of the following committees in compliance with Nasdaq Listing Rules: audit committee, nomination committee and compensation committee. In addition, we expect to rely on an exemption from the requirement that issuers must maintain a code of conduct in compliance with Nasdaq Listing Rules. Applicable Australian law does not require us to maintain any charters for their committees nor does such law require us to maintain a code of conduct. |
| ● | We rely on an exemption for the requirement that a majority of the board of directors be independent. Applicable Australian law does not require that a majority of the board of directors be independent. |
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will only be applicable to the Company from the fiscal year ending on December 31, 2024.
ITEM 16K. CYBERSECURITY
We have developed and maintain a cybersecurity risk management program, consisting of cybersecurity policies, procedures, compliance and awareness programs to mitigate risk and to ensure compliance with security, availability and confidentiality trust principles. The cybersecurity process has been integrated into our overall risk management system and process, and is solely internally managed. Management is responsible for identifying risks that threaten achievement of the control activities stated in the management’s description of the services organizations systems. Management has implemented a process for identifying relevant risks that could affect the organization’s ability to provide secure and reliable service to its users. The risk assessment occurs annually, or as business needs change, and covers identification of risks that could act against the company’s objectives as well as specific risks related to a compromise to the security of data. See “Item 3.D Risk Factors—Risks Related to Our Business and Industry—Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.”
The level of each identified risk is determined by considering the impact of the risk itself and the likelihood of the risk materializing and high scoring risks are actioned upon. Risks are analyzed to determine whether the risk meets company risk acceptance criteria to be accepted or whether a mitigation plan will be applied. Mitigation plans include both the individual or department responsible for the plan and may include budget considerations.
The oversight of cybersecurity threats is undertaken by Yossi Segal our VP R&D, who holds over two decades of experience in communication and information technology and is supported by management. Our audit committee is responsible for cybersecurity oversight and monitoring risk. Management informs the audit and investment committee of such risk by committee meetings.
As of the date of this report, we are not aware of any material risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements and related information pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial statements and the related notes required by this Item are included in this Annual Report on Form 20-F beginning on page F-1.
ITEM 19. EXHIBITS.
| * | Filed herewith. |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F filed on its behalf.
| MOBILICOM LIMITED | ||
| Date: March 25, 2024 | By: | /s/ Oren Elkayam |
| Oren Elkayam | ||
| Chairman and Chief Executive Officer | ||
74
 |
Mobilicom Limited
Annual Report - December 31, 2023
|
Mobilicom Limited Contents December 31, 2023 |
|
F-
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors of Mobilicom Limited
Level 7, 90 Collins Street
Melbourne, Victoria, 3000
Australia
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Mobilicom Limited (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of profit and loss and other comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and Interpretations.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2021.
| /s/ Ziv Haft | |
| Tel-Aviv, Israel | Ziv haft |
March 25, 2024 | Certified Public Accountants (Isr.) |
| BDO Member Firm |
F-
|
Mobilicom Limited Consolidated statements of profit or loss and other comprehensive income (loss) For the year ended December 31, 2023 |
 |
| Consolidated | Consolidated | |||||||||||||||||||
| Note | 2023 | 2022 | 2021 | 2023 | ||||||||||||||||
| AUD$ | AUD$ | AUD$ | $* | |||||||||||||||||
| Revenue | 4 | 3,301,887 | 2,327,058 | 3,578,603 | 2,258,491 | |||||||||||||||
| Cost of sales | 5 | (1,357,614 | ) | (883,483 | ) | (1,243,583 | ) | (928,608 | ) | |||||||||||
| Government grants | 296,567 | 923,033 | 787,544 | 202,852 | ||||||||||||||||
| Interest received | 441,715 | 168,843 | 1,580 | 302,133 | ||||||||||||||||
| Foreign exchange gains | 552,971 | 1,175,735 | 378,233 | |||||||||||||||||
| Fair value gains (loss) from financial liability | 3,768,466 | |||||||||||||||||||
| Expenses | ||||||||||||||||||||
| Selling and marketing expenses | 6,23 | (2,484,905 | ) | (2,464,936 | ) | (1,692,074 | ) | (1,699,675 | ) | |||||||||||
| Research and development | 7,23 | (2,936,825 | ) | (2,585,307 | ) | (2,458,600 | ) | (2,008,788 | ) | |||||||||||
| General and administration expenses | 8,23 | (4,032,454 | ) | (2,690,920 | ) | (1,430,862 | ) | (2,758,199 | ) | |||||||||||
| Finance costs | (54,765 | ) | (65,972 | ) | (53,544 | ) | (37,460 | ) | ||||||||||||
| Fair value gains (loss) from financial liability | (476,745 | ) | (326,094 | ) | ||||||||||||||||
| Foreign exchange losses | (184,743 | ) | ||||||||||||||||||
| Loss before income tax expense | (6,750,168 | ) | (327,483 | ) | (2,695,679 | ) | (4,617,115 | ) | ||||||||||||
| Income tax expense | 9 | (121,797 | ) | (13,986 | ) | (9,166 | ) | (83,309 | ) | |||||||||||
| Loss after income tax expense for the year attributable to the owners of Mobilicom Limited | (6,871,965 | ) | (341,469 | ) | (2,704,845 | ) | (4,700,424 | ) | ||||||||||||
| * | US Dollars numbers presented solely for convenience of the reader |
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of profit or loss and other comprehensive income (loss) For the year ended December 31, 2023 |
|
| Consolidated | Consolidated | |||||||||||||||||||
| Note | 2023 | 2022 | 2021 | 2023 | ||||||||||||||||
| AUD$ | AUD$ | AUD$ | $* | |||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||
| Items that will not be reclassified subsequently to profit or loss | ||||||||||||||||||||
| Re-measurement of defined benefit plans (refer to note 21) | 9,560 | 366,517 | (34,197 | ) | 6,539 | |||||||||||||||
| Items that may be reclassified subsequently to profit or loss | ||||||||||||||||||||
| Foreign currency translation (refer to note 21) | (511,368 | ) | (935,142 | ) | 206,363 | (349,776 | ) | |||||||||||||
| Other comprehensive income (loss) for the year, net of tax | (501,808 | ) | (568,625 | ) | 172,166 | (343,237 | ) | |||||||||||||
| Total comprehensive loss for the year attributable to the owners of Mobilicom Limited | (7,373,773 | ) | (910,094 | ) | (2,532,679 | ) | (5,043,661 | ) | ||||||||||||
| * | US Dollars numbers presented solely for convenience of the reader |
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of profit or loss and other comprehensive income (loss) For the year ended December 31, 2023 |
|
| Consolidated | Consolidated | |||||||||||||||||||
| Note | 2023 | 2022 | 2021 | 2023 | ||||||||||||||||
| AUD$ | AUD$ | AUD$ | $* | |||||||||||||||||
| Basic earnings (loss) per share | 30 | (0.52 | ) | (0.05 | ) | (0.91 | ) | (0.35 | ) | |||||||||||
| Diluted earnings (loss) per share | 30 | (0.52 | ) | (0.05 | ) | (0.91 | ) | (0.35 | ) | |||||||||||
| 1,328,152,166 | 664,158,704 | 297,914,797 | 1,328,152,166 | |||||||||||||||||
| * | UD Dollars numbers presented solely for convenience of the reader |
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of financial position As at December 31, 2023 |
|
| Consolidated | Consolidated | |||||||||||||||
| Note | 2023 | 2022 | 2023 | |||||||||||||
| AUD$ | AUD$ | $* | ||||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 10 | 12,259,185 | 18,917,416 | 8,385,283 | ||||||||||||
| Restricted cash | 10 | 86,880 | 59,126 | 59,426 | ||||||||||||
| Trade and other receivables, net | 11 | 1,429,209 | 828,351 | 977,578 | ||||||||||||
| Inventories | 12 | 1,366,635 | 838,658 | 934,779 | ||||||||||||
| Total current assets | 15,141,909 | 20,643,551 | 10,357,066 | |||||||||||||
| Non-current assets | ||||||||||||||||
| Property, plant and equipment, net | 13 | 117,758 | 135,878 | 80,547 | ||||||||||||
| Right-of-use assets | 14 | 672,954 | 426,817 | 460,300 | ||||||||||||
| Total non-current assets | 790,712 | 562,695 | 540,847 | |||||||||||||
| Total assets | 15,932,621 | 21,206,246 | 10,897,913 | |||||||||||||
| * | US Dollar numbers presented solely for convenience of the reader |
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of financial position As at December 31, 2023 | |
| Consolidated | Consolidated | |||||||||||||||
| Note | 2023 | 2022 | 2023 | |||||||||||||
| AUD$ | AUD$ | $* | ||||||||||||||
| Liabilities | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Trade and other payables | 15 | 2,076,052 | 1,608,846 | 1,420,018 | ||||||||||||
| Lease liabilities | 16 | 327,046 | 333,850 | 223,700 | ||||||||||||
| Financial liability | 17,20 | 1,572,818 | 1,097,520 | 1,075,808 | ||||||||||||
| Total current liabilities | 3,975,916 | 3,040,216 | 2,719,526 | |||||||||||||
| Non-current liabilities | ||||||||||||||||
| Lease liabilities | 16 | 334,909 | 95,403 | 229,078 | ||||||||||||
| Employee benefits | 18 | 295,542 | 203,636 | 202,151 | ||||||||||||
| Governmental liabilities on grants received | 19 | 6,666 | 6,084 | 4,560 | ||||||||||||
| Total non-current liabilities | 637,117 | 305,123 | 435,789 | |||||||||||||
| Total liabilities | 4,613,033 | 3,345,339 | 3,155,315 | |||||||||||||
| Net assets | 11,319,588 | 17,860,907 | 7,742,598 | |||||||||||||
| Equity | ||||||||||||||||
| Issued capital | 20 | 41,855,722 | 41,636,762 | 28,629,314 | ||||||||||||
| Reserves | 21,23 | 388,674 | 276,988 | 265,853 | ||||||||||||
| Accumulated losses | (30,924,808 | ) | (24,052,843 | ) | (21,152,569 | ) | ||||||||||
| Total equity | 11,319,588 | 17,860,907 | 7,742,598 | |||||||||||||
| * | US Dollars numbers presented solely for convenience of the reader |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of changes in equity For the year ended December 31, 2023 |
|
| Issued capital |
Share
based payments reserve |
Foreign currency translation reserves |
Re-measurement reserves |
Accumulated losses |
Total
equity |
|||||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | ||||||||||||||||||
| Balance at January 1, 2021 | 22,884,795 | 1,046,869 | 198,160 | (474,752 | ) | (21,635,786 | ) | 2,019,286 | ||||||||||||||||
| Loss after income tax expense for the year | - | - | - | - | (2,704,845 | ) | (2,704,845 | ) | ||||||||||||||||
| Other comprehensive income for the year | - | - | 206,363 | (34,197 | ) | - | 172,166 | |||||||||||||||||
| Total comprehensive loss for the year | - | - | 206,363 | (34,197 | ) | (2,704,845 | ) | (2,532,679 | ) | |||||||||||||||
| Share-based payments (note 23) | - | 223,171 | - | - | - | 223,171 | ||||||||||||||||||
| Transactions with owners in their capacity as owners: | ||||||||||||||||||||||||
| Contributions of equity, net of transaction costs (note 20) | 3,619,341 | - | - | - | - | 3,619,341 | ||||||||||||||||||
| Expiry of options | - | (46,425 | ) | - | - | 46,425 | - | |||||||||||||||||
| Forfeiture of options | - | (8,806 | ) | - | - | 8,806 | - | |||||||||||||||||
| Re-allocation between accumulated losses and foreign currency reserve | - | - | (167,086 | ) | - | 167,086 | - | |||||||||||||||||
| Balance at December 31, 2021 | 26,504,136 | 1,214,809 | 237,437 | (508,949 | ) | (24,118,314 | ) | 3,329,119 | ||||||||||||||||
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of changes in equity For the year ended December 31, 2023 | |
| Issued capital |
Share
based payments reserve |
Foreign currency translation reserves |
Re-measurement reserves |
Accumulated losses |
Total
equity |
|||||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | ||||||||||||||||||
| Balance at January 1, 2022 | 26,504,136 | 1,214,809 | 237,437 | (508,949 | ) | (24,118,314 | ) | 3,329,119 | ||||||||||||||||
| Loss after income tax expense for the year | - | - | - | - | (341,469 | ) | (341,469 | ) | ||||||||||||||||
| Other comprehensive loss for the year | - | - | (935,142 | ) | 366,517 | - | (568,625 | ) | ||||||||||||||||
| Total comprehensive loss for the year | - | - | (935,142 | ) | 366,517 | (341,469 | ) | (910,094 | ) | |||||||||||||||
| Share-based payments (note 23) | - | 309,256 | - | - | - | 309,256 | ||||||||||||||||||
| Transactions with owners in their capacity as owners: | ||||||||||||||||||||||||
| Contributions of equity, net of transaction costs (note 20) | 15,132,626 | - | - | - | - | 15,132,626 | ||||||||||||||||||
| Expiry of options | - | (311,840 | ) | - | - | 311,840 | - | |||||||||||||||||
| Forfeiture of options | - | (95,100 | ) | - | - | 95,100 | - | |||||||||||||||||
| Balance at December 31, 2022 | 41,636,762 | 1,117,125 | (697,705 | ) | (142,432 | ) | (24,052,843 | ) | 17,860,907 | |||||||||||||||
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of changes in equity For the year ended December 31, 2023 | |
| Issued capital |
Share based payments reserve |
Foreign currency translation reserves |
Re-measurement reserves |
Accumulated losses |
Total equity |
Total equity |
||||||||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | $* | |||||||||||||||||||||
| Balance at January 1, 2023 | 41,636,762 | 1,117,125 | (697,705 | ) | (142,432 | ) | (24,052,843 | ) | 17,860,907 | 12,216,860 | ||||||||||||||||||
| Loss after income tax expense for the year | (6,871,965 | ) | (6,871,965 | ) | (4,700,424 | ) | ||||||||||||||||||||||
| Other comprehensive loss for the year | (511,368 | ) | 9,560 | (501,808 | ) | (343,237 | ) | |||||||||||||||||||||
| Total comprehensive loss for the year | (511,368 | ) | 9,560 | (6,871,965 | ) | (7,373,773 | ) | (5,043,661 | ) | |||||||||||||||||||
| Share-based payments (note 23) | 882,055 | 882,055 | 603,326 | |||||||||||||||||||||||||
| Transactions with owners in their capacity as owners: | ||||||||||||||||||||||||||||
| Forfeiture of options | (18,899 | ) | (18,899 | ) | (12,927 | ) | ||||||||||||||||||||||
| Expiry of options | 249,662 | (249,662 | ) | |||||||||||||||||||||||||
| Cancellation of shares | (30,702 | ) | (30,702 | ) | (21,000 | ) | ||||||||||||||||||||||
| Balance at December 31, 2023 | 41,855,722 | 1,730,619 | (1,209,073 | ) | (132,872 | ) | (30,924,808 | ) | 11,319,588 | 7,742,598 |
|
|||||||||||||||||
| * | US Dollars numbers presented solely for convenience of the reader |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
F-
|
Mobilicom Limited Consolidated statements of cash flows For the year ended December 31, 2023 |
|
| Consolidated | Consolidated | |||||||||||||||||||
| Note | 2023 | 2022 | 2021 | 2023 | ||||||||||||||||
| AUD$ | AUD$ | AUD$ | $* | |||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||
| Receipts from customers (inclusive of VAT) | 2,534,404 | 2,670,178 | 3,977,275 | 1,733,532 | ||||||||||||||||
| Interest received | 441,715 | 168,843 | 1,580 | 302,133 | ||||||||||||||||
| Interest paid | (22,199 | ) | (22,004 | ) | (31,916 | ) | (15,184 | ) | ||||||||||||
| Payments to suppliers and employees (inclusive of VAT) | (9,458,587 | ) | (8,209,263 | ) | (6,540,662 | ) | (6,469,672 | ) | ||||||||||||
| Government grants received and tax incentives | 297,149 | 923,942 | 787,544 | 203,250 | ||||||||||||||||
| Net cash used in operating activities | 31 | (6,207,518 | ) | (4,468,304 | ) | (1,806,179 | ) | (4,245,941 | ) | |||||||||||
| Cash flows from investing activities | ||||||||||||||||||||
| Payments for property, plant and equipment | (1,463 | ) | (26,628 | ) | (30,534 | ) | (1,001 | ) | ||||||||||||
| Net cash used in investing activities | (1,463 | ) | (26,628 | ) | (30,534 | ) | (1,001 | ) | ||||||||||||
| Cash flows from financing activities | ||||||||||||||||||||
| Proceeds from issue of shares | 20 | 22,450,965 | 3,840,000 | |||||||||||||||||
| Share issue transaction costs | (2,615,470 | ) | (220,659 | ) | ||||||||||||||||
| Shares buyback (Small parcel plan) payments | (30,702 | ) | (21,000 | ) | ||||||||||||||||
| Repayment of lease liabilities | (390,794 | ) | (360,321 | ) | (250,983 | ) | (267,303 | ) | ||||||||||||
| Net cash provided by/ (used in) financing activities | (421,496 | ) | 19,475,174 | 3,368,358 | (288,303 | ) | ||||||||||||||
| Net Increase (decreased) in cash and cash equivalents and restricted cash | (6,630,477 | ) | 14,980,242 | 1,531,645 | (4,535,245 | ) | ||||||||||||||
| Cash and cash equivalents and restricted cash at the beginning of the financial year | 18,976,542 | 3,996,300 | 2,464,655 | 12,979,954 | ||||||||||||||||
| Cash and cash equivalents and restricted cash at the end of the financial year | 10 | 12,346,065 | 18,976,542 | 3,996,300 | 8,444,709 | |||||||||||||||
| * | US Dollar numbers presented solely for convenience of the reader |
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 1. General information
The financial statements cover Mobilicom Limited (the “Company”) as a Group consisting of Mobilicom Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Mobilicom Limited’s functional and presentation currency.
The conversion from Australian dollars (AUD$) into U.S. dollars ($) was made at the exchange rate as of December 31, 2023, on which $ 1.00 equalled AUD$ 1.462. The use of US$ is solely for the convenience of the reader.
The functional currency of the Company ’s subsidiary, Mobilicom Ltd (“Mobilicom Israel”), is Israeli New Shekels.
The Company is a listed public company limited by shares, incorporated and domiciled in Australia. On October 19, 2023, the Company chose to voluntarily remove its ordinary shares from the Australian Securities Exchange (“ASX”) and trade exclusively on the NASDAQ in the form of American Depository Receipts. Its registered office and principal place of business are:
| Registered office | Principal place of business | |
| C/- JM Corporate Services | 1 Rakefet Street | |
| Level 21, 459 Collins Street | Shoham, Israel 6083705 | |
| Melbourne, Victoria, 3000 | ||
| Australia |
The Company’s principal activities are design, develop and deliver of cybersecurity and robust solutions including communication datalinks, mesh network, ground control systems, cybersecurity and could-software solutions for drone, robotics and autonomous platforms.
The Company is an end-to-end provider of cybersecurity and robust solutions for drones, robotics & autonomous platforms. As a high-tech company it designs, develops, and delivers robust solutions focused primarily on targeting global drone, robotics and autonomous system manufacturers. The Company holds patented technology & unique know-how for Mobile Mesh networking. It has a large, field proven portfolio of commercialized products used in a variety of applications. The Company is growing a global customer base with sales to high profile customers including corporates, governments, and military departments. The Company’s competitive advantages include outstanding security capabilities and performance in harsh environmental conditions. The Company’s large solution portfolio is being deployed worldwide, seeing the Company derive revenue from hardware, software sales & licensing fees.
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and other terrorist organizations in parallel to their continued rocket and terror attacks, which included call-up reservists for active military duty in the Israel Defense Forces. As the vast majority of the employees of the Company are situated in Israel, as of the date of the authorization of the financial statements by the directors, none of the Company’s members of management nor employees is in active military reserve duty. Nevertheless, the Company’s product, research and development and business development activities remain on track.
The financial statements were authorized for issue, in accordance with a resolution of directors, on March__,2024. The directors have the power to amend and reissue the financial statements.
Liquidity analysis
These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. As of December 31, 2023, the Company has not achieved positive cash flow from operations and incurred a net loss of AUD$6,871,965 ($4,700,424) for the year ended December 31, 2023, and generated AUD$30,924,808 ($21,152,569) of accumulated losses since inception. The Company estimates that it has adequate financial resources for the foreseeable future based on its current cash and trade receivable balances and its ongoing operations. Until the Company can generate significant recurring revenues, profit and cash flow provided by operating activity it expects to satisfy future cash needs through debt or equity financing as well as governmental grants. In the event that the Company requires additional financing, it may not be able to raise such financing on terms acceptable to it or at all.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The following amendments are effective for the period beginning January 1, 2023:
| ● | Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements); These amendments have no effect on the measurement or presentation of any items in the Consolidated financial statements of the Company but affect the disclosure of accounting policies of the Company. | |
| ● | Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors); These amendments had no material effect on the consolidated financial statements of the Company. | |
| ● | IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction. These amendments had no material effect on the consolidated financial statements of the Company. |
New standards, interpretations and amendments not yet effective:
There are number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to December 31, 2023 (the date on which the Company’s next annual financial statements will be prepared up to) that the Company has decided not to adopt early. These standards and interpretations will not have a material impact on the financial statements once adopted.
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’) and Interpretations.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss and other comprehensive income (loss).
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3 below.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at December 31, 2023 and the results of all subsidiaries for the year then ended..
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 2. Significant accounting policies (continued)
Intercompany transactions, balances and unrealised gains on transactions between entities in the Company are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.
Where the Company loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Company recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
Foreign currency translation
The financial statements are presented in Australian dollars, which is the Company ’s presentation currency and functional currency. The functional currency of the Company’s subsidiary, Mobilicom Ltd (“Mobilicom Israel”), is Israeli New Shekels. The use of US Dollar is solely for the convenience of the reader.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary items are converted at the rate of exchange used to convert the related consolidated statements of financial position items, i.e., at the time of the transaction.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred.
Development costs are capitalised only when technical feasibility studies identify that the project will develop an intangible asset that will be completed and available for use or sale, that there are adequate technical, financial and other resources to complete the development, that it will deliver future economic benefits and these benefits can be measured reliably.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 2. Significant accounting policies (continued)
Segments
The Company operates in one segment. Management does not segregate its business for internal reporting. The Company’s chief operating decision maker (“CODM”) evaluates the performance of its business based on financial data consistent with the presentation in the accompanying financial statements. The Company concluded that its unified business is conducted globally and accordingly represents one operating segment.
Fair value of financial instruments
Liability included in the Company’s Consolidated statement of financial position utilizes market observables inputs and data as far as possible. Inputs used in determining fair value measurement are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the ‘fair value hierarchy’):
| ● | Level 1: Quoted priced in active markets for identical items (unadjusted) | |
| ● | Level 2: Observable direct or indirect inputs other than level 1 inputs. | |
| ● | Level 3: Unobservable inputs (i.e., not derived from market data). |
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur.
The Company measures the Financial liability (warrants) at fair value. See note 3 and note 20.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payments
The Company has a share-based remuneration scheme for employees. The fair value of share options is estimated by using the Black-Scholes option pricing model, on the date of grant based on certain assumptions. Those assumptions are described in the share-based payments note and include, among others, the dividend growth rate, expected share price volatility and expected life of the options. The fair value of the equity settled options granted is charged to statement of comprehensive income over the vesting period of each tranche and the credit is taken to equity, based on the Company’s estimate of shares that will eventually vest.
Financial Liability
The Company measures the fair value of the warrants issued under August 2022 Nasdaq IPO & listing. The fair value of these warrants is estimated by using the Hull-White option pricing model (trinomial Lattice model), on the date of the grant and remeasured at each reporting period (December 31, 2023 and 2022) and is based on certain assumptions. Those assumptions include, among others, the dividend growth rate, expected share price, volatility and expected life of the warrants, early exercise / exercise multiple, capital structure effects and trinomial steps.
On June 30, 2023, the Company reassessed the valuation methodology applied to the valuation of the warrants, in conjunction with an independent valuation from a third party. The warrants are trading on Nasdaq and based on current market activity, it was deemed to be in an active market. The directors believe the quoted share price of the MOBBW security trading on the Nasdaq represents a more accurate valuation of the warrants based on the guidance of IFRS 13 Fair Value Measurement where the fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities. This has resulted in a change of valuation methodology (moving from Level 2 fair value measurement type to Level 1) that was applied on December 31, 2022, as a change in accounting estimates.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 3. Critical accounting judgements, estimates and assumptions (continued)
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Company’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Company reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.
Note 4. Revenue
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Sale of goods | 3,301,887 | 2,327,058 | 3,578,603 | 2,258,491 | ||||||||||||
Revenue from contracts with customers
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery.
For the years ended December 31, 2023, 2022 and 2021, sales of goods include recognized deferred revenues in the amount of AUD$nil, AUD$12,156 and AUD$320,948, respectively.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Government Grant income
The Company receives government grant income from the Israeli Innovation Authority (formerly the Office of the Chief Scientist) (Innovation Authority), as support for participation in sponsored programs for research and development projects. Grants are received for eligible research and development expenses, upon submission and acceptance of periodic project performance reports. Grant income is recognized as the related milestone is met.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 4. Revenue (continued)
Fair value gains (loss) from financial liability
Fair value gain (loss) is recognised at an amount that reflects the changes in fair value of the financial liability between the measured periods.
Major customers
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
| Customer | % of total income | % of total income | ||||||
| A | 18 | % | ||||||
| B | 17 | % | ||||||
| C | 11 | % | 11 | % | ||||
| D | 18 | % | ||||||
| E | 11 | % | ||||||
Income by geographic
| 2023 | 2022 | 2021 | ||||||||||
| % of total income | % of total income | % of total income | ||||||||||
| Israel | 66 | % | 39 | % | 80 | % | ||||||
| U.S. & Canada | 17 | % | 33 | % | 9 | % | ||||||
| Rest of world | 17 | % | 28 | % | 11 | % | ||||||
Note 5. Cost of sales
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Salaries and benefits | 209,822 | 222,693 | 176,787 | 143,518 | ||||||||||||
| Cost of materials | 1,051,315 | 577,902 | 991,959 | 719,100 | ||||||||||||
| Occupancy and office expenses | 18,270 | 22,431 | 14,193 | 12,497 | ||||||||||||
| Other | 26,452 | 21,507 | 43,832 | 18,093 | ||||||||||||
| Depreciation | 51,755 | 38,950 | 16,812 | 35,400 | ||||||||||||
| 1,357,614 | 883,483 | 1,243,583 | 928,608 | |||||||||||||
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 6. Selling and marketing expenses
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Salaries and benefits | 1,658,820 | 1,800,318 | 1,321,555 | 1,134,633 | ||||||||||||
| Marketing services | 369,763 | 255,306 | 158,706 | 252,918 | ||||||||||||
| Travel expenses | 91,178 | 74,425 | 38,077 | 62,365 | ||||||||||||
| Depreciation | 180,477 | 142,325 | 61,642 | 123,446 | ||||||||||||
| Occupancy and office expenses | 24,926 | 38,547 | 21,608 | 17,049 | ||||||||||||
| Other | 159,741 | 154,015 | 90,486 | 109,264 | ||||||||||||
| 2,484,905 | 2,464,936 | 1,692,074 | 1,699,675 | |||||||||||||
Note 7. Research and development
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Salaries and benefits | 2,106,459 | 2,005,506 | 1,688,408 | 1,440,818 | ||||||||||||
| Materials | 174,260 | 111,856 | 247,948 | 119,194 | ||||||||||||
| Royalties to the OCS | 9,865 | 6,478 | (1,924 | ) | 6,747 | |||||||||||
| Subcontractors | 359,464 | 121,471 | 275,087 | 245,874 | ||||||||||||
| Depreciation | 117,849 | 140,426 | 112,077 | 80,609 | ||||||||||||
| Other | 168,928 | 199,570 | 137,004 | 115,546 | ||||||||||||
| 2,936,825 | 2,585,307 | 2,458,600 | 2,008,788 | |||||||||||||
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 8. General and administration expenses
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Salaries and benefits | 1,229,925 | 1,140,392 | 678,814 | 841,269 | ||||||||||||
| Share based payment | 437,902 | 158,887 | 54,033 | 299,525 | ||||||||||||
| Professional fees | 1,073,651 | 576,254 | 547,849 | 734,377 | ||||||||||||
| Insurance | 435,713 | 297,855 | 24,894 | 298,028 | ||||||||||||
| Travel expenses | 86,314 | 6,675 | 231 | 59,039 | ||||||||||||
| Depreciation | 62,012 | 53,815 | 33,623 | 42,416 | ||||||||||||
| Occupancy and office expenses | 237,757 | 48,648 | 20,112 | 162,626 | ||||||||||||
| Other | 469,180 | 408,394 | 71,306 | 320,919 | ||||||||||||
| 4,032,454 | 2,690,920 | 1,430,862 | 2,758,199 | |||||||||||||
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 9. Income tax expense
| Consolidated | Consolidated | |||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Numerical reconciliation of income tax expense and tax at the statutory rate | ||||||||||||||||
| Loss before income tax expense | (6,750,168 | ) | (327,483 | ) | (2,695,679 | ) | (4,617,115 | ) | ||||||||
| Tax at the statutory tax rate of 27.5% (Australian company tax rate) | (1,856,296 | ) | (90,058 | ) | (741,312 | ) | (1,269,707 | ) | ||||||||
| Tax expenses related with previous years’ non-deductible/(taxable) costs in calculating taxable income | 104,840 | 71,710 | ||||||||||||||
| Effect of statutory tax rates difference between Australian company tax rate to Israeli company’s tax rate (23%) | 233,122 | 200,724 | 55,127 | 159,456 | ||||||||||||
| Effect of statutory tax rates difference between Australian company tax rate to U.S. Federal company’s tax rate (21%) | (6,687 | ) | (4,574 | ) | ||||||||||||
| Tax effect amounts which are not deductible/(taxable) in calculating taxable income: | ||||||||||||||||
| Share-based payments | 242,565 | 85,045 | 61,372 | 165,915 | ||||||||||||
| Other temporary differences not recognised | 1,404,253 | (181,725 | ) | 633,979 | 960,509 | |||||||||||
| Income tax expense | 121,797 | 13,986 | 9,166 | 83,309 | ||||||||||||
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that is it probable that future taxable profits will be available against which the benefits of the deferred tax asset can be utilised.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 10. Current assets - cash and cash equivalents and restricted cash
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Cash and cash equivalents | 12,259,185 | 18,917,416 | 8,385,283 | |||||||||
| Restricted cash | 86,880 | 59,126 | 59,426 | |||||||||
| Cash at bank | 12,346,065 | 18,976,542 | 8,444,709 | |||||||||
Accounting policy for cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Restricted cash represents deposits with banks which are used mainly as a security for guarantees provided against facilities lease agreement and line of use for credit cards.
Note 11. Current assets - trade and other receivables, net
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Trade receivables | 971,220 | 203,737 | 664,315 | |||||||||
| Other receivables | 457,989 | 624,614 | 313,263 | |||||||||
| 1,429,209 | 828,351 | 977,578 | ||||||||||
Accounting policy for trade and other receivables
Trade receivables are initially recognised at transaction price and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
No allowance for expected credit losses or overdue balances are accounted for in the financial statements.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 12. Current assets - inventories
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Finished goods - at cost | 621,562 | 345,865 | 425,149 | |||||||||
| Raw materials- at cost | 776,575 | 518,217 | 531,177 | |||||||||
| Accrual for slow inventory | (31,502 | ) | (25,424 | ) | (21,547 | ) | ||||||
| 1,366,635 | 838,658 | 934,779 | ||||||||||
Accounting policy for inventories
Inventories are recognised at the lower of cost and net realisable value.
Inventories cost is based on weighted average method.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 13. Non-current assets - property, plant and equipment, net
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Computer equipment - at cost | 277,045 | 275,582 | 189,498 | |||||||||
| Less: Accumulated depreciation | (251,192 | ) | (242,159 | ) | (171,814 | ) | ||||||
| 25,853 | 33,423 | 17,684 | ||||||||||
| Office furniture & equipment - at cost | 131,728 | 131,728 | 90,102 | |||||||||
| Less: Accumulated depreciation | (50,013 | ) | (41,818 | ) | (34,209 | ) | ||||||
| 81,715 | 89,910 | 55,893 | ||||||||||
| Machinery & equipment - at cost | 85,309 | 85,309 | 58,351 | |||||||||
| Less: Accumulated depreciation | (75,119 | ) | (72,764 | ) | (51,381 | ) | ||||||
| 10,190 | 12,545 | 6,970 | ||||||||||
| 117,758 | 135,878 | 80,547 | ||||||||||
Reconciliations
Reconciliations of the values at the beginning and end of the current and previous financial year are set out below:
| Computer | Office furniture & | Machinery & | ||||||||||||||||||
| equipment | equipment | equipment | Total | Total | ||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | $ | |||||||||||||||
| Balance at January 1, 2022 | 32,849 | 100,582 | 19,140 | 152,571 | ||||||||||||||||
| Additions | 22,018 | 2,190 | 2,420 | 26,628 | ||||||||||||||||
| Depreciation expense | (21,444 | ) | (12,862 | ) | (9,015 | ) | (43,321 | ) | ||||||||||||
| Balance at December 31, 2022 | 33,423 | 89,910 | 12,545 | 135,878 | ||||||||||||||||
| Additions | 1,463 | 1,463 | 1,001 | |||||||||||||||||
| Depreciation expense | (9,033 | ) | (8,195 | ) | (2,355 | ) | (19,583 | ) | (13,395 | ) | ||||||||||
| Balance at December 31, 2023 | 25,853 | 81,715 | 10,190 | 117,758 | 80,547 | |||||||||||||||
Accounting policy for property, plant and equipment
Plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows:
| Computer equipment | 3 years | |||
| Machinery and equipment | 6-7 years | |||
| Office furniture and equipment | 10-14 years |
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Company. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 14. Non-current assets - right-of-use assets
| Consolidated | Consolidated | |||||||||||
| As of December 31, |
As of December 31, |
As of December 31, |
||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Land and buildings - right-of-use | 556,107 | 254,409 | 380,377 | |||||||||
| Motor vehicles - right-of-use | 116,847 | 172,408 | 79,923 | |||||||||
| 672,954 | 426,817 | 460,300 | ||||||||||
Additions to the right-of-use assets during the financial year were AUD$702,079 ($480,222) (2022: AUD$148,815).
During the 2023 financial year, the Company leased new cars for the Israeli subsidiary under agreement for 3 years.
The Company leases land and buildings for its offices in Israel under agreements for 5 years, starting February 1, 2019, and in some cases, options to extend for three additional consecutive periods, each for 24 months. On renewal, the terms of the leases are renegotiated.
The Company continued using the premises and is currently negotiating the terms of the extended lease for a period of additional 24 months.
Reconciliations
Reconciliations of the values at the beginning and end of the current and previous financial year are set out below:
| Land and Buildings |
Motor Vehicle |
Total | Total | |||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | $ | ||||||||||||
| Balance at January 1, 2022 | 517,719 | 92,478 | 610,197 | |||||||||||||
| Additions | 148,815 | 148,815 | ||||||||||||||
| Depreciation expense | (263,310 | ) | (68,885 | ) | (332,195 | ) | ||||||||||
| Balance at December 31, 2022 | 254,409 | 172,408 | 426,817 | |||||||||||||
| Additions | 562,233 | 139,846 | 702,079 | 480,222 | ||||||||||||
| Early return of leased cars | (105,532 | ) | (105,532 | ) | (72,184 | ) | ||||||||||
| Depreciation expense | (260,535 | ) | (89,875 | ) | (350,410 | ) | (239,680 | ) | ||||||||
| Balance at December 31, 2023 | 556,107 | 116,847 | 672,954 | 460,300 | ||||||||||||
Accounting policy for right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the company expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
The Company has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 15. Current liabilities - trade and other payables
| Consolidated | Consolidated | |||||||||||
| As of December 31, |
As of December 31, |
As of December 31, |
||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Trade payables | 733,076 | 299,289 | 501,424 | |||||||||
| Other payables | 1,342,976 | 1,309,557 | 918,594 | |||||||||
| 2,076,052 | 1,608,846 | 1,420,018 | ||||||||||
Refer to notes 2 and 24 for further information on financial instruments.
Amounts noted above in other payables include amounts payable to Directors for wages payable.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 16. Lease liabilities
| Consolidated | Consolidated | |||||||||||
| As of December 31, |
As of December 31, |
As of December 31, |
||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Current | 327,046 | 333,850 | 223,700 | |||||||||
| Non-current | 334,909 | 95,403 | 229,078 | |||||||||
| 661,955 | 429,253 | 452,778 | ||||||||||
Refer to note 24 for further information on financial instruments.
Accounting policy for lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index, or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
Reconciliations
Reconciliations of the values at the beginning and end of the current and previous financial year are set out below:
| 2023 | 2022 | 2023 | ||||||||||
| Consolidated | AUD$ | AUD$ | $ | |||||||||
| Balance at January 1 | 429,253 | 641,660 | 293,609 | |||||||||
| Additions | 702,079 | 148,815 | 480,222 | |||||||||
| Disposals (early return of leased cars) | (82,566 | ) | (56,474 | ) | ||||||||
| Accretion of interest | 22,199 | 22,004 | 15,184 | |||||||||
| Payments | (390,794 | ) | (360,321 | ) | (267,303 | ) | ||||||
| Effect of exchange rates differences | (18,216 | ) | (22,905 | ) | (12,460 | ) | ||||||
| Balance at December 31 | 661,955 | 429,253 | 452,778 |
| 1 year or less | Between 1 and 2 years |
Between 2 and 3 years |
Over 3 years | Total | ||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | |||||||||||||||
| December 31, 2023 | 327,046 | 311,294 | 23,615 | 661,955 | ||||||||||||||||
| December 31, 2022 | 333,850 | 95,403 | 429,253 | |||||||||||||||||
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 17. Financial liability
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Warrants at fair value | 1,572,818 | 1,097,520 | 1,075,808 | |||||||||
On August 25, 2022 the Company completed its US listing via the issuance of 3,220,338 ADSs (American Depository Shares) and the accompanying 3,220,338 pre-funded warrants for a total consideration of $13,299,996. One ADS represents 275 ordinary shares in the Company. One pre-funded warrant gives the holder the right to purchase one ADS. The warrants have 5-year term, and they can be exercised any time before expiry date August 24, 2027.
The warrants represent financial liabilities at fair value through profit or loss.
Refer to note 20 for further information on issued capital.
Note 18. Non-current liabilities - employee benefits
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Employee benefits | 295,542 | 203,636 | 202,151 | |||||||||
The Company’s liabilities for severance pay retirement and pension pursuant to Israeli law and employment agreements are recognized by full - in part by managers’ insurance policies, for which the Company makes monthly payments and accrued amounts in severance pay funds and the rest by the liabilities which are included in the financial statements.
The amounts funded displayed above include amounts deposited in severance pay funds with the addition of accrued income. According to the Severance Pay Law, the aforementioned amounts may not be withdrawn or mortgaged as long as the employer’s obligations have not been fulfilled in compliance with Israeli law.
Statement of financial position amounts
The amounts recognized in the statement of financial position are determined as follows:
| Consolidated | Consolidated | |||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Present value of the defined benefit obligation | 334,335 | 313,227 | 228,685 | |||||||||
| Fair value of defined benefit plan assets | (120,412 | ) | (109,591 | ) | (82,362 | ) | ||||||
| 213,923 | 203,636 | 146,323 | ||||||||||
| Other long-term obligations | 81,619 | 55,828 | ||||||||||
| Net liability in the statement of financial position | 295,542 | 203,636 | 202,151 | |||||||||
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 18. Non-current liabilities - employee benefits (continued)
Movement in plan assets:
| Consolidated | Consolidated | |||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Balance at the beginning of the year | 109,591 | 208,375 | 74,960 | |||||||||
| Interest income | 3,267 | 3,002 | 2,235 | |||||||||
| Contributions | 10,204 | 21,432 | 6,980 | |||||||||
| Payments (withdrawal) | (120,412 | ) | ||||||||||
| Re measurements gain/(loss) | ||||||||||||
| Return on plan assets (excluding interest) | 1,225 | 6,432 | 838 | |||||||||
| Foreign exchanges differences | (3,875 | ) | (9,238 | ) | (2,651 | ) | ||||||
| Balance at the end of the year | 120,412 | 109,591 | 82,362 | |||||||||
Reconciliations
| Consolidated | Consolidated | |||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Reconciliation of the present value of the defined benefit obligation | ||||||||||||
| Balance at the beginning of the year | 313,227 | 1,026,565 | 214,247 | |||||||||
| Interest cost | 16,333 | 11,153 | 11,172 | |||||||||
| Current service cost | 19,600 | 40,309 | 13,406 | |||||||||
| Redeemed accrued benefits | (384,273 | ) | ||||||||||
| Actuarial loss/(gains) from financial assumptions | (3,675 | ) | (340,909 | ) | (2,514 | ) | ||||||
| Foreign exchanges differences | (11,150 | ) | (39,618 | ) | (7,626 | ) | ||||||
| Balance at the end of the year | 334,335 | 313,227 | 228,685 | |||||||||
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 19. Non-current liabilities - Governmental liabilities on grants received
| Consolidated | Consolidated | |||||||||||
| As of December 31, | As of December 31, | As of December 31, | ||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Governmental liabilities on grants received | 6,666 | 6,084 | 4,560 | |||||||||
Accounting policy for Government liabilities on grants received
The Company measured the value of its governmental liabilities on grants received, each period, based on discounted cash flows derived from Company’s future anticipated revenues.
The Company participates in programs sponsored by the Israeli Innovation Authority- Office of Chief Scientist ("OCS"), for the support of research and development projects. Several programs are subjected to royalties, while others are not (the Company is committed to pay royalties for the R&D programs, while the research programs do not require repayment). In exchange for the OCS’s participation in the programs, the Company is required to pay royalties to the OCS at a rate between 3% and 3.5% of sales of developed products linked to U.S dollars, until repayment of 100% of the amount of grants received, plus annual interest at the LIBOR rate. The Company is required to pay royalties, to the OCS, of sales to end customers of products developed with funds provided by the OCS, if and when such sales are recognized. The obligation to pay these royalties is contingent on actual sales of the products. Changes in the liability are recognized in research and development expenses. The projections of the Company to pay the grants are based on its estimation at the end of each year.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 20. Equity - issued capital
| Consolidated | ||||||||||||||||||||||||||||
| As of December 31, | As of December 31, | As of December 31, | As of December 31, | As of December 31, | As of December 31, | As of December 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | ||||||||||||||||||||||
| Shares | Shares | Shares | AUD$ | AUD$ | AUD$ | $ | ||||||||||||||||||||||
| Ordinary shares - fully paid | 1,326,676,693 | 1,331,279,665 | 321,936,715 | 41,855,722 | 41,636,762 | 26,504,136 | 28,629,314 | |||||||||||||||||||||
Movements in ordinary share capital
| Details | Date | Shares | Issue price |
AUD$ | $ | |||||||||||||
| Balance | January 1, 2021 | 257,936,715 | 22,884,795 | |||||||||||||||
| Placement(*) | 64,000,000 | $ | 0.06 | 3,840,000 | ||||||||||||||
| Capital raising costs | ||||||||||||||||||
| Placement(*) | - | (220,659 | ) | |||||||||||||||
| Balance | December 31, 2021 | 321,936,715 | 26,504,136 | |||||||||||||||
| Issue of IPO shares (net of warrant fair value)(**) | 885,592,950 | $ | 0.015 | 13,662,563 | ||||||||||||||
| Exercise of 450,000 pre-funded warrants | 123,750,000 | $ | 0.026 | 4,085,533 | ||||||||||||||
| Capital raising costs | - | (2,615,470 | ) | |||||||||||||||
| Balance | December 31, 2022 | 1,331,279,665 | 41,636,762 | |||||||||||||||
| Expiry of options | - | 249,662 | 170,768 | |||||||||||||||
| Cancelation of shares through small parcel buy back | (4,602,972 | ) | (30,702 | ) | (21,000 | ) | ||||||||||||
| Balance | December 31, 2023 | 1,326,676,693 | 41,855,722 | 28,629,314 | ||||||||||||||
| (*) | On July 15, 2021, the Company issued 64,000,000 options to investors in the Company’s May 2021 capital raising. The options have an exercise price of AUD$0.09 ($0.07), expire July 15, 2023 |
| (**) | On August 24, 2022, the Company issued 3,220,338 units to shareholders in the Company’s August 2022 Nasdaq listing & IPO. Each unit consists of a single ADS and single pre-funded warrant exercisable to a single ADS. The warrants have an exercise price of AUD$7.36 ($5.00), expire August 24, 2027. |
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 20. Equity - issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Capital risk management
The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company’s share price at the time of the investment. The Company is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.
Accounting policy for issued capital
Ordinary shares are classified as equity.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 20. Equity - issued capital (continued)
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Warrants
The Company accounts for warrants issued to investors under IFRS 9.
a. On August 24, 2022, under Nasdaq dual listing & IPO the Company issued a total of 3,220,338 units each includes single ADS and single tradable pre-funded warrant exercised to single ADS at an exercise price of $5.00.
The Company recorded these warrants as a derivative financial liability which represents the fair value of the warrants on the transaction date due to the fact that they do not meet the criteria for a fixed number of equity instruments in exchange for a fixed amount of cash. The derivative financial liability is re-measured at each reporting date, with changes in fair value recognized under fair value gains/(losses) from financial liability. On December 31, 2023, it amounted to AUD$1,486,424 ($1,016,714) (December 31, 2022: AUD$1,044,955). The amounts were recorded at fair value according to a valuation performed by an independent third-party appraiser. The fair value of the pre-funded warrants was classified as a level 2 fair value measurement.
On August 31, 2022, 450,000 pre-funded warrants were exercised into ADS for AUD$3,259,925 ($2,250,000).
The fair value of the pre-funded warrants on August 31, 2022 (exercise date), measured using a Hull-White trinomial option pricing model, was AUD$825,609 ($569,832).
b. On August 24, 2022, under Nasdaq dual listing & IPO the Company issued a total 161,017 representative warrants to the underwriter each exercised to single ADS at an exercise price of $5.16. The representative warrant carrying a cashless exercise option with variable exercise mechanism.
The Company recorded these warrants as a derivative financial liability which represents the fair value of the warrants on the transaction date due to the fact that they do not meet the criteria for a fixed number of equity instruments in exchange for a fixed amount of cash. The derivative financial liability is re-measured at each reporting date, with changes in fair value recognized under fair value gains/(losses) from financial liability. The derivative financial liability as of August 24,2022 amounted to AUD$281,436, reflecting the average between high & low valuation inputs. On December 31, 2023, it amounted to AUD$86,394 ($59,093) (December 31, 2022: AUD$52,565) reflecting the average between high & low valuation inputs. The fair value of the representative warrants was classified as a level 2 fair value measurement.
The pre-funded warrant and representative warrant are referred herein together as “Warrants”.
For the year ended December 31, 2023, the Company recorded fair value losses, net of AUD$476,745 ($326,094). For the year ended December 31, 2022, the Company recorded fair value gains, net of AUD$3,768,466. Fair value gains (losses), net, recorded under the statement of comprehensive loss as a result of the change in the fair value of Warrants.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 20. Equity - issued capital (continued)
The following assumptions were based on observable market conditions that existed at the issue date and of December 31, 2023:
| At issue date | At December 31, 2022 |
At December 31, 2023 | ||||||||||||||
| Assumption Value methodology | Level 2 | Level 2 | Level 1 | Level 1 | ||||||||||||
| Historical volatility | 81 | % | 81 | % | - | - | ||||||||||
| Exercise price | US$ | 5.0 | US$ | 5.0 | US$ | 5.0 | US$ | 5.16 | ||||||||
| Share price | US$ | 2.929 | US$ | 0.970 | US$ | 0.367 | US$ | 0.367 | ||||||||
| Risk-free interest rate | 3.3 | % | 4 | % | - | - | ||||||||||
| Dividend yield | 0 | % | 0 | % | - | - | ||||||||||
| Fair value per warrant | US$ | 1.2005 | US$ | 0.2555 | US$ | 0.367 | US$ | 0.367 | ||||||||
A summary of changes in share purchase warrants issued by the Company during the years ended December 31, 2023 and 2022 is as follows:
| Fair value measurements using input type | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Balance as of January 1, 2022 | - | - | ||||||||||||||
| Warrants issued during the period | AUD$ | 5,598,835 | - | AUD$ | 5,598,835 | |||||||||||
| Fair value loss (gain) recognized in consolidated statement of profit or loss and other comprehensive income | (3,768,466 | ) | - | (3,768,466 | ) | |||||||||||
| Transfer upon exercise | (825,609 | ) | - | (825,609 | ) | |||||||||||
| Translation adjustments | 92,760 | 92,760 | ||||||||||||||
| Warrant liability as of December 31, 2022 | AUD$ | 1,097,520 | - | AUD$ | 1,097,520 | |||||||||||
| Transfer to level 1 valuation input | 1,097,520 | (1,097,520 | ) | - | ||||||||||||
| Fair value loss (gain) recognized in consolidated statement of profit or loss and other comprehensive income | 476,745 | - | 476,745 | |||||||||||||
| Translation adjustments | (1,447 | ) | (1,447 | ) | ||||||||||||
| Warrant liability as of December 31, 2023 | AUD$ | 1,572,818 | - | AUD$ | 1,572,818 | |||||||||||
Refer to notes 2 and 24 for further information on financial instruments. Refer to note 3 for further information on change in valuation methodology.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 21. Equity - reserves
| Consolidated | Consolidated | |||||||||||||||
| As of December 31, | As of December 31, | As of December 31, | As of December 31, | |||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Foreign currency reserve | (1,209,073 | ) | (697,705 | ) | 237,437 | (827,006 | ) | |||||||||
| Re-measurements of defined benefit plans reserve | (132,872 | ) | (142,432 | ) | (508,949 | ) | (90,884 | ) | ||||||||
| (1,341,945 | ) | (840,137 | ) | (271,512 | ) | (917,890 | ) | |||||||||
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars.
Re-measurements of defined benefit plans reserves
The reserve is used for remeasurements comprising actuarial gains and losses on the net defined benefit liability.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 21. Equity – reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
| Re-measurement of defined benefit plans |
Foreign currency | |||||||||||||||
| reserve | reserve | Total | Total | |||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | $ | ||||||||||||
| Balance at January 1, 2021 | (474,752 | ) | 198,160 | (276,592 | ) | |||||||||||
| Re-measurement of defined benefit plans | (34,197 | ) | (34,197 | ) | ||||||||||||
| Re-allocation between accumulated losses and foreign currency reserve | 39,277 | 39,277 | ||||||||||||||
| Balance at December 31, 2021 | (508,949 | ) | 237,437 | (271,512 | ) | |||||||||||
| Re-measurement of defined benefit plans | 366,517 | 366,517 | ||||||||||||||
| Re-allocation between accumulated losses and foreign currency reserve | (935,142 | ) | (935,142 | ) | ||||||||||||
| Balance at December 31, 2022 | (142,432 | ) | (697,705 | ) | (840,137 | ) | ||||||||||
| Re-measurement of defined benefit plans | 9,560 | 9,560 | 6,539 | |||||||||||||
| Re-allocation between accumulated losses and foreign currency reserve | (511,368 | ) | (511,368 | ) | (349,776 | ) | ||||||||||
| Balance at December 31, 2023 | (132,872 | ) | (1,209,073 | ) | (1,341,945 | ) | (917,890 | ) | ||||||||
Note 22. Equity - dividends
There were no dividends paid, recommended or declared during the years ended December 31, 2023, 2022 and 2021.
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 23. Equity – share-based compensation and share-based payment reserve
The Company has adopted a share incentive plan (the “Plan”) under which it is authorized to grant options to officers, directors, employees and consultants enabling them to acquire up to 5% of the issued and outstanding common stock of the Company. The options expiration and vesting schedule are as determined by the Board of Directors. The exercise price of each option granted may not be less than the fair market value of the common shares at the time of grant.
A summary of changes in stock options for the years ended December 31, 2023, 2022 and 2021 is presented below:
| Number
of options outstanding |
Weighted
average exercise price |
Weighted average exercise price |
||||||||||
| Balance, January 1, 2021 | 24,948,242 | AUD$ | 0.11 | $ | ||||||||
| Granted (i) | 11,500,000 | 0.08 | ||||||||||
| Expired (ii) | (921,116 | ) | 0.05 | |||||||||
| Forfeited (iii) | (4,295,425 | ) | 0.09 | |||||||||
| Balance, December 31, 2021 | 31,231,701 | AUD$ | 0.10 | |||||||||
| Granted (iv) | 7,503,678 | 0.05 | ||||||||||
| Expired (v) | (3,350,000 | ) | 0.18 | |||||||||
| Forfeited (vi) | (5,770,000 | ) | 0.08 | |||||||||
| Balance, December 31, 2022 | 29,615,379 | AUD$ | 0.09 | |||||||||
| Granted (vii) | 255,850,000 | 0.01 | 0.01 | |||||||||
| Expired (viii) | (1,800,000 | ) | 0.15 | 0.10 | ||||||||
| Forfeited (ix) | (4,745,000 | ) | 0.08 | 0.06 | ||||||||
| Balance, December 31, 2023 | 278,920,379 | AUD$ | 0.02 | $ | 0.01 | |||||||
F-
|
Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
|
Note 23. Equity – share-based compensation and share-based payment reserve (continued)
| i. | On July 15, 2021, the Company issued 11,500,000 options to directors of the Company, which vest over three years (33% each year). The total fair value of the options was AUD$337,870. The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.057; exercise price - AUD$0.08; expected life - 5 year; annualized volatility 73.13%; dividend yield - 0%; risk free rate - 0.04%. |
| ii. | During the year ended December 31, 2021, 921,116 options with a fair value of AUD$44,359 expired and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
| iii. | During the year ended December 31, 2021, 4,295,425 options were forfeited with a total fair value of AUD$206,504 and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
| iv. | On April 13, 2022, the Company issued 7,503,678 options to employees and consultant of the Company. 1,380,000 options are fully vested at date of grant, 573,678 options are vested after 18 months, 2,000,000 options are vested after 3 years, and 3,550,000 options are vested after 4 years. |
| a. | The fair value of 400,000 options was AUD$9,520 ($6,467). |
The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.044; exercise price - AUD$0.08; expected life - 5 year; annualized volatility 80.4%; dividend yield - 0%; risk free rate - 0.025%.
| b. | The fair value of the 573,678 options was AUD$14,313 ($9,724). |
The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.044; exercise price - AUD$0.07; expected life - 5 year; annualized volatility 80.4%; dividend yield - 0%; risk free rate - 0.025%.
| c. | The fair value of the 6,530,000 options was AUD$181,273 ($123,147). |
The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.044; exercise price - AUD$0.05; expected life - 5 year; annualized volatility 80.4%; dividend yield - 0%; risk free rate - 0.025%.
| v. | During the year ended December 31, 2022, 3,350,000 options with a fair value of AUD$311,840 expired and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
| vi. | During the year ended December 31, 2022, 5,770,000 options were forfeited with a total fair value of AUD$236,959 and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
vii. |
During the year ended December 31, 2023: |
| a. | On May 31, 2023, the Company issued 210,000,000 options to directors of the Company, which vest over three years (33.33% of the options 1 year after grant date; 66.66% remain in equally quarterly over the 2nd & 3rd years after date of grant). The total fair value of the options was AUD$1,637,000 ($1,119,708). |
The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.009; exercise price - AUD$0.008; expected life - 10 year; annualized volatility 86.6%; dividend yield - 0%; risk free rate - 0.0355%.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 23. Equity – share-based compensation and share-based payment reserve (continued)
| b. | On August 3, 2023, the Company issued 45,850,000 options to employees and consultants of the Company. 23,350,000 options are vested after 3 years, and 22,500,000 options are vested after 4 years. The total fair value of the options was AUD$489,678 ($334,940). |
The fair value was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price - AUD$0.012; exercise price - AUD$0.008; expected life - 5 year; annualized volatility 128.89%; dividend yield - 0%; risk free rate - 0.0378%.
| viii. | During the year ended December 31, 2023, 3,020,000 options with a fair value of AUD$249,662 ($170,769) expired and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
| ix. | During the year ended December 31, 2023, 3,525,000 options were forfeited with a total fair value of AUD$89,009 ($60,882) and the Company recorded a charge to the share-based payment reserve with a corresponding credit to accumulated deficit. |
| x. | The Company recognized share-based compensation expense of AUD$882,055 ($603,326) for the year ended December 31, 2023 (2022: AUD$309,256, 2021: AUD$223,171) in relation to the vesting of options issued in previous years. |
| xi. | As at December 31, 2023, stock options were outstanding for the purchase of common shares as follows: |
| Number of Options |
Exercise Price |
Exercisable At December 31, 2023 |
Expiry Date | |||||||||
| 614,090 | AUD$ | 0.20 | 614,090 | October 20, 2026 | ||||||||
| 767,611 | AUD$ | 0.12 | 767,611 | November 5, 2025 | ||||||||
| 400,000 | AUD$ | 0.15 | 400,000 | May 29, 2024 | ||||||||
| 3,000,000 | AUD$ | 0.15 | 3,000,000 | June 25, 2025 | ||||||||
| 3,325,000 | AUD$ | 0.15 | 3,200,000 | December 29, 2025 | ||||||||
| 11,500,000 | AUD$ | 0.08 | 7,666,667 | July 8, 2026 | ||||||||
| 400,000 | AUD$ | 0.08 | 400,000 | April 13, 2027 | ||||||||
| 573,678 | AUD | 0.07 | 573,678 | April 13, 2027 | ||||||||
| 4,740,000 | AUD | 0.05 | 3,365,000 | April 13, 2027 | ||||||||
| 210,000,000 | AUD | 0.01 | May 31, 2033 | |||||||||
| 43,600,000 | AUD | 0.01 | 1,291,667 | August 3, 2028 | ||||||||
| 278,920,379 | 21,278,713 | |||||||||||
As at December 31, 2023, options outstanding have a weighted average remaining contractual life of 8.03 years (December 31, 2022 – 3.25 years).
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 23. Equity – share-based compensation and share-based payment reserve (continued)
Accounting policy for share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price.
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Company receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If the non-vesting condition is within the control of the Company or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Company or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 24. Financial instruments
Financial risk management objectives
The Company’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk.
Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the company and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Company’s operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The Company undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the Company’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The carrying amount of the Company’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows (holdings are shown in AUD equivalents):
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2023 | |||||||||||||||||||
| Consolidated | AUD$ | AUD$ | AUD$ | AUD$ | $ | $ | ||||||||||||||||||
| US dollars | 11,906,907 | 18,061,483 | 808,794 | 31,233 | 8,144,325 | 553,215 | ||||||||||||||||||
| Euros | 48,210 | 1,826 | 468 | 871 | 32,976 | 320 | ||||||||||||||||||
| Israeli New Shekel | 163,311 | 1,849,492 | 111,704 | |||||||||||||||||||||
| 12,118,428 | 19,912,801 | 809,262 | 32,104 | 8,289,005 | 553,535 | |||||||||||||||||||
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the Company’s functional currency. The risk is measured using sensitivity analysis.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 24. Financial instruments (continued)
Price risk
Price risk is the risk that future cashflows derived from financial instruments will be changed as a result of a market price movement, other than foreign currency rates and interest rates. The Company is not exposed to any significant price risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. The Company has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Company obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Company does not hold any collateral.
The Company has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Company based on recent sales experience, historical collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year.
Liquidity risk
Vigilant liquidity risk management requires the Company to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Company manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 24. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the company’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
| 1 year or less | Between 1 and 2 years |
Between 2 and 5 years |
Over 5 years | Remaining contractual maturities |
Remaining contractual maturities |
|||||||||||||||||||
| Consolidated - 2023 | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | $ | ||||||||||||||||||
| Non-derivatives | ||||||||||||||||||||||||
| Non-interest bearing | ||||||||||||||||||||||||
| Trade payables | 733,076 | 733,076 | 501,424 | |||||||||||||||||||||
| Other payables | 1,342,976 | 1,342,976 | 918,594 | |||||||||||||||||||||
| Government liabilities | 6,666 | 6,666 | 4,560 | |||||||||||||||||||||
| Total non-derivatives | 2,076,052 | 6,666 | 2,082,718 | 1,424,578 | ||||||||||||||||||||
| 1 year or less | Between 1 and 2 years |
Between 2 and 5 years |
Over 5 years | Remaining contractual maturities |
||||||||||||||||
| Consolidated - 2022 | AUD$ | AUD$ | AUD$ | AUD$ | AUD$ | |||||||||||||||
| Non-derivatives | ||||||||||||||||||||
| Non-interest bearing | ||||||||||||||||||||
| Trade payables | 299,289 | 299,289 | ||||||||||||||||||
| Other payables | 1,309,557 | 1,309,557 | ||||||||||||||||||
| Government liabilities | 6,084 | 6,084 | ||||||||||||||||||
| Total non-derivatives | 1,608,846 | 6,084 | 1,614,930 | |||||||||||||||||
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Refer to note 2 for further information on Fair value of financial instruments.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 25. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Company is set out below:
| Consolidated | Consolidated | |||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Short-term employee benefits | 860,229 | 821,414 | 588,397 | |||||||||
| Post-employment benefits | 210,543 | 294,171 | 144,011 | |||||||||
| Israel deferred payments | 653,768 | |||||||||||
| Share-based payments | 689,094 | 93,036 | 471,340 | |||||||||
| 1,759,866 | 1,862,389 | 1,203,748 | ||||||||||
Note 26. Commitments
There were no commitments for the current or previous financial year.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 27. Related party transactions
Parent entity
Mobilicom Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 25.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
| Consolidated | Consolidated | |||||||||||
| As of December 31, |
As of December 31, |
As of December 31, |
||||||||||
| 2023 | 2022 | 2023 | ||||||||||
| AUD$ | AUD$ | $ | ||||||||||
| Current payables: | ||||||||||||
| Payables to related parties | 234,641 | 25,667 | 160,494 | |||||||||
| Non-current payables: | ||||||||||||
| Payables to related parties | 132,896 | 90,901 | ||||||||||
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
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Mobilicom Limited Notes to the consolidated financial statements December 31, 2023 |
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Note 28. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 2:
| Ownership interest | ||||||||||
| Principal place of business / | 2023 | 2022 | ||||||||
| Name | Country of incorporation | % | % | |||||||
| Mobilicom Ltd (“Mobilicom Israel”) | Israel | 100.00 | % | 100.00 | % | |||||
| Mobilicom Inc (*) | United States | 100.00 | % | 100.00 | % | |||||
| (*) | Incorporated on December 28, 2022, in Delaware |
Note 29. Reconciliation of loss after income tax to net cash used in operating activities
| Consolidated | ||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Loss after income tax expense for the year | (6,871,965 | ) | (341,469 | ) | (2,704,845 | ) | (4,700,424 | ) | ||||||||
| Adjustments for: | ||||||||||||||||
| Depreciation and amortisation | 412,093 | 375,516 | 224,154 | 253,075 | ||||||||||||
| Share-based payments | 882,055 | 309,256 | 223,171 | 603,326 | ||||||||||||
| Net loss (gain) on fair value movement of warrants | 476,745 | (3,768,466 | ) | 326,094 | ||||||||||||
| Foreign exchange differences | (559,504 | ) | (428,414 | ) | 172,039 | * | (353,904 | ) | ||||||||
| Lease interest | 22,199 | 22,004 | 31,916 | * | 15,184 | |||||||||||
| Change in operating assets and liabilities: | ||||||||||||||||
| Decrease (increase) in trade and other receivables | (600,858 | ) | (132,810 | )* | (310,386 | )* | (410,986 | ) | ||||||||
| Decrease (increase) in inventories | (527,977 | ) | (347,668 | ) | 312,014 | (361,136 | ) | |||||||||
| Increase in trade and other payables | 467,206 | 457,392 | 132,260 | 319,568 | ||||||||||||
| Increase (decrease) in employee benefits | 91,906 | (614,554 | ) | 115,077 | 62,864 | |||||||||||
| Increase (decrease) in Government liabilities | 582 | 909 | (1,579 | ) | 398 | |||||||||||
| Net cash used in operating activities | (6,207,518 | ) | (4,468,304 | ) | (1,806,179 | ) | (4,245,941 | ) | ||||||||
| * | Reclassified |
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Mobilicom Limited Shareholder information December 31, 2023 |
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Note 30. Earnings (loss) per share
| Consolidated | ||||||||||||||||
| 2022 | 2021 | 2020 | 2023 | |||||||||||||
| AUD$ | AUD$ | AUD$ | $ | |||||||||||||
| Loss after income tax attributable to the owners of the Company | (6,871,965 | ) | (341,469 | ) | (2,704,845 | ) | (4,700,424 | ) | ||||||||
| Number | Number | Number | Number | |||||||||||||
| Weighted average number of ordinary shares used in calculating basic earnings (loss) per share | 1,328,152,166 | 664,158,704 | 297,914,797 | 1,328,152,166 | ||||||||||||
| Weighted average number of ordinary shares used in calculating diluted earnings (loss) per share | 1,328,152,166 | 664,158,704 | 297,914,797 | 1,328,152,166 | ||||||||||||
| AUD$ Cents | AUD$ Cents | AUD$ Cents | $ Cents | |||||||||||||
| Basic earnings (loss) per share | (0.52 | ) | (0.05 | ) | (0.91 | ) | (0.35 | ) | ||||||||
| Diluted earnings (loss) per share | (0.52 | ) | (0.05 | ) | (0.91 | ) | (0.35 | ) | ||||||||
The rights to options held by option holders have not been included in the weighted average number of ordinary shares for the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in IASB 133 “Earnings per Share”. The rights to options are non-dilutive as the company is loss generating.
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit (loss) attributable to the owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
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Mobilicom Limited Shareholder information December 31, 2023 |
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Note 30. Earnings (loss) per share (continued)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 31. Subsequent events
| (a) | Commencing January 1, 2024, the Company elected to shift from Australian dollar functional currency to U.S. dollar functional currency and accordingly all internal financial reporting and presentations, to board of directors and executive management as well as external financial reporting and presentations are denominated in U.S. dollar. Following the transition to U.S. Dollar as functional currency the currency transaction adjustment (“CTA”) reserve balance as of December 31, 2023, will remain as is (freeze) and starting January 1, 2024 differences between the USD and the NIS will be recorded under the CTA reserve while transactions with AUD will be recorded as foreign currency transactions under the statement of profit or loss and other comprehensive income (loss). |
| (b) | On January 25, 2024, the Company entered into a definitive agreement (the “Purchase Agreement”) with certain institutional investors providing for the issuance of (i) 133,889,525 ordinary shares represented by 486,871 American Depositary Shares (“ADSs”), and (ii) prefunded warrants to purchase up to an aggregate of 389,497,350 ordinary shares represented by 1,416,354 ADSs, in a registered direct offering at an offering price of $1.55 per ADS and $1.5499 per pre-funded warrant, for aggregate gross proceeds of approximately $2.95 million (AUD$4.31 million). Each ADS represents two hundred seventy-five (275) ordinary shares, no par value, of the company. The offering was closed on January 30, 2024. |
In addition, in a concurrent private placement, the Company agreed to issue the investors warrants to purchase up to an aggregate of 523,386,875 ordinary shares represented by 1,903,225 ADSs at an exercise price of $1.55 per ADS. The warrants will be immediately exercisable and will expire five years following the initial exercise date. The warrants may be exercised on a cashless basis if there is no effective registration statement registering the ADSs underlying the warrants.
Each pre-funded warrant is exercisable for one ADS at an exercise price of $0.001 per share. The pre-funded warrants are immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full.
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Exhibit 12.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Oren Elkayam, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Mobilicom Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| o | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| o | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| o | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| o | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| o | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and | |
| o | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: March 25, 2024
| /s/ Oren Elkayam | |
| Oren Elkayam | |
| Chief Executive Officer |
Exhibit 12.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Liad Gelfer, certify that:
| 1. | I have reviewed this annual report on Form 20-F of Mobilicom Limited; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| o | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| o | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| o | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| o | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| o | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| o | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: March 25, 2024
| /s/ Liad Gelfer | ||
| Liad Gelfer | ||
| Director of Finance |
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mobilicom Limited (the “Company”) hereby certifies to such officer’s knowledge that:
| (i) | the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: March 25, 2024
| /s/ Oren Elkayam | ||
| Oren Elkayam | ||
| Chief Executive Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mobilicom Limited (the “Company”) hereby certifies to such officer’s knowledge that:
| (i) | the accompanying Annual Report on Form 20-F of the Company for the year ended December 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
| (ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: March 25, 2024
| /s/ Liad Gelfer | |
| Liad Gelfer | |
| Director of Finance |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference to any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 15.1
Consent of Independent Registered Public Accounting Firm
Mobilicom Limited
Level 7, 90 Collins Street
Melbourne, Victoria, 3000
Australia
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (File No. 333-274929) of our report dated March 25, 2024, relating to the consolidated financial statements of Mobilicom Limited (the “Company”), appearing in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023.
| Tel-Aviv, Israel | /s/ Ziv haft |
| March 25, 2024 | Certified Public Accountants (Isr.) |
| BDO Member Firm |
|
Tel Aviv 03-6386868 |
Jerusalem 02-6546200 |
Haifa 04-8680600 |
Beer Sheva 077-7784100 |
Bnei Brak 073-7145300 |
Kiryat Shmona 077-5054906 |
Petah Tikva 077-7784180 |
Modiin Ilit 08-9744111 |
Nazrat Ilit 04-6555888 |
Main office: Beit Amot BDO, 48 Menachem Begin Road, Tel Aviv, 6618001 Email: bdo@bdo,co.il Website: www.bdo.co.il
BDO Israel, an Israeli partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firm
Exhibit 97.1
Mobilicom Limited
Executive Officer Clawback Policy
| I. | Purpose |
This Executive Officer Clawback Policy describes the circumstances under which Covered Persons of Mobilicom Limited and any of its direct or indirect subsidiaries (the “Company”) will be required to repay or return Erroneously-Awarded Compensation to the Company.
This Policy and any terms used in this Policy shall be construed in accordance with any SEC regulations promulgated to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including without limitation Rule 10D-1 promulgated under the Securities Exchange Act of 1934, as amended, and the rules adopted by Nasdaq.
Each Covered Person of the Company shall sign an Acknowledgement and Agreement to the Clawback Policy in the form attached hereto as Exhibit A as a condition to his or her participation in any of the Company’s incentive-based compensation programs; provided that this Policy shall apply to each Covered Person irrespective of whether such Covered Person shall have failed, for any reason, to have executed such Acknowledgement and Agreement.
| II. | Definitions |
For purposes of this Policy, the following capitalized terms shall have the respective meanings set forth below:
| (a) | “Accounting Restatement” shall mean an accounting restatement (i) due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial restatements that is material to the previously issued financial statements (a “Big R” restatement), or (ii) that corrects an error that is not material to previously issued financial statements, but would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a “little r” restatement). Notwithstanding the foregoing, none of the following changes to the Company’s financial statements represent error corrections and shall not be deemed an Accounting Restatement: (a) retrospective application of a change in accounting principle; (b) retrospective revision to reportable segment information due to a change in the structure of the Company’s internal organization; (c) retrospective reclassification due to a discontinued operation; (d) retrospective application of a change in reporting entity, such as from a reorganization of entities under common control; and (e) retrospective revision for share splits, reverse share splits, share dividends or other changes in capital structure. |
| (b) | “Board” shall mean the Board of Directors of the Company. |
| (c) | “Clawback-Eligible Incentive Compensation” shall mean, in connection with an Accounting Restatement, any Incentive-Based Compensation Received by a Covered Person (regardless of whether such Covered Person was serving at the time that Erroneously-Awarded Compensation is required to be repaid) (i) on or after the Nasdaq Effective Date, (ii) after beginning service as a Covered Person, (iii) while the Company has a class of securities listed on a national securities exchange or national securities association and (iv) during the Clawback Period. |
| (d) | “Clawback Period” shall mean, with respect to any Accounting Restatement, the three completed fiscal years immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years. |
| (e) | “Committee” shall mean the Compensation Committee of the Board or, if no Compensation Committee has been established by the Board, shall mean the Board. |
| (f) | “Covered Person” shall mean any person who is, or was at any time, during the Clawback Period, an Executive Officer of the Company. For the avoidance of doubt, Covered Person may include a former Executive Officer that left the Company, retired or transitioned to an employee non-Executive Officer role (including after serving as an Executive Officer in an interim capacity) during the Clawback Period, and this Policy applies regardless of whether the Covered Person was at fault for an accounting error or other action that resulted in, or contributed to, the Accounting Restatement. |
| (g) | “Erroneously-Awarded Compensation” shall mean the amount of Clawback-Eligible Incentive Compensation that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts. This amount must be computed without regard to any taxes paid. |
| (h) | “Executive Officer” shall mean (i) the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function or (ii) any other person (including an officer of the Company’s parent(s) or subsidiaries) who performs similar policy-making functions for the Company. For the sake of clarity, at a minimum, all persons who would be executive officers pursuant to Rule 401(b) under Regulation S-K shall be deemed “Executive Officers”. |
| (i) | “Financial Reporting Measures” shall mean measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures, including, without limitation, measures that are “non-GAAP financial measures” for purposes of Exchange Act Regulation G and Item 10(e) of Regulation S-K, as well other measures, metrics and ratios that are not non-GAAP measures. For purposes of this Policy, Financial Reporting Measures shall include stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return). A Financial Reporting Measure need not be presented within the Company’s financial statements or included in a Company filing with the SEC. |
| (j) | “Incentive-Based Compensation” shall have the meaning set forth in Section III below. |
| (k) | “Nasdaq” shall mean The Nasdaq Stock Market. |
| (l) | “Nasdaq Effective Date” shall mean October 2, 2023. |
| (m) | “Policy” shall mean this Executive Officer Clawback Policy, as the same may be amended and/or restated from time to time. |
| (n) | “Received” shall mean Incentive-Based Compensation received, or deemed to be received, in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation is attained, even if the payment or grant occurs after the fiscal period. |
| (o) | “Repayment Agreement” shall have the meaning set forth in Section V below. |
| (p) | “Restatement Date” shall mean the earlier of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date that a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement. |
| (q) | “SARs” shall mean stock appreciation rights. |
| (r) | “SEC” shall mean the U.S. Securities and Exchange Commission. |
| III. | Incentive-Based Compensation |
“Incentive-Based Compensation” shall mean any compensation that is granted, earned or vested wholly or in part upon the attainment of a Financial Reporting Measure.
For purposes of this Policy, specific examples of Incentive-Based Compensation include, but are not limited to:
| ● | Non-equity incentive plan awards that are earned based, wholly or in part, based on satisfaction of a Financial Reporting Measure performance goal; |
| ● | Bonuses paid from a “bonus pool,” the size of which is determined, wholly or in part, based on satisfaction of a Financial Reporting Measure performance goal; |
| ● | Other cash awards based on satisfaction of a Financial Reporting Measure performance goal; |
| ● | Restricted stock, restricted stock units, performance share units, stock options and SARs that are granted or become vested, wholly or in part, on satisfaction of a Financial Reporting Measure performance goal; and |
| ● | Proceeds received upon the sale of shares acquired through an incentive plan that were granted or vested based, wholly or in part, on satisfaction of a Financial Reporting Measure performance goal. |
For purposes of this Policy, Incentive-Based Compensation excludes:
| ● | Any base salaries (except with respect to any salary increases earned, wholly or in part, based on satisfaction of a Financial Reporting Measure performance goal); |
| ● | Bonuses paid solely at the discretion of the Committee or Board that are not paid from a “bonus pool” that is determined by satisfying a Financial Reporting Measure performance goal; |
| ● | Bonuses paid solely upon satisfying one or more subjective standards and/or completion of a specified employment period; |
| ● | Non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or operational measures; and |
| ● | Equity awards that vest solely based on the passage of time and/or satisfaction of one or more non-Financial Reporting Measures. |
| IV. | Determination and Calculation of Erroneously-Awarded Compensation |
In the event of an Accounting Restatement, the Committee shall promptly determine the amount of any Erroneously-Awarded Compensation for each Executive Officer in connection with such Accounting Restatement and shall promptly thereafter provide each Executive Officer with a written notice containing the amount of Erroneously-Awarded Compensation and a demand for repayment, forfeiture or return thereof, as applicable.
| (a) | Cash Awards. With respect to cash awards, the Erroneously-Awarded Compensation is the difference between the amount of the cash award (whether payable as a lump sum or over time) that was Received and the amount that should have been Received applying the restated Financial Reporting Measure. |
| (b) | Cash Awards Paid From Bonus Pools. With respect to cash awards paid from bonus pools, the Erroneously-Awarded Compensation is the pro rata portion of any deficiency that results from the aggregate bonus pool that is reduced based on applying the restated Financial Reporting Measure. |
| (c) | Equity Awards. With respect to equity awards, if the shares, options, SARs or other equity awards are still held at the time of recovery, the Erroneously-Awarded Compensation is the number of such securities Received in excess of the number that should have been received applying the restated Financial Reporting Measure (or the value in excess of that number). If the options, SARs or other equity awards have been exercised, vested, settled or otherwise converted into underlying shares, but the underlying shares have not been sold, the Erroneously-Awarded Compensation is the number of shares underlying the excess options or SARs (or the value thereof). If the underlying shares have already been sold, the Erroneously-Awarded Compensation is the higher of the value of the stock upon vesting, exercise or sale. |
| (d) | Compensation Based on Stock Price or Total Shareholder Return. For Incentive-Based Compensation based on (or derived from) stock price or total shareholder return, where the amount of Erroneously-Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement, the amount shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received (in which case, the Committee shall maintain documentation of such determination of that reasonable estimate and provide such documentation to Nasdaq in accordance with applicable listing standards). |
| V. | Recovery of Erroneously-Awarded Compensation |
Once the Committee has determined the amount of Erroneously-Awarded Compensation recoverable from the applicable Covered Person, the Committee shall take all necessary actions to recover the Erroneously-Awarded Compensation. Unless otherwise determined by the Committee, the Committee shall pursue the recovery of Erroneously-Awarded Compensation in accordance with the below:
| (a) | Cash Awards. With respect to cash awards, the Committee shall either (i) require the Covered Person to repay the Erroneously-Awarded Compensation in a lump sum in cash (or such property as the Committee agrees to accept with a value equal to such Erroneously-Awarded Compensation) reasonably promptly following the Restatement Date or (ii) if approved by the Committee, offer to enter into a Repayment Agreement. If the Covered Person accepts such offer and signs the Repayment Agreement within a reasonable time as determined by the Committee, the Company shall countersign such Repayment Agreement. |
| (b) | Unvested Equity Awards. With respect to those equity awards that have not yet vested, the Committee shall take all necessary action to cancel, or otherwise cause to be forfeited, the awards in the amount of the Erroneously-Awarded Compensation. |
| (c) | Vested Equity Awards. With respect to those equity awards that have vested and the underlying shares have not been sold, the Committee shall take all necessary action to cause the Covered Person to deliver and surrender the underlying shares in the amount of the Erroneously-Awarded Compensation. |
In the event that the Covered Person has sold the underlying shares, the Committee shall either (i) require the Covered Person to repay the Erroneously-Awarded Compensation in a lump sum in cash (or such property as the Committee agrees to accept with a value equal to such Erroneously-Awarded Compensation) reasonably promptly following the Restatement Date or (ii) if approved by the Committee, offer to enter into a Repayment Agreement. If the Covered Person accepts such offer and signs the Repayment Agreement within a reasonable time as determined by the Committee, the Company shall countersign such Repayment Agreement.
| (d) | Repayment Agreement. “Repayment Agreement” shall mean an agreement (in a form reasonably acceptable to the Committee) with the Covered Person for the repayment of the Erroneously-Awarded Compensation as promptly as possible without unreasonable economic hardship to the Covered Person. |
| (e) | Effect of Non-Repayment. To the extent that a Covered Person fails to repay all Erroneously-Awarded Compensation to the Company when due (as determined in accordance with this Policy), the Company shall, or shall cause one or more other members of the Company to, take all actions reasonable and appropriate to recover such Erroneously-Awarded Compensation from the applicable Covered Person. Unless otherwise determined by the Committee in its discretion, the applicable Covered Person shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously-Awarded Compensation in accordance with the immediately preceding sentence. |
The Committee shall have broad discretion to determine the appropriate means of recovery of Erroneously-Awarded Compensation based on all applicable facts and circumstances and taking into account the time value of money and the cost to shareholders of delaying recovery. However, in no event may the Company accept an amount that is less than the amount of Erroneously-Awarded Compensation in satisfaction of a Covered Person’s obligations hereunder.
| VI. | Discretionary Recovery |
Notwithstanding anything herein to the contrary, the Company shall not be required to take action to recover Erroneously-Awarded Compensation if any one of the following conditions are met and the Committee determines that recovery would be impracticable:
| (i) | The direct expenses paid to a third party to assist in enforcing this Policy against a Covered Person would exceed the amount to be recovered, after the Company has made a reasonable attempt to recover the applicable Erroneously-Awarded Compensation, documented such attempts and provided such documentation to Nasdaq; |
| (ii) | Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it would be impracticable to recover any amount of Erroneously-Awarded Compensation based on violation of home country law, the Company has obtained an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation and a copy of the opinion is provided to Nasdaq; or |
| (iii) | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. |
| VII. | Reporting and Disclosure Requirements |
The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the federal securities laws, including the disclosure required by the applicable filings required to be made with the SEC.
| VIII. | Effective Date |
This Policy shall apply to any Incentive-Based Compensation Received on or after the Nasdaq Effective Date.
| IX. | No Indemnification |
The Company shall not indemnify any Covered Person against the loss of Erroneously-Awarded Compensation and shall not pay, or reimburse any Covered Persons for premiums, for any insurance policy to fund such Covered Person’s potential recovery obligations.
| X. | Administration |
The Committee has the sole discretion to administer this Policy and ensure compliance with Nasdaq Rules and any other applicable law, regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith. Actions of the Committee pursuant to this Policy shall be taken by the vote of a majority of its members. The Committee shall, subject to the provisions of this Policy, make such determinations and interpretations and take such actions as it deems necessary, appropriate or advisable. All determinations and interpretations made by the Committee shall be final, binding and conclusive.
| XI. | Amendment; Termination |
The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary, including as and when it determines that it is legally required by any federal securities laws, SEC rule or the rules of any national securities exchange or national securities association on which the Company’s securities are then listed. The Committee may terminate this Policy at any time. Notwithstanding anything in this Section XI to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or the rules of any national securities exchange or national securities association on which the Company’s securities are then listed.
| XII. | Other Recoupment Rights; No Additional Payments |
The Committee intends that this Policy will be applied to the fullest extent of the law. The Committee may require that any employment agreement, equity award agreement or any other agreement entered into on or after the Adoption Date shall, as a condition to the grant of any benefit thereunder, require a Covered Person to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other rights under applicable law, regulation or rule or pursuant to any similar policy in any employment agreement, equity plan, compensation policy, equity award agreement or similar arrangement and any other legal remedies available to the Company. However, this Policy shall not provide for recovery of Incentive-Based Compensation that the Company has already recovered pursuant to Section 304 of the Sarbanes-Oxley Act or other recovery obligations.
| XIII. | Successors |
This Policy shall be binding and enforceable against all Covered Persons and their beneficiaries, heirs, executors, administrators or other legal representatives.
Exhibit A
ACKNOWLEDGEMENT AND AGREEMENT
TO THE
EXECUTIVE OFFICER CLAWBACK POLICY
OF
MOBILICOM LIMITED
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of Mobilicom Limited Executive Officer Clawback Policy (the “Policy”). Capitalized terms used but not otherwise defined in this Acknowledgement Form (this “Acknowledgement Form”) shall have the meanings ascribed to such terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including, without limitation, by returning any Erroneously-Awarded Compensation (as defined in the Policy) to the Company to the extent required by, and in a manner permitted by, the Policy.
| Signature | |
| Name | |
| Date |
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