20-F: Hold Me Ltd. Reports Improved Financial Performance in 2023, But Going Concern Uncertainty Remains

Hold Me Ltd. reports a net profit for 2023 after recurring losses, but substantial doubt about its ability to continue as a going concern persists due to accumulated deficit and working capital deficiency.

Summary

• Hold Me Ltd. reported a net profit of NIS 197,231 for the year ended December 31, 2023, a significant improvement from the net loss of NIS 711,890 in the previous year.
• The company's revenue increased substantially to NIS 927,000, primarily due to consulting fees from a new client.
• Despite the improved financial performance, the company faces substantial doubt about its ability to continue as a going concern due to an accumulated deficit of NIS 3,034,241 and a stockholders deficiency of NIS 1,191,792 as of December 31, 2023.
• The company's independent auditor has included an explanatory paragraph in their report regarding this substantial doubt.
• The company is pursuing a strategy of ongoing product development, marketing efforts, and potential acquisitions or licensing of additional technology.
• Hold Me Ltd. is also looking to form commercial partnerships to expand its market reach and sales.
• The company has a limited non-banking credit license in Israel and is exploring opportunities in the non-bank lending sector.
• The company purchased S.Y. Calimero Entrepreneurship Ltd, an Israeli company that has a basic (limited) non-banking credit license allowing it to provide credit in Israel.
• The company issued two separate revolving credit notes, one to an Israeli company and the other to an Israeli resident.
• The revolving credit facilities grant the borrowers the ability to borrow up to $500,000 from the Company upon 3 business days advance notice.
• As of December 31 2023 and as of the date of this report, the principal amount of these two credit lines, actually withdrawn by the borrowers is NIS 550,000 (approximately USD 151,640).

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there's positive news about improved financial performance, the going concern warning and internal control weaknesses raise significant concerns.

Positives

• The company achieved a net profit in 2023 after experiencing recurring losses.
• Revenues increased significantly due to consulting fees.
• General and administrative expenses were reduced.
• The company has a non-bank lending license and is exploring opportunities in that sector.
• The company purchased S.Y. Calimero Entrepreneurship Ltd, an Israeli company that has a basic (limited) non-banking credit license allowing it to provide credit in Israel.
• The company issued two separate revolving credit notes, one to an Israeli company and the other to an Israeli resident.

Negatives

• The company has a substantial accumulated deficit and stockholders deficiency.
• The independent auditor has expressed substantial doubt about the company's ability to continue as a going concern.
• The company is dependent on external sources for financing its operations.
• The company has material weaknesses in its internal control over financial reporting.
• The company is not in compliance with certain corporate governance requirements under the Companies Law.

Risks

• The company's financial situation raises substantial doubt about its ability to continue as a going concern.
• The company may not be able to generate sufficient revenues or obtain additional financing.
• The market for digital payments may not continue to grow.
• The company faces intense competition in the digital payment market.
• Raising additional capital and the conversion of outstanding preferred shares could cause significant dilution to existing shareholders.
• The company may not be able to introduce products acceptable to customers or improve the technology used in its current systems.
• The company's products may fail to protect against attacks, and customers may experience security breaches.
• The company may be subject to intellectual property infringement claims.
• The company is dependent on Amazon Cloud, and termination of that agreement could severely interrupt its business.
• Conditions in Israel, including the recent attack by Hamas, may adversely affect the company's operations.
• The company is subject to material risks related to foreign currency exchange rate fluctuations.
• An active trading market for the company's ordinary shares may not develop, and the trading price may fluctuate significantly.
• The company's majority shareholder and principal officer has substantial influence over the company, and his interests may not be aligned with the interests of other shareholders.
• The company has material weaknesses in its internal control over financial reporting.

Future Outlook

The company intends to continue to finance its operating activities by raising capital and is pursuing a strategy of ongoing product development, marketing efforts, and potential acquisitions or licensing of additional technology. The company is also looking to form commercial partnerships to expand its market reach and sales.

Industry Context

The digital payment market is intensely competitive, with major players like Google, Apple, and PayPal vying for market share. The company also faces competition from smaller, niche competitors. The company is also entering the non-bank lending market in Israel, which is subject to specific laws and regulations.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• The company's financial performance can be compared to other small companies in the digital payment and non-bank lending sectors in Israel, but specific benchmarks are not provided.
• The company's reliance on a single cloud provider (Amazon Cloud) is a risk factor that is not uncommon in the industry, but it is important to have contingency plans in place.
• The company's lack of intellectual property protection is a concern, as it makes it more vulnerable to competition.
• The company's material weaknesses in internal control over financial reporting are a significant issue that needs to be addressed to ensure the accuracy and reliability of its financial statements.

Related Party Transactions

• Payment of management fees to Menachem Shalom, a controlling shareholder and director of the Company.
• The Company owes Menachem Shalom NIS 1,217,768.
• The Company owes Billio Ltd NIS 1,234,830.
• The Company owes Tamarindi Ltd NIS 254,512.
• Amir Adibi owes the Company NIS 45,000.

Stakeholder Impact

• Shareholders face the risk of dilution from potential capital raises and conversion of preferred shares.
• Employees may be affected by the company's financial instability and potential need to curtail operations.
• Customers may be impacted by the company's ability to provide services and support.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to continue to take remedial measures to address the material weaknesses in its internal control over financial reporting.
• The company will be looking to form commercial partnerships with software distributors and integrators to expand its market reach and sales.
• The company is looking to expand its product offering by developing, acquiring or licensing additional products relevant for its customer-base.

Key Dates

Keywords

financial results, going concern, digital payments, non-bank lending, Israel, revenue, profit, risk factors, accumulated deficit, internal control