20-F: SatixFy Communications Ltd. Reports Fiscal Year 2023 Results in Form 20-F Filing

SatixFy Communications Ltd. releases its 20-F filing, detailing financial results for the fiscal year ended December 31, 2023, and outlining key business activities and risk factors.

Summary

• SatixFy Communications Ltd. has released its Form 20-F filing, providing details on the company's performance for the fiscal year ended December 31, 2023.
• The company's mission is to be a leading global provider of digital satellite communications systems.
• SatixFy designs chips and systems for the entire satellite communications value chain, from satellite payloads to user terminals.
• The company has invested over $243 million in research and development since its inception in June 2012.
• Revenues for the years ended December 31, 2023 and 2022 were $10.7 million and $10.6 million, respectively.
• The company incurred net losses of approximately $29.7 million and $397.8 million for the years ended December 31, 2023 and 2022, respectively.
• As of December 31, 2023, the company's backlog was approximately $59 million.
• The company is experiencing increased risks and costs associated with volatility in labor or component prices and supply chain disruptions.
• The company relies on third parties for manufacturing its products and does not have long-term supply contracts with its foundry or most of its third-party manufacturing vendors.
• The company's headquarters and other significant operations are located in Israel, which may be adversely affected by political, economic, and military instability.
• The company is subject to a wide range of laws and regulations, including export control and economic sanctions laws.
• The company has received grants from the Israeli Innovation Authority that require it to meet several specified conditions and may restrict its ability to manufacture some product candidates and transfer relevant know-how outside of Israel.
• The company relies on its intellectual property and proprietary rights and may be unable to adequately protect them.
• The company is subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity.
• The company may not be able to generate sufficient cash to service its indebtedness.
• The company is an emerging growth company and avails itself of the reduced disclosure requirements applicable to emerging growth companies.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
• The company's estimates, including market opportunity estimates and growth forecasts, are subject to inherent challenges in measurement and significant uncertainty.
• The company's results of operations may vary significantly from its expectations or guidance.
• The company may not be able to comply with its contracts with customers, and non-compliance may harm its operations and expose it to potential third-party claims for damages.
• Loss of key employees and the inability to continuously recruit and retain qualified employees could hurt the company's competitive position.
• The company is subject to warranty claims, product recalls and product liability claims and may be adversely affected by unfavorable court decisions or legal settlements.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there's a slight revenue increase and a significant reduction in net losses, the company faces numerous risks and challenges, including supply chain disruptions, reliance on key customers, and the need for additional capital.

Positives

• The company's revenues saw a slight increase in 2023 compared to 2022.
• Net losses decreased significantly in 2023 compared to 2022, primarily due to a non-recurring listing expense in 2022.
• The company has a substantial backlog of approximately $59 million as of December 31, 2023.
• The company has received significant funding from the European Space Agency (ESA) and the Israeli Innovation Authority (IIA).
• The company completed a $60 million transaction with MDA Ltd. in August 2023, which is expected to open up its solutions to broader markets and new customers.
• The company is developing advanced Application-Specific and Radio Frequency Integrated Circuit chips (ASICs and RFICs) based on technology designed to meet the requirements of a variety of satellite communications applications.

Negatives

• The company has a history of losses and has not demonstrated a sustained ability to generate predictable revenues or cash flows.
• The company is experiencing increased risks and costs associated with volatility in labor or component prices and supply chain disruptions.
• The company relies on third parties for manufacturing its products and does not have long-term supply contracts with its foundry or most of its third-party manufacturing vendors.
• The company's headquarters and other significant operations are located in Israel, which may be adversely affected by political, economic, and military instability.
• The company may not be able to generate sufficient cash to service its indebtedness.
• The company is an emerging growth company and avails itself of the reduced disclosure requirements applicable to emerging growth companies.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.

Risks

• The company has limited capital currently available and will need to raise additional capital in the future to fund its operations and develop its technology and chips and satellite communications systems.
• The satellite communications industry is subject to rapid technological changes, new and enhanced product introductions, product obsolescence and changes in user requirements.
• Obtaining customer contracts may require the company to participate in lengthy competitive selection processes that require it to incur significant costs.
• Some of the company's customers may require its chips and satellite communications systems to undergo a demonstration process that does not assure future sales or customer contracts.
• The company generates a significant percentage of its revenue from certain key customers, and anticipates this concentration will continue for the foreseeable future.
• The company may not be able to continue to develop its technology or develop new technologies for its existing and new satellite communications systems.
• Deterioration of the financial conditions of the company's customers could adversely affect its operating results.
• The company operates in a highly competitive industry and may be unsuccessful in effectively competing in the future.
• The company may not be able to generate sufficient cash to service its indebtedness.
• The company's estimates, including market opportunity estimates and growth forecasts, are subject to inherent challenges in measurement and significant uncertainty.
• The company's results of operations may vary significantly from its expectations or guidance.
• The company may not be able to comply with its contracts with customers, and non-compliance may harm its operations and expose it to potential third-party claims for damages.
• Loss of key employees and the inability to continuously recruit and retain qualified employees could hurt the company's competitive position.
• The company relies on third parties for manufacturing of its products.
• The company's business is subject to a wide range of laws and regulations, many of which are continuously evolving, and failure to comply with such laws and regulations could harm its business, financial condition and operating results.
• The company is subject to risks from its international operations.
• The company relies on its intellectual property and proprietary rights and may be unable to adequately obtain, maintain, enforce, defend or protect its intellectual property and proprietary rights, including against unauthorized use by third parties.
• The company relies on the availability of third-party licenses of intellectual property, and if it fails to comply with its obligations under such agreements or is unable to extend its existing thirdparty licenses or enter into new third-party licenses on reasonable terms or at all, it could have a material adverse effect on its business, operating results and financial condition.
• Defects, errors or other performance problems in the company's software or hardware, or the third-party software or hardware on which it relies, could harm the company's reputation, result in significant costs to the company, impair its ability to sell its systems and subject it to substantial liability.
• The company is subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity, which can increase the cost of doing business, compliance risks and potential liability.
• Changes in the company's effective tax rate may adversely impact its results of operations.
• Exchange rate fluctuations may negatively affect the company's future revenues.
• Managing a public company and compliance with regulatory requirements may divert the attention of the company's senior management from the day-to-day management of its business.
• An active trading market for the company's equity securities may not develop or may not be sustained to provide adequate liquidity.
• The selling shareholders listed in the Registration Statement may be incentivized to sell them under the Registration Statement depending on the market price of our securities, and sales of a significant number of our securities by such selling shareholders could materially adversely affect the trading prices of our securities.
• Investors rights and responsibilities as the company's shareholders will be governed by Israeli law, which differs in some respects from the rights and responsibilities of shareholders of nonIsraeli companies.
• The market price of the company's equity securities may be volatile, and your investment could suffer or decline in value.
• The company is an emerging growth company and avails itself of the reduced disclosure requirements applicable to emerging growth companies, which could make its equity securities less attractive to investors.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.
• Future sales or other issuances of our securities could depress the market price for our securities.
• Failure to meet NYSEs continued listing requirements could result in the delisting of our Ordinary Shares, negatively impact the price of our Ordinary Shares and negatively impact our ability to raise additional capital.
• The listing of our securities on the NYSE did not benefit from the process customarily undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for our securities.
• Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israels war against them.

Future Outlook

The company expects that its growth in the coming years will be driven by continued rapid increases in demand for high-speed broadband services across the globe.

Industry Context

The satellite communications industry is undergoing a dramatic transformation due to lower cost solutions and miniaturization as well as introduction of new technologies and manufacturing practices.

Management Changes

Legal Proceedings

• The company is involved in a proceeding brought by certain plaintiffs, who purport to be stockholders of SatixFy, that have filed two suits, in an Israeli court in Tel Aviv, against SatixFy, Satixfy Limited, Yoel Gat, Doron Rainish, Yair Shamir and Yoav Leibovitch, arguing that plaintiffs are entitled to an aggregate of two million of our Ordinary Shares, and seeking, among other things, an order enjoining the defendants from executing any transaction, including the Business Combination, or taking any other action that could harm plaintiffs rights as shareholders to the extent it does not affect all shareholders equally.
• On December 12, 2022, we filed a complaint against Sensegain in the New York Supreme Court, County of New York, seeking specific performance by Sensegain under the Subscription Agreement or, in the alternative, damages in the amount Sensegain owes pursuant to the Subscription Agreement (plus applicable interest and fees).
• In June 2023, Alta Partners, LLC (Alta) filed a complaint against us in the U.S. District Court for the Southern District of New York claiming unspecified damages for an alleged breach by us of the warrant agreement in relation to certain of its public warrants allegedly held by Alta.

Related Party Transactions

• The company has entered into a Services Agreement with RaySat Ltd., an entity controlled by Mr. Yoav Leibovitch, our Chairman of the board of directors and one of our significant shareholders, for financial management, business development, presidential and management services.
• The company has two commercial contracts with Jet Talk, both related to the development of an Aero/IFC satellite communications terminal for commercial aircraft, which under our joint venture agreement Jet Talk will have the exclusive right to commercialize and sell.

Stakeholder Impact

• The company's performance and future prospects could impact shareholders, employees, customers, suppliers, and creditors.
• The company's ability to attract and retain customers, develop new products, and compete effectively will be crucial for its success.
• The company's ability to comply with laws and regulations, protect its intellectual property, and manage its financial risks will also be important for its stakeholders.

Next Steps

• The company plans to try to raise additional capital, whether in the public or private markets, and is currently examining different alternatives.
• The company is working towards manufacturing the first units of Onyx to be shipped to customers and to be installed on aircrafts in the second half of 2024.

Key Dates

Keywords

SatixFy, financial results, satellite communications, 20-F filing, risk factors, Aero/IFC, ASICs, RFICs, MDA, ESA, IIA, backlog, Israel