A2Z Smart Technologies Corp. — 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022; audited consolidated financial statements prepared under IFRS in U.S. dollars. This is an annual report, not a standalone Q4 filing. The filing also presents fourth-quarter results. The company’s common shares trade as AZ on Nasdaq and the TSX Venture Exchange.
Business context
A2Z develops and commercializes Cust2Mate smart shopping carts, provides advanced engineering and maintenance services, and manufactures precision metal parts through Isramat, acquired in February 2022. Management is prioritizing smart carts; development of automotive and other military/civilian products was slowed or put on hold. All reported revenue was generated in Israel. Smart-cart revenue came from one customer, Yochananof.
Financial results
| Metric (US$ millions, except per-share data) | 2022 | 2021 |
|---|---|---|
| Revenue | 9.351 | 2.685 |
| Gross profit | 1.834 | 0.656 |
| Gross margin | 19.6% | 24.4% |
| Operating loss | (16.702) | (9.162) |
| Loss for the year | (18.347) | (40.290) |
| Total comprehensive loss | (19.273) | (39.735) |
| Net loss attributable to A2Z shareholders | (17.483) | (38.608) |
| Basic and diluted loss per share, per audited statements | (0.70) | (1.70) |
| Operating cash flow | (9.431) | (9.378) |
Amounts are in millions unless indicated. The filing’s MD&A gives 2022 loss per share as $(0.63), while the audited statements report $(0.70); investors should confirm the correct figure. The risk-factor discussion also describes 2022 net loss as approximately $19.3 million, which corresponds to total comprehensive loss rather than the audited net loss for the year.
2022 revenue growth reflected $3.958 million from Isramat, included from its acquisition date, and smart-cart revenue of $3.688 million versus $0.750 million in 2021. Advanced engineering revenue was $1.705 million, down from $1.935 million. Cost of revenue rose to $7.517 million. Research and development was $4.462 million, sales and marketing $0.475 million, and general and administrative expense $13.599 million. G&A growth included $4.868 million of share-based compensation and higher payroll.
Q4 2022 and liquidity
Q4 revenue was $3.825 million, up from $2.650 million in Q3; gross profit was $0.917 million versus $0.430 million. Management attributed the sequential increase mainly to higher Yochananof cart deliveries. Q4 total comprehensive loss was $5.600 million and reported loss per share was $(0.19).
At year-end, cash and cash equivalents were $2.616 million, total current assets $6.942 million and current liabilities $6.237 million, leaving working capital of $0.705 million. Cash was down from $8.470 million at year-end 2021. Investing activities used $1.559 million and financing activities provided $6.096 million; the cash-flow statement reports a $4.894 million decrease before a $0.960 million adverse foreign-exchange effect. Total assets were $12.694 million, total liabilities $9.805 million and total equity $2.889 million.
Loans totaled $1.744 million, of which $1.403 million was current; lease liabilities were $0.886 million. The balance sheet also included a $1.447 million provision related to the Isramat acquisition and a $1.142 million warrant liability. The company reported negative operating cash flow and an accumulated deficit of $67.395 million. Management said it expected to have sufficient resources for at least 12 months, while also warning that further financing would likely be needed to meet growth plans and that funding was not assured.
Outlook, material items and risks
- A2Z reported a Yochananof order for 1,000 smart carts, increased by 300 carts in December 2022. The related cart and maintenance/support amounts were stated as approximately $13 million, including VAT. A $1.373 million customer prepayment for carts not yet delivered was recorded as deferred revenue at year-end.
- Management’s stated 2023 ambition was to generate orders for several thousand carts. It expected the updated Generation 2.9 cart to be released in Q2 2023 and said financing shortfalls could delay development milestones.
- The company reported seven pilot projects at the report date. Pilots at Evergreen and Morton Williams had concluded, with rollout decisions pending; the Yochananof pilot had converted into an order. Pilot timing and conversion to larger rollouts remained uncertain.
- The Isramat acquisition added $3.958 million of 2022 revenue but contributed a net loss of $0.875 million. A contingent commitment to former Isramat shareholders was revalued to $1.447 million, with related finance expense recognized.
- 2021’s $30.895 million warrant revaluation loss was unusually large; the comparable 2022 loss was $0.254 million. This helped reduce the reported annual loss in 2022 despite a larger operating loss.
- Principal risks include continued losses and cash burn, potential dilutive financing, dependence on one smart-cart customer, long sales cycles and unproven large-scale adoption, competition, supplier and component risks, foreign-exchange exposure, and political and military risks in Israel.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 because of a material weakness involving insufficient accounting resources and oversight of financial reporting. Remediation efforts included an enhanced accounting system, additional personnel and outside consultants. The auditor issued an unqualified opinion on the financial statements but did not opine on internal-control effectiveness.
- A March 2023 financing of approximately $2.604 million was reported as closed in escrow, subject to final closing. The company paid no dividends and said it did not expect to do so in the foreseeable future.
Important facts for investors to verify
- Reconcile the filing’s differing 2022 loss-per-share disclosures ($(0.63) in MD&A versus $(0.70) in the audited statements) and distinguish net loss from comprehensive loss.
- Confirm the cash-flow figures and the company’s liquidity runway, including the effect of the March 2023 financing and the stated reliance on officer support.
- Check delivery, acceptance, collections and remaining obligations under the Yochananof order, and whether the pilots convert into commercial rollouts.
- Assess the dilution and financial exposure from outstanding warrants, options, RSUs and the Isramat shareholder price-protection commitment.
- Track remediation of the material weakness and whether subsequent filings demonstrate effective financial-reporting controls.