20-F: B.O.S. Better Online Solutions Reports Increased Net Profit for 2024 Despite Revenue Dip

B.O.S. Better Online Solutions reports a net profit increase for 2024, despite a decrease in overall revenue compared to the previous year.

Summary

• B.O.S. Better Online Solutions Ltd. filed its annual report on Form 20-F with the SEC on March 31, 2025.
• The company reported a net profit of $2.3 million for 2024, compared to $2.01 million in 2023.
• Revenues for 2024 were $40 million, a decrease from $44.179 million in 2023.
• The company operates through three divisions: Intelligent Robotics, RFID, and Supply Chain Solutions.
• The company's cash and cash equivalents amounted to $3.6 million as of December 31, 2024.
• The company had a positive working capital of $13.7 million as of December 31, 2024.
• An impairment of intangible assets and goodwill in the amount of $1.2 million was recorded in 2024.
• The company relies on two banks for its credit facilities and had $980,000 in long-term debt as of December 31, 2024.
• The company's loans from Bank Beinleumi are secured by a first ranking fixed charge on any unpaid share capital of the Company, the goodwill of the Company, and any insurance entitlements in the Companys assets pledged thereunder; and floating charges on all of the assets of the Company and our Israeli subsidiaries, owned now or in the future.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While net profit increased, revenue decreased, and there are several risk factors outlined. The company is operating in a challenging environment with both opportunities and threats.

Positives

• The company reported a net profit of $2.3 million in 2024, an increase from $2.01 million in 2023.
• The company's gross profit margin increased to 23.5% in 2024 from 20.8% in 2023.
• The company had a positive working capital of $13.7 million as of December 31, 2024.
• Financial expenses decreased to $139,000 in year 2024 from $441,000 in year 2023, due mainly to currency differences income.

Negatives

• The company's revenues decreased to $40 million in 2024 from $44.179 million in 2023.
• The company recorded an impairment of intangible assets and goodwill in the amount of $1.2 million in 2024.

Risks

• The company depends on sales being generated from one or few major customers.
• The company may be unable to maintain current gross profit margins.
• The company may be unable to keep up or ahead of technology and to succeed in a highly competitive industry.
• The company may fail to successfully integrate and achieve the potential benefits of the acquisition of the business operations of Dagesh Inventory Counting and Maintenance Ltd.
• The company may be unable to maintain marketing and distribution arrangements and to expand our overseas markets.
• There is uncertainty with respect to the prospects of legal claims against the company.
• The company is affected by exchange rate fluctuations and general worldwide economic conditions.
• The company is affected by the war against the Hamas and other terrorist organizations.
• The continued availability of financing for working capital purposes and to refinance outstanding indebtedness is uncertain.
• The company relies on certain key suppliers, and a disruption in those relationships could have a material adverse effect.
• The company depends on key personnel, and the loss of such personnel could adversely affect the business.
• The company may be unable to effectively manage its growth and expansion.
• The company does not have collateral or credit insurance for all of its customers debt, and its allowance for credit losses may increase.
• Certain customers of the company's Supply Chain Solutions division may cancel purchase orders they placed before the delivery.
• The electronic components provided by the company's Supply Chain Solutions division need to meet certain industry standards, and for some customers, the company needs to be the manufacturers authorized distributors.
• The company's products may contain defects that may be costly to correct, delay market acceptance of the company's products, harm the company's reputation, and expose the company to litigation.
• The company's products may infringe on the intellectual property rights of others.
• The Supply Chain Solutions division engages in a number of business activities governed by U.S. Government Laws and Regulations, which if violated, could subject the Company to civil or criminal fines and penalties.
• Future changes in industry standards may have an adverse effect on the company's business.
• Existing and proposed Israeli legal requirements in respect of minimum wage and work and rest hours may increase the company's labor-related expenses.
• If revenue levels for any quarter fall significantly below the company's expectations, the company's results of operations will be adversely affected.
• The rate of inflation in Israel may negatively impact the company's costs if it exceeds the rate of devaluation of the NIS against the U.S. dollar.
• If the company is unsuccessful in introducing new products, it may be unable to expand its business.
• Disruptions to the company's IT systems due to system failures or cybersecurity attacks may impact the company's operations, result in sensitive customer information being compromised, and expose the company to liability which would negatively materially affect the company's reputation and materially harm the company's business.
• The company has significant sales worldwide and could encounter problems if conditions change in the places where it markets products.
• Unfavorable global economic conditions could have a material adverse effect on the company's business, operating results, and financial condition.
• Environmental, social, and governance matters may impact the company's business and reputation.
• The company may be obligated to indemnify its directors and officers.
• There can be no assurance that the company will not be classified as a passive foreign investment company (a PFIC).
• A decline in the company's market capitalization or other factors could require the company to write-down the value of its goodwill, which could have a material adverse effect on its results of operations.
• The company's business could be impacted as a result of actions by activist shareholders or others.
• The company may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could have a material adverse effect on the company's operating results, investor confidence in the company's reported financial information and the market price of its Ordinary Shares.
• If the company's employees commit fraud or engage in other misconduct, including noncompliance with regulatory standards and requirements or insider trading, the company's business may experience material adverse consequences.
• The company's share price has been and may continue to be volatile, which could result in substantial losses for individual shareholders.
• Future sales of the company's Ordinary Shares, whether by the company or its shareholders, could cause the company's stock price to decline.
• The company's Ordinary Shares may be delisted from the Nasdaq Stock Market as a result of the company's failure to meet the Nasdaq Capital Market continued listing requirements.
• Political, economic, and security conditions in Israel affect the company's operations and may limit its ability to produce and sell products or provide its services.
• The anti-takeover effects of Israeli laws may delay or deter a change of control of the company.
• All of the company's directors and officers are non-U.S. residents and enforceability of civil liabilities against them is uncertain.
• Your rights and responsibilities as the company's shareholder will be governed by Israeli law, which differ in some respects from the rights and responsibilities of shareholders of United States corporations.
• The company relies on the foreign private issuer exemption for certain corporate governance requirements under the Nasdaq Stock Market Rules, which may afford less protection to holders of the company's Ordinary Shares.
• If the company were to lose its foreign private issuer status under U.S. federal securities laws, it would incur additional expenses associated with compliance with the U.S. securities laws applicable to U.S. domestic issuers.
• As a public company in the United States, the company incurs significant accounting, legal and other expenses as a result of listing its Ordinary Shares on the Nasdaq Capital Market, and it may need to devote substantial resources to address new compliance initiatives and reporting requirements.

Future Outlook

BOS vision is to become a leading integrator of comprehensive technological solutions that improve the control over and the productivity of inventory production and logistics processes. A significant factor driving our growth is the substantial portion of our revenues being derived from the defense sectoran industry experiencing strong and sustained expansion. During 2024, we significantly expanded our portfolio of RFID solutions, and we expect this will yield revenue growth in 2025.

Management Comments

• Following an exceptional year in 2023 with revenues of $44 million, our revenues for 2024 amounted to $40 million.
• The surge in demand seen in 2023 was driven by customers rapidly replenishing inventories after COVID-19.
• In 2024, purchasing patterns have normalized as businesses returned to typical consumption and inventory management practices.
• The increase in the gross profit margin was in all three of our divisions and it is a result of a change in mix of our product offerings, with focus on those products in which we have a stronger competitive advantages such as products of which we are the sole distributor in Israel.

Industry Context

The company operates in the Intelligent Robotics, RFID, and Supply Chain Solutions industries, serving customers in the avionics, defense, retail, manufacturers, and government markets. The report mentions increased competition in the RFID market and competition from both Israeli and international companies in the Supply Chain Solutions market. The company's growth is being driven by the expansion of the defense sector.

Comparison to Industry Standards

• The Supply Chains flagship customers are the Israel Aerospace Industries, Elbit Systems, and Rafael that are global leaders in the defense segment.
• The Intelligent Robotics divisions flagship customer is Elbit Systems, a global leader in the defense industry.
• The Companys Israeli competitors for distribution to the electronic industry include the publicly traded Telsys Ltd. and STG International Electronics (1981) Ltd., as well as Nisco Projects Ltd., Eastronics Ltd., Elimec Engineering Ltd. and Teder Electro Mechanical Engineering Ltd.
• In the international market, the Companys competitors consist of mainly Arrow Electronics International Inc., Avnet Electronics Marketing, TTI Inc., PEI-Genesis Inc., Weco Electrical Connectors Inc., Electro Enterprises Inc., Flame Enterprise Inc., Norstan Electronics Inc., Peerless Electronics Inc. and Future Electronics.

Management Changes

Corporate Governance

Related Party Transactions

• During the years 2023 and 2024 the Company charged its subsidiaries, Odem and Dimex, management fees in the total amounts of $2, 331,000 and $2,287,000, respectively.
• Since January 2021 until March 20, 2025, the Company has raised $3.4 million, most of which were contributed to its subsidiaries and used for working capital, bank loans repayments and for acquisitions.
• In certain cases, the Company pays by shares for acquisitions made by a subsidiary (for example, the iDnext acquisition).

Stakeholder Impact

• Shareholders may experience volatility in the share price.
• Employees face potential risks related to job security due to economic conditions and competition.
• Customers may be affected by supply chain disruptions and potential product defects.
• Suppliers may be impacted by changes in the company's business relationships.
• Creditors face risks related to the company's debt obligations and ability to repay loans.

Next Steps

• The company expects its expanded portfolio of RFID solutions to yield revenue growth in 2025.
• The company may grow its business through acquisitions of complementary business for both divisions.
• In order to finance such acquisitions, the Company might need to significantly increase its debt and raise additional equity financing.

Key Dates

Keywords

financial results, annual report, B.O.S. Better Online Solutions, RFID, supply chain solutions, intelligent robotics, Israeli company, financial statements