ON TRACK INNOVATIONS LTD. Forward - Looking Statements
The statements contained in this Quarterly Report on Form 10-Q, or Quarterly Report, that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "intends," "plans", "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any actual future results, performance, levels of activity, or our achievements, or industry results, expressed or implied by such forward-looking statements. Such forward-looking statements may appear in this Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as elsewhere in this Quarterly Report and include, among other statements, statements regarding the following:
? our ability to continue as a going concern and any efforts that we may
undertake to support our future operations, service our debt obligations and to
further execute our business plans;
? the results of our negotiations with
the Company, with respect to the terms of a loan agreement that would address
our cash needs;
? any impact of the Corona Virus, or COVID-19, pandemic on our business and cash
flow, including timing of receipt of orders, revenue recognition, payment from
our customers and gross margin;
? future sources of revenue, ongoing relationships with current and future
business partners, distributors, suppliers, customers, end-user customers and
resellers;
? future costs and expenses and adequacy of capital resources;
? our expectations regarding our short-term and long-term capital requirements
and satisfaction thereof;
? the impact of ongoing litigation on our business;
? interest from current and new customers and rate or orders
? the global shortage in components and the related effects of an increase in
components' prices, freight cost and longer lead-times;
? our outlook for the coming months; and
? plans and strategies for our business.
The factors discussed herein and in those risk factors expressed below and from time to time in our press releases or filings with theSecurities and Exchange Commission , or theSEC , could cause actual results and developments to be materially different from those expressed in or implied by such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak and are made only as of the date of this filing. Our business and operations are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this Quarterly Report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described, among others, under the heading "Risk Factors" below and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 filed with theSEC . Readers are also urged to carefully review and consider the various disclosures we have
made
in that report.
2
As used in this Quarterly Report, the terms "we", "us", "our", "the Company",
and "OTI" mean On Track Innovations Ltd. and our subsidiaries, unless otherwise
indicated or as otherwise required by the context.
All figures in this Quarterly Report are stated in
Overview
We are a leading developer of contactless payment solutions, Near Field Communication (NFC) technology based, for the unattended market. We have been a technology leader since 1990, providing systems, devices and services to operators and integrators with solutions and components that are simple to implement.
To date, we have deployed over one million payment solutions to our focused unattended markets: self-service kiosk, micro-markets and vending machines, entertainment and gaming, automated teller machines, Mass Transit Ticketing Validation and fuel payments.
We operate through regional offices, supporting clients and payment industry partners with its unique contactless payment solutions.
OnApril 21, 2021 , we sold our Polish subsidiary,ASEC S.A. , or ASEC, including our Mass Transit Ticketing activity inPoland . The consideration for the sale of ASEC was agreed to equal$3 million , of which approximately$2.1 million was used to repay Polish bank loans, and which was reduced by an agreed amount of approximately$300,000 due to working capital adjustments. Following this sale, we operate in two segments: (1) Retail, and (2) Petroleum. This discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements and notes thereto contained in "Item 1. Financial Statements" of this Quarterly Report and our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 filed with theSEC . Results of Operations Discontinued operations. InApril 2021 , we completed the sale of 100% of the issued and outstanding share capital of ASEC. ASEC is headquartered in Krakow,Poland and had been conducting our Mass Transit Ticketing business inPoland (which was attributed to our "Retail and Mass Transit Ticketing" segment). InDecember 2013 , we completed the sale of certain assets, certain subsidiaries and IP directly related to our SmartID division. Accordingly, the results and the cash flows from such operations for all reporting periods are presented in the statements of operations and in the statements of cash flows, respectively, as discontinued operations separately from continuing operations. All the data in this Quarterly Report that are derived from our financial statements, unless otherwise specified, exclude the results of those discontinued operations.
Three months ended
Sources of Revenue We have historically derived a substantial majority of our revenues from the sale of our products, including both complete systems and original equipment manufacturer components, and, less significantly, from engineering services, customer services and technical support. In addition, we have derived revenues from Software as a Service, or SaaS. During the three months endedSeptember 30, 2021 andSeptember 30, 2020 , the revenues that we derived from those sources were as follows (in thousands): Three months ended September 30, 2021 2020 Sales$ 4,632 $ 2,624 SaaS$ 407 $ 362 Total revenues$ 5,039 $ 2,986 3 Sales. Sales increased by$2 million , or 77%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 . The increase is mainly attributed to an increase of Retail segment sales in theAmericas and to a lesser degree to an increase of Retail segment sales in theAsia-Pacific region , or APAC, partially offset by a decrease in Petroleum segment sales inAmericas andAfrica . SaaS. SaaS revenues include monthly payments for a set of different software applications such as Terminal Management Systems, Payment gateway, and other software applications for the Retail segment, and a separate set of applications for fuel management systems supporting the Petroleum segment. Our SaaS revenues increased by$45,000 , or 12%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 . The increase is attributed to an increase in revenues in both our segments, mainly in our Retail segment. We have historically derived revenues from different geographical areas. The following table sets forth our revenues, by dollar amount (in thousands) and as a percentage of quarterly revenues in different geographical areas, in the three months endedSeptember 30, 2021 andSeptember 30, 2020 : Three months ended September 30, Americas Europe
Africa APAC
2021 $ 2,892 58 % $ 1,324 26 % $ 313 6 % $ 510 10 %
2020 $ 1,055 35 % $ 1,265 42 % $ 410 14 % $ 256 9 %
Our revenues from sales inAmericas increased by$1.8 million , or 174%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , mainly due to an increase in Retail segment sales, partially offset by a decrease in Petroleum segment sales.
Our revenues from sales in
Our revenues from sales inAfrica decreased by$97,000 , or 24%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , mainly due to a decrease in Petroleum segment sales.
Our revenues from sales in APAC increased by
Our revenues derived from outsidethe United States are primarily received in currencies other than theU.S. dollar and accordingly have a varying impact upon our total revenues as a result of fluctuations in exchange rates. The following table sets forth our revenues by dollar amount (in thousands) and as a percentage of revenues by segments, during the three months endedSeptember 30, 2021 andSeptember 30, 2020 : Three months ended September 30, Retail Petroleum 2021$ 4,515 90 %$ 524 10 % 2020$ 2,231 75 %$ 755 25 % 4 Our revenues from Retail in the three months endedSeptember 30, 2021 increased by$2.3 million , or 102%, compared to the three months endedSeptember 30, 2020 , mainly attributed to an increase in Retail sales in theAmericas and to a lesser degree to an increase in sales in APAC market. Our revenues from Petroleum in the three months endedSeptember 30, 2021 decreased by$231,000 , or 31%, compared to the three months endedSeptember 30, 2020 , mainly due to a decrease in revenues from the Petroleum segment in theAmericas andAfrica .
Cost of Revenues and Gross Margin
Our cost of revenues, presented by gross profit and gross margin percentage, in the three months endedSeptember 30, 2021 andSeptember 30, 2020 were as follows (dollar amounts in thousands): Three months ended Cost of revenues September 30, 2021 2020 Cost of sales$ 3,715 $ 1,834 Gross profit$ 1,324 $ 1,152 Gross margin percentage 26 % 39 % Cost of sales. Cost of sales consists primarily of materials, as well as salaries, fees to subcontractors, related costs of our technical staff that assemble our products and freight expenses. The increase of$1.9 million , or 103%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , resulted primarily from an increase in sales and an increase of components costs due to a global components shortage as a result of the COVID-19 pandemic.
Gross margin. The decrease in gross margin in the three months ended
Operating expenses
Our operating expenses in the three months ended
Three months ended
Operating expenses September 30,
2021 2020
Research and development $ 946 $ 839
Selling and marketing $ 701 $ 765
General and administrative $ 764 $ 799
Total operating expenses $ 2,411 $ 2,403
Research and development. Our research and development expenses consist
primarily of the salaries and related expenses of our research and development
staff, as well as subcontracting expenses. The increase of $107,000 , or 13%, in
the three months ended September 30, 2021 , compared to the three months ended
September 30, 2020 , is primarily attributed to recruitment of new employees and
an increase in subcontracting expenses.
Selling and marketing. Our selling and marketing expenses consist primarily of
salaries and substantially all of the expenses of our sales and marketing for
the subsidiaries and offices in the United States , South Africa and Europe , as
well as expenses related to advertising, professional expenses, participation in
exhibitions and tradeshows and a change in allowance for doubtful accounts. The
decrease of $64,000 , or 8%, in the three months ended September 30, 2021 ,
compared to the three months ended September 30, 2020 , is primarily attributed
to a decrease in professional expenses.
5
General and administrative. Our general and administrative expenses consist primarily of salaries and related expenses of our executive management and financial and administrative staff. These expenses also include costs of our professional advisors (such as legal and accounting), office expenses and insurance. The decrease of$35,000 , or 4%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , is primarily attributed to a decrease in professional expenses. Financing expenses, net
Our financing expenses, net, in the three months ended
Three months ended
September 30,
2021 2020
Financial expenses deriving from a convertible short-term
loan from shareholders $ (345 ) $ -
Other financial expenses, net $ (112 ) $ (72 )
Financing expenses, net $ (457 ) $ (72 )
Financing expenses consist primarily of interest payable on loans, bank
commissions, foreign exchange losses and financial expenses deriving from a
convertible short-term loan, or the Loan, incurred in accordance with the terms
of a loan financing agreement, as amended on January 26, 2021 , or the Loan
Agreement, we entered into with Jerry L. Ivy , Jr., Descendants' Trust , or the
Lead Lender, and another lender. Financing income consists primarily of foreign
exchange gains and interest earned on investments in short-term deposits. The
increase in financing expenses, net, of $385,000 , or 535%, in the three months
ended September 30, 2021 , compared to the three months ended September 30, 2020 ,
is mainly due to non-cash financial expenses derived from the Loan, and to a
lesser degree from exchange rate differential.
Net loss from continuing operations
Our net loss from continuing operations in the three months ended
Three months ended
September 30,
2021 2020
Net loss from continuing operations
The increase in the net loss from continuing operations of$229,000 , or 17%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , is mainly due to an increase in non-cash financing expenses derived from the Loan, partially offset by an increase in our gross profit,
as described above.
Net income (loss) from discontinued operations
Our net income (loss) from discontinued operations in the three months ended
Three months ended
September 30,
2021 2020
Net income (loss) from discontinued operations
6
Our net income (loss) from discontinued operations for the reporting periods is
presented in the statements of operations as discontinued operations separately
from continuing operations. The change in the net income (loss) from
discontinued operations of $335,000 in the three months ended September 30,
2021 , compared to the three months ended September 30, 2020 , is mainly due to
the fact that in 2020, we suffered a loss from the Mass Transit Ticketing
operations as a result of the impact of the COVID-19 pandemic, which was sold
when we sold ASEC, including its Mass Transit Ticketing operation, in April2021. Net loss
Our net loss in the three months ended
Three months ended
September 30,
2021 2020
Net loss $ (1,515 ) $ (1,621 )
The decrease in net loss of $106,000 or 7%, in the three months ended September
30, 2021 , compared to the three months ended September 30, 2020 , is mainly due
to an increase in our gross profit and a decrease in our loss from discontinued
operations, partially offset by an increase in non-cash financing expenses
derived from the Loan, as described above.
7
Nine months ended
Sources of Revenue
During the nine months ended
Nine months ended
September 30,
2021 2020
Sales $ 9,465 $ 9,718
SaaS $ 1,194 $ 972
Total revenues $ 10,659 $ 10,690 Sales. Sales decreased by$253,000 million , or 3%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The decrease is mainly attributed to a decrease of Petroleum segment sales inAmericas . The Retail segment sales remained consistent due to an increase of sales inAmericas , offset by a decrease of sales in APAC andEurope . SaaS. Our SaaS revenues increased by$222,000 , or 23%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The increase is mainly attributed to an increase in revenues of both our Retail segment and our Petroleum segment. The following table sets forth our revenues, by dollar amount (in thousands) and as a percentage of revenues in different geographical areas, in the nine months endedSeptember 30, 2021 andSeptember 30, 2020 : Nine months ended September 30, Americas Europe
Africa APAC
2021 $ 4,590 43 % $ 3,411 32 % $ 1,132 11 % $ 1,526 14 %
2020 $ 3,620 34 % $ 3,775 35 % $ 1,164 11 % $ 2,131 20 %
Our revenues from sales in the Americas increased by $970,000 , or 27%, in the
nine months ended September 30, 2021 , compared to the nine months ended
September 30, 2020 , mainly due to an increase in Retail sales , partially offset
by a decrease of Petroleum segment sales.
Our revenues from sales in Europe decreased by $364,000 , or 10%, in the nine
months ended September 30, 2021 , compared to the nine months ended September 30,
2020 , mainly due to a decrease in Retail sales.
Our revenues from sales in
Our revenues from sales in APAC decreased by
Our revenues derived from outsidethe United States are primarily received in currencies other than theU.S. dollar and accordingly have a varying impact upon our total revenues as a result of fluctuations in exchange rates. 8
The following table sets forth our revenues by dollar amount (in thousands) and as a percentage of revenues by segments, during the nine months endedSeptember 30, 2021 andSeptember 30, 2020 : Nine months ended September 30, Retail Petroleum 2021$ 8,976 84 %$ 1,683 16 % 2020$ 8,655 81 %$ 2,035 19 % Our revenues from Retail in the nine months endedSeptember 30, 2021 increased by$320,000 , or 4%, compared to the nine months endedSeptember 30, 2020 , mainly attributed to an increase in Retail sales inAmericas and an increase in Retail SaaS, partially offset by a decrease in Retail sales in APAC andEurope .
Our revenues in the nine months ended
Cost of Revenues and Gross Margin
Our cost of revenues, presented by gross profit and gross margin percentage, in the nine months endedSeptember 30, 2021 andSeptember 30, 2020 were as follows (dollar amounts in thousands): Nine months ended September 30, 2021 2020 Cost of sales$ 6,955 $ 6,213 Gross profit$ 3,704 $ 4,477 Gross margin percentage 35 % 42 %
Cost of sales. The increase of
Gross margin. The decrease of gross margin percentage in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , is mainly attributed to an increase of components costs due to a global components shortage as part of the impact of the COVID-19 pandemic, partially offset by changes in our revenue mix. Operating expenses
Our operating expenses in the nine months ended
Nine months ended
Operating expenses September 30,
2021 2020
Research and development $ 2,684 $ 2,635
Selling and marketing $ 2,042 $ 2,348
General and administrative $ 2,245 $ 2,299
Total operating expenses $ 6,971 $ 7,282
9
Research and development. The increase of $49,000 , or 2%, in the nine months
ended September 30, 2021 , compared to the nine months ended September 30, 2020 ,
is primarily attributed to recruitment of new employees, partially offset by a
decrease in subcontracting expenses.
Selling and marketing. The decrease of $306,000 , or 13%, in the nine months
ended September 30, 2021 , compared to the nine months ended September 30, 2020 ,
is primarily attributed to a decrease in employment expenses and professional
expenses.
General and administrative. The decrease of $54,000 , or 2%, in the nine months
ended September 30, 2021 , compared to the nine months ended September 30, 2020 ,
is primarily attributed to a decrease in employment expenses, partially offset
by an increase in professional expenses.
Financing expenses, net
Our financing expenses, net, in the nine months ended
Nine months ended
September 30,
2021 2020Financial expenses derive from convertible short-term loan from shareholders
$ (2,398 ) $ - Other financial expenses, net $ (160
)$ (5 ) Financing expenses, net$ (2,558 ) $ (5 )
The increase in financing expenses, net, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , of$2.6 million , is mainly due to non-cash financial expenses derived from the Loan, and to a lesser degree from exchange rate differential.
Net loss from continuing operations
Our net loss from continuing operations in the nine months ended
Nine months ended
September 30,
2021 2020
Net loss from continuing operations
The increase in net loss from continuing operations of$3.0 million , or 106%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , is mainly due to an increase in non-cash financing expenses relating to the Loan, and to a lesser degree due to a decrease in gross profit that resulted primarily from an increase in components costs which derives from a global components shortage as part of the impact of the COVID-19 pandemic, partially offset by a decrease in operating expenses. 10
Net loss from discontinued operations
Our net loss from discontinued operations in the nine months ended
Nine months ended
September 30,
2021 2020
Net loss from discontinued operations
Our net loss from discontinued operations for the reporting periods are presented in the statements of operations as discontinued operations separately from continuing operations. The increase in the net loss from discontinued operations of$1.0 million , or 167%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , is mainly due to classification in an amount of$746,000 of exchange differences on translation from other comprehensive loss to net loss from discontinued operations due to completion of sale of ASEC in the nine months ended onSeptember 30, 2021 , and net expenses relating to the settlement of the litigation processes withMerwell Inc. and SuperCom Ltd. Net loss
Our net loss in the nine months ended
Nine months ended
September 30,
2021 2020
Net loss $ (7,398 ) $ (3,413 ) The increase in net loss of$4.0 million , or 117%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , is mainly due to an increase in non-cash financing expenses derived from the Loan, an increase in loss from discontinued operations and to a lesser degree due to a decrease in gross profit that resulted primarily from an increase in components costs derived from a global components shortage as part of the impact of the COVID-19 pandemic, partially offset by a decrease in operating expenses.
Liquidity and Capital Resources
Our principal sources of liquidity since our inception have been revenues, proceeds from sales of equity securities, borrowings from banks, governments and shareholders, including convertible loans, proceeds from the exercise of options and warrants as well as proceeds from the divestiture of parts of our businesses. We have had recurring losses and cash outflows from operating activities. As ofSeptember 30, 2021 , we had cash and cash equivalents of$1.3 million . The situation inPoland resulting from the COVID-19 pandemic led to an almost complete stop to our Mass Transit Ticketing sales business, which negatively impacted our cash flow sinceMarch 2020 . OnApril 21, 2021 , we completed the sale of our wholly owned Polish subsidiary, ASEC, including our Mass Transit Ticketing activity. The consideration for the sale of ASEC was agreed to equal$3 million , of which approximately$2.1 million was used to repay Polish bank loans and was reduced by approximately$300,000 due to working capital adjustments. We raised additional funds and increased our cash, cash equivalents and long-term investments in a gross amount of$3.3 million by closing a rights offering, or the Rights Offering, on May, 19, 2021, under which we offered our existing shareholders to purchase additional ordinary shares in consideration for a lower exercise price than the quoted share price in the active market, reflecting a bonus element that is somewhat similar to a stock dividend. The Rights Offering was oversubscribed and generated$3.3 million in gross proceeds. The issuance costs derived for the Rights Offering were approximately$128,000 . As part of the Rights Offering we issued an aggregate of 18,965,516 shares
for$0.174 per share. 11
OnDecember 9, 2020 , andJanuary 2021 , we entered into the Loan Agreement, with the Lead Lender who is our controlling shareholder. The Loan Agreement was amended onJanuary 26, 2021 , to allow for an additional lender to join the Lead Lender and lend an additional$100,000 and provides that the Lead Lender and the additional lender will extend us a loan in the aggregate amount of up to$1,600,000 , or the Loan Amount. The Loan Agreement, before it was amended, was further described in the Current Report on Form 8-K filed by the Company onDecember 15, 2020 . The Loan Agreement provides, among other things, that the Loan Amount and all accrued interest, or the Secured Amount, matures upon the lapse of six months following the initial closing, i.e., onJune 17, 2021 , or the Maturity Date, and will be payable in full on the Maturity Date, provided that the maturity date can be extended, in respect of the Loan Amount, at the sole option of the majority of the lenders. OnJune 17, 2021 , the Lead Lender, being the majority of the lenders, exercised its option to extend the maturity date, and the parties entered into a notice of exercise of option and agreement, or the Extension Agreement, according to which the maturity date was extended untilDecember 17, 2021 , or the Extended Maturity Date, and the Extended Maturity Period, as applicable. The Loan Amount has been bearing interest on all outstanding principal at an interest rate of 8.0% per annum. The net amount of interest on the Loan Amount accrued throughJune 17, 2021 was$54,849 , or the Interest Debt. Pursuant to the Extension Agreement, the interest rate will automatically increase, effective as of the Maturity Date, to the rate of 10.0% per annum, or the Extension Interest. Any payment of interest is subject to withholding of taxes at source and the interest rates mentioned above are net of such withholding. Under the Extension Agreement, it was agreed that the Interest Debt shall be payable on the Extended Maturity Date, while until then it shall be considered part of the Loan Amount and shall bear the Extension Interest rate. In the event of a conversion of the Loan amount, the Interest Debt shall convert into our ordinary shares at the conversion price of$0.174 per share, and the remaining Secured Amount shall be converted at a price per share of$0.124 , as originally contemplated under the Loan Agreement. As ofSeptember 30, 2021 , the Secured Amount was$1,702,455 , out of which$102,455 were accrued interest expenses. Since the extension of the date of repayment of the Loan Amount fromJune 17, 2021 to the Extended Maturity Date, we have been working with the Lead Lender, to either convert the Loan Amount to equity or further extend the repayment date of the Loan Amount in order to continue to advance our goals and meet our projections. We are still working through this matter, but given the proximity to the Extended Maturity Date, we are uncertain regarding the likelihood of achieving either of these two alternatives. We believe that if the Loan Amount is paid in December without further fund raising or other increase our cash, we will not have sufficient resources to enable us to continue our operations for a period of at least the next 12 months. As a result, there is a substantial doubt regarding our ability to continue as a going concern. We are attempting to raise additional funds and to increase our cash by negotiating with the Lead Lender, that would address our cash needs. While our management believes in our ability to raise additional funds and increase our cash, there can be no assurances
to that effect. In connection with the outbreak of the COVID-19 pandemic, we have taken steps to protect our workforce inIsrael ,the United States ,Poland ,South Africa and elsewhere. Such steps have included working from home where possible, minimizing face-to-face meetings, utilizing video conference as much as possible, social distancing at facilities and elimination of most international travel. We continue to comply with all local health directives.
We have continued to see an interest from new customers, potential customers and partners as they forecasted that the need for our products will grow, yet execution of closing is still slow due to the current business environment.
While interest from current and new customers is growing, which is reflected in an increasing rate of orders, a global shortage in components, which caused an increase in components' prices, freight cost and longer lead-times, has created a delay in fulfilling customers' orders, which impacted our revenues and product gross margin, mainly in the Retail segment. As a response to this business environment, we encourage our customers to provide their forecast for their demand and continue to maintain a comprehensive network of worldwide suppliers in order to optimize our access to critical components. In addition, we recently purchased an amount of such components to be used for sales later this year and in the beginning of 2022. As long as the COVID-19 pandemic continues, the components' lead-time may be longer than normal and the global shortage in components may continue or get worse.
It is difficult to predict what other impacts the COVID-19 pandemic may have on us.
Operating activities related to continuing operations
For the nine months endedSeptember 30, 2021 , net cash used in continuing operating activities was$5.4 million , primarily due to a$5.8 million net loss from continuing operations, a$2.8 million increase in trade receivables, a$750,000 increase in inventories, a$420,000 increase in other receivables and prepaid expenses, a$110,000 change in accrued interest and linkage differences and$13,000 of deferred tax benefits, net, partially offset by$2.4 million of financial expenses derived from the Loan, a$1.7 million increase in trade payables,$290,000 of depreciation and amortization, a$58,000 increase in other current liabilities,$44,000 of expenses due to stock-based compensation issued to employees and others, and a$17,000 change in accrued severance pay, net. For the nine months endedSeptember 30, 2020 , net cash used in continuing operating activities was$1.6 million , primarily due to a$2.8 million net loss from continuing operations, a$432,000 million increase in trade payables, a$305,000 decrease in other current liabilities, and a$102,000 change in accrued interest and linkage differences, partially offset by a$1.1 million increase in trade receivables,$314,000 of depreciation and amortization, a$306,000 decrease in other receivables and prepaid expenses, a$253,000 decrease in inventories, net,$41,000 of expenses due to stock based compensation issued to employees, net, a$21,000 change in accrued severance pay, net, and$9,000
of
deferred tax expenses,
12
Operating activities related to discontinued operations
For the nine months ended
For the nine months ended
Investing and financing activities related to continuing operations
For the nine months ended
For the nine months endedSeptember 30, 2020 , net cash provided by continuing investing activities was$1.4 million , mainly due to a$1.7 million change in short-term investments, net, partially offset by$336,000 of purchases of property and equipment and intangible assets. For the nine months endedSeptember 30, 2021 , net cash provided by continuing financing activities was$3.7 million , mainly due to$3.2 million in proceeds from issuance of shares as a result of the Rights Offering, net of issuance costs, a$923,000 convertible short-term loan received from shareholders, net of transaction expenses, and a$18,000 long-term loan received, partially offset by a$406,000 decrease in short-term bank credit and loans, net, and a$4,000 repayment of long-term bank loans. For the nine months endedSeptember 30, 2020 , net cash provided by continuing financing activities was$1.4 million , mainly due to$1.4 million of proceeds from issuance of shares, net of issuance costs, and a$70,000 increase in short-term bank credit and loans, net, partially offset by a$8,000 of repayment of long-term bank loans.
Investing and financing activities related to discontinued operations
For the nine months endedSeptember 30, 2021 , net cash provided by discontinued investing activities was$2.9 million , mainly related to$1.6 million derived from a settlement with SuperCom Ltd., including earn-out consideration, and$2.7 million consideration for the sale of ASEC, partially offset by cash and cash equivalents as held by ASEC at the closing date of its sale.
For the nine months ended
For the nine months ended
For the nine months endedSeptember 30, 2020 , net cash provided by discontinued financing activities was$890,000 , related to proceeds from long-term bank loan for the Mass Transit Ticketing operations.
© Edgar Online, source
