BOS Better Online Solutions Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed April 1, 2024. This is an annual report, not a standalone Q4 filing. Financial statements are in U.S. dollars and prepared under U.S. GAAP. BOS operates Intelligent Robotics, RFID, and Supply Chain Solutions divisions.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $44.179 million | $41.511 million |
| Gross profit / margin | $9.209 million / 20.8% | $9.060 million / 21.8% |
| Operating income | $2.450 million | $1.929 million |
| Net income | $2.005 million | $1.276 million |
| Basic / diluted earnings per share | $0.35 / $0.34 | $0.23 / $0.23 |
| Cash from operations | $1.829 million | $1.283 million |
| Cash and cash equivalents | $2.344 million | $1.763 million |
| Total debt, including current maturities | $1.320 million | $1.880 million |
| Working capital | $11.114 million | $9.379 million |
Cash, cash equivalents and restricted cash together were $2.561 million at year-end 2023. Investing activities used $0.772 million, including $0.341 million for property and equipment and $0.431 million for acquired assets. Financing activities used $0.389 million, principally from loan repayments. The company reported no short-term bank loans and an unused short-term credit line of $1.314 million. Its bank debt carries a weighted average interest rate of 8.27%, is secured by company and Israeli subsidiary assets, and was in covenant compliance at year-end.
Business mix and changes from FY2022
- Supply Chain Solutions: Revenue rose 14% to $28.845 million, about 65% of consolidated revenue. Management attributed growth partly to sourcing components from secondary suppliers during shortages.
- RFID: Revenue fell 10% to $13.713 million, about 31% of revenue, amid a slowdown in Israel’s civilian sector. The filing also cites the security situation as a factor in lower RFID revenue.
- Intelligent Robotics: Revenue increased to $1.742 million from $0.961 million. The division recorded an operating loss of $0.073 million, improved from a $0.584 million loss in 2022.
- Consolidated revenue increased 6.4%, while gross margin declined from 21.8% to 20.8%. Net income and operating cash flow improved. Financial expenses decreased to $0.441 million from $0.647 million, mainly because currency-related expenses declined; interest expense increased to $0.402 million from $0.306 million.
- Inventory was $6.070 million, down from $6.433 million. The company recorded a $0.446 million inventory write-down in 2023, versus none in 2022. The allowance for doubtful accounts increased to $0.287 million from $0.082 million.
Outlook, risks and unusual items
- Management expects RFID portfolio expansion to support 2024 revenue growth, subject to possible adverse effects from the war. It expects Supply Chain revenue to remain roughly level with 2023 as official-distributor purchasing returns, and anticipates robotics growth following a new relationship with a leading Israeli defense customer.
- The war and regional shipping disruption may affect employees, supply chains, delivery times, freight and insurance costs, and customer relationships. Management said the security situation had a non-material impact on overall 2023 results, but could not estimate future effects. A post-year-end compensation advance of approximately $138,000 was received for a claimed Q4 sales decline; it was not recognized because entitlement had not been officially confirmed.
- Other principal risks include dependence on key suppliers and customers, fluctuating product mix and margins, customer credit and order cancellations, competition and technology changes, foreign-exchange and interest-rate exposure, debt covenants and reliance on bank financing, and possible Nasdaq continued-listing noncompliance. Israel’s inflation and NIS movements can affect costs.
- Goodwill was $4.895 million, allocated to RFID. Management concluded its year-end impairment analysis indicated no impairment; the auditor identified this analysis as a critical audit matter due to the significant estimates and judgment involved. No long-lived asset impairment was identified.
- The company disclosed a contingent $3.603 million royalty obligation to the Israel Innovation Authority, payable only if relevant products generate sales; BOS says the funded software is no longer sold and expects no future royalties. Previously disclosed customer and sales-agent claims were settled in 2022; the filing reports no current legal proceedings.
- The auditor issued an unqualified opinion on the financial statements. Management stated disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal control.
Investor verification priorities
- Reconcile the filing’s conflicting earnings-per-share statements: MD&A incorrectly describes 2023 and 2022 per-share results as “net loss,” while the audited statements report positive net income and positive EPS.
- Check the quarterly revenue table against audited annual revenue: the quarterly figures sum to $44.233 million, while audited FY2023 revenue is $44.179 million; the table reports Q4 revenue of $10.941 million versus $11.327 million in Q4 2022.
- Confirm working capital: the balance sheet implies $11.114 million, matching one MD&A figure, while another passage reports $11.137 million.
- Track the status and accounting treatment of the approximately $138,000 war-related compensation advance, as well as actual war-related operating and sales impacts.
- Monitor 2024 segment performance, gross margin, customer receivables and inventory quality, bank covenant compliance, debt repayment, and the assumptions supporting the $4.895 million goodwill valuation.