BOS BETTER ONLINE SOLUTIONS LTD

B.O.S. Better Online Solutions Ltd. (BOS) operates through three distinct business divisions: Supply Chain Solutions, RFID, and Intelligent Robotics. The company's core business model revolves around providing comprehensive solutions to enterprises aimed at improving inventory control and increasing productivity in production and logistics processes. Revenue generation is primarily through direct sales teams and sales agents, with a mix of product sales and service contracts. The company's customer base spans industry leaders in avionics, defense, retail, manufacturing, and government markets ¹.

The Supply Chain Solutions Division is a global distributor of electromechanical components, primarily serving the defense and Hi-Tech industries. This division's sales engineers collaborate with customer R&D teams to integrate franchised components into new product designs, leading to recurring orders and long-term revenue ². In 2025, this division accounted for 70% of the company's total revenues ³. Key suppliers for this division include Positronics Manufacturing Company, which supplied 22% of its purchases in 2025, amounting to $6 million ⁴.

The RFID Division focuses on optimizing inventory management by marking and tracking inventory throughout the supply chain. This is achieved by integrating proprietary software with third-party Automatic Identification Data Capture (AIDC) equipment, such as handheld computers, industrial scanners, and RFID readers from manufacturers like Zebra and Honeywell. The division also offers complementary on-site inventory counting services for retail stores and warehouses, generally twice a year ⁵. In 2025, the RFID Division contributed 27% of the company's total revenues ⁶.

The Intelligent Robotics Division develops custom-made robotics cells and integrates off-the-shelf robots into customer production lines using its proprietary mechanical-electrical-software. These robotic cells aim to reduce workforce dependency and increase capacity and accuracy in inventory production and logistics processes, serving as machine-tending robots for production lines and palletizing robots for logistic centers ⁷. This division accounted for 4% of the company's revenues in 2025 ⁸. Towards the end of 2021, the division shifted its focus from the US to the Israeli market, with over 50% of its backlog attributed to the Israeli defense sector. In 2025, 94% of the Intelligent Robotics division's revenues were from the Israeli market ⁹.

For the fiscal year ended December 31, 2025, BOS reported total revenues of $50.569 million ¹⁰, an increase of 26.5% from $39.949 million in 2024 ¹¹. Gross profit for 2025 was $12.075 million ¹², representing a gross profit margin of 23.9% ¹³, compared to $9.294 million and a gross profit margin of 23.5% in 2024 ¹⁴. Operating income for 2025 was $2.908 million ¹⁵, up from $1.439 million in 2024 ¹⁶. Net income for 2025 was $3.611 million ¹⁷, compared to $2.300 million in 2024 ¹⁸. Basic net income per share was $0.59 ¹⁹ and diluted net income per share was $0.57 ²⁰ for 2025, compared to $0.40 and $0.39, respectively, in 2024 ²¹. The company generated positive cash flow from operating activities of $5.046 million in 2025 ²², compared to $1.294 million in 2024 ²³. As of December 31, 2025, cash and cash equivalents amounted to $11.825 million ²⁴, and total debt (short-term loans and current maturities of long-term loans plus long-term loans net of current maturities) was $1.747 million ²⁵.

Year-over-year, revenues increased by 26.5% to $50.569 million in 2025 from $39.949 million in 2024 ²⁶. This growth was primarily driven by a 37.6% increase in the Supply Chain Solutions division's revenues, reaching $35.545 million in 2025 from $25.829 million in 2024 ²⁷. The RFID division's revenues increased by 5.5% to $13.587 million in 2025 from $12.877 million in 2024 ²⁸, while the Robotics division's revenues increased by 3.1% to $1.847 million in 2025 from $1.410 million in 2024 ²⁹. Gross profit margin slightly expanded to 23.9% in 2025 from 23.5% in 2024 ³⁰, reflecting a favorable product mix. However, the RFID division experienced a decrease in gross profit margin to 21.3% in 2025 from 27.4% in 2024 ³¹, attributed to operational inefficiencies. Sales and marketing expenses increased to $5.242 million in 2025 from $4.394 million in 2024 ³², consistent with revenue growth and including approximately $250,000 attributable to the appreciation of the NIS against the U.S. dollar ³³. General and administrative expenses rose to $2.547 million in 2025 from $2.113 million in 2024 ³⁴, partly due to $80,000 in costs related to a sales agreement for an at-the-market offering and approximately $120,000 from NIS appreciation ³⁵. The company recorded goodwill impairment charges of $1.200 million in 2025 and $0.707 million in 2024 ³⁶, primarily due to the negative impact of geopolitical tensions on the Israeli commercial market, which is the primary revenue base for the RFID division. Financial income increased significantly to $590,000 in 2025 from financial expenses of $139,000 in 2024 ³⁷, driven by foreign exchange gains of $806,000 in 2025 compared to losses of $58,000 in 2024 ³⁸, reflecting the NIS appreciation.

During 2025, the company issued 25,000 options to its directors and officers ³⁹. In September 2025, the company entered into a sales agreement with A.G.P./Alliance Global Partners for the sale of up to $4 million of its Ordinary Shares in an at-the-market offering, though no shares were sold under this agreement as of December 31, 2025 ⁴⁰. The company also approved bonuses for its CEO and CFO totaling $102,000, payable in Ordinary Shares, which were issued in 2026 ⁴¹.

BOS aims to become a leading integrator of comprehensive technological solutions that enhance inventory control and productivity in production and logistics processes, leveraging its three divisions: Supply Chain, RFID, and Intelligent Robotics. A significant driver of anticipated growth is the substantial portion of revenues derived from the defense sector, an industry currently experiencing strong and sustained expansion. The company believes it is well-positioned to capitalize on these opportunities for future growth ⁴².

The Supply Chain Solutions division's flagship customers, including Israel Aerospace Industries, Elbit Systems, and Rafael, are global leaders in the defense segment. The company supplies these entities directly and indirectly through their subcontractors worldwide, including in the USA, India, and numerous European countries, indicating a broad market reach within the defense sector ⁴³.

The Intelligent Robotics division has successfully transitioned its focus to the defense sector, with 90% of its backlog now attributed to this rapidly growing market. Elbit Systems, a global leader in the defense industry, is a flagship customer for this division ⁴⁴. This strategic shift is expected to contribute to the division's growth.

The ongoing geopolitical tensions in Israel since October 2023 have negatively affected the Israeli commercial market, which is the primary revenue base for the RFID division. To mitigate this exposure, the company plans to invest throughout 2026 in expanding the RFID division into more stable regulated sectors, specifically medical and defense. This expansion will require broadening the product offering, hiring personnel with relevant domain expertise, and establishing new customer relationships. Revenue contributions from these initiatives are expected to begin in 2027, contingent on successful execution ⁴⁵.

The company's planned capital allocation includes research and development expenses for the Intelligent Robotics division, which were $178,000 for the year ended December 31, 2025, compared to $175,000 in 2024 ⁴⁶. The company may also grow its business through acquisitions of complementary businesses for both divisions, which might necessitate significantly increasing its debt and raising additional equity financing ⁴⁷.

BOS faces several material risks, including financial and operational challenges. The company has a history of losses, with an accumulated deficit of $61 million as of December 31, 2025 ⁴⁸, and its future profitability is unpredictable. Gross profit margins may be difficult to maintain due to product mix fluctuations, changing supplier prices, and competitive pressures ⁴⁹. The company relies on two banks, First International Bank of Israel and Bank Leumi, for its credit facilities, totaling $972,000 in long-term debt and $627,000 in short-term debt as of December 31, 2025 ⁵⁰. These debt obligations require a substantial portion of operating cash flow for repayment, limiting funds for growth and increasing vulnerability to economic downturns. Loan agreements contain covenants related to shareholders' equity, EBITDA, and capital to balance sheet ratio, with non-compliance potentially leading to default ⁵¹. The company is highly dependent on certain key suppliers, with 52% of the Supply Chain Solutions division's purchases in 2025 sourced from five key suppliers, and 22% from Positronics Manufacturing Company alone, making it vulnerable to supply disruptions ⁵². The success of the business also depends on key personnel, including the CEO, Eyal Cohen, and President, Avidan Zelicovsky, and the ability to attract and retain skilled employees ⁵³. The company's growth and expansion plans may be hindered by the inability to effectively manage operational and financial control systems, increase financial resources, and meet delivery commitments ⁵⁴. Credit risk exists as the company does not generally require collateral for customer debt, and while a portion is insured, a global economic slowdown could necessitate additional allowances for credit losses ⁵⁵. The Supply Chain Solutions division faces risks from customer order cancellations before delivery and the need to comply with industry standards like Aviation Standard 9120, as well as customer insistence on purchasing from authorized distributors ⁵⁶. Product defects could lead to costly corrections, delayed market acceptance, reputational harm, and litigation ⁵⁷. The company's products may infringe on third-party intellectual property rights, leading to costly litigation or licensing agreements ⁵⁸. The Supply Chain Solutions division's activities are governed by U.S. Government laws and regulations, including import-export control and anti-corruption laws, with violations potentially leading to civil or criminal liabilities ⁵⁹. Future changes in aviation and defense industry standards could render inventory obsolete ⁶⁰. Existing and proposed Israeli legal requirements, such as minimum wage increases (e.g., approximately 6% in April 2025 to NIS 6,247.67 per month ⁶¹), may increase labor expenses ⁶². Quarterly operating results are sensitive to order receipt and delivery, with relatively fixed expenses, making revenue shortfalls impactful ⁶³. Exchange rate fluctuations, particularly the appreciation of the NIS against the U.S. dollar (e.g., 14% in 2025 ⁶⁴), can negatively impact U.S. dollar-measured costs and results of operations ⁶⁵. The inability to introduce new products in a rapidly changing technology market could hinder business expansion ⁶⁶. Disruptions to IT systems from failures or cyber security attacks could impact operations, compromise sensitive information, and expose the company to liability ⁶⁷. International operations carry risks such as collecting receivables, governmental controls, political and economic instability, foreign currency exchange rate risk, and trade restrictions ⁶⁸. Unfavorable global economic conditions, including the lingering effects of the COVID-19 pandemic on supply chains, could reduce sales and increase credit risk ⁶⁹. ESG matters may impact business and reputation if not managed successfully ⁷⁰. The company may be obligated to indemnify its directors and officers up to $2.500 million in aggregate ⁷¹, and up to $5 million per event for D&O liability insurance ⁷². There is no assurance that the company will not be classified as a Passive Foreign Investment Company (PFIC), which could have adverse tax consequences for U.S. shareholders ⁷³. A decline in market capitalization could necessitate goodwill write-downs, impacting results of operations ⁷⁴. Activist shareholder actions could be costly and divert management attention ⁷⁵. Failure to maintain effective internal control over financial reporting could adversely affect operating results and investor confidence ⁷⁶. Employee fraud or misconduct, including insider trading, could negatively impact reputation and share price ⁷⁷. The company's share price has been and may continue to be volatile ⁷⁸. Future sales of Ordinary Shares could cause the stock price to decline ⁷⁹. The Ordinary Shares may be delisted from the Nasdaq Capital Market due to non-compliance with listing requirements ⁸⁰. Political, economic, and security conditions in Israel, including ongoing conflicts and potential credit rating downgrades (e.g., Moody's downgrade from A2 to Baa1 ⁸¹), directly influence operations and may limit the ability to produce and sell products ⁸². Key personnel in Israel have reserve duty obligations, potentially disrupting business ⁸³. Commercial insurance does not cover losses from security events in the Middle East, and government coverage may not be sufficient ⁸⁴. Restrictive laws or policies towards Israel, such as those following ICJ and ICC decisions, may adversely impact commercial relationships ⁸⁵. Israeli anti-takeover laws may delay or deter a change of control ⁸⁶. Enforceability of civil liabilities against non-U.S. resident directors and officers is uncertain ⁸⁷. Shareholder rights are governed by Israeli law, which differs from U.S. corporations ⁸⁸. The company relies on foreign private issuer exemptions for corporate governance, which may afford less protection to shareholders ⁸⁹. Losing foreign private issuer status would incur additional compliance expenses ⁹⁰.

Management's message to shareholders emphasizes the company's vision to become a leading provider of comprehensive solutions that improve inventory control and increase productivity in production and logistics processes, operating through its three divisions: Supply Chain, RFID, and Intelligent Robotics. A key strategic priority is to capitalize on the strong and sustained expansion of the defense sector, from which a significant portion of the company's revenues are derived. The Supply Chain Solutions division serves global leaders in defense such as Israel Aerospace Industries, Elbit Systems, and Rafael, both directly and through subcontractors worldwide, including the USA, India, and European countries. The Intelligent Robotics division has successfully transitioned its focus to the defense sector, with 90% of its backlog now serving this market, and Elbit Systems as a flagship customer. To address the negative impact of ongoing geopolitical tensions in Israel on the RFID division's primary revenue base in the Israeli commercial market, management plans to invest throughout 2026 in expanding this division into more stable regulated sectors, specifically medical and defense. This initiative will involve broadening the product offering, hiring personnel with relevant domain expertise, and establishing new customer relationships, with revenue contributions anticipated to commence in 2027, subject to successful execution.