A2Z Smart Technologies Corp. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; audited consolidated financial statements prepared under IFRS, in U.S. dollars. The filing is an annual report, not a standalone Q4 filing. The company’s principal focus is Cust2Mate smart carts; it also operates precision metal parts and advanced engineering businesses. The filing identifies the registrant as A2Z Smart Technologies Corp.
Financial performance and liquidity
Unless otherwise stated, amounts are in U.S. dollars, in thousands.
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $11,375 | $9,351 | +21.6% |
| Gross profit | $1,993 | $1,834 | +8.7% |
| Gross margin | 17.5% | 19.6% | Down 2.1 percentage points |
| Operating loss | $(18,068) | $(16,702) | Loss widened |
| Net loss | $(18,057) | $(18,347) | Loss narrowed |
| Total comprehensive loss | $(17,753) | $(19,273) | Loss narrowed |
| Basic and diluted loss per share | $(0.46) | $(0.60) | Improved |
| Net cash used in operating activities | $(11,387) | $(9,431) | Cash use increased |
Revenue growth was led by smart carts: $6,128 versus $3,688. Advanced engineering revenue was $2,163 versus $1,705, while precision metal parts revenue fell to $3,084 from $3,958. Smart cart cost of revenue increased to $5,550 from $2,892. Research and development was $4,751; sales and marketing rose to $1,377 from $475; general and administrative expense was $13,933.
At year-end, cash and cash equivalents were $2,267 (versus $2,616); current assets were $4,731 and current liabilities $5,632, resulting in negative working capital of $901. Total assets were $8,519, total liabilities $10,828, and shareholders’ equity was negative $2,309. Loans totaled $1,394, lease liabilities $600, and warrant liability $3,075. Cash declined by $814 during 2023; financing cash inflows of $10,893 partly offset operating and investing cash outflows.
Quarterly results and material changes
Q4 2023 revenue was $1,349, versus $2,558 in Q3 2023 and $3,825 in Q4 2022. Q4 gross loss was $34, compared with gross profit of $368 in Q3 2023 and $917 in Q4 2022. Management attributed the sequential decline primarily to completion of Yochananof cart deliveries in Q3; smart cart sales were $28 in Q4, versus $1,442 in Q3. Q4 total comprehensive loss was $4,041 and loss per share was $0.11.
Revenue increased year over year, but gross margin declined and operating loss widened as expenses remained high. The 2023 results included a $1,027 goodwill impairment related to Isramat, reflecting continued losses in the precision metal parts segment, and a $1,255 gain from revaluation of warrant liabilities. The filing states that 2022 loss per share was restated from $(0.70) to $(0.60) for an immaterial error.
Outlook, risks and other notable items
- Funding and going concern: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern. The company reports recurring losses and negative operating cash flows, and says it had not generated sufficient revenue to fund operations. Management expects losses for at least the next 12 months and anticipates needing additional financing. The filing also contains a management statement that available liquidity is adequate for at least 12 months; this should be read alongside the going-concern warning and negative working capital.
- Financing and dilution: 2023 financing activities included $10,317 from share and warrant issuances. After year-end, the company raised approximately $3,227 in January 2024. It also reported an April 2024 registered offering of approximately $3.3 million and a proposed private placement of approximately $2.4 million, subject to closing conditions. These financings involve substantial share issuance and potential dilution.
- Customers and commercial pipeline: Smart cart revenue relies heavily on one customer, Yochananof, whose initial 1,300-cart order was delivered by September 2023. The filing describes additional prospects and orders, including a 250-cart Monoprix order, while some larger deployment plans are non-binding or subject to definitive terms. Orders and pipeline should not be treated as completed deployments or assured revenue.
- Strategy: The company is prioritizing Cust2Mate and has put development of military and civilian products on hold. In November 2023, the board approved a proposed spin-off of its 80% interest in AAI; completion was anticipated in Q3 2024 and remained subject to approvals.
- Operating and regional risks: The company’s offices, employees, customers and assets are concentrated in Israel. Management reported no material financial effect from the war through year-end 2023, but duration and broader effects were uncertain; commercial insurance does not cover war- and terrorism-related losses. Other key risks include customer concentration, long sales cycles, competition, supplier reliance, technology execution and foreign-exchange exposure.
- Controls and accounting: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2023, citing a material weakness involving insufficient technical accounting resources and oversight. Remediation includes an enhanced accounting system, additional personnel and outside consultants. The auditor did not provide an opinion on internal-control effectiveness.
Most important facts for investors to verify
- Current cash runway, financing needs and the status and net proceeds of post-year-end offerings and proposed placements.
- Whether disclosed retailer agreements are binding, the timing and scale of actual deployments, and resulting revenue and cash collection.
- The extent of dependence on Yochananof and the status of replacement or diversified smart cart customers.
- Progress in remediating the material weakness and whether internal controls are now effective.
- Execution and approval status of the proposed AAI spin-off, and any effect on assets, liabilities or future funding needs.
- Reconciliation of disclosed smart-cart customer concentration: the filing cites 54% of total revenue in one section and 51.5% in the segment note.