Exhibit 99.1
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
UNAUDITED
IN U.S. DOLLARS
INDEX
Page | |
F - 2 - F - 3 | |
F - 4 | |
Condensed Interim Consolidated Statements of Comprehensive Income (Loss) | F - 5 |
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity | F - 6 |
F - 7 - F - 8 | |
Notes to Condensed Interim Consolidated Financial Statements | F - 9 - F - 27 |
June 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Unaudited
|
Audited
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Short-term deposits
|
|
|
||||||
Restricted cash
|
|
|
||||||
Trade receivables, (net of allowance for credit losses of $
|
|
|
||||||
Contract assets
|
|
|
||||||
Inventories
|
|
|
||||||
Other current assets
|
|
|
||||||
Held for sale asset
|
|
|
||||||
Total current assets
|
|
|
||||||
LONG-TERM ASSETS:
|
||||||||
Restricted cash
|
|
|
||||||
Long-term contract assets
|
|
|
||||||
Severance pay funds
|
|
|
||||||
Deferred taxes
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Other long-term assets
|
|
|
||||||
Total long-term assets
|
|
|
||||||
PROPERTY AND EQUIPMENT, NET
|
|
|
||||||
INTANGIBLE ASSETS, NET
|
|
|
||||||
GOODWILL
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
June 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Unaudited
|
Audited
|
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Trade payables
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Advances from customers and deferred revenues
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
LONG-TERM LIABILITIES:
|
||||||||
Accrued severance pay
|
|
|
||||||
Long-term advances from customers
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total long-term liabilities
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Share capital -
Ordinary shares of NIS
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total shareholders' equity
|
|
|
||||||
Total liabilities and shareholders' equity
|
$
|
|
$
|
|
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Revenues:
|
||||||||
Products
|
$
|
|
$
|
|
||||
Services
|
|
|
||||||
Total revenues
|
|
|
||||||
Cost of revenues:
|
||||||||
Products
|
|
|
||||||
Services
|
|
|
||||||
Total cost of revenues
|
|
|
||||||
Gross profit
|
|
|
||||||
Operating expenses:
|
||||||||
Research and development, net
|
|
|
||||||
Selling and marketing
|
|
|
||||||
General and administrative
|
|
|
||||||
Impairment of held for sale asset
|
|
|
||||||
Total operating expenses
|
|
|
||||||
Operating income (loss)
|
|
(
|
)
|
|||||
Financial expenses, net
|
(
|
)
|
(
|
)
|
||||
Loss before taxes on income
|
(
|
)
|
(
|
)
|
||||
Taxes on income
|
|
|
||||||
Net loss
|
$ |
(
|
)
|
$ |
(
|
)
|
||
Loss per share (basic and diluted)
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Weighted average number of shares used in computing loss per share:
|
||||||||
Basic
|
|
|
||||||
Diluted
|
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Other comprehensive loss:
|
||||||||
Foreign currency translation adjustments
|
|
(
|
)
|
|||||
Change in unrealized loss on hedging instruments, net
|
(
|
)
|
(
|
)
|
||||
Less - reclassification adjustments for net loss (gain) realized on hedging instruments, net
|
|
(
|
)
|
|||||
Total other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
Number of
Ordinary shares
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
loss
|
Accumulated
deficit
|
Total
shareholders' equity
|
|||||||||||||||||||
As Restated (1)
|
||||||||||||||||||||||||
Balance as of December 31, 2020 (1)
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Stock-based compensation of options
|
-
|
-
|
|
-
|
-
|
|
||||||||||||||||||
Exercise of stock options
|
|
|
(
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Comprehensive loss (1)
|
-
|
-
|
-
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||
Balance as of June 30, 2021 (1)
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Number of
Ordinary shares
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
loss
|
Accumulated
deficit
|
Total
shareholders' equity
|
|||||||||||||||||||
Balance as of December 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
|||||||||||
Stock-based compensation of options
|
-
|
-
|
|
-
|
-
|
|
||||||||||||||||||
Exercise of stock options
|
|
|
(
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Comprehensive loss
|
-
|
-
|
-
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||
Balance as of June 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Impairment of held for sale asset
|
|
|
||||||
Stock-based compensation of options
|
|
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accrued severance pay, net
|
|
(
|
)
|
|||||
Deferred taxes, net
|
|
|
||||||
Increase in trade receivables, net
|
(
|
)
|
(
|
)
|
||||
Decrease (increase) in contract assets
|
(
|
)
|
|
|||||
Increase in other assets and receivables
|
(
|
)
|
(
|
)
|
||||
Decrease (increase) in inventories, net
|
(
|
)
|
|
|||||
Increase (decrease) in trade payables
|
|
(
|
)
|
|||||
Decrease in accrued expenses
|
(
|
)
|
(
|
)
|
||||
Increase (decrease) in advances from customers and deferred revenues
|
|
(
|
)
|
|||||
Decrease in other liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash provided by (used in) operating activities
|
(
|
)
|
|
|||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
||||
Repayment of (investment in) short term deposits
|
|
(
|
)
|
|||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Dividend payment
|
|
(
|
)
|
|||||
Repayment of long-term loan
|
|
(
|
)
|
|||||
Net cash used in financing activities
|
|
(
|
)
|
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
(
|
)
|
|||||
Decrease in cash, cash equivalents and restricted cash
|
(
|
)
|
(
|
)
|
||||
Cash, cash equivalents and restricted cash at the beginning of the period
|
|
|
||||||
Cash, cash equivalents and restricted cash at the end of the period (C)
|
$
|
|
$
|
|
Six months ended
June 30,
|
|||||||||
2022
|
2021
|
||||||||
Supplementary disclosure of cash flows activities:
|
|||||||||
(A) |
Cash paid during the period for:
|
||||||||
Interest
|
$
|
|
$
|
|
|||||
Income taxes
|
$
|
|
$
|
|
|||||
(B) |
Non-cash transactions:
|
||||||||
Purchases of property and equipment that were not paid for and reclassification from inventories to property and equipment
|
$
|
|
$
|
|
|||||
New operating lease assets obtained in exchange for operating lease liabilities
|
$
|
|
$
|
|
|||||
(C) |
The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed interim consolidated balance sheets: |
||||||||
June 30,
|
||||||||
2022
|
2021
|
|||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash - Current
|
|
|
||||||
Restricted cash - Long-Term
|
|
|
||||||
Cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
NOTE 1: - |
GENERAL
|
a. |
Organization:
Gilat Satellite Networks Ltd. and its subsidiaries (the "Company") is a global provider of satellite-based broadband communications. The Company designs and manufactures ground-based satellite communications equipment, and provides comprehensive solutions and end-to-end services, powered by its technology. The Company’s portfolio includes a cloud-based satellite network platform, Very Small Aperture Terminals ("VSATs"), amplifiers, high-speed modems, high-performance on-the-move antennas, high power Solid-State Power Amplifiers ("SSPAs"), Block Up Converters ("BUCs") and Transceivers. The Company’s solutions support multiple applications with a full portfolio of products to address key applications including broadband access, cellular backhaul, enterprise, In-Flight Connectivity ("IFC"), maritime, trains, defense and public safety. The Company also provides connectivity services, internet access and telephony, to enterprise, government and residential customers utilizing both its own networks, and other networks that it installs, mainly based on Build Operate Transfer ("BOT") and Build Own Operate ("BOO") contracts. In these projects, the Company builds telecommunication infrastructure typically using fiber-optic and wireless technologies for the broadband connectivity. The Company also provides managed network services over VSAT networks owned by others.
The Company was incorporated in Israel in 1987 and launched its first generation VSAT in 1989.
The Company operates in three business segments consisting of Satellite Networks, Integrated Solutions and Network Infrastructure and Services. For additional information, including major customers, geographic and segment information, see Note 10.
|
|
b. |
The Company depends on major suppliers to supply certain components and services for the production of its products or providing services. If these suppliers fail to deliver or delay the delivery of the necessary components or services, the Company will be required to seek alternative sources of supply. A change in suppliers could result in product redesign, manufacturing delays or services delays which could cause a possible loss of sales and additional incremental costs and, consequently, could adversely affect the Company's results of operations and financial position.
|
c. |
The ongoing COVID-19 pandemic continues to have an adverse effect on the Company’sindustry and the markets in which the Company operates. The COVID-19 outbreak significantly impacted the travel and aviation markets in which the Company’s significant IFC customers operate and has resulted in a significant reduction of the Company’s business with some of these customers. The Company has also experienced postponed and delayed orders in certain other areas of its businesses. Further, the guidance of social distancing, lockdowns, quarantines and the requirements to work from home in various key territories such as Israel, Peru, California, Australia, Bulgaria, China and other countries, in addition to greatly reduced travel globally, has resulted in a substantial curtailment of business activities, which has affected and is likely to continue to affect the Company’s ability to conduct fieldwork as well as deliver products and services in the areas where restrictions are implemented by the local government. In addition, certain of the Company’s sales and support teams are unable to travel or meet with customers and the pandemic threat has caused operating, manufacturing, supply chain and project development delays and disruptions, labor shortages, travel and shipping disruptions and shutdowns (including as a result of government regulation and prevention measures). As a result, the Company experienced a significant reduction in business in 2020. Despite the recovery in the Company’s business in 2021 and in the six months ended June 30, 2022, revenues have not yet reached the 2019 level. In the six months ended June 30, 2022 the Company’s revenues were $
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
d. |
Against the backdrop of the military conflict between Russia and the Ukraine and the rising tensions between the U.S. and other countries, on the one hand, and Russia, on the other hand, major economic sanctions and export controls restrictions on Russia and various Russian entities were imposed by the U.S., European Union and the United Kingdom commencing in February 2022, and additional sanctions and restrictions may be imposed in the future. Theses sanctions and restrictions may materially restrict the Company’s business in Russia which mainly includes exports to Russia, which amounted to revenues of approximately $
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 2: - |
SIGNIFICANT ACCOUNTING POLICIES |
a.Unaudited condensed interim consolidated financial statements:
The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. In the opinion of management, the unaudited condensed interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company's consolidated financial statements.
The balance sheets as of December 31, 2021 have been derived from the audited consolidated financial statements of the Company at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements.
The accompanying unaudited condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission ("SEC") on May 16, 2022. The significant accounting policies applied in the Company’s audited 2021 consolidated financial statements and notes thereto included in the Annual Report are applied consistently in these unaudited condensed interim consolidated financial statements.
Restatement of previously issued condensed interim consolidated financial statements
The Company restated its condensed interim consolidated statements of income (loss) and comprehensive income (loss), condensed interim consolidated statement of changes in shareholders’ equity, and the condensed interim consolidated statement of cash flows for the six months ended June 30, 2021.
A summary of adjustments to certain previously reported financial information for comparative purposes is included in Note 13.
For further information regarding the restatement to our condensed interim financial statements for the six months ended June 30, 2021, please refer to Note 2 in the accompanying notes to the audited consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission ("SEC") on May 16, 2022.
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b.Use of estimates:
The preparation of the condensed interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Main areas that require significant estimates and assumptions by the Company’s management include contract costs, revenues (including variable consideration, determination of contracts duration, establishing stand-alone selling price for performance obligations) and profits or losses, application of percentage-of-completion accounting, provisions for uncollectible receivables and customer claims, impairment of inventories, impairment and useful life of long-lived assets, goodwill impairment, valuation allowance in respect of deferred tax assets, uncertain tax positions, accruals for estimated liabilities, including litigation and insurance reserves, and stock-based compensation. Actual results could differ from those estimates.
c.Principles of consolidation:
The condensed interim consolidated financial statements include the accounts of Gilat Satellite Networks Ltd. and its subsidiaries in which the Company has a controlling voting interest. Inter-company balances and transactions have been eliminated upon consolidation.
d.Recently issued accounting pronouncements – not yet adopted:
In March 2020, the FASB issued Update ASU 2020-04 'Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting' which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments apply only to contracts and transactions that reference LIBOR or another reference rate expected to be discontinued as part of the reform. This ASU applies only to contracts or transactions entered into or evaluated before December 31, 2022. The Company continues to monitor what impact the discontinuance of LIBOR or another reference rate will have on the Company’s contracts and other transactions.
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 3:- |
INVENTORIES
|
June 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Raw materials, parts and supplies
|
$
|
|
$
|
|
||||
Work in progress and assembled raw materials
|
|
|
||||||
Finished products
|
|
|
||||||
$
|
|
$
|
|
NOTE 4:- |
PROPERTY AND EQUIPMENT, NET
|
June 30,
|
December 31,
|
|||||||
2022
|
2021
|
|||||||
Cost:
|
||||||||
Buildings and land
|
$ |
|
$ |
|
||||
Computers, software and electronic equipment
|
|
|
||||||
Network equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Vehicles
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Accumulated depreciation
|
|
|
||||||
Depreciated cost
|
$ |
|
$ |
|
NOTE 5:- |
DEFERRED REVENUES
|
Deferred revenues as of June 30, 2022 and December 31, 2021 were $
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 5:- |
DEFERRED REVENUES (CONT.)
|
NOTE 6:- |
COMMITMENTS AND CONTINGENCIES
|
a. |
Litigations:
|
1.
|
In 2003, the Brazilian tax authority filed a claim against the Company’s inactive subsidiary in Brazil, SPC International Ltda. (the "Brazilian Subsidiary"), for the payment of taxes allegedly due from the Brazilian Subsidiary. After numerous hearings and appeals at various appellate levels in Brazil, the Supreme Court ruled against the Brazilian Subsidiary in final non-appealable decisions published in June 2017. As of June 30, 2022, the total amount of this claim, including interest, penalties and legal fees is approximately $
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 6:-COMMITMENTS AND CONTINGENCIES (Cont.)
2.
|
In 2014, the Company’s Peruvian subsidiary, Gilat To Home Peru S.A., ("GTH Peru"), initiated an arbitration proceedings in Lima against the Ministry of Transport and Communications of Peru, ("MTC"), and the Programa Nacional de Telecomunicaciones ("PRONATEL"). The arbitration was related to the PRONATEL projects awarded to the Company in the years 2000-2001. Under these projects, GTH Peru provided fixed public telephony services in rural areas of Peru. GTH Peru main claim was related to damages caused by the promotion of mobile telephony in such areas by the Peruvian government in the years 2011-2015. In June 2018, the arbitration tribunal issued an arbitration award ordering MTC and PRONATEL to pay GTH Peru approximately $
|
3.
|
In October 2019, GTH Peru initiated additional arbitration proceedings against MTC and PRONATEL based on similar grounds for the years 2015-2019. Evidentiary hearings took place in August and October 2021. In February 2022, the parties submitted their closing arguments. The final hearing took place on March 23, 2022. On June 16, 2022, the arbitration tribunal issued an arbitration award ordering MTC and Pronatel to pay GTH Peru approximately $
|
4.
|
In 2018, Gilat Networks Peru S.A. ("GNP"), the Company’s subsidiary in Peru, won a government bid for two additional regional projects in the Amazonas and Ica regions in Peru for PRONATEL with a contractual value of approximately $
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 6:-COMMITMENTS AND CONTINGENCIES (Cont.)
b. |
Guarantees:
|
c. |
Commitments:
|
NOTE 7:- |
DERIVATIVE INSTRUMENTS
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 7:- |
DERIVATIVE INSTRUMENTS (CONT.)
|
NOTE 8:- |
SHAREHOLDERS' EQUITY
|
a.
|
Share capital:
|
b. |
Stock option plans:
|
Six months ended June 30,
|
||||||||
2022
|
2021
|
|||||||
Risk free interest
|
|
|
||||||
Dividend yields
|
|
|
||||||
Volatility
|
|
|
||||||
Expected term (in years)
|
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 8:-SHAREHOLDERS' EQUITY (Cont.)
Number of options
|
Weighted-average exercise price
|
Weighted- average remaining contractual term
(in years)
|
Aggregate intrinsic value
|
|||||||||||||
Outstanding at January 1, 2022
|
|
$
|
|
|
$
|
|
||||||||||
Granted
|
|
$
|
|
|||||||||||||
Exercised
|
(
|
)
|
$
|
|
||||||||||||
Forfeited
|
(
|
)
|
$
|
|
||||||||||||
Outstanding as of June 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
Exercisable as of June 30, 2022
|
|
$
|
|
|
$
|
|
c. | Dividends: |
1.
|
In the event that cash dividends are declared by the Company, such dividends will be declared and paid in Israeli currency. Under current Israeli regulations, any cash dividend paid in Israeli currency in respect of ordinary shares purchased by non-residents of Israel with non-Israeli currency, may be freely repatriated in such non-Israeli currency, at the exchange rate prevailing at the time of repatriation.
|
2.
|
In January 2021, the Company distributed a cash dividend in the amount of $
|
3.
|
Pursuant to the terms of a bank agreement, the Company is restricted from paying cash dividends to its shareholders without initial approval from the bank; which was received for the above mentioned dividend.
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 9:- |
OTHER COMPREHENSIVE INCOME (LOSS) |
Six months ended
June 30, 2022
|
||||||||||||
Foreign currency translation adjustments
|
Unrealized losses on cash flow hedges
|
Total
|
||||||||||
Beginning balance
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||
Other comprehensive loss before reclassifications
|
|
(
|
)
|
(
|
)
|
|||||||
Amounts reclassified from accumulated other comprehensive income
|
|
|
|
|||||||||
Net current-period other comprehensive loss
|
|
(
|
)
|
(
|
)
|
|||||||
Ending balance
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
NOTE 10:- |
CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION
|
a. |
The Company applies ASC 280, "Segment Reporting" ("ASC 280"). Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker ("CODM"). The CODM is the Company’s Chief Executive Officer. The Company's CODM does not regularly review asset information by segments and, therefore, the Company does not report asset information by segment. |
b. |
From 2018 until December 31, 2021, The Company had three operating segments: Fixed Networks, Mobility Solutions and Terrestrial Infrastructure Projects.
|
c. |
Commencing in the first quarter of 2022, in order to reflect the Company’s new management’s approach in the management of the Company’s operations, organizational alignment, customer base and end markets, the Company operates in three new operating segments, as follows:
|
•
|
Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. The segment provides advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Segment’s customers are service providers, satellite operators, MNOs, Telcos, large enterprises, system integrators, defense, homeland security organizations and governments worldwide. Principal applications include In-Flight-Connectivity, cellular backhaul, maritime, social inclusion solutions, government, defense and enterprise networks and are driving meaningful partnerships with satellite operators to leverage the segment’s technology and breadth of services to deploy and operate the ground-based satellite communication networks. The segment’s product portfolio includes a leading satellite network platform with high-speed VSATs, high performance on-the-move antennas, BUCs and transceivers.
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 10:- | CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (Cont.) |
•
|
Integrated Solutions is focused on the development, manufacturing and supply of products and solutions for mission-critical defense and broadcast satellite communications systems, advanced on-the-move and on-the-pause satellite communications equipment, systems and solutions, including airborne, ground-mobile satellite systems and solutions. The segment’s product portfolio includes leading high-efficiency, high-power SSPAs, BUCs and transceivers with a field-proven, high-performance variety of frequency bands. The segment’s customers are satellite operators, In-Flight Connectivity service providers, defense and homeland security system integrators, and NGSO gateway integrators.
|
•
|
Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. The segment provides terrestrial (fiber optic and wireless network) and satellite network construction and operation. The segment serves customers through technology integration, managed networks and services, connectivity services, internet access and telephony over the segment’s networks. The segment implements projects using various technologies (including the Company’s equipment), mainly based on BOT and BOO contracts.
|
d. |
Information on the reportable operating segments:
|
1.
|
All the above segments changes were reflected through retroactive revision of prior period segment information.
|
2.
|
The measurement of operating profit (loss) in the reportable operating segments is based on the same accounting principles applied in these condensed interim consolidated financial statements and includes certain corporate overhead allocations.
|
3.
|
Financial information relating to reportable operating segments:
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 10:- | CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (Cont.) |
Six months ended
June 30, 2022
|
||||||||||||||||||||
Satellite Networks
|
Integrated Solutions
|
Network Infrastructure and Services
|
Unallocated
|
Total
|
||||||||||||||||
Revenues
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Operating profit (loss)
|
(
|
)
|
|
|
(
|
)
|
|
|||||||||||||
Financial expenses, net
|
(
|
)
|
||||||||||||||||||
Loss before taxes on income
|
(
|
)
|
||||||||||||||||||
Taxes on income
|
|
|||||||||||||||||||
Net loss
|
(
|
)
|
||||||||||||||||||
Depreciation and amortization Expenses
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Six months ended
June 30, 2021
|
||||||||||||||||||||
Satellite Networks
|
Integrated Solutions
|
Network Infrastructure and Services
|
Unallocated
|
Total
|
||||||||||||||||
As Restated (1)
|
||||||||||||||||||||
Revenues
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Operating profit (loss)
|
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||
Financial expenses, net
|
(
|
)
|
||||||||||||||||||
Loss before taxes on income
|
(
|
)
|
||||||||||||||||||
Taxes on income
|
|
|||||||||||||||||||
Net loss
|
(
|
)
|
||||||||||||||||||
Depreciation and amortization Expenses
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 10:- | CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (Cont.) |
e. |
Disaggregation of Revenues:
|
Six months ended
|
||||||||
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Latin America *)
|
$
|
|
$
|
|
||||
Asia Pacific
|
|
|
||||||
United States and Canada
|
|
|
||||||
Europe, the Middle East and Africa **)
|
|
|
||||||
$
|
|
$
|
|
f. |
The table below represents the revenues from major customers and their operating segments:
|
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Customer A - Network Infrastructure and Services
|
|
%
|
|
%
|
||||
Customer B - Integrated Solutions
|
|
%
|
|
)
|
||||
Customer C - Satellite Networks
|
|
%
|
|
)
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 11:- |
INCOME TAXES
|
NOTE 12:- |
RELATED PARTY BALANCES AND TRANSACTIONS
|
a.
|
The Company entered into a number of agreements for the purchase of infrastructure, construction and services from C. Mer Industries Ltd. ("C. Mer"), a publicly traded company in Israel (TASE). As of June 30, 2022, the Company's largest shareholder, FIMI Opportunity Funds ("FIMI"), holds approximately
|
b. |
In December 2015 the Company entered into a memorandum of understanding with Orbit Communication Systems, ("Orbit"), a publicly traded company in Israel (TASE), for development and manufacture of an antenna for an aggregate amount of approximately $
|
|
In addition, Euclid Ltd. ("Euclid"), a supplier of the Company, was fully acquired by Orbit in January 2022. The Company purchases antennas and related services from Euclid. |
||
c. |
The transactions with Company’s related parties were approved by Company’s Audit Committee and Board of Directors in accordance with the requirements of the Israeli Companies Law. |
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 12:- |
RELATED PARTY BALANCES AND TRANSACTIONS (Cont.)
|
d. | Transactions with the related parties: |
Six months ended
June 30,
|
||||||||
2022
|
2021*)
|
|
||||||
As Restated (1)
|
||||||||
Cost of revenues of products
|
$
|
|
$
|
|
e. |
Balances with the related parties:
|
June 30,
2022
|
December 31, 2021 *)
|
|||||||
Trade payables
|
$
|
|
$
|
|
||||
Accrued expenses |
$
|
|
$
|
|
||||
Other current assets
|
$
|
|
$
|
|
NOTE 13:- |
RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The following tables present the impact of adjustments made in the Company’s revenues and cost of revenues in its condensed interim consolidated financial statements for the six months ended June 30, 2021. See Note 2 for additional information.
The condensed interim consolidated statements of cash flows are not presented in the following tables because there is no impact on total cash flows from operating activities, investing activities and financing activities.
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 13:- |
RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
|
Six months ended June 30, 2021
|
||||||||||||
As Reported
|
Adjustments
|
As Restated
|
||||||||||
Revenues:
|
||||||||||||
Products
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Services
|
|
(
|
)
|
|
||||||||
Total revenues
|
|
(
|
)
|
|
||||||||
Cost of revenues:
|
||||||||||||
Products
|
|
(
|
)
|
|
||||||||
Services
|
|
|
|
|||||||||
Total cost of revenues
|
|
(
|
)
|
|
||||||||
Gross profit
|
|
|
|
|||||||||
Operating loss
|
(
|
)
|
|
(
|
)
|
|||||||
Loss before taxes on income
|
(
|
)
|
|
(
|
)
|
|||||||
Net loss
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
*) Adjustment for total basic and diluted loss per share is lower than $0.01
Six months ended June 30, 2021
|
||||||||||||
As Reported
|
Adjustments
|
As Restated
|
||||||||||
Net loss
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 14:- |
EARNINGS PER SHARE
|
1.
|
Numerator:
|
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
As Restated (1)
|
||||||||
Numerator for basic and diluted loss per share -
|
||||||||
Net loss available to holders of ordinary shares
|
$
|
(
|
)
|
$
|
(
|
)
|
2. |
Denominator:
|
Six months ended
June 30,
|
||||||||
2022
|
2021
|
|||||||
Denominator for basic loss per share -
|
||||||||
Weighted average number of shares
|
|
|
||||||
Add - employee stock options
|
|
|
||||||
Denominator for diluted loss per share - adjusted
|
|
|
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
U.S. dollars in thousands
NOTE 15:- |
SUPPLEMENTARY CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS INFORMATION
|
June 30,
2022
|
December 31,
2021
|
|||||||
Governmental authorities
|
$
|
|
$
|
|
||||
Prepaid expenses
|
|
|
||||||
Deferred charges
|
|
|
||||||
Advance payments to suppliers
|
|
|
||||||
Other
|
|
|
||||||
$
|
|
$
|
|
F - 27