Icts International N V 6-K, filed Dec 20, 2024
Icts International N V (ICTSF)
6-K
2024-12-20
For: 2024-06-30
View Original
Added on
April 06, 2026
About this 6-K
Icts International N V filed this 6-K on December 20, 2024.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 6-K
| ☐ |
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☒ |
SEMI-ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE SIX MONTHS ENDED |
OR
| ☐ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☐ |
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date
of event requiring this shell company report . . . . . . .
For
the transition period from ___________________ to ________________________
COMMISSION
FILE NUMBER 0-28542
(Exact
Name of Registrant as specified in its charter) Not
Not
Applicable
(Translation
of Registrant's name into English)
The
Netherlands
(Jurisdiction
of incorporation or organization)
Walaardt
Sacréstraat, 425-5, 1117 BM Schiphol Oost, The Netherlands
(Address
of principal executive offices)
Alon
Raich, Tel: +31-20-3471077
Email:
alon@ictsintl.com, Address: Same as above
(Name,
Telephone, E-mail and/or Facsimile number and
Address
of Company Contact Person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act:
Title
of each Class: Common Stock
Name
of each exchange on which registered: OTCQB
Securities
registered or to be registered pursuant to Section 12(g) of the Act:
Common
Stock, par value 0.45 Euro per share
(Title
of Class)
Securities
for which there is a reporting obligation pursuant to
Section
15(d) of the Act:
None
(Title
of Class)
Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the
annual report: 37,433,333.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
☐ NO ☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
YES
☐ NO ☒
Note
- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 from their obligations under those sections.
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES
☒ NO ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
YES
☒ NO ☐
Indicate
by check mark whether the registrant is a large accelerated filer, am accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer ☐ |
Accelerated
filer ☐ |
Non-accelerated
filer ☒ |
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
International
Financial Reporting Standards as issued |
||
|
U.S.
GAAP ☒ |
by
the International Accounting Standards Board ☐ |
Other
☐ |
If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow.
Item
17 ☐ Item 18 ☐
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
☐ NO ☐
2
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US
$ in thousands, except share and per share data)
TABLE
OF CONTENTS
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Page | ||
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4 | |
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20 | |
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23 |
3
|
ITEM
1. FINANCIAL STATEMENTS |
|
ICTS
INTERNATIONAL N.V AND SUBSIDIARIES |
|
CONSOLIDATED
BALANCE SHEETS |
|
(US
$ in thousands, except share data) |
|
(Unaudited)
|
|
June 30,
|
December 31,
|
|||||||
|
2024
|
2023
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ASSETS
|
||||||||
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CURRENT ASSETS:
|
||||||||
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Cash and cash equivalents
|
$
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|
$
|
|
||||
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Restricted cash
|
|
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||||||
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Bank deposits
|
|
|
||||||
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Accounts receivable,
net |
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Prepaid expenses and
other current assets |
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Total current assets
|
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||||||
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Deferred tax assets,
net |
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Investments
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Deposits
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Restricted cash
|
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Property and equipment,
net |
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Operating leases right
of use assets |
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Goodwill
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||||||
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Other Assets
|
|
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||||||
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Total assets
|
$
|
|
$
|
|
||||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT |
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Notes payable - financial
institutions |
$
|
|
$
|
|
||||
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Accounts payable
|
|
|
||||||
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Accrued expenses and
other current liabilities |
|
|
||||||
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Value added tax (VAT)
payable |
|
|
||||||
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Income taxes payable
|
|
|
||||||
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Operating lease liabilities,
current |
|
|
||||||
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Total current liabilities
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||||||
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Operating lease liabilities,
non current |
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Other liabilities
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Total liabilities
|
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||||||
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COMMITMENTS AND CONTINGENCIES
|
||||||||
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REDEEMABLE NON-CONTROLLING
INTERESTS |
|
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||||||
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SHAREHOLDERS' DEFICIT:
|
||||||||
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Common stock, |
||||||||
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|
||||||||
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|
||||||||
|
December 31, 2023
|
|
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||||||
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Additional paid-in capital
|
|
|
||||||
|
Accumulated deficit
|
( |
) |
(
|
)
| ||||
|
Accumulated other comprehensive
loss |
(
|
)
|
(
|
)
| ||||
|
Treasury shares
|
(
|
)
|
(
|
)
| ||||
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Non controlling interest
in subsidaries |
(
|
)
|
|
|||||
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Total shareholders' deficit
|
(
|
)
|
(
|
)
| ||||
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Total liabilities and
shareholders' deficit |
$ |
$
|
|
|||||
4
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
|
(US
$ in thousands, except share and per share data) |
|
(Unaudited)
|
|
Six
months ended |
Six
months ended |
|||||||
|
June
30, 2024 |
June
30, 2023 |
|||||||
|
Revenue
|
$
|
|
$
|
|
||||
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Cost of revenue
|
|
|||||||
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GROSS PROFIT
|
|
|||||||
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Operating expenses:
|
||||||||
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Research and development
|
|
|
||||||
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Selling, general and
administrative |
|
|||||||
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Total operating expenses
|
|
|||||||
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OPERATING LOSS
|
(
|
)
|
(
|
)
| ||||
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Other income, net
|
|
|
||||||
|
LOSS BEFORE INCOME TAX
EXPENSE |
( |
) |
(
|
)
| ||||
|
Income tax expense
|
|
|
||||||
|
NET LOSS
|
( |
) |
(
|
)
| ||||
|
Net income attributable
to non-controlling interests |
|
|
||||||
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NET LOSS ATTRIBUTABLE
TO ICTS INTERNATIONAL N.V. |
$
|
(
|
)
|
$
|
(
|
)
| ||
|
BASIC AND DILUTED NET
LOSS ATTRIBUTABLE TO ICTS |
||||||||
|
INTERNATIONAL N.V. PER
SHARE |
||||||||
|
Net loss attributable
to ICTS International N.V. |
$ | ( |
) |
$
|
(
|
)
| ||
|
Basic weighted average
number of shares |
|
|
||||||
|
Net loss per share attributable
to ICTS International N.V. - basic |
$
|
(
|
)
|
$
|
(
|
)
| ||
|
Diluted weighted average
number of shares |
|
|
||||||
|
Net income (loss) per
share attributable to ICTS International N.V. - diluted |
$ | ( |
) |
$
|
(
|
)
| ||
|
COMPREHENSIVE LOSS
|
||||||||
|
Net loss
|
$ | ( |
) |
$
|
(
|
)
| ||
|
Other comprehensive income
- translation adjustments |
|
|
||||||
|
Unrealized income (loss)
on derivative instruments |
(
|
) |
(
|
)
| ||||
|
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
| ||
|
Comprehensive income
attributable to non controlling interests |
|
|
||||||
|
COMPREHENSIVE LOSS ATTRUBUTABLE
TO ICTS INTERNATIONAL N.V. |
$ | ( |
) |
$
|
(
|
)
| ||
5
|
ICTS
INTERNATIONAL N.V AND SUBSIDIARIES |
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' DEFICIT |
|
(US
$ in thousands, except share and per share data) |
|
(Unaudited)
|
|
Common
Stock |
Additional
Paid
- In |
Accumulated
|
Accumulated
Other
Comprehensive
|
Treasury
|
Non
Controlling
|
Total
Shareholders'
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Stock |
Interest
|
Deficit
|
|||||||||||||||||||||||||
|
BALANCE AT DECEMBER 31,
2022 |
|
|
|
(
|
)
|
(
|
)
|
|
|
$
|
(
|
)
| ||||||||||||||||||||
|
Net income loss
|
-
|
|
|
(
|
)
|
|
|
|
(
|
)
| ||||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Sale of QDD Shares on
Januay 1, 2023 |
-
|
|
|
|
|
|
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||||||||||||||||||||||||
|
Unrealized losses on
derivatives instruments |
-
|
|
|
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||||||
|
Stock based compensation
- AU10TIX Technologies B.V. |
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
BALANCE AT JUNE 30, 2023
|
|
|
|
(
|
)
|
(
|
)
|
|
|
(
|
)
| |||||||||||||||||||||
|
Net income
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||||||
|
Unrealized gains on derivatives
instruments |
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Stock-based compensation
- AU10TIX Technologies B.V. |
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Issuance price
increase of shares issued in previous years (see note 13) |
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Commitment to purchased
shares from certain directors and officers (see note 13) |
-
|
|
|
|
(
|
)
|
|
(
|
)
| |||||||||||||||||||||||
|
BALANCE AT DECEMBER 31,
2023 |
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
| ||||||||||||||||||||
|
Net loss
|
-
|
|
|
( |
) |
|
|
|
( |
) | ||||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Unrealized losses
on derivatives instruments |
-
|
|
|
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||||||
|
Dividend
to AU10TIX shareholders |
-
|
|
|
|
|
|
(
|
)
|
(
|
)
| ||||||||||||||||||||||
|
Exercise of options
to shares - AU10TIX Technologies B.V. |
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
|
Stock-based compensation
- AU10TIX Technologies B.V. |
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
BALANCE AT JUNE 30, 2024
|
|
$
|
|
$
|
|
$ | ( |
) |
$
|
(
|
)
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
| |||||||||||||
6
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
1 - ORGANIZATION
Description
of Business
ICTS
International N.V. (“ICTS”) was established by the Department of Justice in Amstelveen, Netherlands on October 9, 1992. ICTS
and subsidiaries (collectively referred to as, the “Company” or “ICTS”) operates in four reportable segments:
(a) Corporate (b) Airport Security (c) Other Aviation Related Services and (d) Authentication Technology.
The
Corporate segment does not generate revenue from third parties and contains primarily non-operational expenses. The Airport Security segment
provides security services mostly to airport authorities and airlines predominantly in Europe. The Other Aviation Services segment provides
services mostly to airlines and airport authorities in the United States of America. The Authentication Technology segment provides authentication
services to financial and other companies, predominantly in the United States of America.
NOTE
2 – BASIS OF PRESENTATION
General
The
accompanying condensed unaudited consolidated financial statements for the six months ended June 30, 2024 have been prepared by the Company,
in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for financial information.
These financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals, which are, in the opinion
of management, necessary for a fair presentation of the financial position of the Company as of June 30, 2024 and the results of operations
for the six months then ended. Accordingly, certain information and footnote disclosures normally included in annual financial statements
prepared in accordance with US GAAP have been condensed or omitted. The results of operations presented are not necessarily indicative
of the results to be expected for future quarters or for the year ending December 31, 2024.
The
following discussion and analysis should be read in conjunction with the financial statements, related notes and other information included
in this report and with the Risk Factors included in Part 1 Item 3 in our Annual Report on Form 20-F for the year ended December 31, 2023,
filed with the SEC.
This
Report contains statements that may constitute “forward-looking statements”. Generally, forward-looking statements include
words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,”
“plans,” “projects,” “could,” “may,” “might,” “should,” “will”,
the negative of such terms, and words and phrases of similar import. Such statements are based on management’s current expectations
and are subject to a number of risks and uncertainties. These risks and uncertainties could cause our actual results to differ materially
from those described in the forward-looking statements. Any forward-looking statement represents our expectations or forecasts only as
of the date it was made and should not be relied upon as representing its expectations or forecasts as of any subsequent date. Except
as required by law, we undertake no obligation to correct or update any forward-looking statement, whether as a result of new information,
future events or otherwise, even if our expectations or forecasts change.
7
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
June
30, |
December
31, |
|||||||
|
2024
|
2023
|
|||||||
|
Receivable from the German
authorities (1) |
|
|
||||||
|
Income tax receivable
|
|
|
||||||
|
Interest from bank deposits
|
|
|
||||||
|
Value Added Tax (VAT)
receivable |
|
|
||||||
|
Prepaid uniforms
|
|
|
||||||
|
Prepaid insurance
|
|
|
||||||
|
Prepaid licenses and
training |
|
|
||||||
|
Prepaid rent
|
|
|
||||||
|
Other
|
|
|
||||||
|
$
|
|
$
|
|
|||||
|
1.
|
In
Germany, the employees are eligible for payroll support. The Company paid its German employees their full salary and subsequently, the
Company was reimbursed by the German government for the payroll support amount. |
NOTE
4 – INVESTMENTS
Manuka,
Inc. (Previously Artemis Therapeutics, Inc.)
As
of June 30, 2024, the Company owns less
than 1% of the issued and outstanding share capital of Manuka, Inc. (“MNKA”). MNKA is a company incorporated
in Israel engaged in developing and manufacturing skincare products based on Manuka honey and bee venom. The market value of the Company’s
investment in MNKA as of June 30, 2024 and December 31, 2023 is $4
and $9 ,
respectively. The Company evaluated the stock price of MNKA. Because the MNKA share price is low, the number of shares traded is low and
MNKA still does not have any material revenue or profitable operations, the Company previously determined that the value of the investment
is impaired and accordingly, valued the investment at zero.
Mesh
Technologies, Inc.
In
January 2019, the Company invested an amount of $50
in Mesh Technologies, Inc. (“Mesh”), a company incorporated in the USA. As of June 30, 2024 and December 31, 2023, the investment
represented less
than 1%
8
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
4 – INVESTMENTS (CONTINUED)
Arrow
Ecology & Engineering Overseas (1999)
In
December 2019, the Company invested an amount of $1,750
in Arrow Ecology & Engineering Overseas (1999) Ltd (“Arrow”), a limited company incorporated in Israel. Arrow develops
and operates a sustainable green process to recycle mixed and sorted municipal solid waste. The Company purchased a few types of shares
representing 22.6 %
of Arrow’s equity for an amount of $22
and shareholder loans were purchased for a price of $1,728
($4,146
stated value less $2,418
allowance for credit losses, which have not changed since the acquisition).
The
Company suspended its use of the equity method to accounting for this investment in 2022 after its investment balance was reduced to zero.
The
Company has an agreement with an entity related to its main shareholder, according to which, if the value of the investment decreases,
the related party entity has guaranteed to repurchase this full investment at a minimum amount of $1,750 .
The guarantee is effective immediately as of the date of purchase and terminates on January 1, 2025. Some Directors, managers and shareholders
of Arrow are related parties of the Company.
GreenFox
Logistics LLC.
In
March 2020, the Company invested an amount of $100
in GreenFox Logistics, LLC. (“GreenFox”), a company incorporated in the USA. The investment was done as SAFE investment (Simple
Agreement for Future Equity). GreenFox is an on-demand delivery/moving/transportation company. As GreenFox is a private, closely held
company, there is no active market for this investment. Therefore, the Company measures the investment at cost minus impairment.
SardineAI
Corp.
In
August 2020, the Company invested an amount of $50
in SardineAI Corp (“SardineAI”), a company incorporated in the USA. In return, the Company received preferred shares representing
less
than 1% of SardineAI’s equity. SardineAI is a Fraud Prevention-as-a-Service (FaaS) platform for Digital businesses
to detect frauds and financial crimes. As SardineAI is a private, closely held company, there is no active market for this investment.
Therefore, the Company measures the investment at cost minus impairment. In January 2023, the Company sold approximately 85 %
of its investment for a total amount of $758 .
Silver
Circle One
In
December 2021, March 2022 and December 2022, the Company invested a total amount of $38
in Silver Circle One, a capital fund which aims to invest in private emerging companies with focus on consumer, commerce and technology
companies. The company committed to invest up to $100
in the pool. As Silver Circle One is a private, closely held fund, there is no active market for this investment. Therefore, the company
measures the investment at cost minus impairment.
Justt
Fintech Ltd (previously Acrocharge Ltd)
In
December 2021, the Company invested an amount of $50
in Justt Fintech Ltd (“Justt”), a company incorporated in Israel. As of June 30, 2024, the investment represented less
than 1%
9
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
4 – INVESTMENTS (CONTINUED)
Nilus
OS Ltd
In
March 2022, the Company invested an amount of $25
in Nilus OS Ltd. (“Nilus”), a company incorporated in Israel. As of June 30, 2024, the investment represented less
than 1% of the issued and outstanding share capital of Nilus. Nilus is a company that automates payment and financial
workflows for platforms that involve transfers of money. As Nilus is a private, closely held company, there is no active market for this
investment. Therefore, the Company measures the investment at cost minus impairment.
|
NOTE
5 - PROPERTY AND EQUIPMENT |
Property and equipment is as follows:
|
June 30,
|
December 31,
|
|||||||
|
2024
|
2023
|
|||||||
|
Office, equipment and
facilities |
$
|
|
$
|
|
||||
|
R&D capitalization
costs |
|
|
||||||
|
Vehicles
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
|
|
|||||||
|
Less: accumulated depreciation
and amortization |
|
|
||||||
|
Total property and equipment,
net |
$
|
|
$
|
|
||||
Depreciation
and amortization expense are $1,199
and $1,322
for the periods ended June 30, 2024 and 2023, respectively.
NOTE
6 – NOTES PAYABLE – FINANCIAL INSTITUTIONS
United
States of America
The
Company’s U.S subsidiary secured a three-year
credit facility with its primary bank in September 2023. The credit facility has a maximum borrowing base limit of $7,500 .
The borrowing base limitation is equivalent to: (i)
85% of eligible non-investment grade receivables and 90% of eligible investment grade receivables, plus (ii) 80% of direct labor payroll
for the previous two pay periods plus 20%. The company is required to maintain a fixed charge ratio of 1.00. Borrowings
on the credit facility are subject to interest at SOFR
plus 2.65% and a minimum annual interest charge of $60 .
As of June 30, 2024 and December 31, 2023, the Company has no outstanding balances under the credit facility and the unused available
amount of the line is $7,500 .
Europe
The
Company has a credit arrangement in Sweden to provide it with up to 4,000
SEK ($376
as of June 30, 2024) in borrowings. Borrowings under the line of credit bear annual interest of 2.8 %
and are subject to annual extension by the financial institution. The
line of credit is secured by accounts receivable of the Swedish subsidiary. As of June 30, 2024, and December 31, 2023,
the Company had 1,733
SEK and 2,098
SEK ($163
and $209 )
respectively, in outstanding borrowings under the line of credit facility.
On
November 2023, the Company entered into a loan agreement with a commercial bank in Spain to provide it with up to €1,000
($1,099
as of December 31, 2023). The interest rate will be determined by the bank at the time the loan will be taken. The loan agreement expires
in November 2024. As of June 30, 2024 and December 31, 2023 the outstanding balances regarding those loans are €900
and €0
($968
and $0 ),
respectively.
10
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
6 – NOTES PAYABLE – FINANCIAL INSTITUTIONS (CONTINUED)
During
the period ended December 31, 2023 from time to time, the Company has been taking revolving short term loans of variable amounts from
the same commercial bank. The loans ranged between €250
to €1,415
($269
and $1,522 )
as of June 30, 2024 with interest rates between 5.25 %
to 5.90 %
and for periods between to six
months . On December 2023, an agreement with the commercial bank was extended, to provide loans up to €1,500
($1,613 )
as of June 30, 2024. The exact interest rate will be determined at the time the loan is taken. These loans can be used only for paying
different taxes to the Spanish tax authorities. The loan agreement can be terminated by both sides at any time. As of June 30, 2024 and
December 31, 2023 the outstanding balances regarding those loans are €334
and €0
($359
and $0 )
as of June 30, 2024, respectively, with an interest rate of 4.28 %.
On
March 2024, the Company entered into a factoring agreement with the same commercial bank to provide it with up to €2,250
($2,419 )
as of June 30, 2024. Borrowings on the factoring facility are subject to interest at EUROBIR plus 0.6 %
and additional commission of 0.2 %.
The loan agreement is for one year with possible extensions and can be terminated with a notice of 15 days by each party. As of June 30,
2024 the outstanding balance regarding e factoring agreement is €1,744
($1,875 )
as of June 30, 2024, with an interest rate of 4.37 %.
On
June 2024, the Company entered into a factoring agreement with a commercial institution in Germany to provide it with up to €9,800
($10,538 )
as of June 30, 2024. Borrowings on the factoring facility are subject to interest at EUROBIR plus 3.0 %
and 1.5 %
for the unused balance. The loan agreement has no expiration date and can be terminated with a notice of 14 days by each party. As of
June 30, 2024, the Company had no outstanding balances under the factoring agreement.
NOTE
7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities are as follows:
|
June
30, |
December 31,
|
|||||||
|
2024
|
2023
|
|||||||
|
Accrued payroll and related
costs |
$
|
|
$
|
|
||||
|
Accrued vacation
|
|
|
||||||
|
Deferred revenue
|
|
|
||||||
|
Advanced payments from
a customer |
|
|
||||||
|
Commitment to purchase
shares from directors and officers |
|
|
||||||
|
Dividend to AU10TIX shareholders
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total accrued expenses
and other current liabilities |
$
|
|
$
|
|
||||
11
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
8 – CONVERTIBLE NOTES PAYABLE TO A RELATED PARTY
The
Company had an agreement with an entity related to its main shareholder, to provide it with up to $2,000
in revolving loans through January 2024. The term of the arrangement can be automatically extended for four additional six-month periods
at the option of the holder. Loans received under the arrangement bear interest at the rate of 2.5 %,
compounded semi-annually and payable at maturity. In connection with the arrangement in May 2019, the holder was granted an option to
convert up to $2,000
of the loan into a maximum of 5,000,000
shares at a price of $0.4
per share. In October 2020, the entity converted $800
into 2,000,000
shares. In November 2023, the Company and the related party agreed to extend the length of the note until January 2026 and to adjust the
terms of the option to convert the loan into a maximum 5,000,000
shares at a price of $0.75
per share. As a result, an adjustment was made to the per share price of the 2,000,000
shares issued in the October 2020 conversion, resulting in an amount of $700
of the loan derecognized with a corresponding increase to the additional paid in capital. See also note 13.
As
of June 30, 2024 and December 31, 2023 there are no outstanding balances relating the convertible notes payable to this related party.
NOTE
9 – OTHER LIABILITIES
|
Other liabilties are
as follows: |
||||||||
|
June
30, |
December
31, |
|||||||
|
2024
|
2023
|
|||||||
|
Deferred wagetax and
social security (1) |
$
|
|
$
|
|
||||
|
Deferred VAT (1)
|
|
|
||||||
|
Severance pay
|
|
|
||||||
|
Other (2)
|
|
|
||||||
|
Total other liabilities
|
$
|
|
$
|
|
||||
|
(1)
|
Deferred
VAT and deferred wage tax relate to measurements taken by the Dutch government, where they postponed all VAT payable for the years 2021
and 2020 and all wage tax and social security payable for the months March – December 2021, to be paid in 60 instalments starting
October 2022. |
|
(2)
|
Including
a |
NOTE
10 – REDEEMABLE NON-CONTROLLING INTERESTS
On
July 3, 2019, AU10TIX entered into a Series A Preferred Subscription Agreement (the “Agreement”) with TPG Lux 2018 SC I, S.a.r.l
(“TPG”), according to which AU10TIX issued 3,000,000
Series A Preferred Shares (“Series A Shares”) to TPG for a subscription price of US$60,000
in cash representing approximately 24 %
of the outstanding share capital of AU10TIX and 23.077 %
of the fully-diluted share capital of AU10TIX. Transaction costs totaled $4,540
and were deducted from the redeemable non-controlling interests balance.
On
November 7, 2019, AU10TIX entered into a Series A and Series A-1 Preferred Subscription Agreement with Oak HC/FT Partners II, L.P. (“Oak”),
according to which AU10TIX issued 1,000,000
Series A Preferred Shares and 23,622
Series A-1 Preferred Shares (“Series A-1 Shares” and together with Series A Shares – “the Preferred Shares”)
to Oak for a subscription price of US$20,000
in cash representing approximately 7.401 %
of the outstanding share capital of AU10TIX and 7.143 %
of the fully-diluted share capital of AU10TIX. For accounting purposes, the investment was allocated to the Series A and Series A-1 Preferred
Shares on a relative fair value basis of $19,537
and $461 ,
respectively. Transaction costs totaled $1,513
and were deducted from the respective investment amounts.
12
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
10 – REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
Following
the Oak investment, on November 7, 2019, TPG subscribed for 307,087
Series A-1 Shares at nominal value (US$0.001
per share) (“Bonus Issue Series A-1 Shares”) in order to preserve its 23.077 %
ownership interest in the fully diluted share capital of AU10TIX.
On
June 28, 2021, TPG, Oak, GF GW LLC (“GF”) and AU10TIX, entered into a Sale and Purchase Agreement (the “SPA”),
pursuant to which Oak and GF purchased preferred shares in AU10TIX from TPG. In connection with the SPA, (i) such parties and ICTS entered
into an amended and restated shareholders agreement (the “SHA”) and an amended and restated registration rights agreement
(the “RRA”) and (ii) AU10TIX’s Articles of Association (the “Articles”) were amended by a deed of amendment
(the “Deed of Amendment”).
Pursuant
to the SPA, Oak purchased 755,906
AU10TIX Series A Preferred shares from TPG and GF purchased 1,511,811
AU10TIX Series A Preferred Shares from TPG. In connection with such purchases, all outstanding AU10TIX’s Series A Preferred Shares
and Series A-1 Preferred Shares were re-designated as New Series A Preferred Shares and the Ordinary Shares owned by ICTS were re-designated
as Class B Ordinary Shares, as described below.
Following
the completion of the sales and purchases contemplated by the SPA on June 28, 2021: (i) ICTS owns 68.69 %
of the outstanding share capital of AU10TIX in the form of Class B Ordinary Shares; (ii) Oak owns 12.87 %
of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares; (iii) GF owned 10.93 %
of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares; and (iv) TPG owns 7.51 %
of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares. In addition, AU10TIX may issue up to 500,000
Class A Ordinary Shares under its existing employee stock option plan. In February 2023, the option plan was increased to up to 1,000,000
Class A Ordinary Shares. In April 2024, 241,000
options were exercised into shares.
In
consideration of the benefits to Oak increasing its shareholding and GF becoming a shareholder, AU10TIX provided certain customary warranties
to Oak and GF concerning AU10TIX and its business. In addition, AU10TIX agreed to be primarily liable to Oak and GF for any breaches by
TPG of its customary fundamental warranties given to Oak and GF (including that TPG owns AU10TIX Series A Preferred Shares being sold
to Oak and GF); provided, that, TPG has agreed to indemnify and hold AU10TIX harmless for any losses incurred by AU10TIX in relation to
such fundamental warranties given by TPG.
The
Preferred Shares Rights
The
SHA and the Articles (as amended by the Deed of Amendment) provide for the following material matters in respect of the rights attaching
to the New Series A Preferred Shares and the Ordinary Shares and the ongoing governance of AU10TIX:
General:
The New Series A Preferred Shares are entitled to one vote per share and rank equally with the Ordinary Shares in regards to dividends.
The Ordinary Shares are divided into two classes: Class A Ordinary Shares and Class B Ordinary Shares, which rank equally as to dividends.
The Class A Ordinary Shares are entitled to one vote per share. The Class B Ordinary Shares are entitled to three votes per share and
may only be held by ICTS and its permitted transferees.
Liquidation
Preference: the holders of New Series A Preferred Shares (“Series A Holders”) are entitled to a liquidation preference upon
the occurrence of a (i) sale, initial public offering, which term includes certain business combinations with a SPAC (an “IPO”),
merger, consolidation or reorganization, which results in a change of control of AU10TIX, and (ii) winding-up, dissolution or liquidation
of AU10TIX, pursuant to which the Series A Holders are entitled, on the occurrence of such event and in priority to the Ordinary Shares,
to receive the greater of: (a) US$26.4583
per share, subject to adjustments for certain events affecting the capital of AU10TIX (the “Starting Price”) plus all accrued
but unpaid dividends in respect of the New Series A Preferred Shares, less all dividends previously paid on the New Series A Preferred
Shares, and (b) the proceeds distributable in respect of the New Series A Preferred Shares had they been converted into Class A Ordinary
Shares. The Ordinary Shares rank equally in liquidation.
13
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
10 - REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
The
Preferred Shares Rights (Continued)
Conversion
Rights: The New Series A Preferred Shares are subject to conversion into Class A Ordinary Shares on a 1:1
basis (subject to adjustments for certain events affecting the capital of AU10TIX): (a) upon the written request by any Series A Holder;
and (b) immediately prior to a qualifying IPO of AU10TIX (being an IPO where each Class A Ordinary Share is valued at not less than 150 %
of the Starting Price at the completion of the IPO, subject to adjustments for certain events affecting the capital of AU10TIX) (a “Qualifying
IPO”). The Class B Ordinary Shares are convertible into Class A Ordinary Shares at any time upon the written request of a holder
of Class B Ordinary Shares on a 1:1
basis, subject to adjustments for certain events affecting the capital of AU10TIX.
Anti-Dilution
Protection: The SHA contains customary broad-based weighted average anti-dilution protection whereby if further shares are issued by AU10TIX
at a price per new security that is less than the Starting Price, then the Series A Holders shall be entitled to receive additional Class
A Ordinary Shares (at no further cost) on a weighted-average basis reflecting the value of the equity in AU10TIX, based on the subscription
price paid in the new issue of securities.
Transfers:
Subject to certain customary exceptions, including a transfer to a permitted transferee, any shareholder (other than TPG, Oak and GF)
wishing to transfer any of the shares held by it shall first offer such shares to each shareholder holding 3 %
or more of AU10TIX’s outstanding share capital at the same price and on the same terms at which the selling shareholder wishes to
transfer such shares.
New
Issuances: Subject to certain customary exceptions, each shareholder holding 3 %
or more of AU10TIX’s outstanding share capital has the right to participate in any new issuance of securities by AU10TIX.
Information
Rights: Subject to certain exceptions, each shareholder holding 3% or more of AU10TIX’s outstanding share capital is entitled to
receive certain financial information regarding AU10TIX including budgets, annual and quarterly accounts and details of any third party
offer for the stock or assets of AU10TIX, as well as certain inspection rights.
Exit
Rights: At any time from and after July 3, 2026, upon written request by Series A Holders holding at least 60 %
of the then outstanding New Series A Preferred Shares (the “Preferred Majority”), AU10TIX is required to use reasonable endeavors
to facilitate a sale of AU10TIX within six months after such written request, and, thereafter, the Preferred Majority has the right to
step-in and require AU10TIX to facilitate a sale or IPO. On the exercise of such step-in right, each other shareholder (including ICTS)
is required to cooperate with the Preferred Majority regarding such sale or IPO and the Preferred Majority has the right to exercise drag
rights over the shares held by other shareholders in order to facilitate such exit event.
Board
Arrangements: The Shareholders Agreement and Articles provide that the board of directors of AU10TIX shall be constituted by up to six
directors: (i) four of whom will be appointed by the holder of a majority of the Class B Ordinary Shares (i.e., currently ICTS); (ii)
one of whom will be appointed by Oak (for so long as Oak holds at least 50 %
of the New Series A Preferred Shares held on the date of the closing of the transactions contemplated by the SPA, subject to adjustments
for certain events affecting the capital of AU10TIX); and (iii) one of whom will be appointed by GF (for so long as GF holds at least
50 %
of the New Series A Preferred Shares held on the date of the closing of the transactions contemplated by the SPA, subject to adjustments
for certain events affecting the capital of AU10TIX). As a general matter, the board of AU10TIX is able to pass resolutions by a simple
majority, subject to the consent rights of the Preferred Majority set out below.
14
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
10 - REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
The
Preferred Shares Rights (Continued)
Preferred
Majority Consent Rights: For as long as the Series A Holders hold, in the aggregate, at least 25% of the New Series A Shares Preferred
Shares on the date of the closing of the transactions contemplated by the SPA, subject to adjustments for certain events affecting the
capital of AU10TIX, the consent of the Preferred Majority is required for the following actions (i) amending the SHA or the Articles in
a manner that would adversely affect the rights, preferences or privileges of the New Series A Preferred Shares; (ii) issuing new securities
ranking senior to or pari passu with the New Series A Preferred Shares; (iii) making of any dividend or distribution other than a dividend
or distribution that is pro rata to the Series A Holders and the holders of the Ordinary Shares; (iv) redeeming any Ordinary Shares; (v)
incurring debt in excess of 4.0x AU10TIX’s consolidated EBITDA in the 12-month period ending on the last day of the month preceding
the month in which the debt was incurred; (vi) consummating an IPO other than a Qualifying IPO; (vii) making certain changes to the size
of AU10TIX’s board; (viii) making any fundamental change in the nature of the business of AU10TIX and its subsidiaries; (ix) entering
into related party transactions, unless such transaction is commercially reasonable and on an arm’s-length basis; and (x) either
amending AU10TIX’s existing stock option plan or creating a new stock option plan to allow for the issuance of more than 500,000
additional Class A Common Shares.
Tag
Rights: Following completion of the procedures on transfers set out above, each Series A Holder holding 3% or more of AU10TIX’s
outstanding shares will have the right to participate proportionately in any third-party share sale by another shareholder other than
a Series A Holder (subject to certain customary exceptions).
Drag
Rights: AU10TIX has the right to drag other shareholders into an exit event subject to certain requirements being satisfied (including
either (i) holders of New Series A Shares receiving the greater of: (a) the Starting Price and (b) the proceeds distributable in respect
of the New Series A Preferred Shares had they been converted into Class A Ordinary Shares, in each case with the approval of the Board,
the Preferred Majority and the holders of a majority of the shares or (ii) a minimum value per New Series A Share of 150 %
of the Starting Price approved by the Board and holders of a majority of the shares, in each case subject to adjustments for certain events
affecting the capital of AU10TIX) in relation to such exit transaction.
Termination:
The SHA terminates upon (i) the agreement of AU10TIX, the Preferred Majority and a majority of the holders of the Ordinary Shares or (ii)
the closing of a Qualifying IPO.
Tax
Matters: AU10TIX is required to provide the Series A Holders with certain customary information for U.S. federal tax reporting purposes.
Confidentiality
and Public Announcements: The SHA provides for customary confidentiality protections and limitations on public announcements without consent.
The
RRA provides the Series A Holders (and in certain cases the holders of the Class B Ordinary Shares) with a limited number of customary
long-form and short-form demand registration rights, shelf registration rights and the right to participate under certain conditions if
AU10TIX determines to register its shares. In addition, AU10TIX has undertaken to (i) take certain actions to facilitate the rights of
the parties under the RRA; (ii) provide customary indemnification; (iii) not agree to further registration rights superior to those granted
under the RRA; and (iv) limit issuances of its shares under certain circumstances set out in the RRA.
Pre-emption
Rights: The Shareholders Agreement contains a restriction on issuing any securities senior to or pari passu with the New Series A Preferred
Shares for so long as the holders of the New Series A Preferred Shares on June 28, 2021 (or their transferees in accordance with the terms
of the Shareholders Agreement) continue to collectively hold at least 25 %
of such number (appropriately adjusted for certain corporate events) of New Series A Preferred Shares. In addition, each shareholder holding
in excess of 3% of AU10TIX’s outstanding shares has the right to participate in any new issuance of securities by AU10TIX, subject
to customary exceptions.
15
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
10 - REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
The
Preferred Shares Rights (Continued)
On
April 2024, AU10TIX declared a dividend of $10,000
which was paid in November 2024 to its shareholders. Out of this amount $6,751
was paid to ICTS, $3,249
was paid to the preferred shares shareholders of AU10TIX and $171
was paid to other shareholders of AU10TIX.
The following table sets forth for the movement in the redeemable non-controlling interests:
|
Period
Ended, |
||||||||
|
June 30, |
December 31, |
|||||||
|
2024
|
2023
|
|||||||
|
Balance as
of the beginning of the year |
$
|
|
$
|
|
||||
|
Net Income
(Loss) |
|
|
||||||
|
Dividend
from AU10TIX |
(
|
)
|
||||||
|
Other Comprehensive
Income - Translation adjustement |
|
|
||||||
|
Balance as
of the end of the period |
$
|
|
$
|
|
||||
NOTE
11 - REVENUE RECOGNITION
Revenue
Recognition
Revenue
is recognized when the promised services are performed for our clients, and the amount that reflects the consideration we are entitled
to receive in exchange for those services is determined. The Company’s revenues are recorded net of any sales taxes.
The
following table presents the Company’s revenues according to the Company’s segments:
|
Period
ended June 30, |
||||||||
|
2023
|
2022
|
|||||||
|
Aviation Security
|
$
|
|
|
|||||
|
Other Aviation Related
Services |
|
|
||||||
|
Authentication Technology
|
|
|
||||||
|
Total revenues
|
$
|
|
$
|
|
||||
The
following table presents the Company’s revenues generated from customers by geographical area based on the geographical location
of the customers invoicing address:
|
Period
ended June 30, |
||||||||||||||||
|
2024
|
2023
|
|||||||||||||||
|
Germany
|
$
|
|
|
%
|
$
|
|
|
%
| ||||||||
|
United States
|
|
|
%
|
|
|
%
| ||||||||||
|
The Netherlands
|
|
|
%
|
|
|
%
| ||||||||||
|
Spain
|
|
|
%
|
|
|
%
| ||||||||||
|
Other countries
|
|
|
%
|
|
|
%
| ||||||||||
|
Total revenues
|
$
|
|
|
%
|
$
|
|
|
%
| ||||||||
16
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
11 - REVENUE RECOGNITION (CONTINUED)
Deferred
Revenues
The
Company records deferred revenues when cash payments are received or due in advance of our performance. Deferred revenues as of June 30,
2024 and December 31, 2023 were $4,517
and $4,938 ,
respectively shown as part of the accrued expenses and other current liabilities. Revenue recognized for the periods ended June 30, 2024
and 2023 that was included in the deferred revenue at the beginning of each period was $4,938
and $3,569 ,
respectively.
NOTE
12 – GOVERNMENTAL SUPPORT
During
2022 and 2021, governments in some of the countries in which we operate have announced the implementation of government assistance measures,
which mitigated the impact of the COVID-19 outbreak on our results and liquidity.
In
the Netherlands wage tax, social security and VAT payments for the period March 2020 until September 2021 were postponed and will be paid
in 60 monthly installments, starting October 2022. The debt incurs annual interest starting July 2022 of 1% and increases every six months
to a maximum of 4% starting on January 1, 2024 onwards. As of June 30, 2024, and December 31, 2023, the Company accumulated debt of €21,565
and €24,886
($23,188
and $27,347 ),
respectively, to the Dutch tax authorities.
NOTE
13 – COMMITMENTS AND CONTINGENCIES
Letters
of Credit and Guarantees
As
of June 30, 2024, and December 31, 2023, the Company has $3,591
and $7,215 ,
respectively, in outstanding letters of credit and guarantees. Letters of credit and guarantees are being secured either by the same amounts
in restricted cash with commercial banks or with deposits provided to customers which serve as cash collateral in order to guarantee the
performance and quality of services provided to the customers.
As
of June 30, 2024 and December 31, 2023, the Company has commercial guarantees of €1,700
and €1,700
($1,828
and $1,868 ),
respectively which is not secured by restricted cash or deposits provided to customer. The guarantee is part of an agreement between the
Company and one of its customers in order to guarantee the performance and quality of the services provided to that customers.
Legal
Proceedings
General
The
Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary
course of its business activities. These claims are primarily related to grievances filed by current and former employees for unfair labor
practices or discrimination, and for passenger aviation claims. Management recognizes a liability for any matter when the likelihood of
an unfavorable outcome is deemed to be probable and the amount is able to be reasonably estimated. Management has concluded that such
claims, in the aggregate, would not have a material adverse effect on the Company’s consolidated financial position, results of
operations, or cash flows.
17
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
Inquiry
Proceedings
In
June 2022, at the request of a minority shareholder, the Enterprise Chamber of the Amsterdam Court of Appeal ordered an investigation
into two aspects of the Company’s policy and affairs. Following the filing of the investigation report with the Enterprise Chamber
in November 2023, the relevant minority shareholder requested the Enterprise Chamber to establish mismanagement and to order certain definitive
measures at the Company. All of these requests were dismissed in full by the Enterprise Chamber by judgment dated November 14, 2024.
Agency
Agreements
In
April 2013, prior to the purchase of one of the current subsidiaries in Europe, the Company entered into an agency agreement with a third
party to assist it with this transaction. According to the agreement, in the event that the operations in that country are sold in the
future, the third-party agent is entitled to a payment of €3,000
($3,226 )
as of June 30, 2024.
In
April 2024, the Company entered into an agreement with a third party to assist the Company with the possible sale of one of the Company’s
subsidiaries. The fees are 2 %
of the sale consideration but not less than $500 .
The agreement will be in place until cancelled by any of the parties with a residual period of twelve months on which the third party
will be entitled to the fee in case a deal is being signed with a buyer that was approached by the third party.
In
April 2024, the Company entered into an agreement with a third party to assist the Company with the possible sale of one of the Company’s
subsidiaries. The fees depend on the outcome of the assignment and are between 1.25 %
- 1.75 %
of the sale consideration. The agreement will be in place until cancelled by any of the parties with a residual period of nine months
on which the third party will be entitled to the fee in case a deal is being signed with a buyer that was approached by the third party.
Employment
Agreement
In
December 2022, the Company entered into an employment agreement with a third party to serve as the CEO of one of the Company’s subsidiaries.
According to the agreement the employee is entitled to an annual target bonus. The annual target bonus is based on achievement of targets,
to be defined by the subsidiary’s board of directors. The bonus shall be equal to 10 %
of the EBIDA (excluding the applicable taxes).
18
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US $ in thousands, except share and per share data)
NOTE
14 – SEGMENT AND GEOGRAPHICAL INFORMATION
The
Company operates in four reportable segments: (a) Corporate (b) Airport Security (c) Other Aviation Services and (d) Authentication Technology.
The Corporate segment does not generate revenue from third parties and contains primarily non-operational expenses. The Airport Security
segment provides security services mostly to airport authorities and airlines predominantly in Europe. The Other Aviation Services segment
provides services mostly to airlines and airport authorities in the United States of America. The Authentication Technology segment provides
authentication services to financial and other companies predominantly in the United States of America.
All
inter-segment transactions are eliminated in consolidation. The accounting policies of the segments are the same as the accounting policies
of the Company as a whole.
The
operating results of these reportable segments are regularly reviewed by the chief operating decision.
|
Corporate
|
Airport
Security |
Other
Aviation
Services
|
Authentication
Technology
|
Total
|
||||||||||||||||
|
Six months ended June
30, 2024: |
||||||||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
| |||||||||||
|
Total assets
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Six months ended June
30, 2023: |
||||||||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
| |||||||||||
|
Total assets
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
NOTE
15 – SUBSEQUENT EVENTS
On
October 2024 a shareholder’s meeting the Company’s shareholders approved reduction of the nominal value of the Company’s
capital by lowering the nominal value of each of the shares in the Company from €0.45
to €0.01
per share.
19
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US
$ in thousands, except share and per share data)
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The
following discussion and analysis should be read in conjunction with the financial statements, related notes and other information included
in this report and with the Risk Factors included in Part 1 Item 3 in our Annual Report on Form 20-F for the year ended December 31, 2023,
filed with the SEC.
The
following table summarizes certain statement of operations data for the Company for the periods ended June 30, 2024, 2023, 2022, 2021
and 2020:
|
U.S.
Dollars in Thousands |
||||||||||||||||||||
|
Period
ended June 30, |
||||||||||||||||||||
|
2024 |
2023 |
2022 |
2021 |
2020 |
||||||||||||||||
|
Revenue |
$ |
233,559 |
$ |
204,408 |
$ |
156,011 |
$ |
154,419 |
$ |
126,126 |
||||||||||
|
Cost of revenue |
199,229 |
170,705 |
119,095 |
93,260 |
111,343 |
|||||||||||||||
|
GROSS PROFIT |
34,330 |
33,703 |
36,916 |
61,159 |
14,783 |
|||||||||||||||
|
Operating expenses: |
||||||||||||||||||||
|
Research and development |
7,173 |
6,533 |
6,607 |
5,545 |
3,880 |
|||||||||||||||
|
Selling, general and
administrative |
32,188 |
28,612 |
27,912 |
22,915 |
19,466 |
|||||||||||||||
|
Total operating expenses |
39,361 |
35,145 |
34,519 |
28,460 |
23,346 |
|||||||||||||||
|
OPERATING INCOME (LOSS) |
(5,031 |
) |
(1,442 |
) |
2,397 |
32,699 |
(8,563 |
) | ||||||||||||
|
Equity Income (loss)
from investment in affiliate |
- |
- |
(93 |
) |
(447 |
) |
(89 |
) | ||||||||||||
|
Other income, net |
1,098 |
727 |
65 |
96 |
738 |
|||||||||||||||
|
INCOME (LOSS) BEFORE
INCOME TAX EXPENSES |
(3,933 |
) |
(715 |
) |
2,369 |
32,156 |
(9,390 |
) | ||||||||||||
|
Income tax expenses |
349 |
625 |
2,414 |
3,215 |
708 |
|||||||||||||||
|
NET INCOME (LOSS) |
(4,282 |
) |
(1,340 |
) |
(45 |
) |
28,941 |
(10,098 |
) | |||||||||||
|
Net income (loss) attributable
to non-controlling interests |
459 |
1,000 |
(52 |
) |
6,273 |
431 |
||||||||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE
TO ICTS INTERNATIONAL N.V. |
$ |
(4,741 |
) |
$ |
(2,340 |
) |
$ |
7 |
$ |
22,668 |
$ |
(10,529 |
) | |||||||
|
BASIC NET INCOME (LOSS)
ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.PER SHARE |
||||||||||||||||||||
|
Net Income (loss) |
$ |
(0.13 |
) |
$ |
(0.06 |
) |
$ |
- |
$ |
0.34 |
$ |
(0.30 |
) | |||||||
|
Basic weighted average
number of shares |
37,433,333 |
37,433,333 |
37,433,333 |
37,433,333 |
35,433,333 |
|||||||||||||||
|
DILUTED NET INCOME (LOSS)
ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. PER SHARE |
||||||||||||||||||||
|
Net Income (loss) |
$ |
(0.13 |
) |
$ |
(0.06 |
) |
$ |
- |
$ |
0.31 |
$ |
(0.30 |
) | |||||||
|
Diluted weighted average
number of shares |
37,433,333 |
37,433,333 |
40,108,529 |
40,231,313 |
35,433,333 |
|||||||||||||||
The
Company’s business plan projects income from operations and positive cash flows from operations. The Company is also seeking to
increase its liquidity by getting new lines of credit for its operations in Europe. There can be no assurance that management will be
successful in achieving its business plan or increasing its liquidity.
20
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US
$ in thousands, except share and per share data)
Revenue
Total
revenue increased from $204.4 million in the first six months of 2023 to $233.6 million in the first six months of 2024.
Revenue
generated in Germany was $57.4 million in the first six months of 2024 compared to $56.2 million in the parallel period of 2023.
Revenue
generated in the Netherlands was $53.6 million in the first six months of 2024 compared to $46.4 million in the parallel period of 2023.
The Company has provided more services to its existing customers in the Netherlands and provides services to new customers as well.
Revenue
generated in Spain was $54.9 million in the first six months of 2024 compared to $39.2 million in the first six months of 2023. The increase
in revenue was due to the fact the company won several bids in Spain and increased the services it provides to new and existing clients.
The Company continued to extend its operations in Spain in the last few years as part of its strategy for growth in the Aviation security
segment.
Revenue
generated in the United States of America was $48.8 million in the first six months of 2024, compared to $50.0 million in the parallel
period of 2023. Services provided by the Other Aviation Services segment to its customers in the United States of America increased during
the first six months of 2024 compared to the parallel period of 2023. Increase in revenue was due to the increase in services provided
to clients and increase of minimum wage rates in few states in the United States of America which usually increase the billable rates
as well as the labor costs of the Company. In the other hand, services in the United States provided by the Authentication Technology
segment decreased during the first months of 2024 compared to the parallel period.
Revenue
outside Germany, the Netherlands, Spain and the United States of America totaled $18.9 million in the first six months of 2024 compared
to $12.6 million in the first six months of 2023. This increase in revenue represents an increase in sales in different countries, both
from the Aviation Security Services segment and the Authentication Technology segment.
Cost
of revenue
Cost
of revenue for the period ended June 30, 2024 was $199.2 million or 85.3%, compared to $170.7 million or 83.5% of revenue in the first
six months of 2023. Payroll and related costs comprise the majority of Cost of Revenue. Following the increase of revenue of the Airport
Security and Other Aviation Services segments in 2024 cost of revenue increased accordingly. Due to changes in the composition of the
demand, the productivity is being affected based on the requests of the customers. Increase in sickness rate and over time paid to employees
affect the Cost of Revenue as well.
21
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US
$ in thousands, except share and per share data)
Research
and Development (“R&D”)
R&D
expenses for the period ended June 30, 2024 were $7.2 million (3.1% as percentage of revenue) compared to $6.5 million (3.2% as percentage
of revenue) for the first six months of 2023. All R&D expenses are related to the Authentication Technology segment. During the first
six months of 2024, R&D labor costs decreased by $0.8 million while costs of consultants increased by 0.3 million and technical and
other costs increased by $1.2 million compared to parallel period of last year.
Selling,
general and administrative expenses (“SG&A”)
SG&A
expenses were $32.2 million for the period ended June 30, 2024 (13.8% as percentage of revenue) compared to $28.6 million (14.0% as percentage
of revenue) for the first six months of 2023. During the first six months of 2024, the Company’s revenues continued growing compared
to previous year which resulted also in an increase to SG&A. Legal expenses increased by $1.5 million following (i) an increase of
the deductible of insurances that relate to the Other Aviation Services and; (ii) an increase of legal costs relating to the claim against
the Company initiated by one of the shareholders.
Other
income, net
Other
income, net mainly includes interest from / to banks, related parties and other institutions, exchange rate income (expense), capital
gains (losses) and bank charges. Other income, net, was $1.1 million (0.5% as percentage of revenue) for the first six months of 2024
compared to $0.7 million (0.4% as percentage of revenue) for the comparable period ending June 30, 2023. Interest from deposits in the
first six months of 2024 were higher by $0.7 million compared to the parallel period last year. In January 2023, the Company sold
approximately 85% of its investment in SardineAI Corp, creating a capital gain of approximately $0.7 million in 2023. In addition, in
the first six months of 2024 the Company recognized $0.2 million from exchange rates while in the parallel period of 202 the Company had
$0.2 million expense.
Income
tax expense
Income
tax expense for the period ended June 30, 2024 was $0.3 million. (0.1% as percentage of revenue) compared to expense of $0.6 million (0.3%
as percentage of revenue) in the comparable period of 2023. The tax expenses both as of June 30, 2024 and 2023 relate mostly to the Authentication
Technology segment. As the profit of that segment during 2024 was lower than the profitability in 2023, the tax expense is lower as well.
Net
Loss
As
result of the above, the Company’s net loss amounted to $4.3 million (1.8% as percentage of revenue) for the first six months of
2024, compared to a net loss of $1.3 million (0.7% as percentage of revenue) for the comparable period of 2023.
Net
income attributable to non-controlling interests
Net
income attributable to non-controlling interests totaled $0.5 million (0.2 % as a percentage of revenue) for the first six months of 2024
compared to $1.0 million (0.5% as percentage of revenue) for the comparable period of 2023. The net income (loss) attributable to non-controlling
interests relates to the non-controlling interests in the Authentication Technology segment.
Net
loss attributable to ICTS International N.V.
Net
loss attributable to ICTS International N.V. was $4.7 million (2.0% as a percentage of revenue) for the first six months of 2024, compared
to net loss attributable to ICTS International N.V of $2.3 million (1.1% as a percentage of revenue) for the first six months of 2023.
22
ICTS
INTERNATIONAL N.V. AND SUBSIDIARIES
(US
$ in thousands, except share and per share data)
SIGNATURE
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.
ICTS
INTERNATIONAL N.V.
By:
/s/ Alon Raich
Alon
Raich, Managing Director and Chief Financial Officer
Dated: December
20, 2024
23