A2z Cust2mate Solutions Corp 6-K, filed Nov 13, 2024
A2z Cust2mate Solutions Corp. (AZ)
About this 6-K
A2z Cust2mate Solutions Corp filed this 6-K on November 13, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For
the month of November
Commission
File Number:
(formerly A2Z Smart Technologies Corp.) (Registrant)
(Address of Principal Executive Offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
This Report on Form 6-K and Exhibit 99.1 and Exhibit 99.2 are hereby incorporated by reference into the registrant’s Registration Statement on Form F-3 (File No. 333-271226), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| A2Z CUST2MATE SOLUTIONS CORP. | ||
| (Registrant) | ||
| Date November 13, 2024 | By | /s/ Gadi Graus |
| Gadi Graus | ||
| Chief Executive Officer | ||
EXHIBIT INDEX
Exhibit 99.1
A2Z Cust2Mate Solutions Corp.
(formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
(Unaudited)
(Expressed in US Dollars)
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
A2Z CUST2MATE SOLUTIONS CORP.
(formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
(Unaudited)
(Expressed in US Dollars)
INDEX
| 2 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(Expressed in Thousands of US Dollars)
As at September 30, 2024 |
As at December 31, 2023 |
|||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Deposits | ||||||||
| Inventories | ||||||||
| Trade receivables, net | ||||||||
| Other accounts receivable | ||||||||
| Total current assets | ||||||||
| Intangible asset - patent, net | ||||||||
| Long term financial asset at fair value | ||||||||
| Property, plant and equipment, net | ||||||||
| Total non-current assets | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Short term loan and current portion of long-term loans | ||||||||
| Bank overdraft | ||||||||
| Lease liability | ||||||||
| Trade payables | ||||||||
| Other accounts payable | ||||||||
| Total current liabilities | ||||||||
| Lease liability | ||||||||
| Long term loans | ||||||||
| Provisions | ||||||||
| Warrant Liability (note 3) | ||||||||
| Severance payment, net | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ deficit (note 4) | ||||||||
| Share capital and additional paid in capital | ||||||||
| Warrant Reserve | ||||||||
| Accumulated other comprehensive income | ( |
) | ( |
) | ||||
| Transactions with non-controlling interests | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total equity attributable to Company shareholders | ||||||||
| Non-controlling interest | ( |
) | ( |
) | ||||
| Total shareholders’ deficit | ( |
) | ( |
) | ||||
| Total liabilities and shareholders’ deficit | ||||||||
| November 13, 2024 | “Yonatan De Jongh” | “Gadi Graus” | ||
| Date of approval of the financial statements | Yonatan De Jongh - Director | Gadi Graus Chief Executive Officer |
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 3 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Unaudited)
(Expressed in Thousands of US Dollars, except per share data)
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues (note 6) | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Sales and marketing costs | ||||||||||||||||
| General and administration expenses | ||||||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss (gain) on revaluation of warrant Liability (note 3) | ( |
) | ( |
) | ||||||||||||
| Financial (income) expense | ( |
) | ||||||||||||||
| Loss before taxes on income | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss for the period | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Less: Net loss attributable to non-controlling interests | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss attributable to controlling shareholders | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss for the period | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Item that will not be reclassified to profit or loss: | ||||||||||||||||
| Adjustments arising from translation of financial statements to presentation currency | ( |
) | ( |
) | ( |
) | ||||||||||
| Other comprehensive income (loss) | ( |
) | ( |
) | ( |
) | ||||||||||
| Total comprehensive loss for the period | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss attributable to controlling shareholders | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Basic and diluted loss per share | ) | )(*) | ) | )(*) | ||||||||||||
| Weighted average number of shares outstanding | ||||||||||||||||
| (*) |
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 4 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(Expressed in Thousands of US Dollars)
| Number of shares (*) | Additional paid in capital | Warrant reserve | Other Comprehensive Income | with non-controlling parties | Accumulated deficit | Non-controlling interest | of
the Company (Deficit) |
|||||||||||||||||||||||||
| Ordinary share capital | Accumulated | Transactions | Total Equity of shareholder |
|||||||||||||||||||||||||||||
| Number of shares (*) | Additional paid in capital | Warrant reserve | Other Comprehensive Income | with non-controlling parties | Accumulated deficit | Non-controlling interest | of
the Company (Deficit) |
|||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||
| Net loss for the period | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Adjustments arising from translating financial statements of foreign operations | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Total comprehensive loss for the period | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Issuance of shares in January 2024 private placement (note 4(f)) | ||||||||||||||||||||||||||||||||
| Exercise of RSUs (note 4(i)) | ||||||||||||||||||||||||||||||||
| Issuance of shares in April 2024 private placement (note 4(g)) | ||||||||||||||||||||||||||||||||
| Issuance of shares in August 2024 private placement (note 4(h)) | ||||||||||||||||||||||||||||||||
| Share based compensation (note 5(b)) | - | |||||||||||||||||||||||||||||||
| Balance – September 30, 2024 | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||
| (*) |
| Number of shares | Additional paid in capital | Warrant reserve | Other Comprehensive Income | Accumulated deficit | Non-controlling interest | Total Equity | ||||||||||||||||||||||
| Ordinary share capital | Accumulated | |||||||||||||||||||||||||||
| Number of shares | Additional paid in capital | Warrant reserve | Other Comprehensive Income | Accumulated deficit | Non-controlling interest | Total Equity | ||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Net loss for the period | - | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
| Adjustments arising from translating financial statements of foreign operations | - | |||||||||||||||||||||||||||
| Total comprehensive loss for the period | - | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
| Issuance of shares in respect of private placement | ||||||||||||||||||||||||||||
| Issuance of shares in respect of registered direct offering | ||||||||||||||||||||||||||||
| Exercise of RSU’s | ||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||
| Share based compensation | - | |||||||||||||||||||||||||||
| Balance - September 30, 2023 | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
| (*) | On
September 24, 2024, the Board approved a |
The accompanying notes are an integral part of these Condensed Interim Consolidated financial statements.
| 5 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in Thousands of US Dollars)
| 2024 | 2023 | |||||||
| Nine months ended | ||||||||
| September 30 | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss for the period | ( |
) | ( |
) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Amortization and depreciation | ||||||||
| Share based compensation | ||||||||
| Share based compensation to service providers | ||||||||
| Loss (gain) on revaluation of warrant liability | ( |
) | ||||||
| Changes in contingent liability | ( |
) | ( |
) | ||||
| Change in severance liability | ( |
) | ( |
) | ||||
| Change in inventory | ( |
) | ||||||
| Change in trade receivables | ( |
) | ( |
) | ||||
| Change in other account receivables | ||||||||
| Accrued interest on loans and leases | ( |
) | ||||||
| Changes in bank overdraft | ||||||||
| Change in accounts payable | ||||||||
| Changes in deferred revenues | ( |
) | ||||||
| Change in other accounts payable | ( |
) | ( |
) | ||||
| Cash flow from operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities | ||||||||
| Restricted deposits | ( |
) | ||||||
| Purchase of property, plant and equipment | ( |
) | ( |
) | ||||
| Cash flow used in investing activities | ( |
) | ( |
) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of shares and warrants, net | ||||||||
| Changes in other accounts payable | ||||||||
| Exercise of warrants | ||||||||
| Lease payments | ( |
) | ( |
) | ||||
| Repayment of loans | ( |
) | ( |
) | ||||
| Proceeds from receipt of loans | ||||||||
| Cash flows from financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( |
) | ||||||
| Effect of changes in foreign exchange rates | ( |
) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | ||||||||
| Interest paid during the period | ||||||||
| APPENDIX A: NON-CASH ACTIVITIES | ||||||||
| Recognition of right-of-use asset and lease liability | ||||||||
| 6 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 1 – NATURE AND CONTINUANCE OF OPERATIONS
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.) (the “Company” or “A2Z”) was incorporated on January 15, 2018, under the laws of British Columbia. The head office is located at 1600 – 609 Granville Street, Vancouver, British Columbia V7Y 1C3, and the records and registered office is located at 2200 HSBC Building 885 West Georgia Street, British Columbia, V6C 3E8.
The Company was listed on the NASDAQ Stock Market LLC (“Nasdaq”) starting January 22, 2022, and trades under the symbol “AZ”. The Company was listed on the TSX Venture Exchange (“TSX.V”) in Toronto until February 28, 2024. Following approval for a voluntary delisting, the Company no longer trades on the TSX.V but remains a reporting issuer in Canada and its common shares remain listed on Nasdaq.
The
Company owns
The Cust2Mate system offers various features for shoppers and retailers such as product information and location, an on-cart scale to weigh items and automatically calculate costs, bar-code scanner and on-board payment system to bypass checkout lines. In addition, the product includes big data smart algorithms and computer vision capabilities, allowing for customer specific targeted advertising. (“The Cust2Mate Platform”).
The Company’s other activities include the provision of services in the field of services to the military and security markets as well as the development of related products for the civilian markets. Such services include providing maintenance services and container leasing. The Company also provides maintenance services for complex electronic systems and products.
The
Company, through its
Going Concern
The
accompanying condensed interim consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. The Company has incurred recurring losses and negative cash flows from operating activities since inception, such that as of
September 30, 2024, the Company had accumulated losses of $
Considering the above, the Company’s dependency on external funding for its operations raises a substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements for the nine months ended September 30, 2024, do not include any adjustments that might result from the outcome of these uncertainties.
On October 7, 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 Israeli population and industrial centres located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. The intensity and duration of Israel’s current war is difficult to predict, as are such war’s implications on our business and operations. While none of our supply chains have been impacted since the war broke out on October 7, 2023, the ongoing war may create supply and demand irregularities in Israel’s economy in general or lead to macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on us and our ability to effectively conduct our operations. Moreover, we cannot predict how this war will ultimately affect Israel’s economy in general, which may involve a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative”).
In connection with the Israeli security cabinet’s declaration of war against Hamas and possible or currently occurring hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. A few of our employees, none of whom are members of management, have been called to active military duty since October 7, 2023.
Some of these employees have since returned, but there can be no assurance that they will not be called to military service again. In addition, we rely on service providers located in Israel and our employees or employees of such service providers may be called for service in the current or future wars or other armed conflicts with Hamas and such persons may be absent from their positions for a period of time. As of November 13, 2024, any impact as a result of the number of absences of our personnel and personnel at our service providers or counterparties located in Israel has been manageable. However, military service call ups that result in absences of personnel from our service providers or contractual counterparties in Israel may disrupt our operations and absences for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations.
Following the attack by Hamas on Israel’s southern border, Hezbollah in Lebanon has also launched missile, rocket, and shooting attacks against Israeli military sites, troops, and Israeli towns in northern Israel. In response to these attacks, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in southern Lebanon. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank or the Houthis in Yemen, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include terror and missile attacks. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. Our commercial 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 damage 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.
These Condensed Interim Consolidated financial statements were authorized for issue by the Board of Directors on November 13, 2024.
| 7 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 2 – BASIS OF PREPARATION
| 1. | Significant accounting policy |
Statement of Compliance
These unaudited Condensed Interim Consolidated financial statements of the Company are as of September 30, 2024, and presented in US dollars, which is not the functional currency. The functional currency is the NIS. These unaudited interim condensed consolidated financial statements have been prepared in accordance with the requirements of International Accounting Standard IAS 34 “Interim Financial Reporting” as issued by the IASB. They do not include all the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the financial statements of the Company for the year ended December 31, 2023.
The policies applied in these Condensed Interim Consolidated financial statements are based on IFRS effective as of September 30, 2024, and are consistent with those included in the Company’s annual financial statements for the year ended December 31, 2023.
Basis of Consolidation
The financial results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intercompany balances and transactions and any unrealized income and expenses arising from such transactions are eliminated upon consolidation.
Basis of measurement
These consolidated financial statements have been prepared on a going concern basis, under the historical cost basis, except for financial instruments which have been measured at fair value.
| 2. | Critical Estimates and Assumptions |
The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The Company’s financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the Company’s financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods when the revision affects both current and future periods.
The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the respective entity operates; the Company has determined the functional currency of each entity to be the New Israeli Shekel. Such determination involves certain judgements to identify the primary economic environment. The Company reconsiders the functional currency of its subsidiaries if there is a change in events and/or conditions which determine the primary economic environment. During the three and nine months ended September 30, 2024, there have been no such changes. The Company’s presentation currency is the U.S. dollar.
| 8 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
The critical judgments and significant estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are the same as at December 31, 2023:
| a) | The useful life of property and equipment |
Property and equipment are amortized or depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the amounts charged to the consolidated statement of comprehensive income in specific periods.
| b) | Determining the fair value of share-based payment transactions |
The fair value of share-based payment transactions is determined upon initial recognition by the Binomial model. The Binomial model is based on share price and exercise price and assumptions regarding expected volatility, term of share option, dividend yield and risk-free interest rate.
| c) | Intangible assets |
Intangible assets with indefinite useful life are tested for impairment annually or more frequently if three is an indication of impairment. The carrying value of intangibles with definite lives is reviewed each reporting period to determine whether there is any indication of impairment. If there are indications of impairment the impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable amount, the asset is impaired, and impairment loss is recognized.
| d) | Derivative liability – Warrants |
The Company uses the Black-Scholes option-pricing model to estimate fair value at each reporting date. The key assumptions used in the model are the expected future volatility in the price of the Company’s Common Shares and the expected life of the warrants.
| e) | ECL and their measurement |
ECL are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index) and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario analysis (base case, adverse and optimistic scenarios).
As of September 30, 2024, and December 31, 2023, ECL for trade and other account receivables are not material, and as such are not disclosed, in accordance with IFRS 9.
| 3. | New Accounting Standards |
The following new standards and amendments are effective for the period beginning 1 January 2024:
| a. | Amendment to IAS 1 “Presentation of Financial Statements”: |
In January 2020, the IASB published a revision to IAS 1 on requirements to classify liabilities as current or non-current (hereinafter: “the Original Revision”). In October 2022, IASB issued a subsequent revision to the above revision (hereinafter: “the Subsequent Revision”).
The Subsequent Revision states that:
| ● | Only financial covenants an entity must comply with at the end of the reported period or prior to that impact the classification of that liability as a current liability or a non-current liability. | |
| ● | For liabilities that the examination of compliance with financial covenants is tested within 12 months consecutively to the report date, disclosure must be provided in a manner that allows users of the Financial Statements to assess the risk for that liability. This means that the Consecutive Amendment still states that disclosures must be provided for the book value of the liability, as well as additional financial information that will include the terms and conditions of the covenants and any compliance (or lack thereof) that the entity will be facing within the framework of the covenants. The Original Amendment states that a conversion right of a liability will impact the classification of the liability as a whole as a current or non-current liability, except in cases in which the conversion option is classified as equity. |
Both the Original Revision and the Subsequent Revision were applied retroactively as from annual reporting periods starting on or after January 1, 2024.
The above Amendment had no material impact on the Company’s Interim Consolidated Financial Statements.
| b. | Revision to IFRS 16 “Leases”: |
In September 2022, IASB issued a revision to IFRS 16 “Leases” (hereinafter: “the Revision”), designed to provide for accounting treatment for lease agreements that include seller-lessee lease and lease back transactions, where lease payments are variable lease payments that are not based on an index or rate. In the Revision, it is stated that any seller-lessee will have to apply the regulations that provide accounting treatment for any sale transaction of such agreements. The approach selected includes accounting policy, to wit the sale of control of the transfer of the asset.
The Revision was applied to annual reporting periods starting on January 1, 2024. The Revision is expected to have minimal impact.
The above Amendment had no material impact on the Company’s Interim Consolidated Financial Statements.
| c. | Amendments to IAS 7, “Statement of Cash Flows”, and IFRS 7, “Financial Instruments: Disclosures”: |
In May 2023, IASB issued amendments to IAS 7, “Statement of Cash Flows”, and IFRS 7, “Financial Instruments: Disclosures” (“the Amendments”) to address the presentation of liabilities and the associated cash flows arising out of supplier finance arrangements, as well as disclosures required for such arrangements.
The disclosure requirements in the Amendments enhance the current requirements and are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.
The Amendments are effective for annual reporting periods beginning on or after January 1, 2024. Early adoption is permitted but will need to be disclosed.
The Company believes that the Amendments are not expected to have a material impact on its consolidated financial statements.
| 4. | Disclosure for new IFRS standards to be applicable in future reporting periods
IFRS 18 “Presentation and Disclosure in Financial Statements”:
In April 2024, IASB issued IFRS 18 “Presentation and Disclosure in Financial Statements” (hereinafter: “the New Standard”), superseding IAS 1 “Presentation of Financial Statements” (hereinafter: “IAS 1”).
The objective of the New Standard is to improve comparability and transparency on financial statements.
The New Standard is to include current IAS 1 stipulations, as well as new requirements for presentation on the income statement, including presentation of amounts and sub-totals required by the New Standard, providing disclosure of management-defined performance measures and new requirements for grouping and un-grouping of financial information.
The New Standard does not change the recognition and measurement provisions for items on financial statements. However, since items on the income statement would be required to be classified under one of five categories (current operations, investment operations, financing operations, taxes on income and discontinued operations), this may change the entity’s operating income. Furthermore, the publication of the New Standard resulted in limited revisions to other accounting standards, including IAS 7 “Statement of Cash Flows” and IAS 34 “Interim Financial Reporting”.
The New Standard shall be applied retroactively starting with annual reporting periods starting on or after January 1, 2027. Early implementation is possible, subject to disclosure.
The Company is reviewing the impact of the New Standard, including the impact of revisions to other accounting standards resulting from the New Standard, on its consolidated financial statements. |
| 9 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 3 – WARRANT LIABILITY
| a) | January 2024 Warrants
On
January 4, 2024, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on September 30, 2024:
SCHEDULE OF FAIR VALUE HIERARCHY OF WARRANTS
| Balance at January 1, 2024 | $ | |||
| Issuance of January 2024 Registered Direct Offerings Warrants | ||||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
| Revaluation at September 30, 2024 | ||||
| Effect of changes in foreign exchange rates | ||||
| Balance at September 30, 2024 | $ |
For
the three-month period ended September 30, 2024, the Company recorded a loss on the revaluation of the January 2024 warrant liability
in the amount of $
| b) | December 2023 Warrants
On
December 13, 2023, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on September 30, 2024:
SCHEDULE OF FAIR VALUE HIERARCHY OF WARRANTS
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
| Revaluation at September 30, 2024 | ||||
| Effect of changes in foreign exchange rates | ||||
| Balance at September 30, 2024 | $ |
For
the three-month period ended September 30, 2024, the Company recorded a loss on the revaluation of the December 2023 warrant liability
in the amount of $
| c) | June 2023 Warrants
On
June 15 and on June 20, 2023, the Company issued an aggregate of |
| 10 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 3 – WARRANT LIABILITY – (CONTINUED)
Level 3 Warrant liability for the period ended on September 30, 2024:
SCHEDULE OF FAIR VALUE HIERARCHY OF WARRANTS
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
| Revaluation at September 30, 2024 | ||||
| Effect of changes in foreign exchange rates | ||||
| Balance at September 30, 2024 | $ |
For
the three-month period ended September 30, 2024, the Company recorded a loss on the revaluation of the June 2023 warrant liability in
the amount of $
| d) | March 2023 Warrants
On
March 20, 2023, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on September 30, 2024:
SCHEDULE OF FAIR VALUE HIERARCHY OF WARRANTS
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
| Revaluation at September 30, 2024 | ||||
| Effect of changes in foreign exchange rates | ||||
| Balance at September 30, 2024 | $ |
For
the three-month period ended September 30, 2024, the Company recorded a loss on the revaluation of the March 2023 warrant liability in
the amount of $
| 11 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 3 – WARRANT LIABILITY (CONTINUED)
| c) | November 2022 Warrants
On
November 2, 2022, the Company issued an aggregate of |
Level 3 Warrant liability for the period ended on September 30, 2024:
SCHEDULE OF FAIR VALUE HIERARCHY OF WARRANTS
| Balance at December 31, 2023 | $ | |||
| Revaluation at March 31, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Revaluation at June 30, 2024 | ( | ) | ||
| Effect of changes in foreign exchange rates | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
| Revaluation at September 30, 2024 | ||||
| Effect of changes in foreign exchange rates | ||||
| Balance at September 30, 2024 | $ |
For
the three-month period ended September 30, 2024, the Company recorded a loss on the revaluation of the November 2022 warrant liability
in the amount of $
| 12 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
| The Company’s Authorized share capital is unlimited common shares without par value (“Shares”). |
| a) | On
September 24, 2024, the Board approved a | |
| b) | During
the nine months ended September 30, 2023, the Company issued shares in respect of | |
| c) | During the nine months ended September 30, 2023, the Company issued shares in respect of RSUs that were exercised (note 5 (c)). | |
| d) | On
March 20, 2023, the Company closed a private placement for gross proceeds of $ | |
| e) | On
June 15 and on June 20, 2023, the Company closed registered direct offerings for gross proceeds of $ | |
| f) | On
January 4, 2024, the Company closed a registered direct offering for gross proceeds of $ | |
| g) | On April 2, 2024, the Company closed a registered direct offering for gross proceeds of approximately $ at a purchase price of $ per share and issued an aggregate of common shares in the registered direct offering. The Company issued common shares as finders’ fee. | |
| h) | On August 12, 2024, the Company closed its previously announced private placement for gross proceeds of approximately $, at a purchase price of $ per common share and $ per pre-funded warrant. The Company issued a total of common shares and pre-funded warrants to purchase up to common shares, with each pre-funded warrant having an exercise price of $ per share. Each pre-funded warrant has an exercise price of $ per share and will expire when exercised in full.
Certain directors and officers of the Company purchased $ value of common shares in the private placement. In connection with the closing, the Company has issue certain non-U.S. residents common shares as finders fees. | |
| i) | During the nine months ended September 30, 2024, the Company issued Shares in respect of RSUs that were exercised (note 5 (c)). |
| 13 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS
a) Warrants
| (i) | Warrant transactions for the nine months ended September 30, 2024, and for the year ended December 31, 2023 are as follows: |
SCHEDULE OF WARRANTS TRANSACTIONS
| Number | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2023 | $ | |||||||
| Warrants issued in the March 2023 Private Placement | ||||||||
| Exercise of warrants | ( | ) | ||||||
| Warrants issued in the June 2023 Registered Direct Offering | ||||||||
| Warrants issued in the December 2023 Registered Direct Offering | ||||||||
| Balance, December 31, 2023 | $ | |||||||
| Warrants issued in the January 2024 Registered Direct Offering | ||||||||
| Pre-Funded Warrants issued in the August 2024 Registered Direct Offering | ||||||||
| Balance, September 30, 2024 | $ | |||||||
| 14 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS (CONTINUED)
a) Warrants (continued)
As at September 30, 2024, the Company had outstanding warrants, enabling the holders to acquire common shares as follows:
SCHEDULE OF OUTSTANDING WARRANTS
| September 30, 2024 | Expiry date | Exercise price | Exercise price (USD) | |||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| ILS | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
| CAD | $ | |||||||||||||
b) Stock Options
SCHEDULE OF STOCK OPTION TRANSACTIONS
| Number | Weighted Average Exercise Price (CAD) | Weighted Average Exercise Price (USD) | ||||||||||
| Unaudited | Unaudited | Unaudited | ||||||||||
| Balance January 1, 2023 | $ | $ | ||||||||||
| Options granted (i)(ii)(iii)(iv) | ||||||||||||
| Exercise of options | ||||||||||||
| Expiry of options | ( | ) | ||||||||||
| Balance December 31, 2023 | $ | $ | ||||||||||
| Options cancelled | ( | ) | ||||||||||
| Options granted (v) | ||||||||||||
| Balance September 30, 2024 | $ | $ | ||||||||||
| ||
| ||
| 15 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 5 - WARRANTS AND OPTIONS (CONTINUED)
b) Stock Options (continued)
| Outstanding as of September 30, 2024 | Exercisable as of September 30, 2024 | Expiry date | Exercise price (CAD) | Exercise price (USD) | ||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
| CAD | $ | |||||||||||||||||
Share-based compensation expense is recognized over the vesting period of options. During the three and nine months ended September 30, 2024, share-based compensation of $ and $ was recognized and charged to the Consolidated Statement of Loss and Comprehensive Loss, respectively (September 30, 2023 – $ and $, respectively).
c) RSUs
On August 4, 2022, the Company granted RSUs to directors, officers and advisers, of which RSUs are to executives and directors, pursuant to the Company’s RSU Plan and in acknowledgment of the Company’s management recent success and increased future workload.
On January 4, 2023, the Company granted RSUs to directors, officers and advisers, of which RSUs are to executives and directors, pursuant to the Company’s RSU Plan and in acknowledgment of the Company’s management recent success and increased future workload.
On April 18, 2023, the Company granted RSUs to employees, pursuant to the Company’s RSU Plan.
On June 28, 2023, the Company granted Restricted Share Units (“RSUs”) to officers pursuant to the Company’s RSU Plan.
On August 14, 2024, the Company granted Restricted Share Units (“RSUs”) to officers and advisors, pursuant to the Company’s RSU Plan.
SCHEDULE OF RSU’S TRANSACTIONS
| Number | ||||
| Balance, January 1, 2023 | ||||
| RSUs granted | ||||
| Expiry of RSUs | ( | ) | ||
| Exercise of RSUs | ( | ) | ||
| Balance, December 31, 2023 | ||||
| RSUs cancelled | ( | ) | ||
| RSUs granted | ||||
| Exercise of RSUs | ( | ) | ||
| Balance, September 30, 2024 | ||||
Total exercisable RSUs as of September 30, 2024, are (December 31, 2023 – ). During the three and nine months ended September 30, 2024, share-based compensation of $ and $ was recognized and charged to the Consolidated Statement of Loss and Comprehensive Loss respectively (September 30, 2023 – $ and $).
| 16 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 6 - REVENUES:
Revenue streams:
SCHEDULE OF REVENUE FROM SERVICES
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues from services: | ||||||||||||||||
| Revenues from services | ||||||||||||||||
| Revenues from leasing | ||||||||||||||||
| Precision metal parts: | ||||||||||||||||
| Revenues from sales of precision metal parts | ||||||||||||||||
| Smart Carts: | ||||||||||||||||
| Revenues from smart carts project | ||||||||||||||||
| Total | ||||||||||||||||
NOTE 7 – OPERATING SEGMENTS:
The
Company and its subsidiaries are engaged in the following
| a. | Services to the military/security markets as well as development of related products for the civilian and retail markets. (“Services”) | |
| b. | Retail automation solutions – Smart Carts (“Smart Carts”) | |
| c. | Manufacturing and selling of precision metal parts – “Precision Metal Parts” |
SCHEDULE OF OPERATING SEGMENTS
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss (profit) | ( | ) | ||||||||||||||
| Gain on revaluation of warrant liability | ( | ) | ||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| 17 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss (gain) | ||||||||||||||||
| Loss on revaluation of warrant liability | ||||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| Precision Metal Parts |
Advanced Engineering | Smart Carts |
Total | |||||||||||||
| Three Months Ended September 30, 2024 | ||||||||||||||||
| Precision Metal Parts |
Advanced Engineering | Smart Carts |
Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ||||||||||||||||
| Total | ||||||||||||||||
| Segment loss | ( |
) | ||||||||||||||
| Loss on revaluation of warrant liability | ||||||||||||||||
| Finance expense, net | ||||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Three Months Ended September 30, 2023 | ||||||||||||||||
| Precision Metal Parts | Advanced Engineering | Smart Carts | Total | |||||||||||||
| Revenues | ||||||||||||||||
| External | $ | $ | $ | $ | ||||||||||||
| Inter-segment | ( | ) | ( | ) | ||||||||||||
| Total | ||||||||||||||||
| Segment loss | ||||||||||||||||
| Segment loss (gain) | ||||||||||||||||
| Loss on revaluation of warrant liability | ( | ) | ||||||||||||||
| (Gain) Loss on revaluation of warrant liability | ( | ) | ||||||||||||||
| Finance income, net | ( | ) | ||||||||||||||
| Tax expenses | ||||||||||||||||
| Loss | $ | |||||||||||||||
| 18 |
A2Z CUST2MATE SOLUTIONS CORP. (formerly A2Z Smart Technologies Corp.)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in thousands of US Dollars)
NOTE 8 - FINANCIAL RISK FACTORS:
ECL and their measurement
ECL are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index) and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario analysis (base case, adverse and optimistic scenarios).
As of September 30, 2024, and December 31, 2023, ECL for trade and other account receivables are not material, and as such are not disclosed, in accordance with IFRS 9.
NOTE 9 – SUBSEQUENT EVENTS
| a) | On October 2, 2024, the Company closed its previously announced securities purchase agreement with certain accredited investors to issue, in a registered direct offering, common shares at a purchase price of US$per share, for gross proceeds of $. The Company paid $and issued warrants as finders’ fees. | |
| b) | On October 8, 2024 the Company effected a (“Reverse Share Split”) of its common shares. The common shares continue to trade on the Nasdaq Capital Market under the Company’s existing trading symbol, “AZ,” and a new CUSIP number 002205102 has been assigned as a result of the Reverse Share Split. | |
| c) | On October 15, 2024, the Company closed its previously announced securities purchase agreement with certain accredited investors to issue, in a registered direct offering, common shares at a purchase price of US$per share, for gross proceeds of $, The Company paid $and issue common shares as finders’ fees. |
| 19 |
Exhibit 99.2
A2Z CUST2MATE SOLUTIONS CORP.
(formerly A2Z Smart Technologies Corp.)
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Nine Months Ended September 30, 2024
(Expressed in U.S. Dollars)
November 13, 2024
The following Management’s Discussion and Analysis (“MD&A”) for A2Z Cust2Mate Solutions Corp. (formerly A2Z Smart Technologies Corp.) (“A2Z” or the “Company”) is prepared as of November 13, 2024, and relates to the financial condition and results of operations of the Company for the three and nine months ended September 30, 2024. Past performance may not be indicative of future performance. This MD&A should be read in conjunction with the Company’s audited consolidated annual financial statements for the year ended December 31, 2023, and with the Company’s condensed consolidated interim financial statements for the nine months ended September 30, 2024, which have been prepared using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
All amounts are presented in United States dollars (“USD” or “$”), the Company’s presentation currency, unless otherwise stated.
Statements are subject to the risks and uncertainties identified in the “Risks and Uncertainties”, and “Cautionary Note Regarding Forward-Looking Statements” sections of this document. Readers are cautioned not to put undue reliance on forward-looking statements.
COMPANY OVERVIEW
The Company was incorporated on January 15, 2018, under the laws of British Columbia. The head office is located at 1600 – 609 Granville Street, Vancouver, British Columbia V7Y 1C3, and the records and registered office is located at 2200 HSBC Building 885 West Georgia Street, British Columbia, V6C 3E8. Effective July 31, 2024, the Company changed its name from A2Z Smart Technologies Corp. to A2Z Cust2Mate Solutions Corp.
The Company was listed on the NASDAQ Stock Market LLC (“Nasdaq”) starting January 22, 2022, and trades under the symbol “AZ”. The Company was listed on the TSX Venture Exchange (“TSX.V”) in Toronto until February 28, 2024. Following approval for a voluntary delisting, the Company no longer trades on the TSX.V but remains a reporting issuer in Canada and its common shares remain listed on Nasdaq.
We are an innovative technology company operating the following four complementary business lines through our subsidiaries: (i) development and commercialization of retail “smart cart” solutions designed primarily for use in large grocery stores and supermarkets (“Cust2Mate Carts” or “Cust2Mate Products”); (ii) manufacture of precision metal parts; (iii) provision of maintenance services in Israel (“Maintenance Services”); and (iv) development of our Fuel Tank Inertia Capsule System (“FTICS”) technology and a vehicle device cover for the military and civilian automotive industry (collectively, “Automotive Products”).
In 2020, we began to rapidly develop smart carts for the retail industry, with the aim of becoming the leading mobile checkout system in the international market by providing the optimal solution for shoppers and supermarket retailers. We have since focused the majority of our strategic planning, investment, research, development and marketing efforts on our Cust2Mate Products, as management currently believes our operational capabilities are most effectively leveraged by growing market share in the smart cart industry.
During the first quarter of 2022, the Company completed the acquisition of 100% of the shares of Isramat, a privately held Israeli company. This acquisition vertically integrates certain manufacturing capabilities for the production of the Cust2Mate Products, such as precision metal fabrication of parts, while complementing existing contract manufacturing partnerships to support the Company’s growth.
The raw materials required by the Company’s subsidiaries are readily available from multiple suppliers worldwide and their purchase costs do not fluctuate more than standard raw materials.
Smart Cart Products and Services
Cust2Mate is a mobile self-checkout shopping cart solution that streamlines the retail shopping experience. With a user-friendly smart algorithm, touch screen and computer vision technology, our Cust2Mate smart cart scans, recognizes and adds to a displayed shopping list, each item placed in the cart, providing the shopper with real-time information regarding items in the cart and tabulating the total cost of purchase. Our in-cart solution also enables shoppers to use the cart as the point of sale by use of mobile payment applications, e-wallets and other financial services. Cust2Mate’s point of sale feature effectively increases overall efficiency of the shopping experience, by expanding payment options for shoppers and retailers alike, reducing the need for cashiers, and reducing checkout wait times, which ultimately leads to improved customer engagement and satisfaction.
We combine scanning, computer vision, security scales and other anti-fraud/theft technologies, with a large screen tablet capable of relaying real-time shopping information and value-added digital services. Our solution is stackable and lightweight, with a robust recognition platform that provides a higher level of accuracy in product identification, leveraging in-store Wi-Fi and cutting-edge software.
For retailers, Cust2Mate enables improved inventory management, increased efficiency, reduced labor costs, increased anti-fraud protection, reduced theft and real-time data analytics and insights regarding consumer behavior. Our solutions are designed to easily integrate with existing store systems.
The Cust2Mate touch screen allows for the display of advertisements, promotions and other digital services which can bring added value to shoppers and additional revenue sources to retailers.
We have launched a modular version of the Cust2Mate smart cart, allowing local set-up with modular parts, making mass production and deployment of our smart carts faster and more efficient. With a detachable control unit, our new generation cart will employ the same technologies as our previous offerings, presently deployed in the Yochananof retail chain in Israel and in pilot programs throughout the world.
Our largest smart carts are available in 212 liter and 275 liter sizes, as customized at the discretion of retailers.
We also offer smaller, lighter smart carts, available in 180 liter and 75 liter sizes, with the same touch screen, detachable control panel and security features of our larger carts. Our smaller carts are ideal for urban groceries and supermarkets, drugstores and duty-free shops, where aisles space tends to be limited.
We leverage third-party partners for the manufacture of our Cust2Mate Products in the locations we serve.
| 2 |
Our Customers
M. Yochananof and Sons (1988) Ltd., or Yochananof, a large Israeli retailer, has been our largest Cust2Mate customer to date. Yochananof placed an initial order for an aggregate of 1,300 Cust2Mate smart carts which we are in the process of fulfilling. As of September 30, 2023, we have delivered all the smart carts in connection with Yochananof’s initial purchase order. On April 27, 2023, Yochananof delivered a non-binding letter of intent to purchase up to an additional 1,700 smart carts on terms and conditions to be agreed by definitive agreement. In addition, we have entered into a maintenance and support agreement with Yochananof. Our Maintenance Services division handles the maintenance and support services required for Cust2Mate Products deployed in Israel.
HaStok Concept Ltd., one of Israel’s leading home design and household essentials retail chain with approximately 40 stores across Israel, delivered a purchase order on April 20, 2023. The agreement marked a significant expansion for our smart cart solution into a new vertical outside of grocery retail. The Hastok purchase order was for up to 1,000 smart carts and is comprised of an upfront payment, a guaranteed monthly payment, and a revenue share agreement on added value solutions, such as advertising. On October 31, 2023, Hastok increased its order by an additional 1,000 smart carts, to a total of 2,000 smart carts.
On May 29, 2023, the Company signed an agreement with Morton Williams Supermarkets, a U.S. supermarket with locations throughout the New York City metropolitan area, for the order for up to 100 Cust2Mate smart carts. The Morton Williams order follows our successful pilot of Cust2Mate smart carts at the grocer’s West End Avenue store in Manhattan.
On June 13, 2023, the Company entered into a significant partnership with IR2S, which is intended to deploy 30,000 smart carts between 2023 and 2025 across renowned retail chains in France. With IR2S providing integration and other services, including Monoprix and the Casino Group (who operate over 700 and over 10,500 stores respectively), the logistics and service support for the smart carts will be efficiently carried out. IR2S, a leading integrator of advanced retail technologies (including integration and other services) to many prestigious clients in France, will play a pivotal role in managing the installation, support, and maintenance of the smart carts. IR2S is well-positioned to manage and integrate Cust2Mate’s smart cart solution, providing local hardware and software support to ensure a seamless customer experience. The definitive agreement with IR2S was signed in September 2023. The first purchase order to deliver 250 smart carts to Monoprix stores was received in October 2023, with anticipation for deployment at 20 select Monoprix locations. The first batch of smart carts was delivered to the Monoprix Monop Malakoff store near the Champs Elysées, Paris in August, 2024. In addition, on August 6, 2024 and as part of the IR2S agreement, the Company started deploying its smart carts at a Paris (17th quarter) Franprix store, allowing customers to shop and pay using the smart carts. On September 27, 2024 the Company announced that it had received a follow on order from Franprix franchise stores for its Cust2mate Smart Carts at 10 additional Franprix stores for delivery by end of the fourth quarter of, 2024.
On September 14, 2023, the Company entered into a definitive agreement with HEX 1011, a leading integrator of technological solutions for retail chains, intended to deploy 20,000 smart carts across Asia Pacific (APAC) from 2023 through 2025. HEX 1011 will ensure the efficient rollout and maintenance of the carts for elite retail chains in Thailand and Malaysia.
Since March 2023, as part of the Carrefour’s Connected Cart Project, the Cust2mate smart carts have undergone rigorous testing at Carrefour’s flagship Hypermarket store in Ste Genevieve Des Bois, near Paris, receiving overwhelmingly positive feedback and achieving excellent customer satisfaction reviews. We have currently entered the rollout stage of Carrefour’s Connected Cart Project.
On September 19, 2024, the Company announced that it had entered into a framework agreement with Level 10, LLC, a leading retail IT service provider, for in-field installation, deployment, in-store and laboratory support, maintenance, help desk services and warranty fulfillment related to the company’s Cust2Mate smart cart solutions to be rolled out in the United States.
On September 10, 2024, the Company announced its strategic partnership with Nayax Ltd., a global commerce enablement payments and loyalty platform designed to help merchants scale their business, to pair Nayax’s convenient automated self-service retail mobile payment system with the Company’s innovative smart cart platform for smart retail stores. The smart carts with Nayax’s payment solution will initially be deployed in France. Further, on September 25, 2024, the Company announced that it had entered into a framework agreement with Nayax Capital, whereby Nayax Capital will enable financing for the sale or lease of Cust2Mate smart carts enabled with Nayax’s complete solution.
On September 27, 2024, the Company announced that it had received a follow on order from Franprix franchise stores for its Cust2mate Smart Carts at 10 additional Franprix stores, to be deployed by end of Q4, 2024.
On October 10, 2024 the Company announced that it signed a framework agreement with Trixo (“Trixo”), a leading retail technology integrator providing technology and IT and other services in Mexico and Central America, for in-field installation, deployment, in-store and laboratory support, maintenance, help desk services and warranty fulfillment related to the company’s Cust2Mate smart cart solutions to be rolled out in Mexico and Central America.
Our objective is to generate orders of several thousand Cust2Mate smart carts in the fourth quarter of 2024 and in 2025.
Our Markets
We aspire to be the global leading provider of smart carts and associated technology solutions, providing a superior customer experience and cutting-edge platform for digital value-added services, easing the pain points for all stakeholders in the retail industry.
The market for smart carts is large and diverse, and includes grocery stores, hardware stores, household essentials, “do it yourself (DIY)” retailers, discount stores, warehouse stores, convenience stores, drug stores, duty free shops and similar outlets.
We have designed the range of our Cust2Mate smart carts to accommodate the needs of a varied customer base: large carts for hypermarkets or large stores, medium carts for supermarkets or medium sized stores, and small carts for city stores, drug stores, duty free shops, etc. We are also able to customize our carts with a “look and feel” unique to each retailer as requested.
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Business Model
We envision deriving several distinct revenue streams from our Cust2Mate Products:
| ● | Outright Purchase Model. The outright purchase of the smart carts by customers and payment of a monthly maintenance fee has been the business model to date. For example, the first 1,300 carts ordered by Yochananof were sold to it outright with revenue recognized upon delivery. We intend to move away from this model, however it will remain available as some retailers prefer this option. | |
| ● | Subscription Based Model. We intend to retain title to our smart carts and make them available to customers on a multiyear subscription basis, against payment of a one-time up-front payment and monthly fees to cover hardware and software maintenance, service and version updates. The length of the subscription period depends on many variables unique to each customer, including the design and customization required by the customer, and the size of the up-front payment. We intend to fund the manufacture of our smart carts at scale, against orders, through loans against receivables from such orders, whilst looking to lower per unit manufacturing costs and increase margin as unit sales increase. The subscription model would also enable us to charge additional fees for add-on features such as store navigation maps, shopping lists, etc. The subscription model should also facilitate the provision of the smart carts to customers and, as revenue would be recognized monthly, would allow for a sustained increase of revenue in conjunction with the increase in the installed base of the smart carts. | |
| ● | Digital Services. As our smart carts are fully integrated into the retailers’ systems, we envision them serving as a de-facto marketplace, which we refer to as a Smart Cart Marketplace, for all retail directed apps and digital services. Our Cust2Mate smart carts incorporate a large touch screen, and can present to the shopper additional information at the discretion of the retailer, such as details of the shopper’s purchases, ingredients of goods purchased, allergy information, shopping lists, in-store navigation for goods, and many more applications, while simultaneously facilitating the provision of real-time personalized and directed promotions, advertisements, e-coupons and other digital services by all stakeholders in the retail industry (such as the retailer, consumer product and other manufacturers and advertisers and any third party service provider that joins the Smart Cart Marketplace). As these promotions, advertisements, coupons, etc., are displayed to the shopper when the shopper is deciding what to buy (and not, for example, when the shopper is paying for products already purchased), we believe that digital services will be of considerable value to shoppers, retailers, manufacturers and other third parties. We intend to enter into revenue sharing agreements with stakeholders, allowing us, our customers and relevant third parties to all enjoy increased revenue streams, whilst simultaneously providing shoppers with significant added value. We believe that digital revenues from the Smart Cart Marketplace can become considerable. As the revenue to retailers from digital services increases, the net cost of our smart carts to retailers is expected to decrease. | |
| ● | Big Data Analytics. At present, in many instances the retailer has limited information regarding the actions and decisions of the shopper until the actual time of payment. The retailer may often not know when a shopper has entered the store, how much time a shopper has spent in the store, the route the shopper takes, or where a shopper spends most or as little time in the store, how decisions are actually made by the shopper, and similar customer behavioral information. We are developing software for our smart carts to generate a wealth of data on such shopping behavior which can be mined, analyzed and monetized through data as a service or product offerings tailored to each of the stakeholders in the retail industry. |
Competition and Competitive Strengths
There are a number of companies currently offering smart carts to the retail industry in one form or another. Our Cust2Mate Products, and some of other industry players, offer mobile self-checkout smart carts in which goods are scanned when placed in the smart cart. Other industry participants offer solutions based on “Scan and Go” or image recognition technologies. We believe we are one of the only smart carts providing a full end-to-end turnkey solution for all customers. Below is a brief summary of the various technologies:
● “Scan and Go” comprises a scanner and small screen, either on cart or connected to an app on the mobile phone. These solutions generally come without large screens and thus cannot efficiently provide information and digital services, without on cart anti-fraud protection and without on cart payment capabilities. Though inexpensive, the scan and go carts do not provide the full user experience and retailer added value offered by our Cust2Mate Products.
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● Image Recognition. Many companies are trying to offer smart carts which do not require the scanning of products but instead claim to utilize software which recognizes the products as they are being placed in the smart cart (“one to many”). We believe that there remain technological hurdles to adopting image recognition software both on a practical and conceptual level. On a practical level, every store contains at least several tens of thousands of SKUs which have to be accurately recognized every time in all configurations, from all angles and in different lighting backgrounds, within a very short time without charging the shopper for products not purchased, while charging the shopper for all products purchased. This is a significant technological challenge. On a conceptual level, we believe many types of products are not easily adapted to image recognition, such as clothing size, and meats and cheeses purchased over the counter.
In addition, in an attempt to mitigate the increasing frustration of shoppers at the lengthening queues in the stores, many retailers have installed self-checkout (SCO) stations with the aim that these would lead to a quicker checkout and reduced labor cost. However, these SCO stations have not adequately solved such problems, as check-out queues have not disappeared, and the SCO stations have been accompanied by equipment issues, high up-front costs, consumer confusion, sub-optimal use of space and increased risk of theft.
We believe that our Cust2Mate Products have, and can further develop, the following competitive strengths:
● our smart carts utilize existing technologies proven to work—there is no technological risk to overcome; barcode scanning is a tried and tested, easy to use technology which can easily be adapted for use in a smart cart;
● our software, hardware and customer success teams have, among them, decades of experience in retail technology, supporting our efforts to design one stop shop smart cart solutions which answer the needs of the shopper, retailer and other stakeholders in the retail industry;
● our smart carts have a proven track record with hundreds of smart carts deployed in multiple sites and markets, enabling us to provide the most comprehensive working solution, customer experience and digital platform;
● our smart carts have multiple anti-fraud/theft capabilities which significantly reduce shrinkage from the carts without harming the shopping experience;
● we have successfully completed an initial trial of a computer vision product recognition solution, capable of matching the product put into our smart cart with the product scanned (“one to one” as opposed to “one to many”);
● we intend to continue the development of “one to one” computer vision software and incorporate the solution in future Cust2Mate smart cart offerings. The solution will supplement the smart car’s other anti-theft and fraud protection components;
● a barcode can provide additional information, over and above product identification; for example, by providing details of the expiry or best before date which could allow dynamic pricing based on proximity of such date;
● our smart carts can provide the retail industry with new revenue streams and insights; and
● our contemplated installed base subscription model allows for consistent revenue growth in a very large addressable market.
We continue to improve our smart carts. We have launched a lighter and easier to maneuver modular smart cart with a detachable control unit, allowing the cart, without its expensive components, to leave the store premises and to be retrofitted onto existing carts.
Marketing and Sales
We currently have local distribution and service partners in the United States, Thailand, Mexico, Australia, France and Romania. In the United States, we have a non-exclusive relationship with our distributor, who provides products and services to several thousands of stores nationally. On July 12, 2023, Cust2mate established a wholly owned subsidiary Cust2mate USA Inc. (“Cust2Mate USA”) as a strategic move to serve the thriving U.S. retail market more effectively and appointed Joe Szala as General Manager. Joe Szala brings a wealth of experience in retail, grocery, and consumer packaged goods. On September 19, 2024, the Company announced that it had entered into a framework agreement with Level 10, LLC, a leading retail IT service provider, for in-field installation, deployment, in-store and laboratory support, maintenance, help desk services and warranty fulfillment related to the company’s Cust2Mate smart cart solutions to be rolled out in the United States.
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Our distributors in France, Mexico and Australia (each exclusive for certain chains) are leading supplier and integrator of retail technologies throughout the country. In Romania, we have an exclusive distributor relationship with a leading recognized information technology provider to the retail industry in Romania. In Thailand, we have an exclusive distributor relationship with a leading supplier of software to the retail industry.
Our go-to-market strategy is built on the retail, grocery, and DIY markets, with a focus on supermarkets and hypermarket food chains within Tier 1 (thousands of stores) and Tier 2 (hundreds of stores). We will manage targeted customers for Cust2Mate Products in selected regions directly, leveraging select local partners for sales and distribution to chains in Tier 2 and Tier 3 (tens of stores). Our local partners will take full responsibility for support, training, implementation and sales, while we will focus on product development and direct contact with strategic customers.
On September 10, 2024 we announced a strategic partnership with Nayax Ltd., to pair Nayax’s convenient automated self-service retail mobile payment system with A2Z Cust2Mate’s innovative smart cart platform for smart retail stores. Nayax and A2Z Cust2Mate will collaborate to sell the Cust2Mate 3.0 smart cart system with integrated Nayax payment technology as a unified, end-to-end solution for retailers around the world. The first smart carts with Nayax’s payment solution have been deployed in France.
We presently contemplate that Cust2Mate would (directly or through subsidiaries which it would establish for each country), be the provider of the smart carts to the retailers and that Cust2Mate would enter into a revenue share or other commercial arrangement with its local distribution and service partners.
Pilot Projects
The Company is presently in deployment and scale up stage and no longer views pilots, as significant to its business overview.
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C. Organizational Structure
The following chart lists our material subsidiaries for the three and nine months ended September 30, 2024, and as at the date of this quarterly report, their respective jurisdictions of incorporation and our direct and indirect ownership interest in each of these subsidiaries:
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Advisory Board
In September 2023, Cust2Mate formed an advisory board, to help guide strategic initiatives and drive company growth. A2Z is leveraging its advisory board to help scale and expand its Cust2Mate solution.
In September 2023 the Company appointed Steve Robinson as a member of the advisory board. With over 30 years of experience in supply chain and operations, Mr. Robinson brings a deep understanding of the retail industry from his roles at Walmart and Starbucks. Mr. Robinson previously served as the Vice President of Global Supply Chain at Walmart Inc., one of the world’s largest and most influential retailers. In this role, he oversaw the management of the company’s supply chain, driving operational efficiencies and ensuring seamless logistics across Walmart’s extensive network. In a similar role at the Starbucks Corporation as the Vice President of the Starbucks Center of Supply Chain Excellence, he played a key part in fueling hyper-growth and delivering substantial value, contributing significantly to Starbucks’ global success.
In September 2023, the Company appointed Scott Ukrop as a member of the advisory board. With a wealth of experience in retail grocery, consumer packaged goods, venture capital, and strategic advisory services, Mr. Ukrop will play a pivotal role by aligning A2Z’s Cust2Mate unit and offerings with the dynamic and evolving needs of major retailers. Mr. Ukrop’s extensive 35-year experience spanning across retail and food will help the company in its efforts to elevate the customer experience and deliver substantial value to its clients. Mr. Ukrop has achieved significant milestones in the retail grocery industry as he led the evolution of Ukrop’s Super Markets’ valued customer program.
BUSINESS DEVELOPMENTS DURING THE PERIOD
On January 4, 2024, the Company closed registered direct offerings for gross proceeds of $3,227 through the issuance of 1,122,521 units (“January 2024 Units”) at a price per Unit of $2.875 (CAD$3.40). Each January 2024 Unit consists of one Common Share and one half of one Common Share purchase warrant (each whole such warrant a “Warrant”). An aggregate of 561,260 Warrants were issued with an exercise price of CAD$5.13 ($3.75) per Warrant. The Warrants have a term of two years and if fully exercised, will result in the issuance of an additional 561,260 Common Shares (“January 2024 Registered Direct Offerings Warrants”). A finder’s fee of $258 (CAD$348 thousand) was paid and 89,802 non-registered warrants were issued in connection with the January 2024 registered direct Offering.
On April 2, 2024, the Company closed a registered direct offering for gross proceeds of approximately $3.3 million at a purchase price of $0.875 per share and issued an aggregate of 3,792,200 common shares in the registered direct offering.
In connection with the registered direct offering, the Company has issued certain non-U.S. residents 293,776 common shares as finders fees. These common shares and the common shares issued in the private placement have been issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering and Rule 506(b) promulgated thereunder, as applicable.
On August 12, 2024, the Company closed its previously announced private placement for gross proceeds of approximately $2,502, at a purchase price of $0.875 per common share and $0.875 per pre-funded warrant. The Company issued a total of 1,839,554 common shares and pre-funded warrants to purchase up to 1,200,000 common shares, with each pre-funded warrant having an exercise price of $0.0001 per share. Each pre-funded warrant has an exercise price of $0.00025 per share and will expire when exercised in full.
Certain directors and officers of the Company purchased $420 value of common shares in the private placement. In connection with the closing, the Company has issue certain non-U.S. residents 180,624 common shares as finders fees.
On August 12, 2024, the Company announced the appointment of Mr. Alan Rootenberg to the position of Chief Financial Officer, effective immediately. Mr. Rootenberg has over 45 years of accounting and financial services experience, having also served as the chief financial officer of other publicly listed companies. In addition, Mr. Rootenberg has a Bachelor of Commerce CPA designation. In connection with his appointment as Chief Financial Officer, Mr. Rootenberg resigned from the audit committee of the board of directors and was replaced by director Adi Vazan. Gadi Levin, the former Chief Financial Officer, provides continued consulting services to the Company.
On September 12, 2024, the Company announced that Cust2Mate Ltd., it’s subsidiary, had submitted a patent application for its ‘Shopping Cart Inventory Change Indicator System’, a solution designed to address inventory shrinkage issues in retail through the application of advanced technologies, powered sophisticated proprietary artificial intelligence (AI).
On October 2, 2024, the Company announced that it has closed its previously announced definitive securities purchase agreement with certain accredited investors to issue, in a registered direct offering, up to 2,164,000 common shares at a purchase price of US$1.875 per share, for gross proceeds of $4,058. The Company is expected to pay $325 and issue 21,333 warrants as finders’ fee.
On October 3, 2024, the Company announced that it will effect a 1-for-2.5 reverse share split (“Reverse Share Split”) of its common shares, no par value per share (“Common Shares”). The Reverse Share Split became effective at 12:01 a.m. Eastern Time on October 8, 2024, and the Company’s Common Shares commenced trading on the Nasdaq Capital Market on a post-split basis at the opening of the market on October 8, 2024. The Common Shares continue to trade on the Nasdaq Capital Market under the Company’s existing trading symbol, “AZ,” and a new CUSIP number 002205102 has been assigned as a result of the Reverse Share Split.
On October 15, 2024, the Company announced that it has closed its previously announced definitive securities purchase agreement with certain accredited investors to issue, in a registered direct offering, up to 642,860 common shares at a purchase price of US$2.80 per share, for gross proceeds of $1,800 The Company is expected to pay $144 and issue 186,148 common shares as finders’ fee.
In January 2024, the Company launched its next generation 3.0 smart carts, which the Company anticipates to start deploying in the fourth quarter of 2024. As a result, we recorded minimal revenues from the smart cart operations in the first three quarters of 2024.
Prior Use of Proceeds Disclosure
The section below describes the difference between the Company’s anticipated use of proceeds from offerings completed during the nine months ended September 30, 2024.
The intended principal uses of proceeds were for the continued development and expansion of existing business and for working capital purposes. During the nine months ended September 30, 2024, the Company raised net proceeds of $8,218 thousand, of which all has been used for this purpose.
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DISCUSSIONS OF OPERATIONS
Nine months ended September 30, 2024, compared to the nine months ended September 30, 2023
Revenues
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Services | 1,352 | 1,520 | ||||||
| Smart Carts | 308 | 6,142 | ||||||
| Precision Metal Parts | 3,649 | 2,394 | ||||||
| 5,309 | 10,056 | |||||||
Revenues for the nine months ended September 30, 2024, were $5,309 thousand as compared to $10,056 thousand for the nine months ended September 30, 2023. The decrease is due primarily to the decrease in sales from the Company’s smart cart segment as the Company completed delivery of its purchase order to Yochananof in 2023. Revenues from the Company’s smart cart segment for the nine months ended September 30, 2024, were $308 thousand as compared to $6,142 thousand for the nine months ended September 30, 2023. Revenues from the Company’s traditional operations have decreased as well in comparison with the nine months ended September 30, 2023. Revenues from the Company’s precision metal parts segment have increased in comparison with the nine months ended September 30, 2023.
While revenues from the smart cart division are currently derived from only one customer, revenues from the Company’s services and precision metal parts segments are derived from hundreds of customers.
Cost of revenues
Cost of revenues for the nine months ended September 30, 2024, was $4,113 thousand as compared to $8,029 thousand for the nine months ended September 30, 2023. The decrease is due primarily to the decrease in sales from the Company’s smart cart segment. Cost of revenues in the Company’s smart cart segment for the nine months ended September 30, 2024, were $308 thousand as compared to $5,350 thousand for the nine months ended September 30, 2023. Cost of revenues from the Company’s precision metal parts segment remains largely consistent with the nine months ended September 30, 2023.
The Company’s gross margin in the services segment fluctuates depending on the level of revenue, since a large component relates to fixed payroll costs, and the nature of the project, as some project types have higher margins than others.
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Research and development expenses
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Payroll and related expenses | 1,891 | 1,281 | ||||||
| Subcontractor and outsourced work | 865 | 2,073 | ||||||
| Share based compensation | 171 | - | ||||||
| Other | 110 | 90 | ||||||
| 3,037 | 3,444 | |||||||
Research and development expenses related to the Company’s Cust2Mate product. Research and development expenses were $3,037 thousand for the nine months ended September 30, 2024, as compared to $3,444 thousand for the nine months ended September 30, 2023.
Sales and marketing expenses
Sales and marketing expenses were $1,083 thousand for the nine months ended September 30, 2024, as compared to $757 thousand for the nine months ended September 30, 2023. The increase is mainly due to the increase in marketing expenses relating to the Smart cart segment, particularly in North America and Europe.
General and administrative expenses
| Nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Payroll and related | 2,180 | 3,177 | ||||||
| Professional fees | 1,926 | 1,637 | ||||||
| Share-based compensation | 1,456 | 4,098 | ||||||
| Depreciation and amortization | 393 | 345 | ||||||
| Office maintenance | 487 | 550 | ||||||
| Investor relations | 149 | 174 | ||||||
| Travel | 146 | 109 | ||||||
| Public company related expenses | 276 | 781 | ||||||
| Other | 216 | 675 | ||||||
| 7,229 | 11,546 | |||||||
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General and administrative expenses were $7,229 thousand for the nine months ended September 30, 2024, as compared to $11,546 thousand for the nine months ended September 30, 2023. The decrease is primarily due to the decrease in share-based compensation which amounted to $1,456 thousand for the nine months ended September 30, 2024, compared to $4,098 thousand for the nine months ended September 30, 2023. Another significant factor to the decrease in general and administrative expenses is the decrease in public company related expenses, which amounted to $276 thousand for the nine months ended September 30, 2024, compared to $781 thousand for the nine months ended September 30, 2023. Another significant factor to the decrease in general and administrative expenses is the decrease in payroll which amounted to $2,180 thousand for the nine months ended September 30, 2023, compared to $3,177 thousand for the nine months ended September 30, 2023. The decrease in payroll is mainly due to cost-cutting measures taken by the Company as well as a reduction in headcount.
Loss on revaluation of warrant liability
Gain on revaluation of warrant liability for the nine months ended September 30, 2024, was $3,236 as compared to a loss of $84 for the nine months ended September 30, 2023.
Financial expenses
Financial expenses, net for the nine months ended September 30, 2024, were $186 thousand as compared to financial expenses of $49 thousand for the nine months ended September 30, 2023. Financial expenses comprise interest on loans and leases, interest and accretion in respect of application of IFRS 16, revaluation of a contingent liability, and credit card charges.
Three months ended September 30, 2024, compared to the three months ended September 30, 2023
Revenues
| Three months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Services | 502 | 365 | ||||||
| Smart Carts | 154 | 1,442 | ||||||
| Precision Metal Parts | 1,418 | 781 | ||||||
| 2,074 | 2,588 | |||||||
Revenues for the three months ended September 30, 2024, were $2,074 thousand as compared to $2,588 thousand for the three months ended September 30, 2023. The decrease is due primarily to the decrease in sales from the Company’s smart cart segment and the Company completed delivery of its purchase order to Yochananof in 2023. Revenues from the Company’s smart cart segment for the three months ended September 30, 2024, were $154 thousand as compared to $1,442 for the three months ended September 30, 2023. Revenues from the Company’s traditional operations have increased in comparison with the three months ended September 30, 2023. Revenues from the Company’s precision metal parts segment have increased as well in comparison with the nine months ended September 30, 2023.
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While revenues from the smart cart division are currently derived from only one customer, revenues from the Company’s services and precision metal parts segments are derived from hundreds of customers.
Cost of revenues
Cost of revenues for the three months ended September 30, 2024, was $1,328 thousand as compared to $2,220 thousand for the three months ended September 30, 2023. The decrease is due primarily to the decrease in sales from the Company’s smart cart segment. Cost of revenues in the Company’s smart cart segment for the three months ended September 30, 2024, were $42 thousand as compared to $1,335 for the three months ended September 30, 2023. Cost of revenues from the Company’s precision metal parts segment remains largely consistent with the three months ended September 30, 2023.
The Company’s gross margin in the services segment fluctuates depending on the level of revenue, since a large component relates to fixed payroll costs, and the nature of the project, as some project types have higher margins than others.
Research and development expenses
| Three months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Payroll and related expenses | 621 | 550 | ||||||
| Subcontractor and outsourced work | 61 | 640 | ||||||
| Share based compensation | 104 | - | ||||||
| Other | 38 | 11 | ||||||
| 824 | 1,201 | |||||||
Research and development expenses related to the Company’s Cust2Mate product. Research and development expenses were $824 thousand for the three months ended September 30, 2024, as compared to $1,201 thousand for the three months ended September 30, 2023. The decrease is due primarily to the decrease in subcontractor and outsourced work. Subcontractor and outsourced work for the three months ended September 30, 2024, were $61 thousand as compared to $640 for the three months ended September 30, 2023.
Sales and marketing expenses
Sales and marketing expenses were $189 thousand for the three months ended September 30, 2024, as compared to $275 thousand for the three months ended September 30, 2023.
General and administrative expenses
| Three months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Payroll and related | 613 | 1,217 | ||||||
| Professional fees | 662 | 534 | ||||||
| Share-based compensation | 885 | 1,131 | ||||||
| Depreciation and amortization | 163 | 113 | ||||||
| Office maintenance | 114 | 222 | ||||||
| Investor relations | - | 97 | ||||||
| Travel | 26 | 14 | ||||||
| Public company related expenses | 89 | 83 | ||||||
| Other | 93 | 433 | ||||||
| 2,645 | 3,844 | |||||||
General and administrative expenses were $2,645 thousand for the three months ended September 30, 2024, as compared to $3,844 thousand for the three months ended September 30, 2023. The decrease is primarily due to the decrease in payroll which amounted to $613 thousand for the three months ended September 30, 2024, compared to $1,217 thousand for the three months ended September 30, 2023. The decrease in payroll is mainly due to cost-cutting measures taken by the Company as well as a reduction in headcount. Another significant factor to the decrease in general and administrative expenses is the decrease in share-based compensation which amounted to $885 thousand for the three months ended September 30, 2024, compared to $1,131 thousand for the three months ended September 30, 2023.
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Loss on revaluation of warrant liability
Loss on revaluation of warrant liability for the three months ended September 30, 2024, was $539 as compared to a gain of $2,260 for the three months ended September 30, 2023.
Financial expenses
Financial expenses, net for the three months ended September 30, 2024, was $82 thousand as compared to financial income of $104 thousand for the three months ended September 30, 2023. Financial expenses comprise interest on loans and leases, interest and accretion in respect of application of IFRS 16, revaluation of a contingent liability, and credit card charges.
Trends, demands, commitments, events or uncertainties
Current overall economic conditions together with market uncertainty and volatility may have an adverse impact on the demand for the Company’s products and services as industry may adjust quickly to exercise caution on capital spending. This uncertainty may impact the Company’s revenue.
Our financial performance, share price, business prospects and financial condition are subject to numerous risks and uncertainties, and are affected by various factors outside the control of management. Prior to making any investment decision regarding the Company, investors should carefully consider, among other things, the risks described herein and the risk factors set forth in our annual information form dated December 31, 2023, for our most recently completed fiscal year. These risks and uncertainties are not the only ones that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business. If any of these risks occurs, our financial performance, share price, business prospects and financial condition could be materially adversely affected.
REVIEW OF QUARTERLY RESULTS
| (In Thousands) | 30/09/2024 | 30/06/2024 | 31/03/2024 | 31/12/2023 | ||||||||||||
| Total revenues | $ | 2,074 | $ | 1,538 | $ | 1,697 | $ | 1,349 | ||||||||
| Gross profit (loss) | $ | 746 | $ | 123 | $ | 327 | $ | (34 | ||||||||
| Total comprehensive loss | $ | (3,703 | ) | $ | (2,952 | ) | $ | (1,088 | ) | $ | (4,041 | ) | ||||
| Basic and diluted loss per share | $ | (0.15 | ) | $ | (0.05 | ) | $ | 0.01 | $ | (0.12 | ) | |||||
| 30/09/2023 | 30/06/2023 | 31/03/2023 | 31/12/2022 | |||||||||||||
| Total revenues | $ | 2,558 | $ | 2,860 | $ | 4,608 | $ | 3,825 | ||||||||
| Gross profit | $ | 368 | $ | 638 | $ | 1,021 | $ | 917 | ||||||||
| Total comprehensive loss | $ | (2,672 | ) | $ | (6,394 | ) | $ | (4,192 | ) | $ | (5,600 | ) | ||||
| Basic and diluted loss per share | $ | (0.07 | ) | $ | (0.22 | ) | $ | (0.12 | ) | $ | (0.22 | ) | ||||
The loss per quarter and related net loss per share (profit per share in the first quarter of 2024) is a function of the level of activity that took place during the relevant quarter. Operating losses in the first three quarters of 2024 and throughout four quarters in 2023 remained consistent. The reason for the losses is due to increased research and development expenses and general and administrative costs, largely due to the Company’s expansion ahead of expected increased revenues in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of a company’s ability to meet potential cash requirements. The Company has historically met its capital requirements through the issuance of Common Shares and securing bank loans.
The Company’s financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring losses and negative cash flows from operating activities since inception, such that as of September 30, 2024, the Company had accumulated losses of $89,074 thousand and a net loss in the amount of $7,103 for the nine months ended September 30, 2024. As of the date of the issuance of these financial statements, the Company has not yet commenced generating sufficient revenues to fund its operations, and therefore depends on fundraising from new and existing investors to finance its activities.
Considering the above, the Company’s dependency on external funding for its operations raises a substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements for the three and nine months ended September 30, 2024, do not include any adjustments that might result from the outcome of these uncertainties.
Working capital (In Thousands)
| September 30, 2024 | December 31, 2023 | |||||||
| Cash and cash equivalents | 3,366 | 2,267 | ||||||
| Restricted cash | 76 | 77 | ||||||
| Inventories | 361 | 250 | ||||||
| Trade receivables | 2,283 | 1,477 | ||||||
| Other accounts receivable | 541 | 660 | ||||||
| Total current assets | 6,627 | 4,731 | ||||||
| Short term loan and current portion of long-term loans | 1,239 | 1,166 | ||||||
| Bank overdraft | 69 | - | ||||||
| Lease liability | 297 | 190 | ||||||
| Trade payables | 2,837 | 1,742 | ||||||
| Other accounts payable | 4,914 | 2,534 | ||||||
| Total current liabilities | 9,356 | 5,632 | ||||||
| Working capital | (2,729 | ) | (901 | ) | ||||
| 13 |
Cash flow (In Thousands)
| Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | (8,218 | ) | (9,133 | ) | ||||
| Net cash used in investing activities | (108 | ) | (255 | ) | ||||
| Net cash provided from financing activities | 10,101 | 8,287 | ||||||
| Increase (decrease) in cash | 1,775 | (1,101 | ) | |||||
Cash position
During the nine months ended September 30, 2024, the Company’s overall cash position increased by $1,775 thousand as compared to a decrease of $1,101 thousand for the nine months ended September 30, 2023. This increase can be attributed to the following activities:
Operating activities
The Company’s net cash used in operating activities during the nine months ended September 30, 2024, was $8,218 thousand as compared to $9,133 thousand for the nine months ended September 30, 2023.
Investing activities
Cash used in investing activities for the nine months ended September 30, 2024, was $108 thousand as compared to $255 thousand used in investing activities during the nine months ended September 30, 2023.
Financing activities
Cash provided from financing activities for the nine months ended September 30, 2024, was $10,101 thousand, and was mainly due to the issuance of shares and warrants in the amount of $10,563 thousand, offset in part by repayment of loans in the amount of $160 thousand. Cash provided from financing activities for the nine months ended September 30, 2023, was $8,287 thousand, and was mainly due to the issuance of shares and warrants in the amount of $8,758 thousand.
| 14 |
Capital resources
The Company’s financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring losses and negative cash flows from operating activities since inception, such that as of September 30, 2024, the Company had accumulated losses of $89,074 thousand and a net loss in the amount of $7,103 thousand for the nine months ended September 30, 2024. As of the date of the issuance of these financial statements, the Company has not yet commenced generating sufficient revenues to fund its operations, and therefore depends on fundraising from new and existing investors to finance its activities.
Considering the above, the Company’s dependency on external funding for its operations raises a substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements for the three and nine months ended September 30, 2024, do not include any adjustments that might result from the outcome of these uncertainties.
On January 4, 2024, the Company closed registered direct offerings for gross proceeds of $3,227 thousand through the issuance of 1,122,521 units (“January 2024 Units”) at a price per Unit of $2.875 (CAD$3.4).
On April 2, 2024, the Company closed a registered direct offering for gross proceeds of approximately $3.3 million at a purchase price of $0.875 per share and issued an aggregate of 3,792,200 common shares in the registered direct offering.
On August 12, 2024, the Company closed its previously announced private placement for gross proceeds of approximately $2,502 thousand, at a purchase price of $0.875 per common share and $0.875 per pre-funded warrant. The Company issued a total of 1,839,554 common shares and pre-funded warrants to purchase up to 1,200,000 common shares, with each pre-funded warrant having an exercise price of $0.0001 per share. Each pre-funded warrant has an exercise price of $0.00025 per share and will expire when exercised in full.
On October 2, 2024, the Company announced that it has closed its previously announced definitive securities purchase agreement with certain accredited investors to issue, in a registered direct offering, up to 2,164,000 common shares at a purchase price of US$1.875 per share, for gross proceeds of $4,058 thousand. The Company is expected to pay $325 and issue 21,333 warrants as finders’ fee.
On October 15, 2024, the Company announced that it has closed its previously announced definitive securities purchase agreement with certain accredited investors to issue, in a registered direct offering, up to 642,860 common shares at a purchase price of US$2.80 per share, for gross proceeds of $1,800 thousand. The Company is expected to pay $144 and issue 186,148 common shares as finders’ fee.
Short-term borrowings
Short term borrowing relates to bank loans which will be repaid over the following 12 months. The Company requires short-term borrowing from time to time to accommodate urgent requests from customers that require an initial outlay of cash by the Company.
Long-term borrowings
Long-term borrowing relates to bank loans which will be repaid after the following 12 months. Currently, the nature of cash requirements by the Company can fluctuate greatly from year to year as the Company is reliant on a relatively small pool of customers that have shifting needs. As contracts can vary greatly from year to year the Company is sometimes required to take on long term debt.
No history of dividends
Since incorporation, the Company has not paid any cash or other dividends on its Common Shares and does not expect to pay such dividends in the foreseeable future.
Management of Capital
The Company’s main use for liquidity is to fund the development of its programs and working capital purposes. These activities include staffing, and administrative costs. The primary source of liquidity has been from financing activities to date. The ability to fund operations, to make planned capital expenditures and execute the growth/acquisition strategy depends on the future operating performance and cash flows, which are subject to prevailing economic conditions, regulatory and financial, business and other factors, some of which are beyond the Company’s control.
| 15 |
The Company intends to grow rapidly and expand its operations within the next 12 to 24 months. This growth, along with the expectation of operating at a loss for at minimum the next 12 months, will diminish the Company’s working capital. As such, substantial additional financing may be required if the Company is to be successful in continuing to develop its business, meet ongoing obligations and discharge its liabilities in the normal course of business. No assurances can be given that the Company will be able to raise the additional capital that it may require for its anticipated future development. Any additional equity financing may be dilutive to investors and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company, if at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion.
The Company defines its capital as share capital plus warrants. To effectively manage the Company’s capital requirements, the Company has a planning and budgeting process in place to ensure that adequate funds are available to meet its strategic goals. The Company monitors actual expenses to budget to manage its costs and commitments. The Company manages liquidity risk by reviewing, on an ongoing basis, its sources of liquidity and capital requirements. In evaluating the Company’s capital requirements and its ability to fund the execution of its business strategy, the Company believes that it has adequate available liquidity to enable it to meet its working capital and other operating requirements, and other capital expenditures and settle its liabilities for at least the next 12 months. The Company’s objective is to maintain sufficient cash to fund the Company’s operating requirements and expansion plans identified from time to time. While the Company expects to incur losses for at minimum the next 12 months, the management of the Company continues to work towards the success and eventual profitability of the business.
The Company’s capital management objective is to maximize investment returns to its equity-linked stakeholders within the context of relevant opportunities and risks associated with the Company’s operations. Achieving this objective requires management to consider the underlying nature of research and development and sales and marketing activities, the availability of capital, the cost of various capital alternatives and other factors. Establishing and adjusting capital requirements is a continuous management process.
The Company’s ability to access both public and private capital is dependent upon, among other things, general market conditions and the capital markets generally, market perceptions about the Company and its business operations, and the trading prices of the Company’s securities from time to time. When additional capital is required, the Company intends to raise funds through the issuance of equity or debt securities. Other possible sources include the exercise of stock options of the Company. There can be no assurance that additional funds can be raised upon terms acceptable to the Company, or at all, as funding for early-stage companies remain challenging generally. Given the nature of the Company’s business as of the date of this MD&A, and in particular, the fact that its operations are undertaken exclusively within a foreign jurisdiction, the Company may face difficulty in accessing traditional sources of financing, notwithstanding that its business operations are conducted in a regulatory environment within which the Company’s activities are neither illegal nor subject to conflicting laws.
OFF BALANCE SHEET ARRANGEMENTS
There are no off-balance sheet arrangements to which the Company is committed.
TRANSACTIONS WITH RELATED PARTIES
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making operating and financial decisions. This would include the Company’s senior management, who are considered to be key management personnel by the Company.
| 16 |
Parties are also related if they are subject to common control or significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
The following transactions arose with related parties: (in Thousands of US$)
| Nine months ended September 30, 2024 | ||||||||||||||||||||
| Directors Fees | Consulting Fees / Salaries | Share based awards | Total | Amounts owing by (to) as of September 30, 2024 | ||||||||||||||||
| Chairman and former CEO | $ | - | $ | 567 | $ | - | $ | 567 | $ | (157 | ) | |||||||||
| Director and CEO | - | 243 | 249 | 492 | (27 | ) | ||||||||||||||
| Former CFO | - | 90 | - | 90 | - | |||||||||||||||
| CFO | - | 18 | 31 | 49 | (2 | ) | ||||||||||||||
| Directors | 27 | - | 63 | 90 | (4 | ) | ||||||||||||||
| $ | 27 | $ | 919 | $ | 343 | $ | 1,288 | $ | (190 | ) | ||||||||||
| Three months ended September 30, 2024 | ||||||||||||||||||||
| Directors Fees | Consulting Fees / Salaries | Share based awards | Total | Amounts owing by (to) as of September 30, 2024 | ||||||||||||||||
| Director and former CEO | $ | - | $ | 162 | $ | - | $ | 162 | $ | (157 | ) | |||||||||
| Director and CEO | - | 81 | 249 | 330 | (27 | ) | ||||||||||||||
| Former CFO | - | 21 | - | 21 | - | |||||||||||||||
| CFO | - | 6 | 31 | 37 | (2 | ) | ||||||||||||||
| Directors | 9 | - | 63 | 72 | (4 | ) | ||||||||||||||
| $ | 9 | $ | 326 | $ | 343 | $ | 622 | $ | (190 | ) | ||||||||||
| Nine months ended September 30, 2023 | ||||||||||||||||||||
| Directors Fees | Consulting Fees / | Share based awards | Total | Amounts the Company as
of | ||||||||||||||||
| Director and CEO | $ | - | $ | 1,068 | $ | - | $ | 1,068 | $ | (33 | ) | |||||||||
| CFO | - | 69 | - | 69 | (9 | ) | ||||||||||||||
| Directors | 24 | 247 | 264 | 535 | (28 | ) | ||||||||||||||
| $ | 24 | $ | 1,384 | $ | 264 | $ | 1,672 | $ | (70 | ) | ||||||||||
| Three months ended September 30, 2023 | ||||||||||||||||||||
| Directors Fees | Consulting Fees / Salaries | Share based awards | Total | Amounts owing by the Company (to) as of September 30, 2023 | ||||||||||||||||
| Chairman and CEO | $ | - | $ | 404 | $ | - | $ | 404 | $ | (33 | ) | |||||||||
| CFO | - | 27 | - | 27 | (9 | ) | ||||||||||||||
| Directors | 8 | 80 | 139 | 227 | (28 | ) | ||||||||||||||
| $ | 8 | $ | 511 | $ | 139 | $ | 658 | $ | (70 | ) | ||||||||||
| (1) | The Company’s chairman (formerly CEO as well) has a consulting agreement with the Company pursuant to which he earns $70,000 per month. On July 1, 2024, the Company and the Company’s chairman agreed that the fees due for the consulting agreement would be reduced to NIS100,000 per month (approx. $26,500). |
| (2) | The Company’s CFO has a consulting agreement with the Company pursuant to which he earns $2,000 per month. |
| (3) | The Company’s CEO has a consulting agreement with the Company pursuant to which he earns $27,500 per month. |
| (4) | Three non-executive directors, of which two earn directors’ fees of $1,000 per month. |
| (5) | The CEO participated in the April 2024 registered direct offering in an amount of $105,000 and in the April 2024 private placement in an amount of $80. |
| (6) | A director participated in the April 2024 private placement in an amount of $340. |
Financial Instruments and Financial Risk Exposure
The Company is exposed to a variety of financial risks, which results from its financing, operating and investing activities. The objective of financial risk management is to contain, where appropriate, exposures in these financial risks to limit any negative impact on the Company’s financial performance and position.
| 17 |
The Company’s financial instruments are its cash, trade and other receivables, payables, other payables and loans. The main purpose of these financial instruments is to raise finance for the Company’s operation. The Company actively measures, monitors and manages its financial risk exposures by various functions pursuant to the segregation of duties and principals. The risks arising from the Company’s financial instruments are mainly credit risk and currency risk. The risk rate on loans is fixed. The risk management policies employed by the Company to manage these risks are discussed below.
Liquidity Risk:
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they come due. As of September 30, 2024, the Company has a negative working capital balance of $2,729 thousand (December 31, 2023 – negative working capital of $901 thousand). The table below presents the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:
| Contractual | ||||||||||||
| Carrying amounts | Within 1 year | over 1 year | ||||||||||
| Trade payables | $ | 2,837 | $ | 2,837 | $ | - | ||||||
| Bank overdraft | 69 | 69 | - | |||||||||
| Other accounts payable | 4,914 | 4,914 | - | |||||||||
| Loans | 1,375 | 1,239 | 136 | |||||||||
| Lease liability | 578 | 297 | 281 | |||||||||
| Total | $ | 9,773 | $ | 9,356 | $ | 417 | ||||||
Credit risk:
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. The Company closely monitors the activities of its counterparties and controls the access to its intellectual property which enables it to ensure the prompt collection of customers’ balances. The Company’s main financial assets are cash and cash equivalents, trade receivables, as well as other receivables and represent the Company’s maximum exposure to credit risk in connection with its financial assets.
Wherever possible and commercially practical the Company holds cash with major financial institutions in Israel.
Market risks:
That part of the Company’s business of providing maintenance services of various electronic systems is highly competitive and involves a certain degree of risk. The Company’s business operations will depend largely upon the outcome of continued sales and services to security establishments and the commercialization of its products and services currently in development.
The Company’s Cust2Mate smart cart platform is new and the Company is aware of competitors in the market. In addition to the regular management oversight and skills required, success in this segment will require the Company to penetrate the market as rapidly as possible.
Critical Accounting Policies and Estimates
The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The Company’s financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the Company’s financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and also in future periods when the revision affects both current and future periods.
| 18 |
The functional currency for each of the Company’s subsidiaries is the currency of the primary economic environment in which the respective entity operates; the Company has determined the functional currency of each entity to be the new Israeli Shekel. Such determination involves certain judgements to identify the primary economic environment. The Company reconsiders the functional currency of its subsidiaries if there is a change in events and/or conditions which determine the primary economic environment. The Company’s functional and presentation currency is the U.S. dollar.
The critical judgments and significant estimates in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are the same as at December 31, 2023:
| a) | The useful life of property and equipment |
Property and equipment are amortized or depreciated over their useful lives. Useful lives are based on management’s estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the amounts charged to the consolidated statement of comprehensive income in specific periods.
| b) | Determining the fair value of share-based payment transactions |
The fair value of share-based payment transactions is determined upon initial recognition by the Binomial model. The Binomial model is based on share price and exercise price and assumptions regarding expected volatility, term of share option, dividend yield and risk-free interest rate.
| c) | Intangible assets |
Intangible assets are tested for impairment annually or more frequently if three is an indication of impairment. The carrying value of intangibles with definite lives is reviewed each reporting period to determine whether there is any indication of impairment. If there are indications of impairment the impairment analysis is completed and if the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and impairment loss is recognized.
| d) | Derivative liability – Warrants |
The Company uses the Black-Scholes option-pricing model to estimate fair value at each reporting date. The key assumptions used in the model are the expected future volatility in the price of the Company’s Common Shares and the expected life of the warrants.
| e) | Going concern |
In order to assess whether it is appropriate for the Company to continue as going concern, management is required to apply judgements and make estimates with regards to future cash flow projections. In arriving at this judgement there were several assumptions and estimates involved in calculating the future cash flow projections. These includes making estimates regarding the timing and amounts of future expenditures and the ability and timing to raising additional financing.
| f) | ECL and their measurement |
ECL are measured as the unbiased probability-weighted present value of all cash shortfalls over the expected life of each financial asset. For receivables from financial services, ECL are mainly calculated with a statistical model using three major risk parameters: probability of default, loss given default and exposure at default. The estimation of these risk parameters incorporates all available relevant information, not only historical and current loss data, but also reasonable and supportable forward-looking information reflected by the future expectation factors. This information includes macroeconomic factors (e.g., gross domestic product growth, unemployment rate, cost performance index) and forecasts of future economic conditions. For receivables from financial services, these forecasts are performed using a scenario analysis (base case, adverse and optimistic scenarios).
As of September 30, 2024, and December 31, 2023, ECL for trade and other account receivables are not material, and as such are not disclosed, in accordance with IFRS 9.
New Accounting Standards
A number of amended standards became applicable for the current reporting period. The Company and its subsidiaries did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards:
| 1. | Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 | |
| 2. | Definition of Accounting Estimates – Amendments to IAS 8 | |
| 3. | Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 |
| 19 |
MANAGEMENTS RESPONSIBILITY FOR FINANCIAL STATEMENTS
Evaluation of disclosure controls and procedures
Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company. As such, we maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings is recorded, processed, summarized, and reported within the time periods specified by the Canadian Securities Administrators rules and forms. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management’s report on internal controls over financial reporting
Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining effective internal controls over financial reporting. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of their inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our Management found our material weakness to be a result of a lack of sufficient accounting resources with relevant technical accounting skills to address issues related to the financial statement close process, and because of the size of the Company and its staff complement, we were not able to sufficiently design internal controls to provide the appropriate level of oversight regarding the financial recordkeeping and review of the Company’s financial reporting and accumulate and communicate such information to our management to allow timely decisions regarding disclosure.
To remediate the material weakness in our internal controls over financial reporting described above, we have initiated remedial measures and are taking additional measures to remediate this material weakness. First, we are continuing to roll out an enhanced financial and accounting system. Second, we have hired additional personnel. Third, we are strengthening our controls on financial reporting, with the assistance of outside consultants, experts in the controls and procedures over financing reporting. Consistent with our stage of development, we continue to rely on risk-mitigating procedures during our financial closing process in order to provide comfort that the financial statements are presented fairly in accordance with IFRS.
There were no other changes in internal control over financial reporting during the most recent interim period that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
CURRENT SHARE DATA
A2Z is authorized to issue an unlimited number of Common Shares. As of the date of this MD&A there were 26,066,057 Common Shares issued and outstanding. In addition, the following warrants and options were outstanding:
Outstanding as of the date of this report | Date of expiry | Exercise price USD | ||||||||||
| 1,063,325 | Warrants | November 10, 2025 | $ | 4.81 | ||||||||
| 546,653 | Warrants | December 24, 2025 | $ | 4.81 | ||||||||
| 88,440 | Warrants | April 18, 2026 | $ | 19.56 | ||||||||
| 433,825 | Warrants | May 28, 2026 | $ | 19.56 | ||||||||
| 653,746 | Warrants | November 8, 2024 | $ | 4 | ||||||||
| 413,785 | Warrants | March 13, 2025 | $ | 4.23 | ||||||||
| 885,838 | Warrants | June 12, 2025 | $ | 5.50 | ||||||||
| 300,621 | Warrants | December 13, 2025 | $ | 3.75 | ||||||||
| 651,062 | Warrants | January 11, 2026 | $ | 3.75 | ||||||||
| 1,200,000 | Warrants | - | $ | 0.0025 | ||||||||
| 217,333 | Options | August 20, 2025 | $ | 2.77 | ||||||||
| 13,333 | Options | January 28, 2025 | $ | 5.55 | ||||||||
| 20,000 | Options | June 3, 2026 | $ | 15.53 | ||||||||
| 6,671 | Options | October 28, 2026 | $ | 14.79 | ||||||||
| 360,000 | Options | August 2, 2032 | $ | 6.58 | ||||||||
| 120,000 | Options | August 21, 2032 | $ | 7.39 | ||||||||
| 320,000 | Options | January 4, 2033 | $ | 3.05 | ||||||||
| 40,000 | Options | November 25, 2027 | $ | 3.72 | ||||||||
| 114,000 | Options | April 18, 2033 | $ | 2.96 | ||||||||
| 18,000 | Options | June 28, 2028 | $ | 4.53 | ||||||||
| 60,000 | Options | September 20, 2033 | $ | 4.07 | ||||||||
| 552,000 | Options | August 14, 3034 | $ | 1.78 | ||||||||
| 8,078,634 | ||||||||||||
| 20 |
RISKS
Dilution
The Company has limited financial resources and has financed its operations primarily through the sale of securities such as Common Shares. The Company will need to continue its reliance on the sale of such securities for future financing, resulting in dilution to the Company’s existing shareholders.
Capital and Liquidity Risk
The amount of financial resources available to invest for the enhancement of shareholder value is dependent upon the size of the treasury, profitable operations, and a willingness to utilize debt and issue equity. Due to the size of the Company, financial resources are limited and if the Company exceeds growth expectations or finds investment opportunities it may require debt or equity financing. There is no assurance that the Company will be able to obtain additional financial resources that may be required to successfully finance transactions or compete in its markets on favorable commercial terms.
Acquisition and Expansion Risk
The Company intends to expand its operations through organic growth, adaptation of its technology and products to the civilian markets, development of new technologies and depending on certain conditions, by identifying a proposed acquisition.
Dependence on Key Personnel
Loss of certain members of the executive team or key operational leaders of the company could have a disruptive effect on the implementation of the Company’s business strategy and the efficient running of day-to-day operations until their replacement is found. Recruiting personnel is time consuming and expensive and the competition for professionals is intense.
The Company may be unable to retain its key employees or attract, assimilate, retain or train other necessary qualified employees, which may restrict its growth potential.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements made and information contained herein is “forward-looking information” within the meaning of the Ontario Securities Act. These statements relate to future events or the Company’s future performance. All statements, other than statements of historical fact, may be forward-looking statements. Generally, these forward-looking statements can be identified by the use of forward looking terminology such as “anticipates”, “plans”, “budget”, “scheduled”, “continue”, “estimates”, “forecasts”, “expect”, “is expected”, “project”, “propose”, “potential”, “targeting”, “intends”, “believes” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, or “will be taken”, “occur” or “be achieved” or the negative connotation thereof. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by readers, as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement.
The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above. Although the Company has attempted to identify important factors that could cause results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Readers are cautioned that the foregoing lists of factors are not exhaustive. Forward looking statements are made as of the date hereof and accordingly are subject to change after such date. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement. The Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.
OTHER INFORMATION
Additional information related to the Company, is available for viewing on SEDAR at www.sedar.com.
| 21 |
Exhibit 99.3
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Gadi Graus, Chief Executive Officer of A2Z CUST2MATE SOLUTIONS CORP., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of A2Z CUST2MATE SOLUTIONS CORP. (the “issuer”) for the interim period ended September 30, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it 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 the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (2013) published by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the interim period ended |
| (a) | a description of the material weakness; | |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and | |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| Date: November 13, 2024 | |
| “Gadi Graus” | |
| Gadi Graus | |
| Chief Executive Officer |
Exhibit 99.4
FORM 52-109F2 CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Alan Rootenberg, Chief Financial Officer of A2Z CUST2MATE SOLUTIONS CORP., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of A2Z CUST2MATE SOLUTIONS CORP. (the “issuer”) for the interim period ended September 30, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it 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 the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (2013) published by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the interim period ended |
| (d) | a description of the material weakness; | |
| (e) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and | |
| (f) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2024 and ended on June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| Date: November 13, 2024 | |
| “Alan Rootenberg” | |
| Alan Rootenberg | |
| Chief Financial Officer |