BELFB Bel Fuse Inc

New Jersey		0-11676		22-1463699
(State of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

300 Executive Drive, Suite 300, West Orange, New Jersey		07052
(Address of principal executive offices)		(Zip Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Title of Each Class		Trading Symbol		Name of Exchange on Which Registered
Class A Common Stock ($0.10 par value)		BELFA		Nasdaq Global Select Market
Class B Common Stock ($0.10 par value)		BELFB		Nasdaq Global Select Market

Exhibit No.

Description

23.1		Consent of Ziv Haft, Certified Public Accountants (Isr.), a BDO Member Firm
99.1		Audited Financial Statements of Enercon Technologies, Ltd. for the Fiscal Years Ended December 31, 2023 and 2022, the related notes, and the independent auditor’s report thereon.
99.2		Unaudited Interim Financial Statements of Enercon Technologies, Ltd. for the Nine-Month Periods ending September 30, 2024 and 2023.
99.3		Unaudited Pro Forma Combined Financial Information of Bel Fuse Inc. and Enercon Technologies, Ltd.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Date: January 29, 2025	BEL FUSE INC.
	(Registrant)
By:	/s/Daniel Bernstein
	Daniel Bernstein
	President and Chief Executive Officer

Exhibit No.		Description
23.1		Consent of Ziv Haft, Certified Public Accountants (Isr.), a BDO Member Firm
99.1		Audited Financial Statements of Enercon Technologies, Ltd. for the Fiscal Years Ended December 31, 2023 and 2022, the related notes, and the independent auditor’s report thereon.
99.2		Unaudited Interim Financial Statements of Enercon Technologies, Ltd. for the Nine-Month Periods ending September 30, 2024 and 2023.
99.3		Unaudited Pro Forma Combined Financial Information of Bel Fuse Inc. and Enercon Technologies, Ltd.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

Exhibit 23.1

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-271817) and on Form S-8 (File No. 333-180340 and File No. 333-239267) of Bel Fuse Inc. of our report dated December 31, 2024, relating to the consolidated financial statements of Enercon Technologies, Ltd. which appear in this Form 8-K.

 

 

 

/s/ Ziv Haft

Certified Public Accountants (Isr.)                                       

BDO Member Firm 

 

January 29, 2025

Tel Aviv, Israel

 

Exhibit 99.1

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2023

 

 

 

 

 

 

 

ENERCON TECHNOLOGIES LTD

 

CONSOLIDATED FINANCIAL STATEMENTS

 

TABLE OF CONTENTS

 

	Page
INDEPENDENT AUDITORS' REPORT	2-3
CONSOLIDATED FINANCIAL STATEMENTS OF:
Financial Position	4-5
Comprehensive Income	6
Changes in Equity	7
Cash Flows	8-9
Notes forming part of the Consolidated Financial Statements	10-41

______________________

_____________

 

 

B D O   L E T T E R H E A D

Independent Auditor’s Report

 

Board of Directors

Enercon Technologies Ltd.

Netanya, Israel

 

Opinion

 

We have audited the consolidated financial statements of Enercon Technologies Ltd. and its subsidiaries (the Group), which comprise the consolidated financial position as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

In our opinion, based on our audits, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

 

In performing an audit in accordance with GAAS, we:

●

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

●

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

●

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

●

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

Ziv Haft

Certified Public Accountants (Isr.)   

BDO Member Firm /s/ 

 

December 31, 2024                                                                                 

Tel Aviv, Israel

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

						As of December 31,
						2023				2022
		Note				U.S. dollars in thousands
ASSETS
Current assets
Cash and cash equivalents			3				3,713				2,860
Short-term deposit							129				55
Short-term restricted cash							532				294
Trade receivables			5				20,421				16,622
Other accounts receivable			6				1,662				1,352
Income taxes receivable			17				575				2,278
Inventories			7				37,062				34,823
							64,094				58,284
Non-Current Assets
Restricted Cash							48				368
Long-term prepaid expenses							45				37
Deferred tax assets							36				9
Property, plant and equipment			8				5,420				5,692
Right-of-use assets			9				3,650				4,870
Intangible assets			10				-				278
Goodwill			10				60,466				60,466
							69,665				71,720
TOTAL ASSETS							133,759				130,004

 

The attached notes form an integral part of the consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

						As of December 31,
						2023				2022
		Note				U.S. dollars in thousands
LIABILITIES AND EQUITY
Current Liabilities
Credit, short-term loans and current maturities			12				26,775				28,487
Current maturities of lease liabilities			9				1,292				1,262
Trade payables							7,201				6,273
Income taxes payable			17				85				-
Other accounts payable			13				10,291				9,644
							45,644				45,666
Non-Current Liabilities
Long-term loans net of current maturities			14				11,450				22,092
Lease liabilities			9				2,788				4,179
Deferred income tax liabilities			11				6,220				5,399
							20,458				31,670
Equity attributable to owners of the parent
Share capital			18				7,562				7,536
Reserve from share-based payment transactions			16				1,889				1,196
Capital reserve from transactions with minority							(180	)			(180	)
Retained earnings							58,290				44,028
							67,561				52,580
Non-controlling interests			15				96				88
							67,657				52,668
TOTAL LIABILITIES AND EQUITY							133,759				130,004

 

The consolidated financial statements were authorized to be published by management on December 31, 2024.

 

The attached notes form an integral part of the consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

						Year ended December 31,
						2023				2022
		Note				U.S. dollars in thousands
Revenues			5				95,709				81,281
Cost of sales			20				54,971				53,341
Gross profit							40,738				27,940
Research and development expenses			21				5,296				6,541
Selling and marketing expenses			22				9,446				6,710
General and administrative expenses			23				4,113				4,212
Profit from operations							21,883				10,477
Other expenses (income)							(25	)			-
Finance expenses			24				4,123				4,210
Finance income changes			24				(304	)			(2,648	)
Profit before income tax							18,089				8,915
Taxes on income			17				3,819				854
Total comprehensive income							14,270				8,061
Total comprehensive income attributable to:
Equity holders of the company							14,262				8,040
Non-controlling interest							8				21
							14,270				8,061

 

The attached notes form an integral part of the consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

U.S. dollars in thousands

 

		Share capital				Reserve from share-based payment transactions				Capital reserve from transactions with non-controlling interest				Retained earnings				Total attributable to owners of the parent				Non-controlling interest				Total equity
Balance as of December 31, 2021			7,236				855				-				35,988				44,079				59				44,138
Changes during 2022:
Exercise of ESOP			300				(111	)			-				-				189				-				189
Share based payment			-				452				-				-				452				-				452
Transactions with minority			-				-				(180	)			-				(180	)			8				(172	)
Total comprehensive income for the year			-				-				-				8,040				8,040				21				8,061
Balance as of December 31, 2022			7,536				1,196				(180	)			44,028				52,580				88				52,668
Changes during 2023:
Forfeit of ESOP			26				(26	)			-				-				-				-				-
Share based payment			-				719				-				-				719				-				719
Transactions with minority			-				-				-				-				-				-				-
Total comprehensive income for the year			-				-				-				14,262				14,262				8				14,270
Balance as of December 31, 2023			7,562				1,889				(180	)			58,290				67,561				96				67,657

 

The attached notes form an integral part of the consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Year ended December 31,
		2023				2022
		U.S. dollars in thousands
Cash flows from operating activities:
Profit for the year			14,270				8,061
Adjustments for:
Depreciation and amortization			3,044				2,996
Changes in contingent consideration			-				-
Equity settled share-based payment expense			719				452
Loss (profit) from sale of property, plant and equipment			(4	)			1
Loss (profit) from other current financial assets			(315	)			389
Taxes on income			3,819				854
Other financial expenses			3,555				1,510
			25,088				14,263
Changes in assets and liabilities:
Increase in trade receivables			(3,799	)			(7,106	)
Decrease (increase) in other accounts receivable and prepaid expenses			(255	)			152
Increase in inventories			(2,239	)			(4,270	)
Increase in trade payables			928				2,204
Increase (decrease) in other accounts payable			899				(4,004	)
			(4,466	)			(13,024	)
Cash from operating activities			20,622				1,239
Interest paid			(3,680	)			(2,052	)
Taxes paid			(1,237	)			(2,904	)
Net cash from operating activities			15,705				(3,717	)

 

The attached notes form an integral part of the consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD

CONSOLIDATED STATEMENT OF CASH FLOWS (Cont.)

 

		Year ended December 31,
		2023				2022
		U.S. dollars in thousands
Cash flows from investing activities:
Purchases of property, plant and equipment			(1,226	)			(1,492	)
Proceeds from sale of property, plant and equipment			6				1
Short-term deposit			(74	)			(55	)
Restricted deposit			82				(9	)
Net Cash used in investing activities			(1,212	)			(1,555	)
Cash flows from financing activities:
Short-term credit from banks			(6,727	)			7,461
Repayment of lease liabilities			(1,286	)			(1,323	)
Long-term Loans received from banks			-				5,000
Long-term Loans repayment			(5,627	)			(5,963	)
Acquisition of non-controlling interests			-				(172	)
Exercise of ESOP			-				189
Net Cash (used in)/from financing activities			(13,640	)			5,192
Decrease (increase) in cash and cash equivalents			853				(80	)
Balance of cash and cash equivalents as at the beginning of the year			2,860				2,940
Balance of cash and cash equivalents as at the end of the year			3,713				2,860

 

The attached notes form an integral part of the consolidated financial statements.

 

 

ENERCON TECHNOLOGIES LTD.

NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS    

 

 

NOTE 1 – GENERAL DESCRIPTION OF THE GROUP AND ITS OPERATIONS

 

A.

Enercon Technologies Ltd. (hereafter – the Company) founded in November 2014. The Company itself and through its subsidiaries ("Enercon” or the "Group") develops, designs, manufactures and markets custom power supplies, UPS units and networking solutions that are designed for extreme conditions and are mainly for military, aerospace and civilian aircrafts applications (used for applications in radars, land systems, aircrafts, and missiles) through its manufacturing facilities in Israel, U.S, and India. The Company is a limited liability company incorporated and domiciled in Israel. The address of its registered office is, 27 Yad Harutzim St., Netanya Industrial Area. The Company’s controlling shareholder is Fortissimo Capital Fund.

B.	Impact of the “Swords of Iron” War on the Company:

 

Starting from  October 7, 2023,  following the attacks on Israel and the security situation, the State of Israel has been in a state of war known as the 'Iron Swords War'. Despite this, the Company has continued to operate without interruption, although it has faced challenges including increased transportation costs and employee recruitment for reserve duty. The Company continues to closely monitor the situation and its potential impact on operations.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.  The policies have been consistently applied to all the years presented, unless otherwise stated.

 

A.	Basis of presentation of the financial statements

The consolidated financial statements are presented in U.S. dollars, which is also the Group’s functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated.

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial statements have been prepared under the historical cost convention, as modified by the measurement of certain financial assets and financial liabilities at fair value through profit or loss. The Company has elected to present the statement of comprehensive income using the function of expense method.

 

B.	Estimates and assumptions

The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. These estimates and underlying assumptions are reviewed regularly. Changes in accounting estimates are reported in the period of the change in estimate and thereafter.

 

The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates used by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed in the notes.

 

 

C.	Functional and reporting currency

The Group’s consolidated financial statements are presented in U.S. dollars. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

 

Assets and liabilities of a company which is a foreign operation are translated at the closing rate at each reporting date. Profit or loss items are translated at average exchange rates for the period presented. The resulting translation differences are recognized in other comprehensive income.

 

The majority of the revenues of the Group are generated in U.S. dollars.  In addition, a substantial portion of the Group's costs is incurred in U.S. dollars. The Group's management believes that the U.S. dollar is the primary currency of the economic environment in which the Group operates.

 

D.	Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

 

Revenues from the sale of goods are recognized at the point in time when control of the asset is transferred to the customer, generally upon delivery of the equipment.

 

Certain products sold by the group include warranties that obligate the group to repair or replace defective products during the warranty period if they fail to meet agreed-upon specifications.  In accordance with IFRS 15, such warranties are not considered as separate performance obligations. Consequently, no portion of the transaction price is allocated to the warranties.  Instead, a warranty provision is recognized for the estimated costs of fulfilling warranty obligations in accordance with IAS 37 Provisions, Contingent Liabilities, and Contingent Assets. 

 

E.	Foreign currency transactions

Transactions denominated in foreign currency (other than the functional currency) are recorded on initial recognition at the exchange rate as of the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate as of that date. Exchange differences, other than those capitalized to qualifying assets are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are translated at the exchange rate of initial recognition. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date on which the fair value was determined.

 

F.	Basis of consolidation

The Group controls an investee if and only if the Group has:

●	Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

●	Exposure, or rights, to variable returns from its involvement with the investee, and

●	The ability to use its power over the investee to affect its returns.

 

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over the investee, including: the contractual arrangement with the other vote holders of the investee, the Group’s potential voting rights.

 

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary.

 

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it (i) derecognises the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any non-controlling interests and the cumulative translation differences recorded in equity. (ii) Recognises the consideration received at fair value, recognises any investment retained at fair value of and recognises any surplus or deficit in profit or loss. (iii) reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liabilities.

 

G.	Consolidated financial statements

Where relevant, the accounting policy in the financial statements of the subsidiaries is changed to confirm with the policy applied in the financial statements of the Group.

 

H.

Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost of a business combination comprises the fair values of assets given, liabilities assumed and equity instruments issued. Any costs of acquisition are charged to profit or loss (if the costs of acquisition are related to the issue of debt or equity, they charged to equity or liability respectively).

 

Goodwill is recognized as an intangible asset with any impairment in carrying value being charged to profit or loss. Goodwill is not systematically amortized and the company reviews goodwill for impairment once a year or more frequently if events or changes in circumstances indicate that there may be an impairment.

 

I.	Intangible assets

 

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured on initial recognition at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.

 

Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.

 

Intangible assets with indefinite useful lives are not systematically amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful life of these assets are reviewed annually to determine whether such assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the intangible asset is tested for impairment.

 

J.	Impairment of non-financial assets

 

Impairment tests on goodwill and infinite useful lives assets are undertaken annually on December 31 or sooner when there are indicators of impairment. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of the non-financial asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to dispose), the asset is written down and an impairment charge is recognized accordingly in the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is performed on the asset's cash-generating level (i.e. the smallest Group of assets to which the asset belongs that generates cash inflow that are largely independent of cash inflows from other assets).

 

Goodwill is allocated at initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the business combination giving rise to the goodwill. An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units) is lower than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses allocated to goodwill cannot be reversed in subsequent periods. An impairment loss allocated to asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. A reversal of an impairment loss, as above, is limited to the lower of the carrying amount of the asset that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and the assets recoverable amount. The reversal of an impairment loss of an asset is recognized in profit or loss. Impairment charges are included in general and administrative expenses line item in the statement of comprehensive income. During the years 2023 and 2022 no impairment charges of non-financial assets were recognized.

 

K.	Fair value measurement

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 

A.	In the principal market for the asset or liability, or

B.	In the absence of a principal market, in the most advantageous market for the asset or liability.

 

The principal or the most advantageous market must be accessible by the Group.

 

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

 

Classification by fair value hierarchy:

 

Assets and liabilities presented in the statement of financial position at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value:

 

Level 1	-	Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2	-	Inputs other than quoted prices included within Level 1 that are observable either directly or indirectly.
Level 3	-	Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).

 

L.	Financial instruments

 

1.	Financial assets

The Group classifies its financial assets into one of the following categories, based on the business model for managing the financial asset and its contractual cash flow characteristics. The Group's accounting policy for each category is as follows:

 

Fair value through profit or loss

 

This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value (see "Financial liabilities" section for out-of-money derivatives classified as liabilities).  They are carried in the statement of financial position at fair value with changes in fair value recognized in the consolidated statement of comprehensive income in the finance income or expense line.  Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

 

Amortized cost

 

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest.  They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment.

 

Impairment provisions for trade receivables are recognized based on the simplified approach within IFRS 9 using a provision in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables.

 

For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognized within general and administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

 

2.	Financial Liabilities

 

The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

 

Fair value through profit or loss

 

This category comprises out-of-the-money derivatives where the time value does not offset the negative intrinsic value (see "Financial assets" for in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value). They are carried in the consolidated statement of financial position at fair value with changes in fair value recognized in the consolidated statement of comprehensive income. The Group does not hold or issue derivative instruments for speculative purposes, but for hedging purposes. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.

 

Other financial liabilities include the following items

 

Bank borrowings are initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortized cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

 

Trade payables and other short-term monetary liabilities, which are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method.

 

3.	De-recognition

 

Financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows.

 

Financial Liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.

 

M.	Cash and cash equivalents

Cash equivalents are considered by the Group to be highly-liquid investments, including, inter alia, short-term deposits with banks, the maturity of which do not exceed three months at the time of deposit and which are not restricted.

 

N.	Short-term deposits

Short-term bank deposits are deposits with an original maturity of more than three months from the date of investment and which do not meet the definition of cash equivalents. The deposits are presented according to their terms of deposit.

 

O.	Allowance for doubtful accounts

The allowance for doubtful accounts is determined in respect of specific debts whose collection, in the opinion of the Group's management, is doubtful.

 

P.	Inventories

Inventories are measured at the lower of cost and net realizable value. Cost is calculated according to weighted average model. The Company periodically evaluates the condition and age of inventory and makes provisions for slow moving inventory accordingly. The costs reflected are not in excess of the market value.

 

Q.	Property, plant and equipment

Items of property, plant and equipment are initially recognized at cost including directly attributable costs. Depreciation is calculated on a straight line basis, over the useful lives of the assets at annual rates as follows:

 

	Rate of depreciation	Mainly %
Buildings	3 - 4 %	3.13
Machinery and equipment	6 - 20 %	10
Furniture and office equipment	6 - 15 %	6
Computers and related equipment	10 - 33 %	33
Motor vehicles	15 %	15

 

 Leasehold improvements are depreciated over the term of the expected lease including optional extension, or the estimated useful lives of the improvements, whichever is shorter.

 

R.

Dividends

Dividends are recognized when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

 

S.	Employee benefits

1.       Short-term employee benefits: Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

 

2.       Post-employment benefits: The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans. The Company has defined contribution plans pursuant to Section 14 to the Severance Pay Law since 2004 under which the Company pays fixed contributions to a specific fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense simultaneously with receiving the employees' services and no additional provision is required in the financial statements except for the unpaid contribution.

 

T.	Leased assets

 

The Group has adopted IFRS 16 retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on 1 January 2019.

 

The main impact of adopting the standard is the elimination of requirement on lessees to classify leases as operating lease (off-balance sheet) or finance lease, and they are now required to use a single accounting model for all leases, similarly to how finance leases under IAS 7 are currently accounted for. In agreements where of-use asset and a lease liability upon inception of the lease contract. It does so for all leases in which the Group has right to control the use of identified assets for a period of time in exchange for consideration.

 

Accordingly, the Group recognizes depreciation and depreciation charges on the right-of-use asset and tests the need for recognizing impairment of the right-of-use asset in compliance with IAS 36 "Impairment of Assets", and also recognizes finance expenses in relation to a lease liability. Therefore, beginning on first-time adoption, rent expenses relating to properties rented, are now presented as assets that are depreciated through depreciation assets. For all leases, the Group applied the transitional provisions such that it initially recognized a liability at the commencement day at an amount equal to the present value of the lease payments during the lease, discounted using the effective interest rate as of that date, and concurrently recognized a right-of-use asset at an amount identical to the liability. As a result, the standard had no impact on equity and the accumulated losses of the Group as at initial application. As part of the initial application, the Group elected to adopt the following practical expedients, as permitted by the standard:

a.

The use of a single discount rate for a portfolio of leases with similar characteristics;

b.

Not separating lease and non-lease components of a contract, and instead accounting for all components as a single lease;

c.

Excluding initial direct costs from the measurement of the right-of-use asset as at initial application;

d.

Use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease;

 

The following new significant accounting policy for agreements in which the Group is the lessee was applied beginning on 1 January 2019 following initial application of the standard:

 

Right-of-use assets:

 

The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets comprises the amount of the initial measurement of the lease liability; lease payments made at or before the commencement date less any lease incentives received; and initial direct costs incurred. The recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

 

Lease liabilities:

 

At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

 

Lease term:

 

The term of a lease is determined as the non-cancellable period for which a lessee has the right to use an underlying asset, together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.

 

Depreciation of a right-of-use asset:

 

Subsequent to the inception of the lease, a right-of-use asset is measured using the cost method, less accumulated depreciation and accumulated impairment losses, and is adjusted for re-measurements of the lease liability. Depreciation is measured using the straight-line method over the useful life or contractual lease term, whichever ends earlier. Lessees will be also required to re-measure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will recognize the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset, until the carrying amount is reduced to zero.

 

U.	Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options calculated at the grant date is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted.

 

V.	Taxes on income

Current or deferred taxes are recognized in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income or equity.

 

Current taxes

The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of reporting period as well as adjustments required in connection with the tax liability in respect of previous years.

 

Deferred taxes

Deferred taxes are computed in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts attributable for tax purposes. Deferred taxes are recognized in Profit or loss, except when they relate to items recognized in other comprehensive income or directly in equity. Deferred taxes are measured at the tax rates that are expected to apply in the period when the temporary differences are reversed in profit or loss, other comprehensive income or equity, based on tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred taxes in profit or loss represent the changes in the carrying amount of deferred tax balances during the reporting period, excluding changes attributable to items recognized in other comprehensive income or directly in equity.

 

Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized. In addition, temporary differences (such as carryforward losses) for which deferred tax assets have not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability is probable. Any resulting reduction or reversal is recognized on "income tax" within the statement of comprehensive income. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account, as long as the disposal of such investments is not expected in the foreseeable future and the group has control over such disposal. In addition, deferred taxes that would apply in the event of distribution of dividends have not been taken into account, if distributions of dividends involve an additional tax liability; the Group's policy is not to initiate distribution of dividends that triggers an additional tax liability.

 

All deferred tax assets and liabilities are presented in the statement of financial position as non-current items. Deferred tax assets are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred tax liabilities relate to the same taxpayer and the same taxation authority.

 

W.	Provisions

The Group has recognized provisions for liabilities of uncertain timing or amount including those for warranty claims. The Group generally offers up to eight years warranties on its products. Based on past experience, the Group does not record any provision for warranty of its products and services.

 

X.	The period of the operating cycle

The Company's operating cycle is the time that passes between the purchase of the assets for the purpose of their processing and their disposal for cash of for cash equivalents. The Group's operating cycle in connection with the development, design, manufacture and marketing of power supplies, networking solutions and UPS units that are mainly for military systems and the aerospace industry may continue for a period of approximately one year.

 

The current assets and the current liabilities include items that are designated for sale and which are expected to be sold within the period of the operating cycle of each field of activity in the Group.

 

Y.	Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Judgements

a.	Revenue recognition- .The Group estimates that, based on past experience with similar sales a negligible portion of the products will be returned. As a result the group has recognized revenue for these transactions with no provision for returns.

b.

Income taxes - The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the company's belief that its tax return positions are supportable, the company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.

 

Z.

Loans

Loans are recognized initially at their fair value, net of transaction costs incurred. Loans are subsequently measured at amortized cost; any difference between the consideration (net of transaction costs) and the redemption value is recognized in the statement of income over the period of the loan using the effective interest method. Loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of the loans for at least 12 months after the end of the reporting period, in which case they are classified as non-current liabilities.

 

 

AB. New standards, interpretations and amendments adopted from 1 January 2023

a.	The following amendments are effective for the period beginning January 1, 2023:

	a.	Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements); These amendments have no effect on the measurement or presentation of any items in the Consolidated financial statements of the Company but affect the disclosure of accounting policies of the Company.

	b.	Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors); These amendments had no material effect on the consolidated financial statements of the Company.

	c.	IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction. These amendments had no material effect on the consolidated financial statements of the Company.

 

b.	New standards, interpretations and amendments not yet effective:

There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to December 31, 2023, that the Company has decided not to adopt early. The Company is currently assessing the impact of these new standards, interpretations and amendments. The Company does not believe that the standards, interpretations and amendments will have a material impact on the financial statements once adopted.

 

 

NOTE 3 -         CASH AND CASH EQUIVALENTS

 

		December 31,
		2023				2022
		U.S. dollars in thousands
In U.S. dollars			2,611				1,884
In other currencies			1,102				976
Total			3,713				2,860

 

 

NOTE 4 -         FINANCIAL INSTRUMENTS

 

Financial Risk Management

The Managing Director has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and monitor risks and adherence to limits. The Group is exposed to the following risks from its use of financial instruments:

 

i.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments.

 

ii.

Credit risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Company has no significant concentration of credit risk. The Company has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and the Company has policies to limit the amount of credit exposure to any financial institution.

 

iii.

Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

 

iv.

Foreign currency risk

Foreign exchange risk arises when Group companies enter into transactions denominated in a currency other than their functional currency. Management does mitigate that risk by holding some cash and cash equivalents and deposit accounts in Israeli NIS. The Company also sell from time to time some forwards on the NIS/$ exchange rate to hedge part of the salaries costs.

 

v.

Commodity price risk

The Company purchases aluminum on an ongoing basis as its operating activities in the electronic division require a continuous supply of copper for the production of its electronic devices.

 

vi.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability but can also increase the risk of losses. The Company has procedures with the object of minimizing such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

 

vii.

Composition of financial assets

		December 31,
		2023				2022
		U.S. dollars in thousands
Trade receivable			20,421				16,622
Other accounts receivables			1,662				1,352
Total			22,083				17,974

 

 

NOTE 5 -         TRADE RECEIVABLES

 

		December 31,
		2023				2022
		U.S. dollars in thousands
Open accounts (*)			20,421				16,622
Total			20,421				16,622

(*)        Trade receivables are non-interest bearing. They are generally on 30-90 day terms.

		December 31,
		2023				2022
		U.S. dollars in thousands
Current			17,147				10,975
Late payment of up to 3 months			3,246				4,770
Late payment of more than 3 months			28				877
Total			20,421				16,622

 

 

The Company monitors outstanding accounts receivable and charges off to expense any balances that are determined to be uncollectible or establishes an allowance for doubtful accounts. In reviewing aged receivables, the Company considers their knowledge of customers, historical activity and current economic conditions in establishing the allowance for doubtful accounts.

 

Factoring of Accounts Receivable (Non-Recourse)

The Company has entered into non-recourse factoring agreements with financial institutions to manage its working capital and improve cash flow. Under these agreements, the Company sells certain trade receivables to financial institutions and receives immediate cash. The financial institutions assume the credit risk associated with the receivables, and the Company has no further obligation to repurchase or guarantee payment of the receivables in the event of default by the customer.

 

●	The Company receives approximately 85% to 90% of the face value of the receivables upfront, with the remaining balance (less fees) paid when the financial institutions collect the receivables from the customers.

●	While the Company is not exposed to the risk of non-payment from customers, the factoring arrangement carries a cost in the form of factoring fees, which can vary depending on the credit quality of the receivables and the terms of the factoring agreements.

●	The Company monitors the terms and fees associated with factoring to ensure that it remains an effective financing tool for managing liquidity.

 

Impact on Financial Statements:

 

●	The balances netted from account receivables which relate to the factoring activities for the years ended December 31, 2023 and December 31, 2022 totaled to, US$ 3,918 thousands and US$3,901 thousands, respectively.

●	The financial expenses due to the factoring fee and the discount on the receivables for the years ended December 31, 2023 and December 31, 2022 was US$ 229 thousand and US$ 158 thousand respectively.

 

Revenues from major customers

 

Revenues from major customers which each account for 10% or more of total revenues as reported in the financial statements:

		Year ended December 31,
		2023					2022
Customer A - Israel			16.6	%			15.2	%
Customer B - Israel			14.9	%			9.1	%
Customer C - North America			8.9	%			12.3	%
Customer D - North America			5.1	%			2.1	%
Customer E - North America			3.5	%			2.9	%
Customer F - Israel			3.4	%			2.3	%
Other			47.6	%			56.1	%
			100	%			100	%

 

 

 

NOTE 6 -    OTHER ACCOUNTS RECEIVABLES

 

		December 31,
		2023				2022
		U.S. dollars in thousands
Prepaid expenses			577				487
Tax authorities – V.A.T			1,019				846
Other receivables			3				19
Derivatives Fair Value			63				-
Total			1,662				1,352

 

 

NOTE 7 -         INVENTORIES

		December 31,
		2023				2022
		U.S. dollars in thousands
Raw Materials			22,850				25,199
Products in process			9,585				7,730
Finished products			4,627				1,894
Total			37,062				34,823

 

 

NOTE 8 -    PROPERTY, PLANT AND EQUIPMENT

 

		Buildings & Leasehold improvements				Machinery & equipment				Office furniture & equipment				Computer equipment				Vehicles				Total
		U.S. dollars in thousands
Cost:
Balance as of December 31, 2022			6,385				3,881				615				2,246				78				13,205
Acquisitions			33				771				36				234				152				1,226
Disposals			-				-				1				4				19				24
Balance as of December 31, 2023			6,418				4,652				650				2,476				211				14,407
Accumulated Depreciation:
Balance as of December 31, 2022			2,941				2,454				271				1,774				73				7,513
Depreciation for the year			621				481				49				325				20				1,496
Disposals			-				-				1				3				18				22
Balance as of December 31, 2023			3,562				2,935				319				2,096				75				8,987
Net book value:
As of December 31, 2023			2,856				1,717				331				380				136				5,420

 

 

NOTE 8 -    PROPERTY, PLANT AND EQUIPMENT (Cont.)

 

		Buildings & Leasehold improvements				Machinery & equipment				Office furniture & equipment				Computer equipment				Vehicles				Total
		U.S. dollars in thousands
Cost:
Balance as of December 31, 2021			5,682				3,449				545				1,964				78				11,718
Acquisitions			703				432				70				287				-				1,492
Disposals			-				-				-				5				-				5
Balance as of December 31, 2022			6,385				3,881				615				2,246				78				13,205
Accumulated Depreciation:
Balance as of December 31, 2021			2,384				1,992				235				1,460				64				6,135
Depreciation for the year			557				462				36				316				9				1,380
Disposals			-				-				-				2				-				2
Balance as of December 31, 2022			2,941				2,454				271				1,774				73				7,513
Net book value:
As of December 31, 2022			3,444				1,427				344				472				5				5,692

 

Depreciation of machinery equipment and leasehold improvement and vehicles is charged to cost of revenues. Depreciation of other categories of property, plant and equipment is charged to departments that utilize the relevant assets, primarily in cost of sales and general and administrative expenses.

 

 

NOTE 9 – LEASES

 

The Group has lease contracts for buildings and vehicles, Leases of buildings have lease terms between 10 and 15 years, while vehicles have lease terms 3 years. There are several lease contracts that include extension and termination options, management believes that the options on the buildings will be exercised and therefore they have been taken into account in terms of the value of the right of use and the level of the liability.

 

The Group also has certain leases with lease terms of 12 months or less and leases with low value. The Group applies the short-term lease and lease of low-value assets recognition exemptions for these leases.

 

Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:

 

		Buildings				Vehicles				Total
		U.S. dollars in thousands
As of December 31, 2022			4,510				360				4,870
Additions			-				406				406
Depreciation for the year			1,002				268				1,270
Disposals			305				51				356
As of December 31, 2023			3,203				447				3,650

 

		Buildings				Vehicles				Total
		U.S. dollars in thousands
As of December 31, 2021			4,853				363				5,216
Additions			670				313				983
Depreciation for the year			1,013				270				1,283
Disposals			-				46				46
As of December 31, 2022			4,510				360				4,870

 

 

Set out below are the carrying amounts of lease liabilities (included under "Credit, short-terms loans and current maturities" and "Lease liabilities") borrowings and the movements during the period:

		December 31,
		2023				2022
		U.S. dollars in thousands
As at 1 January			5,441				6,370
Additions			406				983
Disposals			(356	)			(46	)
Interest expense			212				266
Payments			(1,498	)			(1,589	)
Influence of exchange rate differences			(125	)			(543	)
As at 31 December			4,080				5,441
Current			1,292				1,262
Non-current			2,788				4,179

 

 

 

December 31, 2023		Less than one year				1 to 2 years				2 to 3 years				3 to 4 years				> 4 years				Total
Lease liabilities			1,453				1,356				864				265				517				4,455

 

December 31, 2022		Less than one year				1 to 2 years				2 to 3 years				3 to 4 years				> 4 years				Total
Lease liabilities			1,480				1,386				1,306				867				1,076				6,115

 

The following are the amounts recognized in profit or loss:

 

		December 31,
		2023				2022
		U.S. dollars in thousands
Depreciation expense of right-of-use assets			1,270				1,283
Interest expense on lease liabilities			212				266
Exchange rate differences			(125	)			(543	)
Total amount recognized in profit or loss			1,357				1,006

 

 

 

NOTE 10 – INTANGIBLE ASSETS

 

		December 31,
		2023				2022
Order backlog		U.S. dollars in thousands
As at 1 January			278				611
Amortization charge			(278	)			(333	)
As at 31 December			-				278

 

The cost of acquisition was allocated to tangible assets, intangible assets and liabilities which were acquired based on their fair value at the time of the acquisition. The intangible assets that recognized were include customer relations and customer backlog which have a finite useful life and are carried at the recognized amount less accumulated amortization. Amortization is calculated using the straight-line method over the expected life of the order backlog (3 years).

 

Goodwill

 

As part of our annual impairment review in accordance with IAS 36, we have assessed the carrying value of goodwill. The impairment test is based on projected future cash flows and the growth in revenue and profitability of the cash-generating unit (CGU) associated with the goodwill.

For the current reporting period, our analysis indicates that revenue and profit have shown consistent growth. This positive financial performance supports the recoverable amount of the CGU, which exceeds their carrying value. Consequently, no impairment loss has been recognized for the goodwill as of the reporting date.

 

 

 

NOTE 11 -  DEFERRED INCOME TAXES  

 

Deferred income taxes are calculated on temporary differences under the liability method using the tax rate at the year the deferred taxes are recovered.

 

The movement in the deferred taxes is as shown below:

		December 31,
		2023				2022
		U.S. dollars in thousands
As at 1 January			(5,399	)			(5,831	)
Profit charge			(821	)			432
As at 31 December			(6,220	)			(5,399	)

 

Deferred tax assets have been recognized in respect of all differences giving rise to deferred tax assets because it is probable that these assets will be recovered.

 

Composition:

		December 31,
		2023				2022
		U.S. dollars in thousands
Depreciable intangibles			(7,090	)			(6,429	)
Carryforward tax losses			-				340
Provisions for employee-related obligations			156				150
Contingent consideration			(50	)			(102	)
Intangible assets-order backlog			-				(42	)
Research and development expenses deductible over 3 years			764				684
Total			(6,220	)			(5,399	)

 

The deferred income taxes in respect of Group activities in Israel are computed at the tax rate of 16% (see note 17 D). Deferred income taxes of foreign subsidiaries outside Israel are computed at the tax rates applicable to these companies (see note 17 C).

 

 

NOTE 12 -  BANK CREDIT, SHORT-TERM LOANS AND CURRENT MATURITIES

 

						December 31,
		Interest rate				2023				2022
		%				U.S. dollars in thousands
Bank Credit		S+2.30%					1,433				1,860
Short term bank loans		S+1.60% - S+2.49%					14,700				21,000
Current maturities In US $		S+2.81%					960				960
Current maturities In US $		S+2.10%					5,000				-
Current maturities In US $		2.40% - S+2.75%					3,440				3,440
Current maturities In US $			2.81%-2.90%				1,242				1,227
Total							26,775				28,487

 

 

 

NOTE 13 -       OTHER ACCOUNTS PAYABLES

 

		December 31,
		2023			2022
		U.S. dollars in thousands
Employees' wages and other related liabilities			7,503				7,911
Accrued expenses			2,099				863
Seller Debt			-				-
Provision for Repairs			135				135
Advances from Customers			404				387
Derivatives Fair Value			-				252
Tax authorities, Deduction			74				30
Others			76				66
Total			10,291				9,644

 

 

NOTE 14 -  LONG-TERM LOANS NET OF CURRENT MATURITIES

 

		December 31,
		2023			2022
		U.S. dollars in thousands
US Dollars - unlinked			22,092				27,719
Less - current maturities			(10,642	)			(5,627	)
Total			11,450				22,092

 

During December 2020, the Company received long-term bank loans from three different Israeli banks in total of US$ 10.4 million for the purchase of 100% of the share capital of Techaya and funding the working capital increase. The loans are up to 5 years, the repayment on a quarterly basis from March 2021 until December 2025.

 

In March 2021, the Company received a long-term bank loan of US$ 0.8 million, the loans are up to 4 years, the repayment on a quarterly basis from June 2021 until March 2025.

 

During November 2021, the Company received long-term bank loans from three different Israeli banks in total of US$ 19.4 million for the financing purposes repayment of capital note and funding the working capital increase. The loans are up to 6 years, the repayment on a quarterly basis from February 2022 until November 2027.

 

In May 2022, the Company received a long-term bank loan of US$ 5 million, the loans are up to 2 years, the repayment in one payment in May 2024.

 

 

Composition:

 

Long term loans (*):	Currency		Nominal interest rate				Years of maturity				Total amount				Current maturities				Total long term loans
Bank loan	USD		S+2.10%					2022-2024				5,000				5,000				-
Bank loan	USD		S+2.81%					2020-2025				1,920				960				960
Bank loan	USD			2.81% - 2.90%				2020-2025				1,962				1,242				720
Bank loan	USD		2.40% - S+2.75%					2021-2027				13,210				3,440				9,770
												22,092				10,642				11,450

To secure the loans, given by several banks, the Company granted fixed and floated charges over assets of the Company and in addition has undertaken to comply with the financial covenants to be calculated based on the consolidated financial statements of the Company:

 

●	Debt service ratio - The ratio, which is the result of dividing the EBITDA of the Group less CAPEX and current tax expenses by its Current maturities of Long-Term Loans plus current interest expenses, must be at least 1:1.1.

●	The ratio of the total financial liabilities of the Group net of cash and cash equivalents to EBITDA must not exceed 3.5.

●	The ratio of the total short term financial liabilities of the Group net of cash and cash equivalents to working capital must not exceed 75%.

●	Minimum EBITDA - US$ 9 million.

 

 

NOTE 15 -  SUBSIDIARIES

 

A.	The principal subsidiaries of the Company, all of which have been consolidated in these consolidated financial statements, are as follows:

 

Name	Country of incorporation		Proportion of ownership interest			Held by
Enercon Technologies Europe AG (former - P.T.E. Production & Trading Enterprises AG)	Switzerland			100	%	Enercon Technologies Ltd.
Milpower source, Inc.	United States			100	%	Enercon Technologies Ltd.
Multisphere power solutions Pvt. Ltd*	India			55	%	Enercon Technologies Ltd.
Mil Power Converter Technologies India Private Limited**	India			100	%	Enercon Technologies Ltd.
Mil Power Magnetics India Private Limited***	India			100	%	Enercon Technologies Ltd.
Elcatech Development Ltd ****	Israel			100	%	Enercon Technologies Ltd.

 

 

On September 4, 2023 the Company signed an agreement for the purchase of 100% of the share capital of Continental Converters Corporation Pte. Ltd, for a consideration of approximately US$ 2.4 million. The acquisition will be completed upon the earlier of: (i) the sale of all, or substantially all of the shares or assets of the Company; and (ii) upon the provision by Company of a notice to the Seller of the closing of the transactions hereunder, to be provided at any time following the 3rd anniversary of this agreement.

 

* On September 4, 2023 the Company signed an agreement for the purchase of 45% of the share capital of and Multisphere Power Solutions Pvt. Ltd., for a consideration of approximately US$360 thousands. The acquisition will be completed upon the earlier of: (i) the sale of all, or substantially all of the shares or assets of the Company; and (ii) upon the provision by Company of a notice to the Seller of the closing of the transactions hereunder, be provided at any time following the first anniversary of this agreement.

 

** On December 21, 2021, the Company signed an agreement with a minority shareholder of Mil Power Converter Technologies India Private Limited to purchase 51% of the share capital, as a result of which the Company received full control over the company and owns 100% of the share capital. On January 4, 2022, the Company paid US$ 172 thousand and March 23, 2022, the shares were transferred to the Company.

 

 On April 25, 2023, the Company invested US$ 122 thousand in share capital of Mil Power Converter Technologies India Private Limited. On May 01, 2023, Mil Power Converter Technologies India Private Limited allotted 160 thousand shares to the Company.

 

*** In July 2020, the Company has established a new company in India by the name "Mil Power Magnetics India Private Limited" (hereafter- "New Company"). During December 2020, the New Company has started commencing operations, as of December 31, 2022, these activities have been transferred to Mil Power Converter Technologies India Private Limited and New company is currently inactive.

 

**** In December 2020, the Company has finalized the purchase of Techaya. Techaya Group includes Techaya (parent company), which holds 100% of Elcatech 100% fully owned subsidiary. As a result of the purchase, the Company acquired full ownership of Techaya. Since January 2021 Elcatech is inactive company. On November 28, 2021, a merger agreement was signed between Techaya Ltd and the Company. Under this agreement, all assets and/or liabilities of Techaya Ltd of any kind as of January 1, 2022, were transferred to the Company and Techaya Ltd will be liquidated and deleted from the Registrar of Israeli Companies' registers, all in accordance with the provisions of Part Eight of the Israeli Companies Law, 5769-1999 and subject to section 103C of the Israeli Income Tax Ordinance.

 

 

B.	Balances of non-controlling interest:

		December 31,
		2023			2022
		U.S. dollars in thousands
Multisphere power solutions Pvt. Ltd			96				88
Total			96				88

 

C.	Income attributable to non-controlling interests:

 

		December 31,
		2023			2022
		U.S. dollars in thousands
Multisphere power solutions Pvt. Ltd			8				21
Total			8				21

 

 

NOTE 16 - SHARE-BASED PAYMENT

 

An Option Plan was adopted by the Company at the shareholders meeting held on June 14, 2016. On December 1, 2023, and on March 1, 2022, additional 80 thousands and 95 thousands options grant was approved respectively, at the board meetings according to the conditions above. The vesting period of the options is mainly 4 years. An approval for the replacement of plans was received from the tax authorities on January 7, 2015, providing the Company, the employees and the trustee of the plan to submit the documentation required within 60 days from approval. Unexercised options expire seven years after date of the grant after which they will be void. Options are forfeited when the employee leaves the Company. The options were granted as part of a plan that was adopted in accordance with the provision of section 102 of the Israeli Income Tax Ordinance. On April 30, 2023, the board of directors of the Company decided to change the options plan of the Company so that the expiration date of the options was extended from a period of 7 years from the date the options were granted to a period of 12 years from the day the options were granted. As a result of the above decision, the additional fair value of the options amounted to US$ 290 thousand.

 

The weighted average fair value of the options was estimated using a Black and Scholes option pricing model based on the following significant data and assumptions:

 

		2023				2022				2021				2020				2019				2018				2017				2016
Share price (dollar)			12.13				12.13				12.13				7.56				0.76				0.76				0.69				0.67
Expected volatility			74	%			74	%			74	%			74	%			74	%			74	%			74	%			74	%
Expected average life (years)			4.50				4.34				4.62				4.31				4.27				4.32				4.21				3.88
Risk free rate			3.89	%			0.62	%			0.62	%			0.62	%			0.62	%			0.62	%			0.62	%			0.62	%
Exercise price (dollar)			12.13				10.69				12.13				7.56				0.76				0.76				0.69				0.67
Fair value of the options			8.73				7.29				7.03				4.38				0.44				0.44				0.39				0.37

 

The expense recognized in the financial statements for employee services received for the years ended December 31, 2023 and December 31, 2022 was US$ 719 thousands and US$ 452 thousands respectively.

 

The following table lists the number of share options, the weighted average exercise prices of share options and modification in employee option plans during the current year:

		2023				2023				2022				2022
		weighted average exercise price				Number				weighted average exercise price				Number
		$								$
Outstanding at beginning of year			2.51				985,000				2.31				1,035,000
Changes during the year:
Granted during the year			12.13				80,000				10.69				95,000
Exercised during the year			-				-				7.56				115,000
Forfeited during the year			12.13				10,000				3.47				30,000
Outstanding at the end of the year			3.15				1,055,000				2.51				985,000
Exercisable at the end of the year			2.12				940,000				1.58				881,250

The weighted average remaining contractual life for the share options outstanding as of December 31, 2023, was 3.28 years.

 

 

NOTE 17 -  INCOME TAX

 

Details regarding the tax environment of the Group:

 

A.

General

The Group is incorporated in various countries where income is basically taxed at statutory rates. Certain subsidiaries benefit from tax incentives or are subject to specific tax rulings.

 

B.	Corporate taxation in Israel

The income of the Company (other than income from "preferred enterprises”) is taxed at the regular corporate tax rate in Israel 23%.

 

C.	Subsidiaries outside Israel

Subsidiaries that are incorporated outside of Israel are assessed for tax under the tax laws in their respective countries of residence. The principal tax rates applicable to subsidiaries outside Israel are as follows:

 

Company incorporated in the Switzerland – The weighted tax rate is about 12% (composed of Federal, Cantonal and Municipal tax).

 

Company incorporated in the USA – tax rate of 21%.

 

Company incorporated in India – tax rate is about 25%.

 

D.	Encouragement Laws in Israel

Benefits under the Law for the Encouragement of Capital Investments - 1959

 

On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – “the Amendment”). The Amendment is effective from January 1, 2011 and its provisions apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, per the definition of these terms in the Amendment. The Law for Change of National Priorities (Legislative Amendments for Achieving the Budgetary Goals for 2013-2014), 2013, which was published in the official gazette on August 5, 2013, enacts among other things, the increase of the tax rate applicable to preferred income to the effect that commencing tax year 2014 and thereafter the tax rate on the income of preferred enterprises of a qualifying Company in Development Zone. A as stated in the Encouragement Law shall increase to 9% (instead of 7% in 2013) and for companies located in zones other than Zone A the rate shall increase to 16% (instead of 12.5%). In addition, the tax rate on dividends distributed on January 1, 2014 and thereafter originating from preferred income under the Encouragement Law will be raised to 20% (instead of 15%).

 

Therefore, the applicable corporate tax rate for 2014 and hereafter is 16%.

 

E.	Income tax assessments for the presented period

 

		Year ended December 31,
		2023			2022
		U.S. dollars in thousands
Current taxes:
For the reported year income			2,892				430
Deferred taxes:
Creation and reversal of deferred taxes			927				424
Total			3,819				854

 

Current taxes are computed in accordance with the statutory tax rates of Group entities around the world (see above) and in accordance with relevant tax benefits for each country.

 

F.	Tax Assessments

The Company, Techaya and Elcatech haves final tax assessments until 2018 for the purpose of ITA (Israeli Tax Authorities). Milpower source, Inc. has been assessed by the IRS (US Tax Authorities) for year 2015. Techaya has been assessed for withholding tax by the ITA (Israeli Tax Authorities) for years 2015-2018, VAT for years 2017-2021 and NII (Israeli National Insurance Institute) for years 2015-2018. The Company has been assessed for withholding tax by the ITA (Israeli Tax Authorities) for years 2018-2021.

 

 

NOTE 18 -  SHARE CAPITAL

 

Composition:

		Authorized
		2023								2022
		Number				NIS				Number				NIS
Ordinary shares of NIS 0.01 each			20,000,000				200,000				20,000,000				200,000

 

		Issued and fully paid
		2023								2022
		Number				NIS				Number				NIS
Ordinary shares of NIS 0.01 each			10,217,497				102,175				10,102,497				101,025
Changes during the year
Exercise of options to share capital			-				-				115,000				1,150
At end of the year			10,217,497				102,175				10,217,497				102,175

 

 

NOTE 19 – LIENS AND GUARANTEES

 

A.    Liens:

The Company has mortgaged to banks, by a first-degree fixed lien and assignment by lien (accordingly) to an unlimited amount, the company's outstanding share capital, both current and future including shares not yet called or repaid,, its goodwill, both current and future, deposit accounts, the debts they represent and all cash and securities deposited in them; Additionally, the company has mortgaged by a first- degree floating charge,  first-degree to an unlimited amount, the entire company enterprise and all the company's rights, assets and property, for every types and kinds, in any location in which they are located, current and future.

 

B.   Guarantees

1.       The Group has guarantees in favor of the lessors in the amount of $194 thousand.

2.       The Group has guarantees in favor of governance authorities in the amount of $664 thousand.

3.       The Group has guarantees in favor of her clients in the amount of $29 thousand.

The guarantees are mainly to guarantee performance of agreements signed.

 

 

NOTE 20 - COST OF SALES

 

		Year ended December 31,
		2023			2022
		U.S. dollars in thousands
Payroll and related expenses			19,986				21,283
Materials consumed			22,611				23,103
Materials consumed- mechanic			4,491				4,868
Subcontractors			2,478				1,262
Deliveries and customs			1,077				715
Depreciation and amortization			2,485				2,488
Other production expenses			4,082				3,892
			57,210				57,611
Increase in inventory			(2,239	)			(4,270	)
Total cost of sales			54,971				53,341

 

 

NOTE 21 - RESEARCH AND DEVELOPMENT EXPENSES

 

 

		Year ended December 31,
		2023			2022
		U.S. dollars in thousands
Payroll and related expenses			4,803				6,090
Other			493				451
Total			5,296				6,541

 

 

NOTE 22 – SELLING AND MARKETING EXPENSES

 

		Year ended December 31,
		2023			2022
		U.S. dollars in thousands
Payroll and related expenses			7,196				4,794
Commissions			729				652
Travel			409				299
Consultants			65				116
Others			1,047				849
Total			9,446				6,710

 

 

 

NOTE 23 - GENERAL AND ADMINISTRATIVE EXPENSES

 

		Year ended December 31,
		2023			2022
		U.S. dollars in thousands
Payroll and related expenses			2,703				2,741
Consultants and Professional services			551				665
Management fees			237				240
Travel			97				107
Legal fees			54				48
Others			471				411
Total			4,113				4,212

 

 

NOTE 24 - FINANCE EXPENSES AND INCOMES, NET

 

		Year ended December 31,
		2023				2022
		U.S. dollars in thousands
Finance expense
Interest on loans			3,290				1,869
Foreign exchange loss			24				213
Interest and bank commissions			651				568
Loss from financial instruments measured at fair value through profit or loss			158				1,560
			4,123				4,210
Finance income
Foreign exchange gain			206				2,584
Interest and other finance			98				64
Total			3,819				1,562

 

NOTE 25- TRANSACTIONS WITH RELATED PARTIES

 

		December 31,
		2023			2022
		U.S. dollars in thousands
Trade payables			7				7

 

The Company and Fortissimo Capital Management (MC) Ltd (herein "Fortissimo") signed a management services agreement whereby Fortissimo through its employees, officers and directors will advise and assists to the Company's management on matters concerning the affairs and business of the Company, Following the agreement Fortissimo has the right to receive annual Management services fee equal to US$ 240 thousand.

 

		Year ended December 31,
		2023				2022
		U.S. dollars in thousands
Management fees			240				240
Payroll to directors			84				89

 

 

 

NOTE 26 - SUBSEQUENT EVENTS

 

A.

On September 18, 2024, Bel Fuse Inc.("Bel) entered into a definitive agreement (the "SPA") with the Company's shareholder(the "FF3") to acquire a majority stake in the Company, based on an enterprise value of US$ 400 million. Under the terms of the SPA, Bel will acquire an 80% stake upfront for US$ 320 million in cash (subject to customary adjustments), plus up to US$ 10 million of potential earnout payments for the 2025-2026 period, with the intent to purchase the remaining 20% by early 2027 based on future EBITDA performance. The acquisition was completed on November 14, 2024 (The "Closing").

 

On November 8, 2024, a Notice of Substitute Purchaser was executed, substituting Bel Power Solutions s.r.o. as the purchaser under the SPA.

 

B.	Following the execution of the Share Purchase Agreement ("SPA") with Bel. on November 14, 2024, the following events occurred:

1.

Pre-existing agreements were activated and amended (See note 15):

●

Continental Converters Corporation Pte. Ltd.

o

Amendments on September 23, 2024, and October 22, 2024, increased the consideration by approximately US$ 3 million and required the amount to be transferred to an escrow account.

o

On October 31, 2024, the adjusted consideration was deposited into the escrow account held by ESOP Trust & Management Services Ltd.

●

Multisphere Power Solutions Pvt. Ltd.:

o

Amended on October 22, 2024, requiring the consideration to be transferred to an escrow account.

o

On October 31, 2024, the adjusted consideration was deposited into the escrow account held by ESOP Trust & Management Services Ltd.

 

2.

At the Closing, 80% of all the outstanding and unexercised Vested Company Options that are in the money were canceled and automatically converted into the right to receive an amount in cash. All unvested Company Options were canceled at the Closing for no consideration. The remaining   20% of the outstanding and unexercised vested Company Options shall continue to be outstanding.

 

 

3.

At the Closing, the Company repaid all long and short bank loans, US$ 12,862 thousand and US$ 6,000 thousand respectively, and its accrued interest. Following the repayment, all lines were removed (see note 14).

 

4.

On November 14, 2024, the Company received two loans from related parties: US$ 19,781 thousand from Bel Power Solutions S.R.O. and US$ 4,945 thousand from FF3 HOLDINGS, L.P. Both loans carry an interest rate of 8% per annum. The repayment date of both loans will be the later of (i) 31 March 2027, and (ii) expiry of the Deferred Exercise Period, or, or, if  Bel acquires the remaining 20% of the company's shares before these dates, the Maturity Date will be the date of such acquisition.

 

C.

On June 28, 2024, the Company signed an agreement to purchase of 100% of the share capital of Enercon Technologies Europe GmbH (Former: Youco B24-H208 Vorrats-GmbH)., for a consideration of approximately US$ 30 thousands. As of the date of this report, the Company has no intention of initiating any activity in the new subsidiary.

 

D.

On January 15, 2024, the Company signed an agreement with Cellcom Israel Ltd. Under the terms of this agreement, the Company will lease an additional area of 521 square meters in Netanya, from January 15, 2024, until July 31, 2026. The Company will pay the Lessor a monthly rental fee of 48 New Israeli Shekels per square meter and a management fee of 8 New Israeli Shekels per square meter, both linked to the Israeli Consumer Price Index.

 

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

ENERCON TECHNOLOGIES LTD

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTENBER 30, 2024

 

 

 

 

 

 

 

 

ENERCON TECHNOLOGIES LTD

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

TABLE OF CONTENTS

	Page
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF:
Financial Position	3-4
Comprehensive Income	5
Changes in Equity	6-7
Cash Flows	8-9
Notes forming part of the Consolidated Financial Statements	10-15

 

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF  30 SEPTEMBER 2024

 

						As of September 30,				As of December 31,
						2024				2023
		Note				U.S. dollars in thousands
ASSETS
Current assets
Cash and cash equivalents							3,489				3,713
Short-term deposit							234				129
Short-term restricted cash							358				532
Trade receivables							25,130				20,421
Other accounts receivable							2,225				1,662
Income taxes receivable							-				575
Inventories							39,473				37,062
							70,909				64,094
Non-Current Assets
Restricted Cash							104				48
Long-term prepaid expenses							72				45
Deferred tax assets							7				36
Property, plant and equipment							5,755				5,420
Right-of-use assets			4				3,228				3,650
Goodwill							60,469				60,466
							69,635				69,665
TOTAL ASSETS							140,544				133,759

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 SEPTEMBER 2024

 

						As of September 30,				As of December 31,
						2024				2023
		Note				U.S. dollars in thousands
LIABILITIES AND EQUITY
Current Liabilities
Credit, short-term loans and current maturities			5				9,144				26,775
Current maturities of lease liabilities							1,462				1,292
Trade payables							9,359				7,201
Income taxes payable							2,588				85
Advances from customers							3,318				404
Employees' wages and other related liabilities							5,204				7,503
Other accounts payable							1,751				2,384
							32,826				45,644
Non-Current Liabilities
Long-term loans net of current maturities			6				7,710				11,450
Lease liabilities							2,102				2,788
Deferred income tax liabilities							6,594				6,220
							16,406				20,458
Equity attributable to owners of the parent
Share capital							7,748				7,562
Reserve from share-based payment transactions			3				2,108				1,889
Capital reserve from transactions with minority							(180	)			(180	)
Retained earnings							81,416				58,290
							91,092				67,561
Non-controlling interests							220				96
							91,312				67,657
TOTAL LIABILITIES AND EQUITY							140,544				133,759

 

The interim condensed consolidated financial statements were authorized to be published by management on December 31, 2024.

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR NINE MONTHS ENDED  30 SEPTEMBER 2024

 

						For the nine months ended September 30,								For the three months ended September 30,
						2024				2023				2024				2023
		Note				U.S. dollars in thousands
Revenues			8				89,783				69,836				30,067				25,095
Cost of sales							46,861				40,664				15,385				13,956
Gross profit							42,922				29,172				14,682				11,139
Research and development expenses							4,390				4,004				1,515				1,291
Selling and marketing expenses							5,953				7,188				2,088				2,505
General and administrative expenses							3,863				2,965				1,612				995
Profit from operations							28,716				15,015				9,467				6,348
Other expenses (income)							(3	)			(29	)			-				-
Finance expenses							1,870				3,252				515				1,050
Finance income							(1,068	)			(1,425	)			(12	)			(669	)
Profit before income tax							27,917				13,217				8,964				5,967
Taxes on income							4,667				1,896				1,453				818
Net profit for the period							23,250				11,321				7,511				5,149
Other comprehensive income							-				-				-				-
Total comprehensive income for the period							23,250				11,321				7,511				5,149
Total comprehensive income attributable to:
Equity holders of the company							23,126				11,349				7,530				5,164
Non-controlling interest							124				(28	)			(19	)			(15	)
							23,250				11,321				7,511				5,149

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR NINE MONTHS ENDED 30 SEPTEMBER 2024

U.S dollars in thousands

 

		Share capital				Reserve from share-based payment transactions				Capital reserve from transactions with non-controlling interest				Retained earnings				Total attributable to owners of the parent				Non-controlling interest				Total equity
Balance as of December 31, 2022			7,536				1,196				(180	)			44,028				52,580				88				52,668
Changes during 2023:
Forfeit of ESOP			26				(26	)			-				-				-				-				-
Share based payment			-				307				-				-				307				-				307
Total comprehensive income for the year			-				-				-				11,349				11,349				(28	)			11,321
Balance as of September 30, 2023			7,562				1,477				(180	)			55,377				64,236				60				64,296
Balance as of December 31, 2023			7,562				1,889				(180	)			58,290				67,561				96				67,657
Changes during 2024:
Exercise of ESOP			186				(78	)			-				-				108				-				108
Share based payment			-				297				-				-				297				-				297
Total comprehensive income for the year			-				-				-				23,126				23,126				124				23,250
Balance as of September 30, 2024			7,748				2,108				(180	)			81,416				91,092				220				91,312

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THREE MONTHS ENDED 30 SEPTEMBER 2024

U.S dollars in thousands

 

		Share capital				Reserve from share-based payment transactions				Capital reserve from transactions with non-controlling interest				Retained earnings				Total attributable to owners of the parent				Non-controlling interest				Total equity
Balance as of June 30, 2023			7,562				1,393				(180	)			50,213				58,988				75				59,063
Changes during 2023:
Share based payment			-				84				-				-				84				-				84
Total comprehensive income for the year			-				-				-				5,164				5,164				(15	)			5,149
Balance as of September 30, 2023			7,562				1,477				(180	)			55,377				64,236				60				64,296
Balance as of June 30, 2024			7,748				2,023				(180	)			73,886				83,477				239				83,716
Changes during 2024:
Share based payment			-				85				-				-				85				-				85
Total comprehensive income for the year			-				-				-				7,530				7,530				(19	)			7,511
Balance as of September 30, 2024			7,748				2,108				(180	)			81,416				91,092				220				91,312

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR NINE MONTHS ENDED 30 SEPTEMBER 2024

 

	For the nine months ended September 30,
	2024				2023
	U.S. dollars in thousands
Cash flows from operating activities:
Profit for the year		23,250				11,321
Adjustments for:
Depreciation and amortization		2,267				2,320
Equity settled share-based payment expense		297				307
Loss (profit) from sale of property, plant and equipment		(3	)			(4	)
Loss (profit) from other current financial assets		(14	)			(230	)
Taxes on income		4,667				1,896
Other financial expenses		1,537				2,559
		32,001				18,169
Changes in assets and liabilities:
Increase in trade receivables		(4,709	)			(5,991	)
Increase in other accounts receivable and prepaid expenses		(576	)			(157	)
Increase in inventories		(2,411	)			(2,969	)
Increase in trade payables		2,158				1,857
Increase (decrease) in other accounts payable		(18	)			1,063
		(5,556	)			(6,197	)
Cash from operating activities		26,445				11,972
Interest paid		(1,604	)			(2,826	)
Taxes paid		(1,186	)			(809	)
Net cash from operating activities		23,655				8,337

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENERCON TECHNOLOGIES LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR NINE MONTHS ENDED 30 SEPTEMBER 2024 (Cont.)

 

		For the nine months ended September 30,
		2024				2023
		U.S. dollars in thousands
Cash flows from investing activities:
Purchases of property, plant and equipment			(1,583	)			(979	)
Proceeds from sale of property, plant and equipment			4				6
Short-term deposit			(105	)			(236	)
Restricted deposit			118				68
Acquisition of subsidiary, net of cash acquired			(3	)			-
Net Cash used in investing activities			(1,569	)			(1,141	)
Cash flows from financing activities:
Short-term credit from banks			(12,141	)			(2,309	)
Repayment of lease liabilities			(1,047	)			(981	)
Long-term Loans repayment			(9,230	)			(4,219	)
Exercise of ESOP			108				-
Net Cash used in financing activities			(22,310	)			(7,509	)
Decrease (increase) in cash and cash equivalents			(224	)			(313	)
Balance of cash and cash equivalents as at the beginning of the year			3,713				2,860
Balance of cash and cash equivalents as at the end of the year			3,489				2,547
Supplemental cash flow activities
Non-cash transactions:
Net lease liabilities arising from obtaining right-of-use assets			(600	)			-

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENERCON TECHNOLOGIES LTD.

NOTES FORMING PART OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – GENERAL DESCRIPTION OF THE GROUP AND ITS OPERATIONS

 

A.

Enercon Technologies Ltd. (hereafter – the Company) founded in November 2014. The Company itself and through its subsidiaries ("Enercon” or the "Group") develops, designs, manufactures and markets custom power supplies, UPS units and networking solutions that are designed for extreme conditions and are mainly for military, aerospace and civilian aircrafts applications (used for applications in radars, land systems, aircrafts, and missiles) through its manufacturing facilities in Israel, U.S, and India. The Company is a limited liability company incorporated and domiciled in Israel. The address of its registered office is, 27 Yad Harutzim St., Netanya Industrial Area. The Company’s controlling shareholder is Fortissimo Capital Fund.

	B.	Impact of the “Swords of Iron” War on the Company:

Starting from October 7, 2023, following the attacks on Israel and the security situation, the State of Israel has been in a state of war known as the 'Iron Swords War'. The war has led to a slowdown in the Israeli economy and if this war continues for a  prolonged period, then it may begin to impact the Company. Despite this, the Company has continued to operate without interruption, although it has faced challenges including increased transportation costs and employee recruitment for reserve duty. As of the date of this report, and to the best of the Company’s knowledge, the war has not had a significant effect on it. The Company continues to closely monitor the situation and its potential impact on operations.

 

 

NOTE 2 – ACCOUNTING POLICIES AND BASIS OF PREPARATION

 

A.

Basis of presentation

The interim condensed financial information has been prepared in accordance with IAS 34 “Interim Financial Reporting”. The results for the interim period are unaudited and, in the opinion of management, include all adjustments necessary for a fair statement of the results for the period ended 30 September 2024. All such adjustments are of a normal recurring nature. The unaudited interim condensed consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group’s annual consolidated financial statements for the year ended 31 December 2023.

 

B.

Estimates and assumptions

The estimates and assumptions applied in the preparation of these interim financial statements are consistently applied with those used in the preparation of the annual financial statements.

 

C.

Basis of  preparation of consolidated interim financial statements

The accounting policy of the group, as summarized in these interim consolidated financial statements, is consistent with the policy applied in the annual financial statements.

 

 

D.

Functional and reporting currency

The financial statements are presented in U.S. dollars and all values are rounded to the nearest thousand dollars except where otherwise indicated. The Group's management believes that the U.S. dollar is the primary currency of the economic environment in which the Group operates.

 

E.

New and amended accounting standards and interpretations

The following amendments became effective as at January 1, 2024:

1. Amendments to IAS 1 - Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants;

The adoption of the above amendments to EU-adopted IFRS did not result in any material changes to the Group’s accounting policies and did not have any material impact on the financial position or performance of the Group. Other amendments coming into effect on 1 January 2024 are assessed to have no impact on the Group’s operations.

 

 

 

NOTE 3 -    SHARE-BASED PAYMENT

 

		September 30,				September 30,				December 31,				December 31,
		2023				2023				2023				2023
		weighted average exercise price				Number				weighted average exercise price				Number
		$								$
Outstanding at beginning of period			3.15				1,055,000				2.51				985,000
Changes during the period:
Granted during the period			-				-				12.13				80,000
Exercised during the period			1.96				55,000				-				-
Forfeited during the period			-				-				12.13				10,000
Outstanding at the end of the period			3.21				1,000,000				3.15				1,055,000
Exercisable at the end of the period			2.49				920,940				2.12				940,000

 

 

NOTE 4 – LEASES

 

The Group has lease contracts for buildings and vehicles, Leases of buildings have lease terms between 10 and 15 years, while vehicles have lease terms 3 years. There are several lease contracts that include extension and termination options, management believes that the options on the buildings will be exercised and therefore they have been taken into account in terms of the value of the right of use and the level of the liability.

 

The Group also has certain leases with lease terms of 12 months or less and leases with low value. The Group applies the short-term lease and lease of low-value assets recognition exemptions for these leases.

 

o

On January 15, 2024, the Company signed an agreement with Cellcom Israel Ltd. According to the agreement the Company will lease an additional area of 521 square meters in Netanya, from January 15, 2024 until July 31, 2026. The value of the right of use asset is approximately US$ 233 thousand.

 

 

 

NOTE 5 -    BANK CREDIT, SHORT-TERM LOANS AND CURRENT MATURITIES

 

						September 30,				December 31,
		Interest rate				2024				2023
		%				U.S. dollars in thousands
Bank Credit		S+2.30%					1,992				1,433
Short term bank loans		S+1.60% - S+2.49%					2,000				14,700
Current maturities In US $		S+2.81%					960				960
Current maturities In US $		S+2.10%					-				5,000
Current maturities In US $		2.40% - S+2.75%					3,340				3,440
Current maturities In US $			2.81%-2.90%				852				1,242
Total							9,144				26,775

 

 

NOTE 6 -    LONG-TERM LOANS NET OF CURRENT MATURITIES

 

The Company did not incur any new loans during the reporting period.

		September 30,			December 31,
		2024			2023
		U.S. dollars in thousands
US Dollars - unlinked			12,862				22,092
Less - current maturities			(5,152	)			(10,642	)
Total			7,710				11,450

 

 

Composition:

Long term loans (*):	Currency		Nominal interest rate				Years of maturity				Total amount				Current maturities				Total long term loans
Bank loan	USD		S+2.81%					2020-2025				1,200				960				240
Bank loan	USD			2.81% - 2.90%				2020-2025				1,032				852				180
Bank loan	USD		2.40% - S+2.75%					2021-2027				10,630				3,340				7,290
												12,862				5,152				7,710

 

 

NOTE 7 -    SUBSIDIARIES

 

On June 28, 2024 the Company acquired 100% of the share capital of Enercon Technologies Europe GmbH (Former: "Youco B24-H208 Vorrats-GmbH"), for approximately US$ 30 thousand. As of the reporting date, the company does not intend to initiate any activity in the subsidiary.

 

 

 

NOTE 8 -         REVENUES

 

Revenues from major customers

 

Revenues from major customers which each account for 5% or more of total revenues as reported in the financial statements:

		For the nine months ended September 30, 2024				For the three months ended September 30, 2024				For the nine months ended September 30, 2023				For the three months ended September 30, 2023
Customer A - Israel			21.8	%			26.1	%			16.8	%			12.7	%
Customer B - North America			7.2	%			6.9	%			6.2	%			9.5	%
Customer C - Israel			6.2	%			7.3	%			15.3	%			17.3	%
Customer D - North America			6.0	%			3.7	%			6.4	%			8.3	%
Customer E - Israel			5.1	%			4.9	%			2.6	%			3.5	%
Other			53.7	%			51.1	%			52.7	%			48.7	%
			100	%			100	%			100	%			100	%

 

 

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

 

		September 30,			December 31,
		2024			2023
		U.S. dollars in thousands
Trade payables			36				7

 

The Company and Fortissimo Capital Management (MC) Ltd (herein "Fortissimo") signed a management services agreement whereby Fortissimo through its employees, officers, and directors will advise and assists to the Company's management on matters concerning the affairs and business of the Company, Following the agreement Fortissimo has the right to receive annual Management services fee equal to US$ 240 thousand.

 

		For the nine months ended September 30, 2024				For the three months ended September 30, 2024				For the nine months ended September 30, 2023				For the three months ended September 30, 2023
		U.S. dollars in thousands
Management fees			180				60				180				60
Payroll to directors			61				20				61				20
Rent and management fees (Cellcom)			820				273				757				251
Municipality tax and water (Cellcom)			151				50				141				46
Electricity (Cellcom)			180				97				158				77
Phone (Cellcom)			1				-				2				1

 

 

 

NOTE 10- SIGNIFICANT EVENTS AND TRANSACTION DURING THE REPORTING PERIOD AND SUBSEQUENT EVENTS

 

A.

On September 18, 2024, Bel Fuse Inc.("Bel") entered into a definitive agreement (the "SPA") with Company shareholders (the "FF3") to acquire a majority stake in the Company based on an enterprise value of US$ 400 million. Under the terms of the SPA, Bel will acquire an 80% stake upfront for US$ 320 million in cash (subject to customary adjustments), plus up to US$ 10 million of potential earnout payments for the 2025-2026 period, with the option to purchase the remaining 20% by early 2027 based on future EBITDA performance. The acquisition was completed on November 14, 2024 (The "Closing"). On November 8, 2024, a Notice of Substitute Purchaser was executed, substituting Bel Power Solutions s.r.o. as the purchaser under the SPA.

B.

Following the execution of the Share Purchase Agreement ("SPA") with Bel. on November 14, 2024, the following events occurred:

1.

Pre-existing agreements were activated and amended:

●

Continental Converters Corporation Pte. Ltd.

o

Amendments on October 22, 2024, requiring consideration to be transferred to an escrow account.

o

On October 31, 2024, the adjusted consideration was deposited into the escrow account held by ESOP Trust & Management Services Ltd.

●

Multisphere Power Solutions Pvt. Ltd.:

o

Amended on October 22, 2024, requiring the consideration to be transferred to an escrow account.

o

On October 31, 2024, the adjusted consideration was deposited into the escrow account held by ESOP Trust & Management Services Ltd.

2.

At the Closing, 80% of all the outstanding and unexercised Vested Company Options that are in the money were canceled and automatically converted into the right to receive an amount in cash. All unvested Company Options were canceled at the Closing for no consideration. The remaining   20% of the outstanding and unexercised vested Company Options shall continue to be outstanding.

3.

At the Closing, the Company repaid all long and short bank loans, US$ 12,862 thousand and US$ 6,000 thousand respectively, and its accrued interest. Following the repayment, all lines were removed (see notes 6,7).

4.

On November 14, 2024, the Company received two loans from related parties: US$ 19,781 thousand from Bel Power Solutions S.R.O. and US$ 4,945 thousand from FF3 HOLDINGS, L.P. Both loans carry an interest rate of 8% per annum. The repayment date of both loans will be the later of (i) 31 March 2027, and (ii) expiry of the Deferred Exercise Period, or if Bel acquires the remaining 20% of the company's shares before these dates, the Maturity Date will be the date of such acquisition

C.

On January 15, 2024, the Company signed an agreement with Cellcom Israel Ltd. According to the agreement the Company will lease an additional area of 521 square meters in Netanya, from January 15, 2024 until July 31, 2026. The Company will pay the lessor a monthly rental fee of 48 New Israeli Shekels per square meter and a management fee of 8 New Israeli Shekels per square meter, both linked to the Israeli Consumer Price Index.

 

 

 

Exhibit 99.3

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Transaction Background

 

On September 18, 2024, Bel Fuse Inc. (“Bel”, the “Company”, “we”, “us” or “our”) entered into a Share Purchase Agreement, dated as of September 19, 2024 (the “Purchase Agreement”), with Enercon Technologies, Ltd. (“Enercon”), FF3 Holdings, L.P., for itself and as Sellers’ Representative (“FF3”), and each of the other seller parties signatory thereto (together with FF3, each a “Seller” and collectively, the “Sellers”). The transaction contemplated by the Purchase Agreement (referred to collectively herein as the “Transaction” or the “acquisition”) closed on November 14, 2024 (the “Closing Date”). Under the terms of the Purchase Agreement, on the Closing Date (and deemed effective solely for accounting purposes as of November 1, 2024), Bel acquired from the Sellers 80% of the issued and outstanding share capital of Enercon on a fully-diluted basis for (i) a cash purchase price of $320 million (subject to customary adjustments), plus (ii) up to $10 million in potential earnout payments for the 2025-2026 period (the “Earnout Payments”), as further described below.  Bel may acquire the remaining 20% stake in Enercon and has the current intention to so purchase such remaining interest by early 2027 in accordance with the terms and subject to the conditions of the Shareholders’ Agreement.

 

At the closing, Bel paid an aggregate of approximately $324.1 million in cash in respect of the cash purchase price (after giving effect to estimated adjustments taken at closing including for Enercon’s cash, indebtedness, net working capital and unpaid transaction costs, and subject to further adjustment post-closing) and Enercon recognized a seller note of $4.9 million. Bel funded the closing of the Transaction through cash on hand of approximately $85.6 million and with approximately $238.5 million provided through incremental borrowings under the Company’s revolving credit facility, as amended in connection with the Transaction.

 

The potential Earnout Payments may become payable of up to $5 million for each of the fiscal 2025 and fiscal 2026 earnout periods (each, an “Earnout Period”), subject to Enercon’s achievement of certain specified EBITDA targets for each respective Earnout Period, as calculated and determined in accordance with the Purchase Agreement.  In the event that (i) the target for the respective Earnout Period has been achieved, the full $5 million Earnout Payment for the Earnout Period shall be payable, or (ii) achievement for the respective Earnout Period is at least 90% of the target level but less than 100% of the target level, then the amount payable in respect of the Earnout Payment for such Earnout Period shall be $2.5 million. In the event that achievement for the respective Earnout Period is less than 90% of the target level, no Earnout Payment shall be due for such period.

 

Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined financial information below has been prepared to illustrate the effect of Bel’s acquisition of Enercon, as further described above. The following pro forma financial information is based on our historical consolidated financial statements and the historical financial statements of Enercon and is intended to provide you with information about how the Transaction might have affected our historical consolidated statement of operations and balance sheet had the Transaction closed as of January 1, 2023.  Our preliminary purchase price has been allocated to the respective assets and liabilities based on current estimates and currently available information and is subject to revision based on final determinations of fair value and the final allocation of purchase price to the assets and liabilities of Enercon.

 

The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2023 and for the nine month period ended September 30, 2024, give effect to the acquisition and the financing obtained to fund the acquisition as if the transaction had occurred on January 1, 2023. The pro forma balance sheet as of September 30, 2024 gives effect to the acquisition and the financing obtained to fund the acquisition as if the transaction had occurred on September 30, 2024.  The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to or remove the effect of events that are directly attributable to the acquisition and are factually supportable.  The unaudited pro forma condensed combined statements of operations do not reflect any of Bel management’s expectations for revenue enhancements, cost savings from the combined companies’ operating efficiencies, synergies or other restructurings, or the costs and related liabilities that would be incurred to achieve such revenue enhancements, cost savings from operating efficiencies, synergies or restructurings, which could result from the acquisition.

 

The accompanying notes are an integral part of the pro forma condensed combined financial information. Such notes describe the assumptions and estimates related to the unaudited adjustments to the pro forma condensed combined financial information.

 

The pro forma financial information below is based on available information and assumptions that we believe are reasonable.  The pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our results of operations would have been had the Transaction occurred on the date indicated.  The pro forma financial information also should not be considered representative of our future financial condition or results of operations.

 

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2024
(dollars in thousands, except per share data)
		Historical																Pro Forma
		Bel Fuse Inc.				Enercon												Transaction
		(as reported)				IFRS (as reported)				U.S. GAAP Adjustments				U.S. GAAP				Accounting Adjustments			Note		Pro Forma Combined
ASSETS										(Note 1)
Current Assets:
Cash and cash equivalents		$	134,266			$	3,489			$	-			$	3,489			$	(85,971	)	3b		$	51,784
Held to maturity U.S. Treasury securities			29,541				-				-				-				-					29,541
Accounts receivable, net			75,998				25,130				-				25,130				-					101,128
Inventories			124,885				39,473				-				39,473				2,395		3a			166,753
Unbilled receivables			5,312				-				-				-				-					5,312
Assets held for sale			2,061				-				-				-				-					2,061
Other current assets			15,586				2,817				-				2,817				950		3c			19,353
Total current assets			387,649				70,909				-				70,909				(82,626	)				375,932
Property, plant and equipment, net			36,735				5,755				-				5,755				3,697		3a			46,187
Right-of-use assets			22,901				3,228				303				3,531				-					26,432
Related party note receivable			3,070				-				-				-				-					3,070
Equity method investment			10,014				-				-				-				-					10,014
Intangible assets, net			45,850				-				-				-				189,700		3a			235,550
Goodwill, net			26,922				60,469				-				60,469				100,452		3a			187,843
Deferred income taxes			16,612				7				-				7				1,516		3j			18,135
Other assets			34,664				176				-				176				950		3c			35,790
Total assets		$	584,417			$	140,544			$	303			$	140,847			$	213,689				$	938,953

 

 

 

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2024
(dollars in thousands, except per share data)
		Historical																Pro Forma
		Bel Fuse Inc.				Enercon												Transaction
		(as reported)				IFRS (as reported)				U.S. GAAP Adjustments				U.S. GAAP				Accounting Adjustments			Note		Pro Forma Combined
LIABILITIES AND STOCKHOLDERS' EQUITY											(Note 1)
Current Liabilities:
Accounts payable		$	37,139			$	9,359			$	-			$	9,359			$	-				$	46,498
Accrued expenses			42,109				10,273				-				10,273				6,592		3j			58,974
Operating lease liabilities, current			6,451				1,462				43				1,505				-					7,956
Credit, short-term loans and current maturities			-				9,144				-				9,144				(9,144	)	3e			-
Other current liabilities			11,188				2,588				-				2,588				1,899		3d			15,675
Total current liabilities			96,887				32,826				43				32,869				(653	)				129,103
Long-term Liabilities:
Long-term debt			60,000				7,710				-				7,710				232,290		3e			300,000
Operating lease liabilities, long-term			16,808				2,102				-				2,102				-					18,910
Liability for uncertain tax positions			18,225				-				-				-				-					18,225
Minimum pension obligation and unfunded pension liability			20,268				-				-				-				-					20,268
Deferred income taxes			1,320				6,594				-				6,594				-					7,914
Other long-term liabilities			3,547				-				-				-				6,346		3d,3n			9,893
Total liabilities			217,055				49,232				43				49,275				237,983					504,313
Commitments and contingencies*
Non-controlling interest (temporary equity)			-				-				-				-				72,354		3f			72,354
Stockholders' Equity:
Preferred stock			-				-				-				-				-					-
Class A common stock			212				-				-				-				-					212
Class B common stock			1,046				-				-				-				-					1,046
Treasury stock			(16,507	)			-				-				-				-					(16,507	)
Additional paid-in capital			47,064				9,896				-				9,896				(9,896	)	3k			47,064
Retained earnings			347,702				81,416				260				81,676				(86,752	)	3k,3j			342,626
Accumulated other comprehensive loss			(12,155	)			-				-				-				-					(12,155	)
Total stockholders' equity			367,362				91,312				260				91,572				(96,648	)				362,286
Total liabilities, temporary equity and stockholders' equity		$	584,417			$	140,544			$	303			$	140,847			$	213,689				$	938,953
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
*See Note 15 to Bel Fuse Inc.'s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2024.

 

 

 

 

BEL FUSE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
(dollars in thousands, except per share data)
		Historical																Pro Forma
		Bel Fuse Inc.				Enercon
		Nine Months Ended				Nine Months Ended
		September 30, 2024				September 30, 2024
		As Reported				IFRS				U.S. GAAP Adjustments (Note 1)				U.S. GAAP				Transaction Accounting Adjustments			Note		Pro Forma Combined
Net sales		$	384,933			$	89,783			$	-			$	89,783			$	-				$	474,716
Cost of sales			238,782				46,861				-				46,861				2,221		3h,3i			287,864
Gross profit			146,151				42,922				-				42,922				(2,221	)				186,852
Research and development costs			16,652				4,390				-				4,390				(25	)	3h			21,017
Selling, general and administrative			75,785				9,816				8				9,824				5,694		3h,3i,3j			91,303
Restructuring charges			1,790				-				-				-				-					1,790
Income from operations			51,924				28,716				(8	)			28,708				(7,890	)				72,742
Interest expense			(1,263	)			(1,870	)			-				(1,870	)			(11,642	)	3c,3n			(14,775	)
Interest income			3,741				-				-				-				-					3,741
Other income/expense, net			21				1,071				(187	)			884				-					905
Earnings before provision for income taxes			54,423				27,917				(195	)			27,722				(19,532	)				62,613
Provision for income taxes			11,663				4,667				-				4,667				(3,701	)	3m			12,629
Net earnings (all shareholders)		$	42,760			$	23,250			$	(195	)		$	23,055			$	(15,831	)			$	49,984
Less: Net earnings attributable to non-controlling interest		$	-			$	124			$	-			$	124			$	3,350				$	3,474		3o
Net earnings (Bel shareholders)		$	42,760			$	23,126			$	(195	)		$	22,931			$	(19,181	)			$	46,510
Earnings per share:
Class A common share - basic and diluted		$	3.23																				$	3.52		3l
Class B common share - basic and diluted		$	3.41																				$	3.71		3l
Weighted-average shares outstanding:
Class A common share - basic and diluted			2,126																					2,126
Class B common share - basic and diluted			10,512																					10,512
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.

 

 

 

BEL FUSE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
(dollars in thousands, except per share data)
		Historical																Pro Forma
		Bel Fuse Inc.				Enercon
		Year Ended				Year Ended
		December 31, 2023				December 31, 2023
		As Reported				IFRS (as reported)				U.S. GAAP Adjustments (Note 1)				U.S. GAAP				Transaction Accounting Adjustments			Note		Pro Forma Combined
Net sales		$	639,813			$	95,709			$	-			$	95,709			$	-				$	735,522
Cost of sales			423,964				54,971				-				54,971				5,079		3g,3h,3i			484,014
Gross profit			215,849				40,738				-				40,738				(5,079	)				251,508
Research and development costs			22,487				5,296				-				5,296				33		3h			27,816
Selling, general and administrative			99,091				13,559				6				13,565				14,329		3h,3i,3j			126,985
Restructuring charges			10,114				-				-				-				-					10,114
Gain on sale of properties			(3,819	)			-				-				-				-					(3,819	)
Income from operations			87,976				21,883				(6	)			21,877				(19,441	)				90,412
Gain on sale of Czech Republic business			980				-				-				-				-					980
Interest expense			(2,850	)			(3,819	)			-				(3,819	)			(13,299	)	3c,3n			(19,968	)
Other income/expense, net			(2,806	)			25				(123	)			(98	)			-					(2,904	)
Earnings before provision for income taxes			83,300				18,089				(129	)			17,960				(32,740	)				68,520
Provision for income taxes			9,469				3,819				-				3,819				(6,249	)	3m			7,039
Net earnings (all shareholders)		$	73,831			$	14,270			$	(129	)		$	14,141			$	(26,491	)			$	61,481
Less: Net earnings attributable to non-controlling interest		$	-			$	8			$	-			$	8			$	(1,184	)			$	(1,176	)	3o
Net earnings (Bel shareholders)		$	73,831			$	14,262			$	(129	)		$	14,133			$	(25,307	)			$	62,657
Earnings per share:
Class A common share - basic and diluted		$	5.52																				$	4.68		3l
Class B common share - basic and diluted		$	5.83																				$	4.95		3l
Weighted-average shares outstanding:
Class A common share - basic and diluted			2,142																					2,142
Class B common share - basic and diluted			10,634																					10,634
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information.

 

 

 

 

Notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

Note 1. Basis of Presentation

 

The historical financial statements have been adjusted in the pro forma combined financial information to give effect to certain transaction accounting adjustments to reflect the accounting for the acquisition of Enercon, as discussed further in Notes 2 and 3.

 

The acquisition of Enercon was accounted for under the acquisition method of accounting in accordance with FASB Accounting Standards Codification (ASC) Topic 805, Business Combinations. Bel is the acquirer for accounting purposes and has therefore estimated the fair value of Enercon’s assets acquired and liabilities assumed. The pro forma financial information contained herein has been prepared in accordance with Article 11 of Regulation S-X.

 

The historical financial statements of Enercon, a foreign business under Securities and Exchange Commission rules, were prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”), and are presented elsewhere in this Form 8-K/A in compliance with IFRS-IASB as permitted by Regulation S-X Rule 3-05(c). In order to present the pro forma financial information contained herein in accordance with U.S. GAAP, the Company assessed the impact of the change in accounting basis from IFRS-IASB to U.S. GAAP and noted material adjustments identified in that conversion process on the face of the pro forma balance sheet and the pro forma statements of operations contained herein in the column titled “U.S. GAAP Adjustments”. Under IFRS 16, a lessee may elect to apply a recognition exemption for leases of “low-value” assets, even if such leases are material in the aggregate. Under U.S. GAAP, there is no exemption for leases of low-value assets. The U.S. GAAP Adjustments shown in the accompanying pro forma balance sheet and statements of income includes the financial impacts related to the previously excluded vehicle leases on Enercon’s financials. The Company assessed other differences in IFRS-IASB accounting policies as compared to U.S. GAAP and no other significant financial impact was identified.

 

Note 2. Preliminary Estimated Purchase Price Allocation

 

The total preliminary estimated purchase price (consideration transferred) has been allocated to Enercon’s tangible and intangible assets and liabilities in the unaudited pro forma condensed combined financial information on the basis of their estimated fair values as of October 31, 2024. Goodwill is calculated as the difference between the preliminary estimate of fair value of the consideration transferred and the preliminary estimates of fair value assigned to the assets acquired and liabilities assumed.

 

 

The total preliminary estimated purchase price was allocated as follows:

 

		Preliminary
		Acquisition Date
		Fair Values
		(as adjusted)
Cash		$	3,994
Accounts receivable			21,088
Inventories			42,271		(a)
Other current assets			3,490
Property, plant and equipment			9,786		(b)
Intangible assets			189,700		(c)
Other assets			3,316
Total identifiable assets			273,645
Accounts payable			9,046
Accrued expenses			3,644
Other current liabilities			7,211
Noncurrent liabilities			3,477
Total liabilities assumed			23,378
Net identifiable assets acquired			250,086
Goodwill			154,403
Net assets acquired		$	404,670
Cash paid			324,071
Fair value of contingent consideration			3,300
Fair value of noncontrolling interest			72,354
Fair value of seller note			4,945
Fair value of consideration transferred			404,670
Deferred consideration			(80,599	)
Total consideration paid		$	324,071

 

a.

The inventories noted include an estimated step-up in fair value of $2.4 million.

 

b.

The property, plant and equipment noted above includes a $3.7 million step-up based on estimated acquisition-date fair value.

 

c.

The preliminary fair value of identifiable intangible assets related to Enercon is shown in the table below. For those intangible assets with finite lives, the acquisition-date fair values will be amortized over their respective estimated future lives utilizing the straight-line method.

 

 

 

	Acquisition Date				Estimated
	Fair Value				Life
Trademarks	$		21,900		Indefinite
Customer relationships			130,300		17 years
Technology			37,500		15 years
Total intangible assets acquired	$		189,700

 

Working capital accounts were valued at their respective carrying amounts because Enercon believes that these amounts approximate the current fair values. The preliminary estimate of fair value of the customer relationships and other intangible assets was determined by Bel with the assistance of a third-party valuation expert. The purchase price allocation adjustments are preliminary and have been made solely to provide unaudited pro forma condensed combined financial information. Bel will determine the final purchase price allocation after thoroughly assessing the fair value of Enercon’s tangible assets and liabilities and identifiable intangible assets and liabilities. As a result, the final acquisition transaction accounting adjustments could differ materially from the pro forma adjustments presented herein. Any increase or decrease in the fair value of Enercon’s tangible and identifiable intangible assets and liabilities as compared with the information shown herein would also change the portion of the purchase price allocable to goodwill.

 

 

 

Note 3. Unaudited Pro Forma Adjustments

 

The pro forma adjustments are preliminary and are subject to change. The unaudited pro forma balance sheet and unaudited pro forma income statements reflect:

 

a.

Adjustments to the assets acquired and liabilities assumed in accordance with the preliminary estimated purchase price described in Note 2, including (1) a net adjustment to goodwill of $100.5 million (reflecting a $60.5 million adjustment to eliminate historical goodwill and a $160.9 million adjustment to record goodwill in connection with the acquisition) and (2) identifiable intangible assets of $189.7 million that are expected to be recorded in connection with the acquisition.

 

	b.	The utilization of $85.6 million of cash to partially fund the acquisition of Enercon and $0.4 million of cash paid in connection with deferred financing costs associated with funding the Transaction.

c.

The recording of $1.9 million of deferred financing costs in connection with fees incurred to effect the third amendment agreement to the Company’s existing credit facility ($1.0 million recorded as a current asset; $1.0 million recorded as a long-term asset). The deferred financing costs are amortized over a life 3.75 years. Amortization is reflected as interest expense in the accompanying pro forma statements of operations in the amount of $0.4 million and $0.5 million for the nine months ended September 30, 2024 and year ended December 31, 2023.

 

d.

The preliminary acquisition-date fair value of the liability associated with the potential earnout payments.

 

e.

Incremental borrowings under Bel’s credit facility of $240.0 million to partially fund the acquisition of Enercon, offset by the elimination of Enercon’s debt balances, which were settled in connection with the Transaction ($9.1 million of short-term loans and $7.7 million in long-term debt).

 

f.

The preliminary fair value of the redeemable non-controlling interest (for the remaining 20% of Enercon), which includes the fair value of the embedded put and call options associated with Bel’s potential future acquisition of the non-controlling interest.

 

g.

The amortization of the inventory step-up of $2.4 million, which would have been expensed through COGS during the year ended December 31, 2023, over a period of 8 months.

 

	h.	The estimated incremental depreciation expense of $0.4 million for the nine months ended September 30, 2024 and $0.6 million for the year ended December 31, 2023 related to estimated fair value adjustments related to property, plant and equipment acquired by Bel. The value of the PP&E step-up is depreciated on a straight-line basis over an estimated weighted-average useful life of 6.5 years. Enercon’s depreciation expense is primarily classified as cost of sales, with less than $0.1 million in each period classified as each research and development costs and selling, general and administrative expenses.

i.

The estimated incremental amortization expense of $7.6 million for the nine months ended September 30, 2024 and $9.9 million for the year ended December 31, 2023 related to the finite lived intangible assets acquired as detailed in Note 2(c) above, offset by elimination of Enercon’s historical amortization expense of $0.3 million during the year ended December 31, 2023.

 

j.

The accrual of estimated transaction costs of $6.6 million (net of taxes of $1.5 million) related to the acquisition of Enercon. Such costs were incurred by Bel after September 30, 2024, and are reflected in (1) retained earnings and accounts payable in the pro forma balance sheet and (2) selling, general and administrative expenses in the pro forma statement of operations for the year ended December 31, 2023. These transaction costs will not recur.

 

Bel incurred $4.3 million of transaction costs during the nine months ended September 30, 2024. These costs are included in Bel’s historical statement of operations for the nine-month period ended September 30, 2024.

 

k.

The elimination of Enercon’s equity balances.

 

l.

Basic and diluted pro forma net earnings per share is based on the weighted average number of shares of Bel’s common shares outstanding for the periods presented.

 

	m.	The income tax effects of the transaction accounting adjustments, by using Bel’s statutory tax rate of 20%. The income tax effects on the Enercon specific adjustments utilized Enercon’s historical tax rate of 17%.

n.

Represents net increases in interest expense of $13.3 million during the year ended December 31, 2023 and $11.6 million during the nine months ended September 30, 2024 related to the $240 million of incremental borrowings under Bel’s revolving credit facility, offset by the elimination of Enercon’s interest expense reflected in their prior period financial statements. The components of the net increase in interest expense consist of:

 

		Nine Months Ended				Year Ended
		September 30,				December 31,
		2024				2023
Incremental borrowings of $240 million under revolving credit facility
average interest rate of 6.80% and 6.51%, respectively		$	12,248			$	15,617
Commitment fees on the revolving credit facility of the
credit agreement at 0.275% of the undrawn balance of $25 million			52				69
Interest on new Enercon borrowing from Fortissimo of $4.9 million at an
interest rate of 8%			297				396
Amortization of deferred financing costs			380				507
Subtotal		$	12,977			$	16,589
Less: Amounts included in Enercon's historical statement of operations
related to prior outstanding debt settled with Transaction			(1,335	)			(3,290	)
Total		$	11,642			$	13,299

 

 

o.

Reduction of 20% non-controlling interest of Enercon net earnings was calculated as follows:

 

		Nine Months Ended				Year Ended
		September 30,				December 31,
		2024				2023
Enercon net earnings (under U.S. GAAP)		$	22,931			$	14,133
Enercon portion of Transaction Accounting Adjustments			(5,563	)			(8,254	)
Enercon pro forma net earnings (post adjustments)			17,368				5,879
Non-controlling interest %			20	%			20	%
Net earnings attributable to non-controlling interest		$	3,474			$	1,176

 

 

4.

Items Not Adjusted in Unaudited Pro Forma Financial Information

 

a.

As a result of the Transaction, Enercon will no longer incur stock-based compensation expense associated with equity awards which settled in connection with the Transaction, the cost of which was previously allocated in the historical financial statements of Enercon.  In the future, certain Enercon associates will be eligible to participate in Bel’s equity compensation plan. No adjustment has been reflected in the pro forma statements of operations for any differences between the amount of estimated costs that will be incurred as part of these new arrangements and the amounts of historically recorded by Enercon, as the difference is not deemed material.

 

b.

We have not reflected any additional interest expense for borrowings of up to $25 million then available under the revolving credit facility, as this portion of the facility was not drawn upon at the closing of the Enercon Transaction.

 

c.

The pro forma statements of operations include non-recurring expenses associated with management fees previously incurred by Enercon in connection with its ownership by Fortissimo in the amount of $0.2 million and $0.3 million during the nine months ended September 30, 2024 and year ended December 31, 2023, respectively.

 

d.

The pro forma statements of operations include non-recurring salaries incurred by Enercon in prior periods, which ceased in connection with the Transaction. These amounted to $0.4 million and $0.5 million during the nine months ended September 30, 2024 and year ended December 31, 2023, respectively, which were allocated 50% to cost of sales and 50% to research and development costs.

v3.24.4

Document And Entity Information	Nov. 14, 2024
Document Information [Line Items]
Entity, Registrant Name	BELFUSE INC /NJ
Document, Type	8-K/A
Document, Period End Date	Nov. 14, 2024
Entity, Incorporation, State or Country Code	NJ
Entity, File Number	0-11676
Entity, Tax Identification Number	22-1463699
Entity, Address, Address Line One	300 Executive Drive
Entity, Address, Address Line Two	Suite 300
Entity, Address, City or Town	West Orange
Entity, Address, State or Province	NJ
Entity, Address, Postal Zip Code	07052
City Area Code	201
Local Phone Number	432-0463
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity, Emerging Growth Company	false
Amendment Description	8-K/A - Bel Fuse Inc Completion of Acquisition (Enercon)
Amendment Flag	true
Entity, Central Index Key	0000729580
ClassACommonStock010ParValue Custom [Member]
Document Information [Line Items]
Title of 12(b) Security	Class A Common Stock ($0.10 par value)
Trading Symbol	BELFA
Security Exchange Name	NASDAQ
ClassBCommonStock010ParValue Custom [Member]
Document Information [Line Items]
Title of 12(b) Security	Class B Common Stock ($0.10 par value)
Trading Symbol	BELFB
Security Exchange Name	NASDAQ

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