BOS Better Online Solutions Ltd. — FY2020 Form 20-F
Period: Fiscal year ended December 31, 2020; filed March 30, 2021. This is an annual report, not a standalone fourth-quarter filing. The filing gives quarterly revenue but does not provide clear standalone Q4 profit, cash flow, or margin figures. Financial amounts below are in U.S. dollars; unless stated otherwise, millions.
Business context
BOS is an Israeli provider of industrial robotics, RFID and supply-chain solutions. Its three reporting divisions were Supply Chain Solutions, RFID and Intelligent Robotics. In 2020, they represented approximately 55%, 37% and 8% of revenue, respectively. Israel accounted for 72% of revenue; exports were 27%.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Revenue | $33.551m | $33.817m | Down 0.8% |
| Gross profit | $6.118m | $6.658m | Down 8.1% |
| Gross margin | 18.0% | 19.6% | Down 1.6 percentage points |
| Operating loss | $0.651m | $0.631m | Loss widened slightly |
| Net loss | $0.960m | $0.913m | Loss widened; per-share loss was $0.22 versus $0.23 |
| Operating cash flow | $1.058m | $(0.915)m | Turned positive |
| Cash and cash equivalents | $1.036m | $0.339m | Restricted cash was an additional $0.140m |
| Working capital | $7.621m | $7.632m | Positive and broadly unchanged |
| Bank loans | $2.031m | $2.705m | $0.815m current; $1.216m long-term |
Total assets were $23.028m, versus $25.199m in 2019; shareholders’ equity was $11.869m, versus $12.557m. Financing cash flow was a $0.532m use of cash, while investing activities provided $0.071m. Operating cash flow benefited from lower receivables and inventory; trade payables declined by $1.011m. The company reported compliance with its bank covenants at year-end and an unused short-term credit line of $1.482m.
Material changes and unusual items
- Supply Chain revenue fell to $18.594m from $19.750m, with sales to the Far East and India down 30% as long-term contracts ended without significant renewals.
- RFID revenue declined 6% to $12.455m; management attributed the decrease to slower commercial activity during COVID-19.
- Intelligent Robotics revenue rose to $2.502m from $0.826m, but the division recorded an $0.871m gross loss, attributed to pricing and production problems. Its operating loss was $2.722m.
- Goodwill and intangible-asset impairment charges totaled $0.988m in 2020 ($0.471m goodwill and $0.517m intangible assets), compared with $0.970m in 2019. The charges related to the Imdecol business acquired in 2019.
- General and administrative expenses decreased to $1.747m from $2.255m, partly because 2019 included acquisition, special-meeting and executive-departure expenses. Sales and marketing expenses were $3.922m, compared with $4.064m.
Outlook, risks and contingencies
Management expected Intelligent Robotics revenue growth to continue in 2021 and said pricing and production controls were intended to support a return to division-level gross profit. It also expected RFID growth from expanded offerings in Israel. Conversely, management expected the decline in Supply Chain revenue to continue as contracts in India and the Far East expire. These are expectations, not quantified company-wide guidance.
- COVID-19 could disrupt suppliers, shipments, customer activity and collections; the company relies on some manufacturers in China.
- Debt repayment depends substantially on operating cash generation. Bank facilities are concentrated with one lender, secured by company and Israeli-subsidiary assets, and include financial covenants. Some borrowings carry variable rates.
- Supplier exposure is material: five suppliers accounted for 33% of Supply Chain purchases, 51% of Intelligent Robotics purchases and 41% of RFID purchases. Positronic alone represented 17% of Supply Chain purchases.
- Foreign-exchange movements matter because substantial revenue is U.S.-dollar-denominated while many Israeli costs are in shekels. The company used currency forwards but noted these do not eliminate all exposure.
- Inventory, order cancellations, customer collections, competition, technology changes, key-person retention and successful U.S. market penetration by Intelligent Robotics are additional stated risks.
- The company said it was not party to legal proceedings at December 31, 2020. A facility-related claim was settled for NIS 70,000; a separate shareholder claim had previously been settled, with a $35,000 company deductible.
- Contingent royalties to Israel’s Office of the Chief Scientist were disclosed at approximately $3.603m, including interest, but management said the related software was no longer sold and expected no future royalty payments.
Subsequent events and investor checks
- On January 4, 2021, BOS completed a registered direct offering of 800,000 shares and 720,000 warrants for $2.0m gross proceeds ($1.84m net). Warrants have a $2.75 exercise price and five-year term. Shares outstanding increased from 4,391,163 at year-end to 5,193,663 by March 30, 2021.
- Verify the assumptions underlying the Imdecol impairment and the evidence supporting management’s 2021 robotics recovery expectations.
- Track Supply Chain contract renewals, geographic sales concentration and the effect of supplier changes, particularly at Positronic.
- Assess cash conversion, receivables collection, inventory exposure, debt repayments and continued compliance with bank covenants.
- Review the dilution and potential resale impact of the 2021 offering, warrants and remaining equity-financing arrangements.
- The independent auditor issued an unqualified opinion on the U.S. GAAP financial statements and identified goodwill impairment valuation as a critical audit matter. Management reported effective internal control over financial reporting; the auditor did not provide an internal-control attestation.