ICTS International (OTCQB: ICTSF) grows 2025 revenue but swings to deeper net loss
ICTS International N.V. reports higher 2025 revenue but a return to significant losses. Revenue rose to $534.4 million from $483.3 million, driven mainly by airport security growth in Germany and Spain, and higher U.S. aviation services.
Cost pressures, especially labor, pushed gross margin down to 11.2% and produced an operating loss of $17.4 million. Net loss widened to $18.5 million, and shareholders’ deficit deepened to $21.2 million. Cash, deposits and term deposits fell sharply as operating cash flow was negative and funds moved into term deposits.
The airport security segment grew to $421.8 million of revenue but posted a loss due to wage inflation, sickness and efficiency issues. U.S. aviation services earned $81.1 million of revenue and $1.6 million of net income. Authentication technology revenue dropped to $31.5 million, turning from profit to a $12.2 million loss.
Positive
- None.
Negative
- Profitability deterioration and deeper deficit: Net loss expanded to $18.5 million in 2025, shareholders’ deficit widened to $21.2 million, and operating margin fell to -3.3% as labor and other costs rose faster than revenue.
Insights
Revenue grew double‑digit in 2025, but margins eroded and losses deepened across ICTS’s core and tech businesses.
ICTS International N.V. lifted 2025 revenue to $534.4M, up from $483.3M, mainly from airport security in Germany and Spain plus stronger U.S. aviation services. However, cost of revenue climbed faster than sales, cutting gross margin from 14.5% to 11.2% and producing an operating loss of $17.4M.
Net loss widened to $18.5M, versus $3.9M in 2024, and shareholders’ deficit increased to $21.2M. The airport security segment generated $421.8M of revenue but posted a $3.9M loss due to higher labor costs, sickness and efficiency issues. Authentication technology revenue fell from $46.0M to $31.5M, swinging to a $12.2M loss.
Liquidity weakened: cash and equivalents declined to $16.9M from $64.7M, and total current cash, restricted cash, bank and term deposits moved while operating cash flow was $(31.0)M. The company relies on credit lines and factoring in Europe and the U.S., and still carries €12.2M of deferred Dutch tax debt as of December 31, 2025. Actual outcomes will depend on executing cost controls, stabilizing the AU10TIX technology segment, and managing funding arrangements.
Key Figures
Revenue 2025: $534.4M
Revenue 2024: $483.3M
Net income (loss) 2025: $(18.5)M
+5 more
8 metrics
Revenue 2025
$534.4M
Total revenue for the year ended December 31, 2025
Revenue 2024
$483.3M
Total revenue for the year ended December 31, 2024
Net income (loss) 2025
$(18.5)M
Net loss for the year ended December 31, 2025
Shareholders’ deficit 2025
$21.2M
Shareholders’ deficit as of December 31, 2025
Cash and cash equivalents 2025
$16.9M
Cash and cash equivalents as of December 31, 2025
Airport security revenue 2025
$421.8M
Revenue from airport security segment for 2025
Authentication technology revenue 2025
$31.5M
Revenue from AU10TIX segment for 2025
Dutch COVID-related tax debt 2025
€12.2M
Deferred wage tax, social security and VAT owed as of December 31, 2025
Key Terms
redeemable non-controlling interests, factoring agreement, working capital, valuation allowance of deferred income taxes, +1 more
5 terms
redeemable non-controlling interests financial
"Redeemable non-controlling interests | | | 87,023 | | | | 90,737 |"
Redeemable non-controlling interests are ownership stakes in a company’s unit held by outside investors that can be forced to be bought back by the parent company for cash or a set value. Think of it like a part-owner who has the contractual right to ‘cash out’ their share; for investors this matters because it can create a future cash obligation, change reported equity versus debt, and affect earnings and ownership percentages.
factoring agreement financial
"The Company has a factoring arrangement in Sweden to provide it with up to 4.0 million SEK"
working capital financial
"As of December 31, 2025 and 2024, the Company had working capital of $63.3 million and $82.4 million, respectively"
Working capital is the money a business has available to cover its daily expenses, like paying bills and buying supplies. It’s like the cash in your wallet that helps you handle everyday costs; having enough ensures the business can operate smoothly without running into money shortages.
valuation allowance of deferred income taxes financial
"One critical accounting policy that require the use of judgment and estimates is valuation allowance of deferred income taxes."
non-recourse factoring agreement financial
"In March 2024 the Company signed a non-recourse factoring agreement with a commercial bank"
AI-generated analysis. How Rhea-AI works. Not financial advice.
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FAQ
How did ICTS International N.V. (ICTSF) perform financially in 2025?
ICTS International generated higher 2025 revenue of $534.4 million, up from $483.3 million in 2024. However, gross margin compressed to 11.2% and the company reported an operating loss of $17.4 million and a net loss of $18.5 million attributable to rising labor and other costs.
Which segments drove ICTS International’s 2025 revenue growth?
Growth came mainly from the airport security and other aviation related services segments. Airport security revenue rose to $421.8 million, helped by contracts in Germany and Spain. U.S. aviation services revenue increased to $81.1 million through expanded services and higher minimum wages billed to customers.
What happened to ICTS International’s AU10TIX authentication technology segment in 2025?
The AU10TIX authentication technology segment saw revenue fall to $31.5 million from $46.0 million in 2024 as some customers were lost and activity declined. With largely fixed cost levels, this revenue drop led the segment to post a net loss of $12.2 million after prior-year profit.
How strong was ICTS International’s balance sheet and liquidity at year-end 2025?
At December 31, 2025, ICTS International reported $30.0 million in cash, restricted cash, bank and term deposits combined, down from $87.4 million a year earlier. Working capital was $63.3 million, while shareholders’ deficit stood at $21.2 million and deferred Dutch tax debt totaled €12.2 million.
How did ICTS International’s geographic revenue mix evolve in 2025?
In 2025, ICTS International’s revenue was diversified: $158.2 million from Germany, $130.3 million from Spain, $111.8 million from The Netherlands, $93.0 million from the United States, and $41.1 million from other locations. All European regions benefited from a stronger euro versus the dollar compared to 2024.
What are the main risks highlighted by ICTS International in its 20-F filing?
Key risks include labor cost and availability, contract cancellations with airports and airlines, concentration in a few large customers, geopolitical threats such as war and terrorism, regulatory changes in aviation security, technology competition, cyber threats, inflation, currency fluctuations and a controlling shareholder group holding about 78.6% of common stock.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
|
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OR
|
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
|
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
OR
|
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Date of event requiring this shell company report
For the transition period from _________________ to _________________
COMMISSION FILE NUMBER 0-28542
(Exact Name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
The Netherlands
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Email: alon@ictsintl.com , Address: Same as above
(Name, Telephone, E-mail and/or Facsimile number
and Address of Company Contact Person)
and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each Class: Common Stock
Name of each exchange on which registered: OTCQB
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value 0.01 Euro per share
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 37,433,333 .
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ☐ NO ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
YES ☐ NO ☒
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, am accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer ☐
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Accelerated filer ☐
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|
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
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International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
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Other ☐
|
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐ NO ☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
YES ☐ NO ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
When used in this Form 20-F, the words “may”, “will”, “expect”, “anticipate”, “continue”, “estimates”, “project”, “intend” and similar expressions are intended to identify Forward-Looking Statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding events, conditions and financial trends that may affect the Company's future plans of operations, business strategy, operating results and financial position. Prospective investors are cautioned that any Forward-Looking Statements are not guarantees of future performance and are subject to risks and uncertainties and those actual results may differ materially from those included within the Forward-Looking Statements as a result of various factors.
|
Table of Contents
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Part I |
4 | |
|
Item 1 |
Identity of Directors, Senior Management and Advisers |
4 |
|
Item 2 |
Offer Statistics and Expected Timetable |
4 |
|
Item 3 |
Key Information |
4 |
|
Item 4 |
Information on the Company |
11 |
|
Item 5 |
Operating and Financial Review and Prospects |
21 |
|
Item 6 |
Directors, Senior Management and Employees |
32 |
|
Item 7 |
Major Shareholders and Related Party Transactions |
36 |
|
Item 8 |
Financial Information |
37 |
|
Item 9 |
The Offer and Listing |
39 |
|
Item 10 |
Additional Information |
40 |
|
Item 11 |
Qualitative Disclosures about Market Risk |
57 |
|
Item 12 |
Description of Securities other than Equity Securities |
58 |
|
Part II |
58 | |
|
Item 13 |
Defaults, Dividend Arrearages and Delinquencies |
58 |
|
Item 14 |
Material Modifications to the Rights of Security Holders and the Use of Proceeds
|
58 |
|
Item 15 |
Controls and Procedures |
58 |
|
Item 16A |
Audit Committee Financial Expert |
58 |
|
Item 16B |
Code of Ethics |
58 |
|
Item 16C |
Principal Accountant Fees and Services |
59 |
|
Item 16D |
Exemptions from the Listing Standards for Audit Committees |
59 |
|
Item 16E |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
59 |
|
Item 16F |
Change in Registrant’s Certifying Accountant |
59 |
|
Item 16G |
Corporate Governance |
59 |
|
Item 16J |
Trading Policy |
60 |
|
Item 16K |
Cybersecurity |
60 |
|
Part III |
60 | |
|
Item 17 |
Financial Statements |
60 |
|
Item 18 |
Financial Statements |
60 |
|
Item 19 |
Exhibits |
61 |
|
Exhibits |
61 | |
|
Exhibit 12.1 |
Certification |
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Exhibit 13.1 |
Certification |
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3
PART I
Item 1. Identity
of Directors, Senior Management and Advisers
Not Applicable
Item 2. Offer
Statistics and Expected Timetable
Not Applicable
Item 3. Key
information
Operations
ICTS International N.V. (“ICTS”) was registered at
the Department of Justice in Amstelveen, Netherlands on October 9, 1992. ICTS and subsidiaries (collectively referred to as “ICTS”
or the “Company”) operate in three reportable segments: (a) airport security (b) other aviation related services and (c) authentication
technology. The Company also incurs general corporate expenses and costs which are not allocated to the reportable business segments but
have been included in the “unallocated corporate” component which does not generate revenue and contains primarily non-operational
expenses. The airport security segment includes the I-SEC International group. The airport security segment provides security services
primarily to airlines and airport authorities in Europe. The other aviation related services segments include Huntleigh USA. The
other aviation related services segment provides various services to airlines within airports in the United States of America. The authentication
technology represents the AU10TIX Technologies group. The authentication technology segment provides authentication services to financial
and other companies, predominantly in the United States of America.
Selected Financial Data
Selected data set forth below have been derived from the ICTS Consolidated
Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”). The Selected Consolidated Financial Data set forth below should be read in conjunction with Item 5 - Operating
and Financial Review and Prospects, the ICTS Consolidated Financial Statements and the Notes to those Consolidated Financial Statements
included in Item 18 in this Annual Report.
In the Netherlands, wage tax, social security and VAT payments
for the period March 2020 until September 2021 were postponed as part of the government assistance regarding COVID - 19 and were set to
be paid in 60 monthly installments beginning October 2022. Beginning July 2022, the debt incurs annual interest of 1% and increases every
six months to a maximum of 4% subsequent to January 1, 2024. In November 2025, the Company filed a request with the tax authorities to
extend the installments from 60 to 84 monthly installments. In January 2026, the request was approved. As of December 31, 2025 and 2024,
the Company accumulated debt of €12.2 million and €18.2 million ($14.3 million and $19.0 million as of December
31, 2025 and 2024), respectively, to the Dutch tax authorities.
As of December 31, 2025 and 2024, ICTS owned 66.30% and 67.51%,
respectively of the outstanding share capital of AU10TIX in the form of Class B Ordinary Shares.
The following table summarizes certain balance sheet data for the
Company at December 31, 2025, 2024, 2023, 2022 and 2021:
|
(U.S. Dollars in Thousands) |
||||||||||||||||||||
|
December 31, |
||||||||||||||||||||
|
2025 |
2024 |
2023 |
2022 |
2021 |
||||||||||||||||
|
Cash and cash equivalents |
$ |
16,890 |
$ |
64,668 |
$ |
55,222 |
$ |
50,937 |
$ |
88,753 |
||||||||||
|
Restricted cash |
1,110 |
2,858 |
9,766 |
15,867 |
14,699 |
|||||||||||||||
|
Bank deposits |
10,305 |
18,083 |
34,002 |
24,568 |
- |
|||||||||||||||
|
Term deposits |
30,763 |
- |
- |
- |
- |
|||||||||||||||
|
Total current assets |
143,839 |
161,633 |
176,557 |
155,483 |
174,562 |
|||||||||||||||
|
Total assets |
165,547 |
185,782 |
197,096 |
184,633 |
195,880 |
|||||||||||||||
|
Total current liabilities |
80,497 |
79,190 |
80,495 |
68,326 |
60,887 |
|||||||||||||||
|
Other liabilities |
12,518 |
13,966 |
22,038 |
29,214 |
40,867 |
|||||||||||||||
|
Total liabilities |
99,752 |
101,452 |
106,178 |
105,019 |
111,234 |
|||||||||||||||
|
Redeemable non-controlling interests |
87,023 |
90,737 |
93,521 |
89,974 |
90,478 |
|||||||||||||||
|
Shareholders' deficit |
21,228 |
6,407 |
2,603 |
10,360 |
5,832 |
|||||||||||||||
4
The following table summarizes certain statement of operations
data for the Company for the years ended December 31, 2025, 2024, 2023, 2022, and 2021:
|
U.S. Dollars in Thousands for the Years ended December 31, |
||||||||||||||||||||
|
2025 |
2024 |
2023 |
2022 |
2021 |
||||||||||||||||
|
Revenue |
$ |
534,376 |
$ |
483,310 |
$ |
431,542 |
$ |
324,977 |
$ |
324,934 |
||||||||||
|
Cost of revenue |
474,634 |
413,469 |
351,558 |
261,181 |
209,771 |
|||||||||||||||
|
GROSS PROFIT |
59,742 |
69,841 |
79,984 |
63,796 |
115,163 |
|||||||||||||||
|
Operating expenses: |
||||||||||||||||||||
|
Research and development |
14,508 |
14,372 |
12,325 |
13,601 |
12,114 |
|||||||||||||||
|
Selling, general and administrative |
62,648 |
61,249 |
56,927 |
53,799 |
50,882 |
|||||||||||||||
|
Goodwill impairment |
- |
- |
- |
139 |
||||||||||||||||
|
Total operating expenses |
77,156 |
75,621 |
69,252 |
67,400 |
63,135 |
|||||||||||||||
|
OPERATING INCOME (LOSS) |
(17,414 |
) |
(5,780 |
) |
10,732 |
(3,604 |
) |
52,028 |
||||||||||||
|
Equity loss from investment in affiliates |
- |
- |
(97 |
) |
(983 |
) | ||||||||||||||
|
Other income (expenses), net |
577 |
1,427 |
1,584 |
113 |
(537 |
) | ||||||||||||||
|
INCOME (LOSS) BEFORE INCOME TAX EXPENSES |
(16,837 |
) |
(4,353 |
) |
12,316 |
(3,588 |
) |
50,508 |
||||||||||||
|
Income tax benefits (expenses) |
(1,644 |
) |
452 |
(1,745 |
) |
(1,646 |
) |
(9,220 |
) | |||||||||||
|
NET INCOME (LOSS) |
(18,481 |
) |
(3,901 |
) |
10,571 |
(5,234 |
) |
41,288 |
||||||||||||
|
Net income (loss) attributable to non-controlling interests
|
(4,133 |
) |
331 |
3,490 |
(509 |
) |
6,481 |
|||||||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$ |
(14,348 |
) |
$ |
(4,232 |
) |
$ |
7,081 |
$ |
(4,725 |
) |
$ |
34,807 |
|||||||
|
BASIC NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
PER SHARE |
||||||||||||||||||||
|
Net income (loss) |
$ |
(0.40 |
) |
$ |
(0.11 |
) |
$ |
0.19 |
$ |
(0.13 |
) |
$ |
0.66 |
|||||||
|
Basic weighted average number of shares |
36,175,799 |
37,433,333 |
37,433,333 |
37,433,333 |
37,433,333 |
|||||||||||||||
|
DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL
N.V. PER SHARE |
||||||||||||||||||||
|
Net income (loss) |
$ |
(0.40 |
) |
$ |
(0.11 |
) |
$ |
0.18 |
$ |
(0.13 |
) |
$ |
0.61 |
|||||||
|
Diluted weighted average number of shares |
36,175,799 |
37,433,333 |
39,423,506 |
37,433,333 |
40,237,340 |
|||||||||||||||
5
Risk Factors
You should carefully consider the risks described below regarding
the business and the ownership of our shares. If any of the risks are realized, our business, financial condition or results of operations
could be adversely affected, and the price of our common stock could decline significantly.
Labor Concerns
Our subsidiaries operate in many different jurisdictions in Europe,
the United States of America and Asia and are therefore subject to the different labor laws of such jurisdictions. Any changes in such
laws, for example, the establishment or change of minimum wages, could have an adverse effect on the business of the Company.
In addition, some of our employees are covered by collective bargaining
agreements with unions. Such collective agreement detail, inter alia, financial and non-financial
entitlements to our employees that effect our financial results. Relationship with unions, including work stoppages or changes in work
rules, could have an adverse impact on our financial results.
In some jurisdictions and subject to legislation related to employees’
entitlements during sick leave, increase in employees’ sick rate could have an adverse impact on our financial results. Lack of
manpower and/or employees’ turnover may lead to additional costs. As an example, recruitment and training cost and therefore an
increase in employees’ turnover rate could have an adverse impact on our financial results.
If any of such changes and/or circumstances have a financial impact
on the Company and the Company is not able to fully adjust its fees for its services to accommodate such changes and/or circumstances,
of which there is no assurance, there could be a material adverse effect on our business.
Further, escalating costs of providing employee benefits and other
labor issues may lead to labor disputes and disruption of our business.
Potential Liability Claims
From time to time, lawsuits have been commenced against the Company
or its subsidiaries usually claiming injury or damage to property. In addition, labor related issues, such as employee dismissal, may
lead to labor disputes. Most of these claims are covered by insurance. In the event such claims are not covered by the insurance, there
could be an adverse impact on the Company.
Our Contracts with Airports, Airlines or Other
Customers may be Cancelled or not Renewed
Our revenues are primarily provided from services pursuant to contracts,
which are cancellable on short notice at any time with or without cause. We cannot assure you that existing clients won’t terminate
our contracts or that we won’t renew our contracts. In some jurisdictions and operations, contracts are subject to a tender detailing, inter
alia, participation terms, cap pricing and award criteria. In addition, consolidation in the airline industry could also result
in a loss of customers. Any such termination, failure to renew a contract with us and/or failure in tenders could have a material adverse
effect on our results of operations and financial condition. If our relationships with our major customers are impaired there may be a
material adverse effect on our results of operations and financial condition. Our major customers include airports in Europe and major
airlines servicing the United States of America. The aviation industry might encounter difficulties which may have a material adverse
impact on our business.
Terrorism, War or Risk of War
Our business is affected by numerous factors outside of our control
such as terrorist attacks and acts of war. Future terrorist attacks against the countries where the Company has a presence, rumors or
threats of war, actual conflicts involving those countries or their allies, or military or trade disruptions affecting customers may materially
adversely affect operations. Our facilities and equipment could be direct targets or indirect casualties of terrorist attacks and acts
of war. Strategic targets such as high-technology aviation security assets, passenger terminals or aircrafts may be at greater risk of
future terrorist attacks than other targets. It is possible that any or a combination of these occurrences could have a material impact
on the business of the Company, on cash flows, results of operations, financial condition, business reputation, claims etc. In addition,
insurance premiums for some or all of our current coverages could increase dramatically, or certain coverages may not be available to
us in the future.
The cost and availability of jet fuel as a result of the Iran war,
during or after, can affect our business by flight cancellations or reduction of flight due to reduced travelers and cost of flights.
Reduction of customers for our tech business as a result of the Iran war can also affect our business.
6
Results from Operations
The Company incurred a net income (loss) of $(18.5) million, $(3.9)
million and $10.6 million in 2025, 2024 and 2023, respectively. The Company has a shareholders’ deficit of $21.2 million and $6.4
million as of December 31, 2025 and 2024, respectively. If we are unable to obtain new service contracts, increase revenues, increase
profitability and reduce the Company’s shareholders deficit, our financial condition and results of operations might be affected
and our share price may decline.
Loans from Third Parties
Our financing activities have consisted in the past of loans from
banks and other third parties. Currently, a few of the Company’s subsidiaries have a line of credit, loan facilities or factoring
agreements, while the Company is looking for additional lines of credit for other subsidiaries. There is no assurance that third parties
will provide loans to the Company and even if loans are made, there is no assurance that the terms will be favorable to the Company.
Key Personnel
Our success largely depends on the services of our senior management
and executive personnel. The loss of the services of one or more of such key personnel could have an adverse impact on our operations.
Our success is also dependent upon our ability to hire and retain additional qualified executive personnel. We cannot assure you that
we will be able to attract, assimilate and retain personnel with the attributes necessary to execute our strategy. We cannot assure you
that one or more of our executives will not leave our employment and either work for a competitor or otherwise compete with us.
Development of New Technology
As part of our technology business strategy, we develop technological
solutions and systems for financial and other industries and seek other revenue producing business and business opportunities. We cannot
assure you that we will be able to develop new systems or develop systems that are commercially viable. Our success in developing and
marketing our systems will also depend on our ability to adapt to rapid technology changes in the industry and to integrate such changes
into our systems. We cannot assure you that we will be successful in our attempts to change or implement our business strategy. We may
not have the expertise to be successful in developing our business in areas that are not related to the security industry. We compete
in a highly competitive industry and our competitors may be more successful in developing new technology and achieving market acceptance
of their products.
Acquiring or Investing in Other Businesses
From time to time, the Company may seek to acquire or invest in
other business, which may or may not be related to the business of the Company. No assurance can be given that the Company will acquire
or invest in any companies. If the Company decides to acquire or invest, no assurance can be given that such acquisition or investment
will be successful.
Cyber Security Measures
We rely on computer systems and information technology in our business
and have established security programs for protection. We might be the target of attempted cyber and other security threats and despite
our security measures, our systems might be vulnerable to interruption or damage from computer hackings, viruses, worms or other destructive
or disruptive software, process breakdowns, denial of service attacks, social engineering or other malicious activities or any combination
of the foregoing. The Company has in place policies and procedures to identify and manage cybersecurity risks. We must continuously monitor
and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access,
misuse, computer viruses and other events that could have a security impact. Insider or employee cyber and security threats are increasingly
a concern for all companies including ours. It is not possible to determine the cost to the Company in the event of a cyber security incident
because costs are a function of the size and nature of the incident. For more information see item 5 – Operating and Financial Review
and Prospects in this 20F report for additional information on cybersecurity.
Use of Artificial Intelligence
We have increasingly integrated artificial intelligence (“AI”)
technologies into certain aspects of our operations, including customer support, internal process automation, and business analytics,
in addition to developing our own AI models and capabilities. While AI contributes to improved efficiency and scalability, its use presents
several risks that could materially and adversely affect our business, financial condition, and results of operations.
| • |
Evolving Regulatory Landscape. The evolving regulatory landscape surrounding AI, including potential restrictions on data usage,
transparency, and accountability, may limit our ability to deploy or expand these technologies. Such restrictions could also increase
our compliance costs. |
7
| • |
Inaccurate or Biased Outputs. AI systems can produce inaccurate, biased, or inappropriate outputs. Such errors may lead to operational
failures, reduced service quality, incorrect business decisions, or reputational harm, which could subject us to liability. |
| • |
Reliance on Third Parties. We rely on third-party AI platforms and services, which exposes us to risks related to their availability,
security, intellectual property rights, and compliance with applicable laws and ethical standards. |
| • |
AI Disruption to Services and Business Model. The rapid advancement of AI, both internally developed and commercially available
from third parties, may lead to technologies that can fully or partially replace certain services currently offered by the Company. The
obsolescence of existing services due to more advanced or cost-effective AI solutions could negatively impact our revenues and require
us to incur significant costs to rapidly re-align our business strategy, develop new offerings, or re-train our workforce. If we are unable
to adapt quickly or successfully, our competitive position will be harmed. |
Competition
Competition in the aviation security and aviation related services
industry as well as in the technology industry is intense. Many of our competitors have greater financial, technical and marketing resources.
Our competitors might develop and market alternative systems and technologies that may have greater functionality or be more cost effective
than the services we provide or the systems that we develop. If our competitors develop such systems, we may not be able to successfully
market our systems. Even if we are able to develop systems with greater functionality which are more cost effective than those developed
by our competitors, we may not be able to achieve market acceptance of our systems.
Operations in International Environments Risk
The Company is currently engaged in direct operations in numerous
countries and is therefore subject to risks associated with international operations including economic and/or political instability,
conflict, trade restrictions, wars and strikes. Such risks can cause the Company to have significant difficulties in connection with the
sale or provision of its services in international markets and have a material impact on the Company's consolidated financial position,
results of operations and cash flows.
Our R&D facility is located mostly in Israel and currently
remain largely unaffected following the military activity in the region. However, the duration, severity and global implications of the
current military activity and other geopolitical conflicts that may arise in the future, cannot be predicted at this time and could have
an effect on our business if our employees who are military reservists are called to active military duty, and if the war impacts the
economic, social and political stability of Israel.
Governmental Regulation
Industries on which we operate are subject to extensive governmental
regulation, the impact of which is difficult to predict. In the past, the Aviation and Transportation Security Act (the “Security
Act”) has had a significant negative impact on our aviation security business in the USA. In addition, our ability to successfully
market new systems will be dependent upon government regulations over which we have no control. Any existing or new regulation may cause
us to incur increased expenses or impose substantial liability upon the Company. The likelihood of such new legislation is difficult to
predict.
Aviation
Security Regulatory Matters
Our aviation security activities are subject to various regulations
imposed by authorities and various local and federal agencies having jurisdiction in the serviced area. The Company, on behalf of its
clients, is responsible for adherence to such regulations relating to certain security aspects of their activities. The Company is also
responsible to prevent passengers without proper travel documentation from boarding a flight, thereby avoiding fines otherwise imposed
on its clients by immigration authorities. We are subject to random periodic tests by government authorities with regard to the professional
level of the Company’s services and training. Any failure to pass such a test may result in the loss of a contract or a license
to perform services or a fine or both. In the airports in which we operate, a license to operate is required from the respective airport
authority. The Company currently holds the licenses required to operate in such locations.
Legislation Designed to Protect Privacy Rights
From time to time, personal identity databases and technologies
utilizing such databases have been the focus of organizations and individuals seeking to curtail or eliminate the use of personal identity
information technologies on the grounds that personal information and these technologies may be used to diminish personal privacy rights.
In the event that such initiatives result in restrictive legislation, the market for our products may be adversely affected. In addition,
in the event that the Company fails to comply with legislation designed to protect privacy rights, the market for our products may be
adversely affected.
8
Licenses for Operations
A license to operate is required by the airport authority in the
airports in which we currently operate. The loss of, or failure to obtain, a license to operate in one or more of such airports could
result in the loss of existing clients or the inability to compete for contracts in the airports in which we currently have licenses or
limit our growth in new airports.
Poor Economic Conditions
Poor economic conditions could adversely affect our business. Deterioration
in the global economic environment may result in decreased demand for our services. Weakening economic conditions could also affect our
customers, which may result in redirection of their request for our services.
Inflation
In some of the last years, record levels of inflation have resulted
in significant volatility and disruptions in the global economy. In response to rising inflation, central banks in the markets in which
we operate, including the United States Federal Reserve, have tightened their monetary policies and raised interest rates, and such measures
may continue if there is a period of sustained heightened inflation. Higher interest rates and volatility in financial markets could lead
to additional economic uncertainty or recession. Increased inflation rates have increased our operating costs, primarily labor costs.
There is no assurance that we will be able to promptly increase our pricing to offset our increased costs, or that our operations will
not be materially impacted by rising inflation and its broader future effect on the markets in which we operate. We have implemented certain
measures in response to such inflation pressures, including negotiating with major customers for reimbursement for salary increases
following the inflation adjustments in the employees’ salaries. There is no assurance that we will be fully or partly successful
in those negotiations. In addition, the Company has loan facilities, factoring agreements and a line of credit for a few of its subsidiaries.
The increased interest rates will increase the Company's financing costs. We continuously monitor the effects of inflation on our business
performance and financial condition. However, we cannot accurately predict whether we will be able to effectively and timely mitigate
their impact on our business.
Currency Risk
A substantial portion of our revenue is generated in foreign countries.
We usually retain our income in local currency at the location the funds are received. Since our financial statements are presented in
United States dollars, any significant fluctuation in the currency exchange rate between such currency and the United States dollar would
affect our results of operations and financial condition.
Limitations in Price Share
The market price of our common stock may from time to time be significantly
affected by a large number of factors, including among others, variations in our operating results, the depth and liquidity of the trading
market for our shares and differences between actual results of operations and the results anticipated by investors and securities analysts.
Many of the factors which affect the market price of our common stock are outside of our control and may not even be directly related
to us. The market price of our common stock may be volatile and the volume may be low, which may make it more difficult for you to sell
your shares.
Main Shareholders
As of April 25th, 2026, the MacPherson Trust, its beneficiaries
and Mr. M.J. Atzmon, own or control together approximately 78.6% of our issued and outstanding common stock (excluding conversion rights).
Mr. Atzmon, the Chairman of the Supervisory Board, disclaims any benefit or interest in the MacPherson Trust. As a result of such ownership
and conversion rights, the MacPherson Trust and its beneficiaries together with Mr. Atzmon are able to significantly influence and/or
control all matters requiring shareholder approval including the election of directors and approval of significant corporate transactions.
Such concentration may also have the effect of delaying or preventing a change in control. Their interests could conflict with yours.
In addition, significant sales of shares held by them could have a negative effect on our stock price.
Dividends
There is no assurance the Company will pay any cash dividends on
our common stock in the foreseeable future.
9
The Ability of Shareholders to Bring Action
or Enforce Judgments Against the Company, the Managing Directors and the Supervisory Directors may be Limited Since ICTS is a Foreign
Company
The ability of shareholders of ICTS (Shareholders) to bring actions
against ICTS, the members of the management board of ICTS (“Management Board” and its members “Managing Directors”)
and the members of the supervisory board of ICTS (“Supervisory Board” and its members “Supervisory Directors”)
or to enforce liabilities predicated upon non-Dutch laws may be limited.
The Company is a public company with limited liability (naamloze
vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands. The corporate affairs of ICTS are governed
by the articles of association of ICTS (the Articles of Association) and by the laws governing companies incorporated in the Netherlands.
A significant number of ICTS’ assets and activities are located outside the United States of America. In addition, Managing Directors
and some of the Supervisory Directors are residents of countries other than the United States of America.
The United States of America and the Netherlands currently do not
have a treaty providing for reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial
matters. In addition, the countries of residence of the Managing Directors, the Supervisory Directors and of the Company’s employees
may also not have a treaty providing for the reciprocal recognition and enforcement of judgments. Consequently, a final judgment for payment
rendered by an US court that is enforceable in the United States of America, whether or not predicated solely upon US securities laws,
will not be recognized and enforced by the Dutch courts. In order to obtain a judgment which is enforceable in the Netherlands, the claim
must be relitigated before a competent Dutch court. A Dutch court will, under current practice, generally grant the same judgment without
relitigating on the merits if the judgment by the US court (i) is final and conclusive and results from proceedings compatible with the
Dutch concept of due process, (ii) does not contravene public policy (openbare orde) of the Netherlands, (iii) has been based on an internationally
acceptable ground and (iv) is not incompatible with a judgment rendered between the same parties by a Dutch court, or with an earlier
judgment rendered between the same parties by a non-Dutch court in a dispute that concerns the same subject and is based on the same cause,
provided that the earlier judgment qualifies for recognition in the Netherlands. Dutch courts may deny the recognition and enforcement
of punitive damages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a US court and recognize damages
only to the extent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of US courts
in the Netherlands are governed exclusively by the Dutch Civil Procedure Code (Wetboek van Burgerlijke Rechtsvordering) and relevant case
law.
ICTS is a Dutch Public Limited Liability Company.
The rights of the Shareholders may be Different from the Rights of Shareholders in Companies Governed by the Laws of US Jurisdictions.
The rights of Shareholders and the responsibilities of Managing
Directors and Supervisory Directors may be different from the rights and obligations of shareholders in companies governed by the laws
of US jurisdictions. Such differences include, among others, voting requirements for important shareholder resolutions regarding capital
measures, corporate reorganizations and certain shareholder rights, such as assertion of liability claims. In the performance of its duties
the Management Board and Supervisory Board are required by Dutch law to solely act in the best interests of the Company, which in principle
is determined by the continued success of the Company with a view to sustainable long-term value creation. It is generally accepted that,
in discharging this duty, the Management Board and Supervisory Board must take into account the reasonable interests of all the Company’s
stakeholders, including its shareholders, employees and creditors. There will generally not be one prevailing stakeholder interest and
so directors will often have discretion in balancing those interests. It is possible that some of these parties will have interests that
are different from, or in addition to, the interests of the Shareholders.
10
Item 4.
Information on the Company
ICTS is a public limited liability company organized under the
laws of The Netherlands since 1992. Our offices are located at Walaardt Sacréstraat 425-5, 1117 BM Schiphol-Oost, The Netherlands
and its telephone number is +31-20-347-1077.
History and Development of the Company:
Aviation Security
The Company provides aviation security through its subsidiary I-SEC
International Security B.V. and its subsidiaries.
In 2001 and 2002, ICTS sold its European aviation security operations
in two stages for an aggregate purchase price of $103 million. As a result of the sale, ICTS divested itself at that time from most of
its European operations.
In February 2005, the Company decided to re-enter the European
aviation security market. In March 2005, the Company established a wholly owned subsidiary, I-SEC International Security B.V. and Subsidiaries
(“I-SEC”), under which all the airport security activities provided by ICTS are operated. Thereafter, I-SEC established new
subsidiaries throughout Europe and the Far East.
Other Aviation Related
Services Businesses
The Company provides other aviation related services in the United
States of America through its subsidiary Huntleigh U.S.A. (“Huntleigh”).
Authentication Technology
Business
Our technology business is primarily involved in the services of
authentication security to financial and other companies, mainly in the United States of America and Europe through its subsidiary AU10TIX
(the Company holds 66.30% of AU10TIX as of December 31, 2025).
Business Overview
General
ICTS provides the following services through its subsidiaries:
I-SEC provides mainly aviation security services at airports in
Europe and the Far East.
Huntleigh provides for the most part non-security other aviation
related services in the United States of America.
AU10TIX develops technological systems and provides authentication
solutions for financial and other companies.
Business Strategy
We are currently pursuing the following business strategy:
Aviation Security and Critical Infrastructure Operations in Europe
and the Far East
Through the I-SEC subsidiaries, we supply aviation and other high-end
security services to airports, airlines, governments and critical infrastructure facilities in Europe and the Far East. Currently, I-SEC
provides aviation security services to some of the largest airports in Europe. I-SEC is focused on the critical infrastructure operations
in the countries where we are present that are adjacent to our core business (airports, airlines, cargo). I-SEC is continually seeking
looking for ways to extend its operations mostly in the current countries it operates.
Other Aviation Related Services in the United States of America.
Through Huntleigh, the Company provides limited security services
and non-security other aviation related services in the United States of America. Huntleigh is continually seeking for ways to extend
its operations in new and existing locations with the USA.
Developing Authentication Technologies
Through AU10TIX, we are focusing on developing authentication technologies
in order to provide authentication services to financial and other markets worldwide. AU10TIX is continually seeking for ways to extend
the services it provides worldwide, both to new and existing customers.
11
Services
Services Offered in Europe
and the Far East
I-SEC specializes in the provision of advanced aviation security
services worldwide. These include services in four fields: Airports, Airlines, Cargo and General (High-risk) Security. Furthermore, I-SEC
offers Consulting, Training, Auditing and Technology in all those fields.
The Company benefits from the broad know-how and international
operational experience it has acquired in more than three decades of intensive activity in the field of aviation security. I-SEC’s
management and key personnel are widely recognized in the industry as developers of pioneering aviation security solutions, methods and
technologies, focusing on airport security and high-risk environments. With its highly skilled and experienced professional staff supported
by proprietary technological innovations, I-SEC is ideally positioned to deliver cost-effective aviation security solutions and services
to airports and airlines with varying operational volumes and needs.
I-SEC has operations in The Netherlands, Germany, Spain, Denmark,
Sweden and Japan.
Building on its management’s strong reputation and on its
broad know-how and experience, I-SEC is committed to providing its clients with security services at the highest professional level while
offering unprecedented cost savings. The Company constinually upgrades its services, trains its employees and applies a state-of-the-art
quality management system in order to ensure that amendments in regulatory requirements as well as changes in the threat environment and
developing needs are at all times respected.
I-SEC Aviation Security Services
Airports:
I-SEC offers a wide range of services to airports. These services
include Security Screening of passengers as well as hold baggage, vehicles and employees and are performed at the highest level for its
clients. The Company trains its staff to perform screening at checkpoints, both efficiently and effectively, fully complying with regulatory
and client requirements on one hand and focusing on hospitality and customer service requirements on the other hand.
Upon clients’ requirements, the services may be extended
to cover behavior detection on crowds and queues while at all times maintaining passenger privacy and confidentiality in accordance with
all relevant regulations issued by both the US and EU regulators. Furthermore, I-SEC is actively engaged in delivering Perimeter guarding,
CCTV surveillance and Vehicle marshalling if required.
Services related to Airports:
| • |
Security Screening: |
| o |
Passenger and hand luggage |
| o |
Hold baggage |
| o |
Employees / Staff |
| o |
Access control and vehicles |
| • |
Behavior detection on crowds and queues |
| • |
Perimeter guarding / patrolling |
| • |
CCTV surveillance and/or alarm resolution |
| • |
Vehicle marshalling |
On November 2025, the Company entered into certain agreements for
the provision of security services to Schiphol Nederland B.V (“SNBV”). The services will start in May 2026 until and up to
May 2031 with and extension option for another five years. Those agreements will replace the current service agreements with SNBV. The
servoces will be rendered through a dedicated special purpose vehicle (SPV) company jointly owned by SNBV and the Company. The Company
will hold the majority of the SPV’s shares.
Airlines:
Delivering services to airlines requires a high proficiency in
security services combined with hospitality requirements of the client, operational processing and knowledge of regulatory requirements
from international authorities (e.g. TSA) and authorities at the location of the operations. I-SEC is well equipped to deliver a wide
variety of such integrated services linking security with customer service. I-SEC’s performance is based on numerous years of experience
and expertise and fully complies with all local, national and international regulatory requirements. Included in I-SEC’s offerings
are many customer service functions enabling airlines to improve customer services while reducing manpower needs and operational costs.
12
Services related to Airports:
a. Above Wing Services:
| • |
Security: |
| o |
Security interviewing |
| o |
Behavior detection |
| o |
Escort of valuables and weapons |
| • |
Handling (Check-in, Ticketing, Boarding, etc) |
| b. |
Below Wing Services:
|
| • |
Ramp guarding |
| • |
Door guarding |
| • |
Interior and exterior searches |
| • |
Catering guarding |
| • |
Bag room guarding |
| • |
Selectee search |
Cargo Security
I-SEC provides a range of services that focuses on screening of air cargo for global
forwarding companies and Cargo Centers applying the highest standards. The Company supports not only related services but also implements
dedicated security programs, trains the client’s staff and management team and deploys explosives detection dogs to support the
efficient screening of goods.
Services related to Cargo:
| • |
Cargo Screening |
| • |
Explosives Detection Dogs |
| • |
Access control (Guard duties and airside gate checks) |
| • |
Vehicle marshalling |
General
(high-risk) Security:
The requirements, especially in the EU, for a higher degree of
security in Critical Infrastructure has led I-SEC to offer its services in these areas as well. I-SEC delivers a variety of services which
are similar to those offered to airports and airlines stemming from a different legal requirement and based on a different regulatory
framework. I-SEC’s professionalism and experience in these fields establish an advantageous position for I-SEC to offer general
security services worldwide.
Services related to General Security:
| • |
Security search and screening services |
| • |
Access control |
| • |
Perimeter guarding / patrolling (Including weapons and dogs) |
| • |
Security host & reception services |
| • |
CCTV surveillance and/or alarm resolution |
Training
/ Consulting / Auditing
I-SEC’s Training Programs are the product of over 30 years
of expertise and experience in the development of training materials covering every aspect of airline and airport as well as cargo security
operations and their implementation worldwide. They are similarly suitable to be implemented in Critical Infrastructure facilities and
for High-End guarding services.
Aviation security and security awareness training courses are offered,
which are modular in nature and are adapted to meet the specific needs of each client. The courses are continually being updated to ensure
that they cover all relevant material relating to new regulations, new threats, etc. Many of the courses include simulations, role play,
situational exercises, case studies and on-the-job training. Sophisticated training aids are employed to make the training experience
more efficient and interesting, thus ensuring optimal results.
13
The identification of the risks relevant to the particular site
or operation, and the grading according to their potential damage and probability enables I-SEC to develop security solutions that effectively
deal with these risks. I-SEC security experts possess broad experience in the design and development of modular aviation security systems
which are customized to meet local needs as well as complying with international standards. For over three decades, I-SEC specialists
have been assisting their clients implement and assimilate proven work methods and security solutions designed on the basis of extensive
know-how and experience and tailored to meet their specific needs.
Furthermore, I-SEC’s expert security consultants specialize
in the performance of airport security surveys and audits. Surveys can range from individual aspects of airport security to comprehensive,
all-encompassing operations. Special attention is put on the verification of compliance with applicable regulation and the presentation
of recommendations regarding any amendments that may be required. As security systems are only effective if they continue to address existing
and anticipated threats and to fully comply with international, national and local regulatory requirements, periodical aviation security
audits are of vital importance. I-SEC experts possess vast international experience in the performance of such audits and the resulting
recommended steps to ensure full compliance and suitability of the aviation security system.
Aviation Security Technology
In the interest of enabling clients to maintain the required level
of security while reducing operational costs, I-SEC utilizes several innovative, proprietary products.
X-CHECK & I-CHECK
X-Check and I-Check support airline staff, security or filtering
agents with customer processing. Performing automated customer filtering for different reasons, like security vetting, reducing in-admissible
and optimizing customer flow by reducing touchpoints. The application turns a tablet or cell phone into an extremely fast and accurate
passport and barcode scanner. Once the X-Check tablet app is connected to the X-Check infrastructure, a wide variety of functionalities
including NAPS customer filtering, becomes available guiding the airline, security and or filtering agents and supervisors intuitively
through the features and functionalities.
Services Offered in the
United States of America
As of December 31, 2025, Huntleigh provides limited aviation security
services and other aviation related services at approximately 30 airports in 20 states.
The limited security services provided by Huntleigh involve the
following:
• Private
Charter Flight Screening for Airlines - which includes security check of passengers’ body, checked baggage and carry-on items.
• Cargo
Security Screening – for some international and domestic carriers.
• Catering
Security Screening – for some international and domestic carriers.
• Aircraft
Security Screening – for some international and domestic carriers.
• Aircraft
Search – search of the entire aircraft to detect dangerous objects.
• Employee Screening
- check of employees entering and leaving a facility.
Each of the non– security services involve one of the following
specific job classifications:
Agent
Services for Airlines
Agent services include vendor behind counters, baggage service
(BSO)and lobby management – directing passengers to the appropriate check in counters. Although an agent is a Huntleigh employee,
the employee is considered a representative of specific airlines.
Guard Services
Guard services involve guarding secured areas including aircraft.
Huntleigh also provides guard services to schools, places of worship, homeowners association, events, etc. In addition, Huntleigh provides
camera security monitoring services.
Aircraft Cleaning
Huntleigh provides employees who perform aircraft cleaning services
such as:
• Cleaning the aircraft interior
• Conducting cabin searches
• Waxing the aircraft exterior
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Janitorial
Huntleigh provides janitorial services to airline airport offices, airline terminal areas, airline cargo
facilities and airlines gates
Shuttle Service
Huntleigh provides shuttle services to airline crews between hotel
and airport.
Skycap Services Provider
A skycap assists passengers with their luggage. Located at the
curb side of the check-in at airports, a skycap checks in passengers’ luggage and screens passengers for security requirements established
by the TSA. A skycap also assists arriving passengers with transporting luggage from the baggage carousel to ground transportation or
other designated areas.
A skycap also may transport checked baggage from the curb side
check-in to the airline counter. Concierge Service involves an employee monitoring the baggage carousel to ensure that passengers do not
remove luggage not belonging to them.
Wheelchair Attendants
Wheelchair attendants transport passengers through the airport
in airline and/or Company owned wheelchairs and may also operate electric carts for transporting passengers through the airport. Working
closely with the attendants are dispatch agents who monitor requests and assignments for wheelchairs and dispatch the attendants as needed
utilizing various wheelchair dispatch technologies.
Baggage
Handling Services
Huntleigh provides employees who move passengers’ baggage from the check-in counter to screening
machines and/or vice versa, assisting check in agents with putting passengers’ baggage on the baggage belts, moving oversized baggage
from check-in to appropriate bag belts and moving the baggage which was not collected by passengers to a Baggage Service Office (BSO).
VIP Meet and Greet Services
Huntleigh provides VIP passenger meet and greet services transitioning
through the airport on arrival and or departure.
Authentication Systems and Solutions
AU10TIX, an identity management company, has as its mission to
obliterate fraud and further a more secure and inclusive world. The Company provides critical, modular solutions to verify and link physical
and digital identities so businesses and their customers can confidently connect. Over the past decade, AU10TIX has become the preferred
partner of major global brands for customer onboarding and customer verification automation and continues to work on the edge of what’s
next for identity’s role in society. AU10TIX’s proprietary technology provides results in less than 8 seconds, enabling businesses
to onboard customers faster while preventing fraud, meeting compliance mandates and, importantly, promoting trust and safety.
AU10TIX stands at the forefront of identity management, dedicated
to stamping out fraud and building a safer business environment. With decades of mature technology, our award-winning and innovative products
offer modular, cutting-edge solutions to verify and link physical and digital identities so businesses and their customers can use a verified
connection. Our scalable and flexible technology adapts in real-time to the shifting dynamics of fraud, offering a versatile solution
for any business, industry, and use case. Delivering an exceptional user experience, AU10TIX's system achieves verification results within
seconds, driving higher conversion rates by meeting diverse customer onboarding and verification needs with precision. As a trusted partner
for global brands, our commitment to trust, safety, and compliance is unwavering, enabling businesses to grow confidently with the assurance
that every identity challenge they face is met.
Product & Technology
AU10TIX’s modular SaaS offering for identity verification
and fraud prevention automates the capture, extraction and validation from physical and digital ID documents. AU10TIX speeds up customer
screening and enrollment while enhancing security and identity fraud prevention with fully automated (i.e., no data entry or back-office
dependencies) multi-level fraud protection, counterfeiting and risk factor detection and higher conversion rates of borderline quality
images. AU10TIX technology, in addition, is data-rich and has fast-response exception reporting and multi-lingual document content support
while providing rapid processing (typically 8 seconds or less for the complete verification process).
15
AU10TIX technology is designed for security-sensitive and business-sensitive
environments such as airports, border control, financial services, etc., which require hi-resolution document imaging, auto image optimization,
auto-classification of documents up to version level, extraction of readable + encoded content including MRZ lines and barcodes. The automated
technology provides real-time verification of both data and visual elements across multi-factor identity verification. It offers immediate,
detailed exception alerts, supports integration with chip and barcode readers, enables biometric input processing and allows queries against
databases and watchlists
AU10TIX’s core IDV engine along with products like the Identity
Verification Suite, KYB solution, and Digital services, automates all essential components of KYC and KYB initiation in regulated markets
including ID document authentication, face matching, Proof-Of-Address processing, identity data verification and screening (eIDVS), and
business and UBOs verification.
AU10TIX enables fully automated ID image recognition and optimization,
pre-screening, content retrieval, forgery, counterfeiting collateral risk flag detection and exception reporting. Customers are also offered
SDK packages to improve and control ID and face image capturing by customers.
This portfolio of services enables service providers to rapidly
automate customer onboarding and AML/KYC/ KYB processes.
AU10TIX incorporates advanced AI algorithms and advanced neural
networks that increase the accuracy of analyzing images at a broad range of image quality levels for various types of official ID documents.
The system is designed to handle images that originate from any common imaging device including mobile phones, tablets, computer webcams,
etc.
AU10TIX is relevant for a variety of commercial and government
global markets many of which are required to comply with KYC/AML regulations. The technology can be integrated with additional Identity
Data Verification and Screening (eIDV/eIDVS) as a client or 3rd party augmented service or seamlessly integrated into AU10TIX’s
ID verification and POA handling components, enabling automated submission of customer data to the required person and address verification
services, as well as screening services such as PEPs & Sanctions, watchlists, etc., through a single API call.
Artificial Intelligence
Artificial intelligence is expected to play an increasingly important
role in shaping the identity authentication market and our strategic direction. The widespread adoption of AI in the identity space
may intensify competition. It may also create demand for hybrid solutions - such as combining human review with AI screening - for
high-assurance use cases. Our ability to adapt our offerings, integrate advanced AI tools and continue developing and improving our
AI models and capabilities responsibly and maintain trust in our systems might be material to sustaining our competitive position
and meeting evolving customer expectations.
Target Markets
Key markets for AU10TIX are financial services including banking,
insurance, payments, wallets, money transfer, lending, remittance, online investments, trading and forex, cryptocurrency exchanges, rental
services, sharing economy, professional services, telecommunications and social media, etc.
16
Investments
A summary of investments in unconsolidated subsidiaries and affiliates
as of December 31, 2025, and 2024 is as follows (in thousands):
|
December 31, |
December 31, |
|||||||||||||||||||
|
2025 |
2024 |
|||||||||||||||||||
|
Measurement
Method |
Carrying
Value |
Ownership
Percentage |
Carrying
Value |
Ownership
Percentage |
||||||||||||||||
|
Manuka, Inc. (Previously Artemis Therapeutics, Inc.) (1) |
Measurement alternative |
$ |
- |
Less than 1% |
$ |
- |
Less than 1% |
|||||||||||||
|
Mesh Technologies, Inc. (2) |
Equity method |
36 |
Less than 1% |
36 |
Less than 1% |
|||||||||||||||
|
Arrow Ecology & Engineering Overseas (1999) (3) |
Measurement alternative |
- |
22.6 |
% |
- |
22.6 |
% | |||||||||||||
|
GreenFox Logistics LLC. (2) |
Measurement alternative |
100 |
Less than 1% |
100 |
Less than 1% |
|||||||||||||||
|
SardineAI Corp. (2) (4) |
Measurement alternative |
8 |
Less than 1% |
8 |
Less than 1% |
|||||||||||||||
|
Silver Circle One (2)(5) |
Measurement alternative |
88 |
Less than 1% |
58 |
Less than 1% |
|||||||||||||||
|
Bring it On Games Ltd (2) |
Measurement alternative |
50 |
Less than 1% |
- |
- |
|||||||||||||||
|
Justt Fintech Ltd (previously Acrocharge Ltd) (2) |
Measurement alternative |
50 |
Less than 1% |
50 |
Less than 1% |
|||||||||||||||
|
Nilus OS Ltd (2) |
Measurement alternative |
25 |
Less than 1% |
25 |
Less than 1% |
|||||||||||||||
|
Total investments in unconsolidated subsidiaries and affiliates |
$ |
357 |
$ |
277 |
||||||||||||||||
| (1) |
The market value of the Company’s investment in MNKA is $0 both as of December 31, 2025, and 2024. |
| (2) |
Private, closely held company, with no active market for the investment. Therefore, the Company applies the measurement alternative
and measures the investment at cost minus impairment. |
| (3) |
The investment includes various classes of shares representing 22.6% of Arrow’s equity and shareholders loans of $4.2 million
which were purchased for a total amount of $1.7 million. The Company suspended its use of the equity method for this investment in 2023
after its investment balance was reduced to zero. In March 2026, the Company purchased from a related party additional shareholders loans
for a total amount of $500. |
| (4) |
The Company has an agreement with an entity related to its main shareholder, according to which, if the value of the investment decrease,
the related party entity has guaranteed to repurchase this full investment at a minimum amount of $1.7 million. The guarantee is effective
immediately as of the date of purchase and terminates on January 1, 2027. Some Directors, managers and shareholders of Arrow are related
parties of the Company. |
| (5) |
On January 2023, the Company sold approximately 85% of its investment for a total amount of $0.8 million. |
| (6) |
A capital fund which aims to invest in private emerging companies with focus on consumer, commerce and technology companies. The
Company committed to invest up to $0.1 million in a collective investment fund. |
17
Revenue
Revenue generated from customers by geographical area based on
the geographical location of the customers invoicing address is as follows:
Revenue in Germany
Revenue in Germany during the years 2025, 2024 and 2023 totaled
$158.2 million (30% of total revenue), $128.3 million (27% of total revenue) and $114.2 million (26% of total revenue), respectively.
Revenue in Spain
Revenue in Spain during the years 2025, 2024 and 2023 totaled $130.3
million (24% of total revenue), $113.2 million (23% of total revenue) and $82.2 million (12% of total revenue), respectively.
Revenue in The Netherlands
Revenue in The Netherlands during the years 2025, 2024 and 2023
totaled $111.8 million (21% of total revenue), $106.0 million (22% of total revenue) and $101.5 million (24% of total revenue), respectively.
Revenue in the U.S.
Revenue in the United States of America during the years 2025,
2024 and 2023 totaled $93.0 million (17% of total revenue), $97.0 million (20% of total revenue) and $99.7 million (23% of total revenue),
respectively.
Revenue in Other Locations
Revenue in other locations during the years 2025, 2024 and 2023
totaled $41.1 million (8% of total revenue), $38.8 million (8% of total revenue) and $33.9 million (8% of total revenue), respectively.
18
Major
Customers
Revenue from three customers represented 50% of total revenue for
the year ended December 31, 2025 and 37% of total accounts receivable as of December 31, 2025, of which customer A accounted for 20% from
total revenue and 16% of total accounts receivable. Customer B accounted for 15% from total revenue and 10% of total accounts receivable
and customer C accounted for 15% from total revenue and 11% of total accounts receivable. Accounts receivable from these three customers
represented 37% of total accounts receivable as of December 31, 2025. Revenue from these three customers is presented under the airport
security segment of the Company.
Revenue from three customers represented 47% of total revenue for
the year ended December 31, 2024 and 24% of total accounts receivable as of December 31, 2024, of which customer A accounted for 18%,
from total revenue and 13% of total accounts receivable. Customer B accounted for 17%, from total revenue and 1% of total accounts receivable
and customer C accounted for 12% from total revenue and 9% of total accounts receivable. Revenue from these three customers is presented
under the airport security segment of the Company.
Revenue from two customers represented 34% of total revenue for
the year ended December 31, 2023 and 20% of total accounts receivable as of December 31, 2023, of which customer A accounted for 20% from
total revenue and 13% of total accounts receivable, and customer B accounted for 14% of total revenue and 7% of total accounts receivable.
Revenue from these two customers is presented under the airport security segment of the Company.
Climate
Change Regulation
Our business is not affected directly by existing and pending,
local, state, regional, federal or international legal requirements and agreements related to climate change. Although our business
is not affected by climate change directly, it may be affected indirectly as the airlines we serve emit significant greenhouse gases and
if flights are reduced as a result it could affect our business.
19
Organizational Structure
The following are the active subsidiaries of ICTS as of December
31, 2025:
I-SEC Global Security B.V. (The Netherlands - 100%) and its wholly-owned
subsidiaries:
I-SEC International Security B.V. (The Netherlands - 100%), which
holds the shares of:
I-SEC Benelux Holdings B.V. (Netherlands - 100%) which holds the
shares of:
I-SEC Nederland Security Services B.V. (Netherlands – 100%)
I-SEC Belgium Aviation Security B.V. (Belgium – 100%)
I-SEC Nederland B.V. (Netherlands – 100%) which holds the
shares of:
I-SEC Schiphol Security B.V (Netherlands –
75%)
I-SEC Spain Holdings B.V. (Netherlands - 100%) which holds the
shares of:
I-SEC Spain Services Management S.L. (Spain - 100%)
I-SEC Spain Security Management S.L. (Spain – 100%)
I-SEC Aviation Security S.L. (Spain – 100%)
I-SEC Nordic Holding B.V. (Netherlands – 100%) which holds
the shares of:
I-SEC Denmark Aviation Security A.S (Denmark – 100%)
I-SEC Norway Aviation Security A.S. (Norway – 100%)
I-SEC Sweden Aviation Security A.B. (Sweden – 100%)
I-SEC German Holding B.V. (Netherlands – 100%) which holds
the shares of:
I-SEC Security Services GmbH (Germany - 100%)
I-SEC German Aviation Holdings 1 B.V. (Netherlands – 100%)*
which holds the shares of:
I-SEC Verwaltungs SE (Germany – 100%)**
I-SEC Deutsche Luftsicherheit SE&Co.KG (Germany – 100%)
Platin 2422 GmBH (Germany - 100%) ***
I-SEC Academy GmbH &Co.KG
I-SEC Tech B.V. (Netherlands – 100%)
I-SEC Italia s.r.l. (Italy - 100%), which holds the shares of:
I-SEC Italia Services s.r.l. (Italy – 100%)
I-SEC Japan K.K. (Japan - 100%)
ICTS USA, Inc. (New York - 100%) which holds the shares of:
Huntleigh USA Corporation (Missouri, USA - 100%)
Aviation Mobility Solutions, Inc (Texas, USA – 100%)
AU10TIX Technologies B.V. (The Netherlands – 66%,) which
holds the shares of:
AU10TIX Limited (Cyprus – 100%) which holds the shares of:
AU10TIX B.V. (The Netherlands – 100%) which holds the shares
of:
AU10TIX Ltd. (Israel – 100%), which holds the shares of:
AU10TIX Services Inc. (Texas, USA – 100%)
*I-SEC German Aviation Holdings 1 B.V. is a limited partner (100%)
of I-SEC Deutsche Luftsicherheit SE&Co.KG (Germany)
I-SEC German Aviation Holdings 1 B.V. is a limited partner (100%)
of I-SEC Academy GmBH & Co.KG (Germany)
**I-SEC Verwaltungs SE is a general partner (0%) of I-SEC Deutsche
Luftsicherheit SE&Co.KG (Germany).
*** Platin 2422 GmBH is a general partner (0%) of I-SEC Academy
GmBH &Co.KG
20
Property, Plant and Equipment
The Company leases certain premises under various operating leases.
Maturities of operating lease liabilities as of December 31, 2025 were as follows (in millions):
|
Years ended December 31, |
||||
|
2026 |
$ |
3.8 |
||
|
2027 |
2.9 |
|||
|
2028 |
1.8 |
|||
|
2029 |
0.7 |
|||
|
2030 |
0.5 |
|||
|
Thereafter |
2.0 |
|||
|
$ |
11.7 |
|||
Lease expenses for the years ended December 31, 2025, 2024 and
2023 are $8.9 million, $7.9 million and $6.5 million, respectively.
Item 5.
Operating and Financial Review and Prospects
This section contains forward-looking statements within the meaning
of the U.S. Private Securities Litigation Reform Act of 1995 concerning our business, operations and financial condition. All statements
other than statements of historical facts included in this annual report on Form 20-F regarding ICTS’s strategy, future operations,
financial position, costs, prospects, plans and objectives of management are forward-looking statements. When used in this annual report
on Form 20-F the words “expect”, “anticipate”, “intend”, “plan”, “believe”,
“seek”, “estimate”, and similar expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. Because these forward- looking statements involve risks and uncertainties,
actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons,
including those discussed under “Risk Factors” and elsewhere in this annual report on Form 20-F.
We cannot guarantee any future results, levels of activity, performance
or achievements. The forward-looking statements contained in this annual report on Form 20-F represent managements’ expectations
as of the date of this annual report on Form 20-F and should not be relied upon as representing ICTS’s expectations as of any other
date. Subsequent events and developments will cause management’s expectations to change. However, while we may elect to update these
forward-looking statements, ICTS specifically disclaims any obligation to do so, even if its expectations change.
Overview
The Company operates in three reportable segments (a) airport Security
(b) other aviation related services and (c) authentication technology. The Company also incurs general corporate expenses and costs which
are not allocated to the reportable business segments but have been included in the “unallocated corporate” component which
does not generate revenue and contains primarily non-operational expenses. The airport security segment includes the I-SEC International
group. The airport security segment provides security services primarily to airlines and airport authorities in Europe. The other
aviation related services segments include Huntleigh USA. The other aviation related services segment provides various services to airlines
within airports in the United States of America. The authentication technology represents the AU10TIX Technologies group. The authentication
technology segment provides authentication services to financial and other companies, predominantly in the United States of America.
Critical Accounting Estimates
The consolidated financial statements have been prepared in accordance
with US GAAP. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
One critical accounting policy that require the use of judgment and estimates is valuation allowance of deferred income taxes. Please
refer to Note 2 of ICTS’s consolidated financial statements included in this Annual Report for the year ended December 31, 2025
for a summary of ICTS’s significant accounting policies.
Income Taxes
The Company accounts for income taxes using the liability method.
Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
period that includes the enactment date. A valuation allowance is established for net deferred tax assets when it is more-likely-than-not
that they will not be realized.
21
Discussion and Analysis of the Results of Operations
The following table summarizes our results of operations for the
years ended December 31, 2025, 2024 and 2023. However, our discussion of the results of operations excludes the comparison of the results
for the years ended December 31, 2024 and 2023. Refer to item 5, Operating and Financial Review and Prospects-Results of Operations in
our Annual Report on Form 20-F for the year ended December 31, 2024 which was filed with the SEC on May 13, 2025.
|
U.S. Dollars in Thousands |
||||||||||||
|
For the Years ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Revenue |
$ |
534,376 |
$ |
483,310 |
$ |
431,542 |
||||||
|
Cost of revenue |
474,634 |
413,469 |
351,558 |
|||||||||
|
Gross profit |
59,742 |
69,841 |
79,984 |
|||||||||
|
Operating expenses: |
||||||||||||
|
Research and development |
14,508 |
14,372 |
12,325 |
|||||||||
|
Selling, general and administrative |
62,648 |
61,249 |
56,927 |
|||||||||
|
Total operating expenses |
77,156 |
75,621 |
69,252 |
|||||||||
|
OPERATING INCOME (LOSS) |
(17,414 |
) |
(5,780 |
) |
10,732 |
|||||||
|
Other income, net |
577 |
1,427 |
1,584 |
|||||||||
|
INCOME (LOSS) BEFORE INCOME TAX EXPENSES |
(16,837 |
) |
(4,353 |
) |
12,316 |
|||||||
|
Income tax benefits (expenses) |
(1,644 |
) |
452 |
(1,745 |
) | |||||||
|
NET INCOME (LOSS) |
(18,481 |
) |
(3,901 |
) |
10,571 |
|||||||
|
Less: Net income (loss) attributable to non-controlling interests |
(4,133 |
) |
331 |
3,490 |
||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V |
$ |
(14,348 |
) |
$ |
(4,232 |
) |
$ |
7,081 |
||||
22
The following table sets forth, for the annual periods indicated, certain results of
operations data as a percentage of revenue for the years ended December 31, 2025, 2024 and 2023:
|
For the Years ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Revenue |
100.0 |
% |
100.0 |
% |
100.0 |
% | ||||||
|
Cost of revenue |
88.8 |
% |
85.5 |
% |
81.5 |
% | ||||||
|
Gross profit |
11.2 |
% |
14.5 |
% |
18.5 |
% | ||||||
|
Research and development |
2.8 |
% |
3.0 |
% |
2.9 |
% | ||||||
|
Selling, general and administrative |
11.7 |
% |
12.7 |
% |
13.1 |
% | ||||||
|
Total operating expenses |
14.5 |
% |
15.7 |
% |
16.0 |
% | ||||||
|
OPERATING INCOME (LOSS) |
(3.3 |
)% |
(1.2 |
)% |
2.5 |
% | ||||||
|
Other income, net |
0.1 |
% |
0.3 |
% |
0.4 |
% | ||||||
|
INCOME (LOSS) BEFORE INCOME TAX EXPENSES |
(3.2 |
)% |
(0.9 |
)% |
2.9 |
% | ||||||
|
Income tax benefits (expenses) |
(0.3 |
)% |
0.1 |
% |
(0.5 |
)% | ||||||
|
NET INCOME (LOSS) |
(3.5 |
)% |
(0.8 |
)% |
2.4 |
% | ||||||
|
Less: Net income (loss) attributable to non-controlling interests |
(0.8 |
)% |
(0.1 |
)% |
0.8 |
% | ||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. |
(2.7 |
)% |
(0.9 |
)% |
1.6 |
% | ||||||
The following table sets forth, for the annual periods indicated,
the Company’s revenues generated from customers by geographical area based on the geographical location of the customers invoicing
address:
|
(U.S. Dollars in Thousands) |
||||||||||||
|
For the Years ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Germany |
$ |
158,224 |
$ |
128,278 |
$ |
114,176 |
||||||
|
Spain |
130,258 |
113,177 |
82,217 |
|||||||||
|
The Netherlands |
111,804 |
106,027 |
101,512 |
|||||||||
|
United States of America |
93,008 |
97,000 |
99,765 |
|||||||||
|
Other |
41,082 |
38,828 |
33,872 |
|||||||||
|
Total Revenue |
$ |
534,376 |
$ |
483,310 |
$ |
431,542 |
||||||
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The majority of the Company’s operations are in Euros which
affects the annual results by the movements in exchange rates between Euros and the US Dollars. The annual average exchange rate for the
year 2025 was 1.13 USD to 1.00 Euro compared to 1.08 USD to 1.00 Euro in 2024, representing an increase of approximately 4.6%.
In the Netherlands, wage tax, social security and VAT payments
for the period March 2020 until September 2021 were postponed as part of the government assistance regarding COVID - 19 and were required
to be paid in 60 monthly installments, beginning October 2022. In January 2026 the Dutch authorities agreed to extend the monthly payments
of the balance by two years until October 2029.The debt incurs annual interest of 4% since January 1, 2024. As of December 31, 2025 and
2024, the Company accumulated debt of €12,156 and €18,245 ($14,260 and $18,984), respectively, to the Dutch tax authorities.
Revenue
Total revenue in 2025 was $534.4 million compared to $483.3 million
in 2024.
Revenue generated in
Germany was $158.2 million in 2025 compared to $128.3 million in 2024. As revenue in Germany is in Euro, it is being translated to US
Dollars which had a positive effect of approximately 4.6% on the revenue for the year ended December 31, 2025. Increase of additional
revenue in Germany represents primarily services provided to new customers following new contracts signed during 2024 and passenger’s
growth in regional airports, increasing demand of services provided to existing customers.
Revenue generated in the Netherlands was $111.8 million in 2025
compared to $106.0 million in 2024. As revenue in The Netherlands is in Euro, it is being translated to US Dollars which had a positive
effect of approximately 4.6% on the revenue for the year ended December 31, 2025. Increase of additional revenue represents primarily
increase in the hourly rates paid to the employees because of indexation, which are being charged to the customer back-to-back.
23
Revenue generated in Spain was $130.3 million in 2025 compared
to $113.2 million in 2024. As revenue in Spain is in Euro, it is being translated to US Dollars which had a positive effect of approximately
4.6% on the revenue for the year ended December 31, 2025. The additional increase in revenue generated in Spain represents both new contracts
in Spain and an increase of services to existing customers.
Revenue generated in the United States of America was $93.0 million
in 2025, compared to $97.0 million in 2024. The decrease in revenue generated in the United States of America was primarily a result of
decrease of services provided by our authentication technology segment to its American customers, from $22.5 million in 2024 to $11.9
million in 2025. The revenue decrease was offset by an increase of revenue by our other aviation related services segment which increased
from $74.5 million in 2024 to $81.1 million in 2025, primarily following increase of services provided to customers and increases in minimum
wage rates which are being charged back to the customers.
Revenue outside Germany, the Netherlands, Spain and the United
States of America totaled $41.1million in 2025 compared to $38.8 million in 2024. The increase in revenue generated in those locations
represents mostly increase of services to existing customers and exchange rate affects.
Cost of Revenue
Cost of revenue in 2025 was $474.6 million or 88.8% of revenue,
compared to $413.5 million or 85.5% of revenue in 2024. The majority of cost of revenue relates to payroll and related costs. Cost of
revenue of European countries is in Euros and it is being affected by exchange rate fluctuations as its being translated to USD which
had an effect of approximately 4.6% on the cost of revenue for the year ended December 31, 2025.Increase in cost of revenue during 2025
relates mostly to increase in labor costs which increased by $57.9 million compared to 2024, mostly because of increase in revenue, increase
in sickness rates, decrease in efficiency, wage inflation adjustments and changes in labor terms and conditions on the benefit of employees
in certain locations.
Research and Development
Expenses (“R&D”)
Research and development costs in 2025 were $14.5 million or 2.8%
of revenue, similar to $14.4 million or 3.0% of revenue in 2024. The decrease in R&D as percentage of revenue is a result of the increase
in the consolidated revenue compared to previous year.
Selling, General and Administrative Expenses
(“SG&A”)
SG&A expenses in 2025 were $62.6 million or 11.7% of revenue
in 2024, compared to $61.2 million or 12.7% of revenue in 2024. Cost of revenue of European countries is in Euros and it is being affected
by exchange rate fluctuations as its being translated to USD which had an effect of approximately 4.6% on the SG&A for the year ended
December 31, 2025.. The decrease in SG&A as percentage of revenue is a result of the increase in the consolidated revenue compared
to previous year.
Other Income, net
Other income, net, were $0.6 million or 0.1% of revenues in 2025,
compared to $1.4 million or 0.3% of revenues in 2024, respectively. In 2025 and 2024, The Company recognized interest expense of $0.7
million and $0.9 million owed to the Dutch tax authorities in relation to the debt following the COVID-19 assistance. Other interest expenses
and bank charges were $1.3 million in 2025 compared to $0.7 million in 2024 following the increase in use of loans and factoring agreements
during 2025 compared to previous years in order to finance the increase in revenue and the losses accumulated during the year. Offsetting
those expenses were interest income of $2.4 million in 2025 and $3.1 million in 2024 resulting from a decrease in market interest rates
on bank deposits. In addition, in 2025 the Company recorded an exchange rate income of $0.2 million compared to an exchange rate loss
of $0.1 million in 2024.
Income Tax Benefits (Expenses)
Income tax expenses were $(1.6) million or 0.3% of revenue in 2025
compared to income tax benefits of $0.5 million or 0.1% of revenue in 2024. Income tax expenses relating to the authentication technology
segment were $(0.8) million in 2025 compared to $(0.2) million in 2024. Income tax expenses relating to the airport security segment were
$(0.8) million in 2025 compared to income tax benefits of $0.7 million in 2024. Income tax expenses relating to the other aviation related
services segment were $0.0 million in both in 2025 and in 2024. Previous net operating losses are utilized to reduce the yearly income
tax expenses in some of the countries we operate.
24
Reportable Segment
The following table sets forth for the annual periods indicated
certain financial data related to the Company’s reportable segments. However, our discussion of the reportable segments excludes
the comparison for the year ended December 31, 2023. Refer to item 5, Operating and Financial Review and Prospects – Results of
Operations in our Annual Report on Form 20-F for the year ended December 31, 2024, which was filed with the SEC on May 13, 2025.
|
U.S. Dollars in Thousands |
||||||||||||||||||||
|
Unallocated Corporate |
Airport Security |
Other Aviation related Services |
Authentication Technology |
Total |
||||||||||||||||
|
Year ended December 31, 2025: |
||||||||||||||||||||
|
Revenue |
$ |
- |
$ |
421,818 |
$ |
81,106 |
$ |
31,452 |
$ |
534,376 |
||||||||||
|
Labor costs (1) |
1,261 |
393,624 |
68,082 |
25,208 |
488,175 |
|||||||||||||||
|
Depreciation and amortization |
53 |
839 |
326 |
883 |
2,101 |
|||||||||||||||
|
Other costs and expenses |
2,536 |
31,303 |
11,146 |
17,596 |
62,581 |
|||||||||||||||
|
Net income (loss) |
(3,850 |
) |
(3,948 |
) |
1,552 |
(12,235 |
) |
(18,481 |
) | |||||||||||
|
Goodwill |
- |
713 |
- |
- |
713 |
|||||||||||||||
|
Total assets |
9,682 |
81,138 |
19,723 |
55,004 |
165,547 |
|||||||||||||||
|
Year ended December 31, 2024: |
||||||||||||||||||||
|
Revenue |
$ |
- |
$ |
362,799 |
$ |
74,526 |
$ |
45,985 |
$ |
483,310 |
||||||||||
|
Labor costs (1) |
1,324 |
338,326 |
63,105 |
27,000 |
429,755 |
|||||||||||||||
|
Depreciation and amortization |
68 |
678 |
354 |
1,271 |
2,371 |
|||||||||||||||
|
Other costs and expenses |
2,472 |
25,612 |
10,513 |
16,488 |
55,085 |
|||||||||||||||
|
Net income (loss) |
(3,864 |
) |
(1,817 |
) |
554 |
1,226 |
(3,901 |
) | ||||||||||||
|
Goodwill |
- |
633 |
- |
- |
633 |
|||||||||||||||
|
Total assets |
19,791 |
80,422 |
18,832 |
66,737 |
185,782 |
|||||||||||||||
|
Year ended December 31, 2023: |
||||||||||||||||||||
|
Revenue |
$ |
- |
$ |
309,335 |
$ |
66,463 |
$ |
55,744 |
$ |
431,542 |
||||||||||
|
Labor costs (1) |
1,091 |
284,083 |
56,346 |
29,507 |
371,027 |
|||||||||||||||
|
Depreciation and amortization |
5 |
904 |
307 |
1,463 |
2,679 |
|||||||||||||||
|
Other costs and expenses |
2,215 |
21,771 |
9,796 |
13,483 |
47,265 |
|||||||||||||||
|
Net income (loss) |
(3,311 |
) |
2,577 |
14 |
11,291 |
10,571 |
||||||||||||||
|
Goodwill |
- |
668 |
- |
- |
668 |
|||||||||||||||
|
Total assets |
17,740 |
81,733 |
19,325 |
78,298 |
197,096 |
|||||||||||||||
| (1) |
Labor costs includes employee payroll, share-based compensation, bonus, and employee benefits, insurances and other. |
Unallocated Corporate
Segment
The Company’s loss in the corporate segment of $3.8 million
in 2025 was similar to the loss of $3.9 million in 2024.
Airport Security Segment
Increase in revenue from the airport security segment from $362.8
million in 2024 to $421.8 million in 2025 relates primarily to increase in the operations of the Companies in Germany and Spain. In Germany,
revenue increased from $128.3 million in 2024 to $158.2 million in 2025. The increase in revenue relates mostly to additional services
provided to new customers during 2025. Operations in Spain continued to grow from $113.2 million in 2024 to $130.3 million in 2025. Increase
in revenue in Spain relates moistly to additional services provided to existing and new customers during 2025. As the Airport Security
segment operates mostly in Europe and is affected by fluctuations of exchange rates between the Euro to the USD. The annual average exchange
rate for the year 2025 was 1.13 USD to 1.00 Euro compared to 1.08 USD to 1.00 Euro in 2024, representing an increase of approximately
4.6%.
The Company’s net loss from the airport security segment
was $3.9 million in 2025 compared to $1.8 million in 2024. The main reasons for the increase of losses in 2025 relate to increase
in labor costs as increase in sickness rates, decrease in efficiency and changes in labor terms and conditions on the benefit of employees
in certain locations.
25
Other Aviation Related
Services Segment
Increase in revenue from the aviation related services segment
from $74.5 million in 2024 to $81.1 million in 2025 relates to increase of services provided to certain existing and new customers. In
addition, in a few states in the United States of America there have been increases in minimum wages, which increased both our revenues
and our labor costs, though not always by the same amounts.
The Company’s net income from the other aviation related
services was $1.6 million in 2025 compared to $0.6 million in 2024. The main reasons for the increase in profitability from 2024 to 2025
are the increase in revenue and changes implemented in 2024 in the operations in order to improve efficiency as improving the planning
and reducing overtime hours.
Authentication Technology
Segment
Revenue in 2025 from the authentication technology segment was
$31.5 million compared to $46.0 million in 2024. The Company has lost a few customers and the activities of some existing customers has
decreased during the year 2025. The net loss from this segment amounted $12.2 million in 2025 compared to net profit of $1.2 million in
2024. The loss in 2025 was a result of decrease in revenue. The technology’s segment profitability tends to increase with higher
revenues while when revenues decline, the profitability margin typically decreases to the point losses are being accumulated due to the
relatively stable level of fixed costs and the limited amount of variable expenses.
Liquidity and Capital
Resources
The Company’s most significant expenditures consist of payroll,
related costs and professional fees. The Company has historically financed such expenditures through cash flows from operations, funding
received from lines of credit, loans and factory agreements with lenders in Europe and the United States of America.
As of December 31, 2025 and 2024, the Company had cash, cash equivalents,
restricted cash and bank deposits of $30.0 million and $87.4 million, respectively. As of December 31, 2025 and 2024, cash and cash equivalents
totaled $16.9 million and $64.7 million, respectively. Restricted cash was $2.8 million and $4.7 million which consist of collateral for
our letters of credit, derivative instruments and restricted bank accounts in the Netherlands which are restricted for payments to local
tax authorities. As of December 31, 2025 and 2024, bank deposits were $10.3 million and $18.1 million, respectively and term deposits
were $30.8 and $0, respectively.
As of December 31, 2025 and 2024, the Company had working capital
of $63.3 million and $82.4 million, respectively and shareholders’ deficit of $21.2 million and $6.4 million, respectively. During
the years ended December 31, 2025, 2024 and 2023, the Company incurred net income (loss) of $18.5million, $(3.9) million and $10.6 million
and net cash flows provided by (used in) operating activities of $(31.0) million, $(9.5) million and $4.4 million, respectively.
In 2023 The Company’s U.S subsidiary secured a three-year
credit facility with its primary bank in September 2023. The credit facility has a maximum borrowing base limit of $7.5 million. The borrowing
base limitation is equivalent to: (i) 85% of eligible non-investment grade receivables and 90% of eligible investment grade receivables,
plus (ii) 80% of direct labor payroll for the previous two pay periods plus 20%. The company is required to maintain a fixed charge ratio
of 1.00. Borrowings on the credit facility are subject to interest at SOFR plus 2.65% (6.52% as of December 31, 2025). In April 2026 the
credit facility was extended until April 2029.As of December 31, 2025 and 2024, the outstanding balances under the credit facility for
both years are $0.0 million and the unused available amount of the line is $7.5 million.
The Company has a factoring arrangement in Sweden to provide it
with up to 4.0 million SEK ($0.4 million as of December 31, 2025) in borrowings. Borrowings under the agreement bear annual interest of
4.9% and are subject to an annual extension by the financial institution. The factoring agreement is secured by accounts receivable of
the Swedish subsidiary. As of December 31, 2025 and 2024, the Company had 0.8 million SEK and 2.2 million SEK ($0.1 million and $0.2 million
as of December 31, 2025 and 2024) respectively in outstanding borrowings under the credit facility.
In November 2023, the Company entered into a loan agreement with
a commercial bank in Spain to provide it with up to €1.0 million ($1.2 million as of December 31, 2025). The loan agreement is secured
by accounts receivable of the Spanish subsidiary. The interest rate is determined by the bank at the time the loan is taken. The loan
agreement was renewed in November 2024 and still in place. As of December 31, 2025 and 2024, the Company had no outstanding balances under
the loan agreement.
In December 2023, an agreement was signed with the same commercial
bank in Spain, to provide loans up to €1.5 million ($1.8 million as of December 31, 2025). These loans can be used only for paying
different taxes to the Spanish tax authorities. The interest rate is determined at the time the loans are taken. During the periods ending
December 31, 2025 and 2024, the loans taken ranged between €1.0 million and €1.5 million ($1.2 million and $1.8 million as
of December 31, 2025) for periods of three months. As of December 31, 2025 and December 31, 2024 the outstanding balances were €0.3
million and €1.0 million ($0.4 million and $1.0 million respectively).
In June 2024, the Company signed a factoring agreement with a commercial
bank in Germany for an unlimited period. According to the agreement, the Company factors accounts receivable related to invoices issued
to certain customers up to the amount of €11.5 million ($13.6 million as of December 31, 2025). The amounts can be used only for
payroll related costs in Germany. The Company is being charged fees until the collection date equal to Euribor plus 3.00% (4.95% as of
December 31, 2025). The Company is also subject to a 1.5% annual fee on the total factoring amount. As of December 31, 2025 and 2024,
the outstanding balances were €6.2 million and €1.9 million ($7.3 million and $1.9 million as of December 31, 2025 and 2024),
respectively. In February 2026 the financial institution agreed to increase the availability up to €15.8 million.
26
In July 2025, an agreement with a commercial bank in Spain was
signed, to provide loans up to €0.1 million ($0.2 million as of December 31, 2025). These loans can be used only for paying different
taxes to the Spanish tax authorities. The Company pays a commission that is determined at the time the loans are taken, without additional
interest. As of December 31, 2025 there is no outstanding balance under the loan agreement.
In March 2024 the Company signed a non-recourse factoring agreement
with a commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to €3.0
million ($3.5 million as of December 31, 2025). The maximum amount provided by the bank cannot exceed 75% of the monthly invoice for that
customer. In March 2025 the agreement was extended for one year and the facility was increased up to €4.0 million ($4.7 million
as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit risks associated with the purchased
receivables and the Company has no further obligation related to their collection. Accordingly, the factored receivables are derecognized
from the Company’s balance sheet once the funds are received by the Company. The arrangement does not create any liability and therefore
no loan or financing obligation is recorded in the Company’s financial statements. The Company is also subject to a 0.2% fee for
every factored invoice issued under the agreement and with interest equal Euribor plus 0.60% (2.55% as of December 31, 2025) until the
date the payment is anticipated. In January 2026, the agreement was renewed for additional year under the same terms and conditions.
In July 2025, the Company signed a non-recourse factoring agreement
with another commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to
€0.7 million ($0.9 million as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit
risks associated with the purchased receivables and the Company has no further obligation related to their collection. Accordingly, the
factored receivables are derecognized from the Company’s balance sheet once the funds are received by the Company. The arrangement
does not create any liability and therefore no loan or financing obligation is recorded in the Company’s financial statements. The
interest rate is Euribor of the month plus 0.90% (2.85% as of December 31, 2025).
The Company’s business plan projects loss from operations
in 2026 and profit from operations in 2027. The Company is dependent mostly in Europe and the United States of America for its businesses
on the airline industry. ICTS is an employee intensive company, especially its aviation security and other aviation related services segments.
The decisions taken in previous years by the Dutch government following
the COVID 19 pandemic have affected the Company’s business as following:
Wage tax, social security and VAT payments in the Netherlands for
the period March 2020 through September 2021 were postponed and have to be paid in 60 monthly installments, starting October 2022. Beginning
July 2022, the debt incurs annual interest of 1% and increases every six months to a maximum of 4% from January 1, 2024. In November 2025,
the Company filed a request with the tax authorities to extend the installments from 60 to 84 monthly installments. In January 2026, the
request was approved. As of December 31, 2025 and 2024, the Company accumulated debt of €12.2 million and €18.2 million
($14.3 million and $19.0 million as of December 31, 2025 and 2024), respectively, to the Dutch tax authorities.
The below analysis of cash flows excludes discussions relate to
the year ended December 31, 2023. Refer to items 5, operating and Financial review and Prospects-Liquidity and Capital Resources in our
Annual Report on Form 20-F for the year ended December 31, 2024, which was filed with the SEC on May 13, 2025.
Cash Flows from Operating
Activities
Our cash flows from operating activities vary significantly from
year to year, depending on our operating results, timing of cash receipts and disbursements on accounts receivable, accounts payable,
accrued expenses and other current liabilities.
Net cash provided by (used in) operating activities for the year
ended December 31, 2025 was $(31.0) million. Net cash provided resulted primarily from a net loss for the year of $18.5 million, a decrease
of 5.4 million of accrued expenses and other current liabilities compared to 2024 – mostly repayment of advanced payment from a
customer of $4.8 million, a decrease of income tax and other taxes payable of $2.4 million compared to 2024, a decrease of VAT payable
of $0.8 million compared to 2024, a decrease of other liabilities of $3.0 million compared to 2024 due to payments made during 2025 by
the Company in order to repay its long-term debt to the Dutch tax authorities related to the governmental assistance to the Company during
COVID-19, an increase of accounts receivable of $5.8 million compared to 2024 due to the increase in revenue, and an increase of deposits
with customers of $1.1 million . Those amounts were offset compared to 2024 by a decrease of prepaid expenses of $1.8 million. Non-cash
charges of $2.1 million for depreciation and amortization, $1.3 million for bad debt and $0.8 million for deferred taxes.
27
Net cash provided by (used in) operating activities for the year
ended December 31, 2024 was $(9.5) million. Net cash provided resulted primarily from a net loss for the year of $3.9 million, a decrease
of income tax and other taxes payable of $1.8 million compared to 2023, a decrease of VAT payable of $1.0 million compared to 2023,
a decrease of other liabilities of $7.0 million compared to 2023 due to payments made during 2024 by the Company in order to repay its
long-term debt to the Dutch tax authorities related to the governmental assistance to the Company during COVID-19, an increase of accounts
receivable of $1.0 million compared to 2023 due to the increase in revenue and increase of prepaid expenses of $0.7 million compared to
2023. Those amounts were offset compared to 2023 by a decrease of deposits held by customers by $1.0 million, an increase in accounts
payable of $0.3 million and an increase in accrued expenses and other current liabilities of $0.3 million. Non-cash charges of $2.4 million
for depreciation and amortization, $0.8 million for bad debt, $0.4 million for deferred taxes and $0.9 million for stock-based compensation
regarding the options granted to the AU10TIX employees were recognized in 2024.
Cash Flows from Investing
Activities
Net cash used in investing activities for the year ended December
31, 2025 was $32.9 million and consisted primarily of increase of term deposits of $30.8 and capital expenditures of $1.8 million.
Net cash used in investing activities for the year ended December
31, 2024 was $2.1 million and consisted primarily of capital expenditures of $1.9 million.
Cash Flows from Financing
Activities
Net cash provided by financing activities for the year ended December
31, 2025 was $4.0 million which consisted of loans repaid, net of $0.8 million during the year 2025. In addition, the Company withdraw
$4.8 million, net under factoring agreements
Net cash used in financing activities for the year ended December
31, 2024 was $0.2 million which consisted of loans received, net of $1.1 million during the year 2024. In addition, the Company withdraw
$2.0 million, net under factoring agreements. Furthermore, in 2024 the Company paid $3.2 million dividend to the AU10TIX external shareholders.
Borrowings
United States of America
The Company’s U.S subsidiary secured a three-year credit
facility with its primary bank in September 2023. The credit facility has a maximum borrowing base limit of $7.5 million. The borrowing
base limitation is equivalent to: (i) 85% of eligible non-investment grade receivables and 90% of eligible investment grade receivables,
plus (ii) 80% of direct labor payroll for the previous two pay periods plus 20%. The company is required to maintain a fixed charge ratio
of 1.00. Borrowings on the credit facility are subject to interest at SOFR plus 2.65% (6.52% as of December 31, 2025) and a minimum annual
interest charge of $0.1 million. In April 2026 the credit facility was extended until April 2029. As of December 31, 2025 and 2024, the
outstanding balances under the credit facility for both years are $0.0 million, and the unused available amount of the line is $7.5 million.
Europe
The Company has a factoring arrangement in Sweden to provide it
with up to 4.0 million SEK ($0.4 million as of December 31, 2025) in borrowings. Borrowings under the agreement bear annual interest of
4.9% and are subject to an annual extension by the financial institution. The factoring agreement is secured by accounts receivable of
the Swedish subsidiary. As of December 31, 2025 and 2024, the Company had 0.8 million SEK and 2.2 million SEK ($0.1 million and $0.2 million
as of December 31, 2025 and 2024) respectively in outstanding borrowings under the credit facility. The weighted average interest rate
for this loan during the years ended December 31, 2025, 2024 and 2023, was 4.9%, 5.3% and 2.8% respectively.
In November 2023, the Company entered into a loan agreement with
a commercial bank in Spain to provide it with up to €1.0 million ($1.2 million as of December 31, 2025). The loan agreement is secured
by accounts receivable of the Spanish subsidiary. The interest rate is determined by the bank at the time the loan is taken. The loan
agreement was renewed in November 2024 and still in place. As of December 31, 2025 and 2024, the Company had no outstanding balances under
the loan agreement.
In December 2023, an agreement was signed with the same commercial
bank in Spain, to provide loans up to €1.5 million ($1.8 million as of December 31, 2025). These loans can be used only for paying
different taxes to the Spanish tax authorities. The interest rate is determined at the time the loans are taken. During the periods ending
December 31, 2025 and 2024 the loans taken ranged between €1.0 million and €1.5 million ($1.2 million and $1.8 million as
of December 31, 2025) for periods of three months. As of December 31, 2025 and December 31, 2024 the outstanding balances were €0.3
million and €1.0 million ($0.4 million and $1.0 million), respectively, with an average interest rate of 3.96% and 5.25%, respectively.
28
In June 2024, the Company signed a factoring agreement with a commercial
bank in Germany for an unlimited period. According to the agreement, the Company factors accounts receivable related to invoices issued
to certain customers up to the amount of €11.5 million ($13.6 million as of December 31, 2025). The amounts can be used only for
payroll related costs in Germany. The Company is being charged fees until the collection date equal to Euribor plus 3.00% (4.95% as of
December 31, 2025). The Company is also subject to a 1.5% annual fee on the total factoring amount. As of December 31, 2025 and 2024,
the outstanding balances were €6.2 million and €1.9 million ($7.3 million and $1.9 million as of December 31, 2025 and 2024),
respectively. In February 2026 the financial institution agreed to increase the availability up to €15.8 million.
In July 2025, an agreement with a commercial bank in Spain was
signed, to provide loans up to €0.1 million ($0.2 million as of December 31, 2025). These loans can be used only for paying different
taxes to the Spanish tax authorities. The Company pays a commission that is determined at the time the loans are taken, without additional
interest. As of December 31, 2025 there is no outstanding balance under the loan agreement.
The Following table summarizes the different loans mention above
and as reflected at the Company’s financial liabilities (in thousands):
| Maximum Availability as of December 31, 2025* | Debt Balance as of December 31, 2025 | Interest Rate as of December 31, 2025 | Maximum Availability as of December 31, 2024* | Debt Balance as of December 31, 2024 | Interest Rate as of December 31, 2024 | |||||||||||||||||||
| Line of Credit | $ |
7,500 |
$ |
31 |
6.52 |
% |
$ |
7,500 |
$ |
- |
7.14 |
% | ||||||||||||
|
Factoring |
434 | 84 |
4.90 |
% |
363 |
201 |
5.30 |
% | ||||||||||||||||
|
Revolving Loans |
1,173 |
- |
3.73 |
% |
1,041 |
- |
3.20 |
% | ||||||||||||||||
|
Revolving Loans** |
1,760 |
392 |
3.07 |
% |
1,561 |
1,041 |
4.00 |
% | ||||||||||||||||
|
Revolving Loans** |
176
|
-
|
0.90 |
% | - |
- |
- |
|||||||||||||||||
| Factoring |
13,552 |
7,254 |
4.95 |
% |
12,123 |
1,939 |
5.89 |
% | ||||||||||||||||
| Total | $ |
24,595 |
$ |
7,761 |
4.86 |
% |
$ |
22,588 |
$ |
3,181 |
5.23 |
% | ||||||||||||
* Maximum availability is subject to terms and conditions according
to the agreements with the different financial institutions.
** Loans can be used only for payment of taxes in Spain.
In March 2024 the Company signed a non-recourse factoring agreement
with a commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to €3.0
million ($3.5 million as of December 31, 2025). The maximum amount provided by the bank cannot exceed 75% of the monthly invoice for that
customer. In March 2025, the agreement was extended for one year and the facility was increased up to €4.0 million ($4.7 million
as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit risks associated with the purchased
receivables and the Company has no further obligation related to their collection. Accordingly, the factored receivables are derecognized
from the Company’s balance sheet once the funds are received by the Company. The arrangement does not create any liability and therefore
no loan or financing obligation is recorded in the Company’s financial statements. The Company is also subject to a 0.2% fee for
every factored invoice issued under the agreement and with interest equal Euribor plus 0.60% (2.55% as of December 31, 2025) until the
date the payment is anticipated. In January 2026, the agreement was renewed for additional year under the same terms and conditions.
In July 2025 the Company signed a non-recourse factoring agreement
with another commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to
€0.7 million ($0.9 million as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit
risks associated with the purchased receivables and the Company has no further obligation related to their collection. Accordingly, the
factored receivables are derecognized from the Company’s balance sheet once the funds are received by the Company. The arrangement
does not create any liability and therefore no loan or financing obligation is recorded in the Company’s financial statements. The
interest rate is Euribor of the month plus 0.90% (2.85% as of December 31, 2025).
29
Related Parties Financing
Convertible Notes Payable
to a Related Party
The Company had an agreement with an entity related to its main
shareholder to provide it with up to $2.0 million in revolving loans, convertible at a price of $0.75 per share. Loans received under
the arrangement bear interest at the interest rate of 2.5%, which is compounded semi-annually and payable at maturity. The agreement expired
in January 2026.
As of December 31, 2025 and 2024, convertible notes payable to
this related party consist of $0.0 million for both years.
Sale of AU10TIX Technologies B.V. Preferred
Shares
In 2019 AU10TIX has entered into several agreements with certain
investors, according to which AU10TIX has issued for a net consideration of approximately $74 million, a total of 4,000,000 Series
A Preferred Shares ("Series A Shares") and 330,709 Series A-1 Preferred Shares ("Series A-1 Shares" and together with Series
A Shares – "the Preferred Shares") representing as of the date of the agreements approximately 31.401% of the outstanding share
capital of AU10TIX and 30.22% of the fully-diluted share capital of AU10TIX.
In 2021, certain investors purchased 2,267,717 AU10TIX
Series A Preferred shares from other investors. In connection with such purchases, all outstanding AU10TIX’s Series A Preferred
Shares and Series A-1 Preferred Shares were re-designated as New Series A Preferred Shares and the Ordinary Shares owned by ICTS were
re-designated as Class B Ordinary Shares.
According to the agreements with the investors, AU10TIX had the
right to issue up to 1,000,000 Class A Ordinary Shares under its existing employee stock option plan.
As of December 31, 2025 and following exercise of options by employees
the holdings in AU10TIX are as follows: : (i) ICTS owned 66.30% of the outstanding share capital of AU10TIX in the form of Class
B Ordinary Shares; (ii) Oak owned 12.42% of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares;
(iii) GF owned 10.55% of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares (iv) TPG owned 7.25%
of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares and (v) Other shareholders owned 3.48% of the
outstanding share capital of AU10TIX in the form of Class B Ordinary Shares.
The New Series A Preferred
The Share Holders Agreement (“SHA”) and the Articles
(as amended by the Deed of Amendment) provide for the following material matters in respect of the rights attaching to the New Series
A Preferred Shares and the Ordinary Shares and the ongoing governance of AU10TIX:
The New Series A Preferred Shares are entitled to one vote per
share and rank equally with the Ordinary Shares in regards to dividends. The Ordinary Shares are divided into two classes: Class A Ordinary
Shares and Class B Ordinary Shares, which rank equally as to dividends. The Class A Ordinary Shares are entitled to one vote per share.
The Class B Ordinary Shares are entitled to three votes per share and may only be held by ICTS and its permitted transferees.
The holders of New Series A Preferred Shares (“Series A Holders”)
are entitled to a liquidation preference upon the occurrence of a certain events (as defined in the SHA), The Ordinary Shares rank equally
in liquidation. The New Series A Preferred Shares are subject to conversion into Class A Ordinary Shares on a 1:1 basis (subject
to adjustments for certain events affecting the capital of AU10TIX) at the option of the New Series A Holder; and immediately prior to
a qualifying IPO of AU10TIX. The Class B Ordinary Shares are convertible into Class A Ordinary Shares at any time upon the written request
of a holder of Class B Ordinary Shares on a 1:1 basis, subject to adjustments for certain events affecting the capital of AU10TIX.
Exit Rights: At any time from and after July 3, 2026, upon written
request by Series A Holders holding at least 60% of the then outstanding New Series A Preferred Shares (the “Preferred Majority”),
AU10TIX is required to use reasonable endeavors to facilitate a sale of AU10TIX within six months after such written request, and, thereafter,
the Preferred Majority has the right to step-in and require AU10TIX to facilitate a sale or IPO. On the exercise of such step-in right,
each other shareholder (including ICTS) is required to cooperate with the Preferred Majority regarding such sale or IPO and the Preferred
Majority has the right to exercise drag along rights over the shares held by other shareholders in order to facilitate such exit event.
Shares of redeemable convertible preferred stock are not mandatorily
or currently redeemable. However, the Exit Right would constitute a contingent redemption event that is outside of AU10TIX’s control.
As such, New Series A Shares have been presented outside of permanent equity as redeemable non-controlling interests.
30
Research and Development Costs
Research and development costs are expensed as incurred and consist
primarily of payroll and related costs. Research and development costs are $14.5 million, $14.4 million and $12.3 million during the years
ended December 31, 2025, 2024 and 2023, respectively.
Trend Information
Labor market conditions may require the Company to increase its
prices when possible according to the contracts with customers. Cost of labor is the main variable in determining any cost increases.
The Company might be affected by a worldwide economic slowdown
which might affect the aviation industry. As the Company is a service provider to this industry, such trends can affect the results of
the Company.
Off-Balance Sheet Arrangements
The Company is a party to an agency agreement, so that in the event
that the operations on a specific country on which we operate are sold in the future, the third-party agent is entitled to a payment of
€3.0 million ($3.5 million as of December 31, 2025).
In 2022 the Company has signed an employment agreement with a CEO of a subsidiary
such that starting in 2023, the CEO is entitled to 10% EBIDA (excluding the applicable taxes) of that subsidiary. The employment agreement
was terminated as of March 31, 2025.
The Company has no unconsolidated special purpose entities.
Future Contractual Obligations
The following table summarizes our future contractual obligations
as of December 31, 2025:
|
Contractual Obligations |
Payments due by Period (U.S. Dollars in Thousands) |
|||||||||||||||||||
|
Total |
Less than 1Year |
1-3 years |
4-5 years |
more than 5 years |
||||||||||||||||
|
Operating lease obligations |
$ |
11,685 |
$ |
3,787 |
$ |
5,423 |
$ |
1,006 |
$ |
1,469 |
||||||||||
|
Governmental payments in the Netherlands (VAT, social security, wage tax and interest) |
15,352 |
4,394 |
10,958 |
- |
- |
|||||||||||||||
|
$ |
27,037 |
$ |
8,181 |
$ |
16,381 |
$ |
1,006 |
$ |
1,469 |
|||||||||||
The following table summarizes the Company’s other future
commercial obligations as of December 31, 2025:
|
Contractual Obligations |
Payments due by Period (U.S. Dollars in Thousands) |
|||||||||||||||||||
|
Total |
Less than 1 Year |
1-3 years |
4-5 years |
more than 5 years |
||||||||||||||||
|
Guarantees and Letters of credit |
$ |
5,146 |
$ |
1,108 |
$ |
4,179 |
$ |
- |
$ |
- |
||||||||||
31
Item 6. Directors,
Senior Management and Employees
Directors are being voted for election every calendar year during
the Company’s shareholders meeting. The following table lists the directors and executive officers of ICTS:
|
Age |
Position | ||
|
Menachem Atzmon |
81 |
Chairman of the Supervisory Board | |
|
Ron Atzmon |
52 |
Member of the Supervisory Board | |
|
Aya Atzmon Wandersman |
43 |
Member of the Supervisory Board | |
|
Gail F. Lieberman |
82 |
Member of the Supervisory Board, Chairwoman of the Audit Committee and member of the
Compensation Committee | |
|
Frans van Westen |
70 |
Member of the Supervisory Board, Member of the Audit Committee and member of the Compensation
Committee | |
|
Ilan Nir |
44 |
Member of the Supervisory Board, Chairman of the Compensation committee and member
of the Audit committee | |
|
Alexander Trager Lewis |
52 |
Member of the Supervisory Board | |
|
Gil Atzmon |
50 |
Managing Director | |
|
Alon Raich |
50 |
Managing Director and Chief Financial Officer |
Menachem J. Atzmon is a CPA (Isr). Since 1976 Mr. Atzmon serves
as director and chairman of Spencer Corporation. From 1996 until 2012, Mr. Atzmon has been the managing director of Albermale Investment
Ltd., an investment company. Since 1998 until 2012, he has served as the Chairman of the Management Board of Seehafen Rostock, Umschlagsgesellschaft
GmbH and its Holding Company. Mr. Atzmon has been a member of the Supervisory Board of ICTS since 1999 and since 2004 holds the position
of Chairman of the Supervisory Board. Since 2010, he serves as the Chairman of Arrow Ecology & Engineering Overseas (1999) Ltd, an
advance recycling company. During 2014, Mr. Atzmon was appointed, in addition to his role of Chairman of the Supervisory Board, to CEO
of the Arrow Ecology & Engineering Overseas Ltd. Since 2019 Mr. Atzmon serves as the Chairman of AU10TIX Technologies B.V, a subsidiary
of ICTS.
Ron Atzmon acted as the Managing Director of the AU10TIX Group
since September 2008 until 2018. Since 2022 Mr. Atzmon acts as the chairman of the executive committee of AU10TIX, a subsidiary of ICTS. Mr.
Atzmon was the CEO and founder of 1ST2C.com between April 2005 and January 2009. Mr. Atzmon holds an MA in Business Administration from
the College of Management Academic, Israel and an MBA from the Imperial College London, UK. Mr. Ron Atzmon is the son of Mr. Menachem
J. Atzmon.
Aya Atzmon Wandersman has over a decade of experience in business
development, operations, and strategic partnerships in the technology and financial sectors. From 2007 to 2011, she worked at Deloitte
Israel. Since 2014, she has held several key leadership positions at AU10TIX, including Channel Manager, Director of Business Development,
and Director of Operations. Mrs. Atzmon Wandersman holds a B.A. in Business Administration from Reichman University and an International
MBA from IE Business School in Madrid, one of Europe’s best and globally recognized MBA programs. Mrs. Aya Atzmon Wandersman is
the daughter of Mr. Menachem J. Atzmon.
Gail F. Lieberman is the founder and Managing Partner of Rudder
Capital, LLC, which provides deal coaching for middle-market companies in the services & technology sectors. Previously, she was the
Chief Financial Officer for Thomson Corporation’s Financial & Professional Publishing division, Moody’s Investor Service,
Inc. and Scali, McCabe, Sloves, Inc. (Ogilvy Group). Ms. Lieberman is a director of Thesys Group, a private financial technology company.
She is a former board member and Chair of the Audit & Finance Committee of WL Gore & associates and a former board member and
lead director of Equilend, a financial technology company, where she chaired the nominating, governance and compensation committee. Formerly
Mrs. Lieberman served as board member for the South-Central Connecticut Regional Water Authority, board member, Compensation Committee
Chair and Audit Committee Member for Dara Biosciences (NASDAQ: DARA), board member and Audit Committee Chair for I-Trax Inc. (Amex: DMX),
board member and Audit and Governance Committee Member for TriPath Imaging Inc. (NASDAQ: TPTH) and board member and Audit Committee Chair
for Breeze-Eastern Corporation (Amex: BZC). She also served on the board of FTEN, a financial technology company. Ms. Lieberman sits on
the National Association of Corporate Directors-CT board and Women Executive on Boards. Ms. Lieberman holds a BA in Mathematics
and Physics and an MBA in Finance from Temple University.
32
Frans van Westen is the founder of WestFinance B.V., which provides
financial advisory and interim management services to a broad range of companies. In this capacity, Mr. Van Westen has, amongst others,
served as interim director at NPO, the Dutch public broadcaster, and as court-appointed interim managing director at Greenchoice, a Dutch
energy company that supplies only green energy. In addition, Mr. Van Westen is currently the chairman of the supervisory board of Mediahuis
Nederland B.V., one of the largest Dutch media companies. Mr. Van Westen holds a master in general economics from the Rijksuniversiteit
Groningen.
Ilan Nir is the CEO of Schellevis B.V., a Dutch company that produces
concrete paving and elements to connect architecture with nature. Previously, Mr. Nir has had leadership roles within one of the leading
family-owned multinationals companies in the Netherlands (Pon Holdings), where Mr. Nir led strategic projects and was deeply involved
in the M&A practice. Mr. Nir had leadership roles at different operating companies of Pon Holdings across the Netherlands, USA and
Germany from 2012 till 2025. From 2011 to 2012 Mr. Nir worked at PWC in the M&A tax practice. From 2009 to 2010, Mr. Nir worked
as a tax lawyer at Loyens & Loeff N.V. in the international tax practice. Mr. Nir holds a Master of Tax Laws (LL.M.), specializing
in International & European Tax Law.
Trager-Lewis is managing senior partner of CH. Hausmann & Co.,
a prestigious London based boutique Law Firm. Mr. Trager-Lewis specialises in company law, contract law, trust law, tax law and litigation.
Mr. Trager-Lewis is qualified and regulated by the Solicitors Regulation Authority in England. He holds an LL. B Honours degree in Law
from the University of Essex (1995-1998) and the College of Law (1998-1999). In addition to his legal practice, Mr. Trager-Lewis acts
as a board member for several companies in the UK and internationally, as well as trustee of various UK-based charities. He has experience
in advising both private and corporate clients.
Gil Atzmon serves as Chief Executive Officer (CEO) of Arrow Ecology
since February 2017 and director of AU10TIX Technologies B.V. since June 2021. From 2002 to 2017, Mr. Gil Atzmon held the position of
Director of Sales at S. Juwal & Co. Mr. Gil Atzmon holds a BA degree in Business Administration and Management from IDC Herzliya,
Israel, and an MBA from London Metropolitan University, UK. Mr. Gil Atzmon served as a Supervisory Board of the Company from 2018 till
2025 and since 2025 acts as joint Managing Director of the Company. Mr. Gil Atzmon is the son of Mr. Menachem J. Atzmon.
Alon Raich is a CPA (Isr). From 2001 to 2002, Mr. Raich worked
at the accounting firms Kesselman & Kesselman and PriceWaterhouseCoopers (PWC). Mr. Raich joined ICTS in September 2005 as Financial
Controller and became Chief Financial Officer (CFO) of ICTS in 2008. Since February 2020, Mr. Raich is a joint Managing Director and CFO
of the Company. Mr. Raich holds a BA degree in economics and accounting and a MA degree in law from Bar Ilan University, Israel.
Summary Compensation Table
The following table sets forth the yearly executive’s highest compensation expenses
as recorded by the Company during the years 2023 through 2025 (U.S. Dollars in thousands):
|
Principal Position |
Year |
Salary, Fees, Grants and Bonus |
All Other Compensations |
Non-equity Incentive Plan Compensation |
Non qualified Deferred Compensation Earnings |
Number of Option Award (1) |
Number of Stock Awards |
Total |
||||||||||||||||||||||
|
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||||
|
Chairman of the ICTS and AU10TIX Boards |
2025 |
1,039 |
108 |
- |
- |
- |
- |
1,147 |
||||||||||||||||||||||
|
Managing Director and CFO |
2024 |
914 |
67 |
- |
- |
- |
- |
981 |
||||||||||||||||||||||
|
CEO of a subsidiary |
2023 |
1,513 |
106 |
- |
- |
420 |
- |
1,619 |
||||||||||||||||||||||
(1) Options granted relate to options of a subsidiary.
33
Each member of the Supervisory Board who is not an employee of
the Company received during 2025 an annual fee of $50 thousand and a fee for each Supervisory Board or committee meeting attended of $1
thousand. The Chairman of the Audit Committee received an additional $20 thousand per year. The Chairman of the Compensation committee
received additional $15 thousand per year. The Chairman of the Board received an annual fix fee of $150 thousand and a one time grant
of $625 thousands. Two Managing Directors are employed by the Company and the total expenses regarding their employment for the year ended
December 31, 2025 was $1.2 million.
The following table sets forth information concerning the aggregate
compensation paid or accrued on behalf of all of our directors, executive officers, subsidiaries CEOs and Chairmen as a group for the
year ended December 31, 2025:
|
Salaries, Board fees, grants, commissions and bonuses |
Pension, retirement and other similar benefits |
|||||||
|
(in thousands) |
||||||||
|
Supervisory Directors as a group (8 persons) |
$ |
1,095 |
$ |
- |
||||
|
Officers as a group (8 persons) |
$ |
2,988 |
$ |
490 |
||||
Background and Compensation Philosophy
Our Compensation Committee consists of Ilan Nir, Chairman, Gail
F. Lieberman, and Frans van Westen, all of whom are independent.
The Compensation Committee is to assist and undertake preparatory
work for the Supervisory Board in its decision-making in relation the compensation to be paid to members of the Management Board and (other)
executive officers based on our financial and operating performance and prospects, the level of compensation paid to similarly situated
executives in comparably sized companies, and contributions made by the officers to our success. Each of the named officers will be measured
by a series of performance criteria by the Supervisory Board, or the Compensation Committee on a yearly basis. Such criteria will be set
forth based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills,
related experience, personal performance and overall corporate performance.
Our Supervisory Board and Compensation Committee have not adopted
or established a formal policy or procedure for determining the amount of compensation paid to our executive officers.
The Compensation Committee provides an independent evaluation
of appropriate compensation of key employees, with input from management.
ICTS’ compensation program for our executive officers and
all other employees is designed such that it will not incentivize unnecessary risk-taking. The base salary component of our compensation
program is usually a fixed amount and does not depend on performance. Our cash incentive program takes into account multiple metrics,
thus diversifying the risk associated with any single performance metric, and we believe it does not incentivize our executive officers
to focus exclusively on short-term outcomes. Our equity awards are limited by the terms of our equity plans to a fixed maximum specified
in the plan, and are subject to vesting to align the long-term interests of our executive officers with those of our stockholders.
The Compensation Committee has an Operating Charter.
Elements of Compensation
We provide our executive officers with a base salary and certain
bonuses and commissions as well as equity awards in some cases to compensate them for services rendered during the year. The Compensation
Committee determines and recommends the composition and amount of director’s and key employee’s compensation. When the
annual award consists of equity purchases, it is only permitted at a price equal to or above market.
34
Board Practices
ICTS has a two-tier board system, inclusive of a Supervisory Board
and a Management Board. The Supervisory Board has the primary responsibility of supervising the policies of the Management Board and the
general course of corporate affairs of ICTS and the business connected with it as well as to provide the Management Board with advice.
The Management Board is responsible for the day-to-day operations
of ICTS. Members of the Supervisory Board and the Management Board are appointed by the general meeting for a term of one year.
Non-executive officers are appointed by and serve at the satisfaction
of the Management Board.
The members of the Supervisory Board as of December 31, 2025 and
the initial year they joined the Supervisory Board are as follows: Menachem Atzmon (1999), Ron Atzmon (2018), Gail F. Lieberman (2010),
Ilan Nir (2023), Frans van Westen (2024), Aya Atzmon – Wandersman (2025) and Alexander Trager-Lewis (2025).
The Audit Committee consists of Gail F. Lieberman, Chairwoman,
Ilan Nir and Frans van Westen, all of whom are independent. Ms. Lieberman and Mr. van Westen have financial expertise. The Audit Committee
provides assistance and undertakes preparatory work for the Supervisory Board in its decision-making regarding the supervision of ICTS’
accounting and financial reporting processes and audits of the financial statements. In doing so, the Audit Committee evaluates ICTS's
accounting policies and practices and financial reporting and internal control structures, selection of independent auditors to audit
ICTS’ financial statements and confers with the auditors and the officers. The Audit Committee has an Operating Charter.
ICTS does not have a Nominating Committee.
The members of the Audit Committee and Compensation Committee are
all independent and were never officers or employees of the Company.
The Supervisory Board of the Company has adopted a Code of Ethics
for principal executive officers, directors and senior financial officers.
The Articles of Association of ICTS require at least one member
of both the Management Board and the Supervisory Board, but do not specify a maximum number of members for such boards. The general meeting
determines the exact number of members of both the Management Board and the Supervisory Board.
Employees
As of December 31, 2025, the Company has 9,895 employees, of which 7,610 employees are
located in Europe, Far East and Israel and 2,285 are located in the United States of America.
Share Ownership
See tables under Item 7: “Major Shareholders” and “Related
Party Transactions” below.
Options to Purchase Securities
AU10TIX Technologies B.V, has a Stock Option Plan which reserved 1,400,000 class
A ordinary shares (“Ordinary Share”) in the capital of AU10TIX Technologies B.V for its option issuances. The Plan grants
rights to subscribe ordinary shares to employees, directors, consultants and service providers of AU10TIX Technologies B.V. and / or any
related entity (as defined in the plan) at an exercise price as determined by the subsidiary’s board of directors with expiration
terms of not more than ten years after the date such option is granted. Options granted under the plan generally vest over a period of four
years.
As of December 31, 2025, there are 100,375 options granted and
outstanding of which 48,375 options are fully vested and exercisable. During 2025 258,125 options were exercised into shares of AU10TIX.
The weighted average exercise price is $2.34 and the weighted average remaining contractual term as of December 31, 2025 is 5 years.
35
Item 7.
Major Shareholders and Related Party Transactions
Major Shareholders
The following table sets forth certain information regarding ownership
of the Company's Shares as of December 31, 2025 with respect to:
Each person who is known by the Company to own beneficially more
than 5% of the Company's outstanding Shares.
All directors and officers as a group.
|
Name Shareholders Holding Five Percent or More |
Percent of Amount Beneficially Owned (a) |
Shares Outstanding (a) |
||||||
|
MacPherson Trust and its beneficiaries (b) |
23,018,851 |
66.8 |
% | |||||
|
Menachem J. Atzmon |
4,050,000 |
11.8 |
% | |||||
|
Igal Tabori |
2,002,483 |
5.8 |
% | |||||
|
All officers and directors as a group, the MacPherson Trust
and its Beneficiaries (7 persons) |
28,020,214 |
81.2 |
% | |||||
(a) The amounts include Shares owned by each of the above, directly or indirectly.
(b) 1. The MacPherson Trust (“Trust”) was created
for the benefit of the family of Mr. Menachem J. Atzmon. The Trust owns Spencer Corporation, Limited, which, together with the Trust and
its beneficiaries, holds approximately 66.9% of the issued and outstanding Shares. Mr. Atzmon disclaims any beneficial interest in the
MacPherson Trust. Spencer Corporation Limited and the MacPherson Trust and its beneficiaries together with Mr. Atzmon are able to appoint
all the directors of ICTS and control the affairs of ICTS.
2. As of December 31, 2025, the Company had no convertible notes
payable to a related party. However, there is a promissory note facility agreement with a related party whereby that related party, to
the extent convertible notes are payable to it, has the right to convert up to 3,000,000 Shares into the Company’s shares at a rate
of $0.75 per share. The note expired in January 2026.
3. The Company repurchased during the year ended December 31, 2025
the 3,000,000 shares issued to its directors and certain employees in 2019 at the same price of issuance, EUR 0.45.
Related Party Transactions
An entity related to one of the Company’s former Supervisory
Board members who served until August 2024, provided legal services to the Company. Legal expense related to these services is $26 thousands,
$39 thousands and $46 thousands for the years ended December 31, 2025, 2024 and 2023, respectively.
The Chairman of the board is related to a trust which is an indirect
main shareholder of the Company. The Company incurred expenses of $0.9 million, $0.1 million and $0.1 million for the years ended December
31, 2025, 2024 and 2023, respectively for his services as the Chairman including a one-time grant of $0.6 million in 2025. In addition,
in 2025, 2024 and 2023, the Company incurred salary expenses of $0.3 million, $0.8 million and $0.1 million, respectively for the
services he provides to AU10TIX. The salary expenses of 2024 included a retroactive salary adjustment since 2019 as approved by the AU10TIX
board during 2024.
The Company engages the services of an individual who is a beneficiary
of a trust, which is an indirect main shareholder of the Company, to provide certain selling and management services to the authentication
technology segment. The Company incurred expenses of $0.6 million, $0.7 million and $0.9 million for such services for the years
ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the outstanding balances due for these services
were $0.0 million and $0.1 million, respectively, included in accrued expenses and other current liabilities. In January 2026, it
was agreed between the Company and the individual that the employment agreement will be terminated as of December 31, 2027. In addition,
the individual serves as a supervisory board member of the Company and was paid an amount of $52 thousands, $48 thousands and $36 thousands
as supervisory board fees, for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company engaged the services of an individual who is a beneficiary
of a trust, which is an indirect main shareholder of the Company, to provide certain selling and administrative services to its authentication
technology segment. The Company incurred expenses of $0.4 million, $0.3 million and $0.3 million for such services for the years
ended December 31, 2025, 2024 and 2023, respectively. In addition, the individual served as a supervisory board member of the Company
until July 2025 and was paid an amount of $29 thousands, $48 thousands and $38 thousands as supervisory board fees for the years
ended December 31, 2025, 2024 and 2023, respectively. In July 2025 the individual was elected to be a joint managing director of the Company
and was paid an amount of $0.1 million as salary for the year ended December 31, 2025.
36
The Company engages the services of an individual who is a beneficiary
of a trust, which is an indirect main shareholder of the Company, to provide certain selling services to its authentication technology
segment. The Company incurred expenses of $0.2 million, $0.2 million and $0.2 million for such services for the years ended
December 31, 2025, 2024 and 2023, respectively. In addition, the individual serves since July 2025 as a supervisory board member of the
Company and was paid an amount of $24 thousands as supervisory board fees, for the year ended December 31, 2025.
The Company engages the services of an individual which is a family
member of the Chairman of the Board and the main shareholder, to provide services as a Managing Director of one of the Company’s
subsidiaries. The Company incurred expenses of $0.5 million, $0.6 million and $0.5 million for such services for the years ended
December 31, 2025, 2024 and 2023, respectively.
The Company engages the services of an individual who is a family
member of a beneficiary of a trust which is an indirect main shareholder of the Company to provide certain administration services. The
Company incurred expenses of $0.1 million, $0.1 million and $0.1 million for such services for the years ended December 31,
2025, 2024 and 2023, respectively.
The Company engaged the services of Spencer Corporation, a main
shareholder of the Company to provide administrative services. The Company incurred expenses of $0.3 million, $0.0 million and $0.0
million for such services for the years ended December 31, 2025, 2024 and 2023, respectively. The expenses of 2025 include a one-time
expense of $0.2 million regarding costs incurred in previous years.
The Company had an agreement with an entity related to its main
shareholder to provide it with up to $2.0 million in revolving loans which expired in January 2026. Interest expenses were $0.0 million
for each of the years ended December 31, 2025, 2024 and 2023.
As of December 31, 2024 and 2023, the Company included a liability
for a purchase of shares from certain directors and officers of the Company in the amount of $1.5 million. The purchase transaction was
completed in July 2025.
| Item 8. |
Financial Information |
The Consolidated Financial Statements and Financial Statement Schedule
are included herein on pages F-1 through F-42.
Letters of Credit and Guarantees
As of December 31, 2025, the Company has $3.2 million in outstanding
letters of credit and guarantees. Letters of credit and guarantees are being secured either by the same amounts in restricted cash with
commercial banks or with deposits provided to customers which serve as cash collateral in order to guarantee the performance and quality
of services provided to the customers.
As of December 31, 2025, the Company has commercial guarantees
of €1.7 million ($2.0 million as of December 31, 2025) which is not secured by restricted cash or deposits provided to customer.
The guarantee is part of an agreement between the Company and one of its customers to guarantee the performance and quality of the services
provided to that customer.
Legal Proceedings
General
The Company is subject to various investigations, claims and legal
proceedings covering a wide range of matters that arise in the ordinary course of its business activities. These claims are primarily
related to grievances filed by current and former employees for unfair labor practices or discrimination and for passenger aviation claims.
Management recognizes a liability for any matter when the likelihood of an unfavorable outcome is deemed to be probable and the amount
is able to be reasonably estimated. Management has concluded that such claims, in the aggregate, are not reasonably possible to have a
material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
37
Inquiry Proceedings
In June 2021, a minority shareholder initiated proceedings by requesting
the Enterprise Chamber of the Amsterdam Court of Appeal to order an inquiry into seven aspects of the policy and affairs of the Company
that have been previously disclosed by the Company in its periodic filings with the SEC for the fiscal years 2020 and 2019. In June 2022,
the Enterprise Chamber rendered its judgment and (i) it accepted the Company’s defense on all items except two and ordered an investigation
into those two aspects of the policy and affairs of the Company, being (a) the issuance of shares to directors and certain employees at
USD 0.40 in May 2019 and (b) the adjustment of the conversion price under a convertible shareholder loan to USD 0.40 in May 2019, and
(ii) appointed an investigator for this purpose.
Following the filing of the investigation report with the Enterprise
Chamber in November 2023, the minority shareholder filed three new requests with the Enterprise Chamber, including a request to establish
mismanagement on the basis of the investigation report and to order certain definitive measures at the Company. Each of these requests
was dismissed in full.
As part of the above procedures the Company committed in 2023 to
repurchase the shares issued under the May 2019 issuance for the same price they were issued, thereby undoing the issuance. As of December
31, 2024 the Company included a liability for this purchase in the amount of $1.5 million in its balance sheet with a corresponding reduction
to shareholders deficiency. In order to achieve this goal in December 2024 the Company initiated a reduction of the Company’s issued
share capital by reducing the nominal value of each of the shares in the Company from EUR 0.45 to EUR 0.01 per share in order to be able
to purchase the shares. Consequently, the authorized capital of the Company was reduced to a total of EUR 1.5 million resulting in a decrease
of $18.8 million in common stock and an increase of the same amount in additional paid-in capital. The nominal value per share has been
reduced as referred to in Section 2:99 paragraph 1 of the Dutch Civil Code without repayment to the shareholders. The Company concluded
that the capital reduction did not result a value transfer to or from the shareholders. The Company recorded such capital reduction by
a corresponding reduction in the common stock and an increase to additional paid-in capital. The purchase transaction was completed in
July 2025.
In February 2025, the minority shareholder appealed the Enterprise
Chamber’s judgment on its request to establish mismanagement on the basis of the investigation report and to order certain definitive
measures at the Company to the Dutch Supreme Court. In March 2026 the Dutch Supreme Court has dismissed the minority shareholder’s
appeal. With the Supreme Court’s decision, the Enterprise Chamber’s judgment is now final, and the proceedings have been resolved
in the Company’s favor.
Class Action Lawsuit
AU10TIX is currently named as a defendant in a class action lawsuit
pending in U.S. federal court (Case No. 1:24-cv-08122, U.S. District Court for the Northern District of Illinois). The complaint
asserts two claims. First, the plaintiff alleges that AU10TIX violated the Illinois Biometric Privacy Act, 740 ILCS 14/1 et
seq. by collecting biometric information without obtaining necessary consent. Second, the plaintiff alleges that AU10TIX violated
the Illinois Driver’s License Act, 625 ILCS 5/6-117.1 by using end-user driver’s licenses for machine learning to improve
Au10tix’s products. The plaintiff seeks to represent two classes consisting of Illinois residents in relation to both claims.
AU10TIX denies that it violated either statute. On February 13, 2025, AU10TIX filed a motion seeking dismissal of all claims.
Agency Agreement
In April 2013, prior to the purchase of one of the current subsidiaries
in Europe, the Company entered into an agency agreement with a third party to assist it with this transaction. According to the agreement,
in the event that the operations in that country are sold in the future, the third-party agent is entitled to a payment of €3.0
million ($3.5 million as of December 31, 2025).
Employment Agreement
In December 2022, the Company entered into an employment agreement
with an individual to serve as the CEO of one of the Company’s subsidiaries. The annual target bonus is equal to 10% of the
EBIDA (excluding the applicable taxes) of that subsidiary. The employment agreement was terminated as of March 31, 2025.
38
Item 9.
The Offer and Listing
Our shares of common stock are currently traded on the OTCQB under
the symbol ICTSF.
The reported high and low closing sales prices per shares during the last six months
were as follows:
|
Period |
High |
Low |
||||||
|
October 2025 |
$ |
4.39 |
$ |
4.33 |
||||
|
November 2025 |
$ |
4.35 |
$ |
3.73 |
||||
|
December 2025 |
$ |
3.73 |
$ |
3.10 |
||||
|
January 2026 |
$ |
3.80 |
$ |
3.06 |
||||
|
February 2026 |
$ |
4.30 |
$ |
3.25 |
||||
|
March 2026 |
$ |
6.02 |
$ |
3.48 |
||||
|
April 1-29, 2026 |
$ |
4.60 |
$ |
3.70 |
||||
The reported high and low closing sales prices per shares during the last five years
were as follows:
|
Year |
High |
Low |
||||||
|
2021 |
$ |
10.00 |
$ |
4.00 |
||||
|
2022 |
$ |
9.79 |
$ |
5.00 |
||||
|
2023 |
$ |
7.00 |
$ |
3.56 |
||||
|
2024 |
$ |
6.60 |
$ |
0.96 |
||||
|
2025 |
$ |
4.75 |
$ |
3.10 |
||||
The reported high and low closing sales prices per share during each quarter for the
last three years were as follows:
|
2025 |
High |
Low |
||||||
|
First quarter |
$ |
4.67 |
$ |
3.15 |
||||
|
Second quarter |
$ |
4.00 |
$ |
3.25 |
||||
|
Third quarter |
$ |
4.75 |
$ |
3.50 |
||||
|
Fourth quarter |
$ |
3.73 |
$ |
3.10 |
||||
|
2024 |
High |
Low |
||||||
|
First quarter |
$ |
6.00 |
$ |
3.80 |
||||
|
Second quarter |
$ |
6.60 |
$ |
4.72 |
||||
|
Third quarter |
$ |
5.00 |
$ |
4.45 |
||||
|
Fourth quarter |
$ |
5.59 |
$ |
0.96 |
||||
|
2023 |
High |
Low |
||||||
|
First quarter |
$ |
6.00 |
$ |
3.76 |
||||
|
Second quarter |
$ |
5.30 |
$ |
3.56 |
||||
|
Third quarter |
$ |
7.00 |
$ |
3.75 |
||||
|
Fourth quarter |
$ |
5.60 |
$ |
4.01 |
||||
39
Item 10.
Additional Information
Introduction
ICTS International N.V. is a public company with limited liability
(naamloze vennootschap) incorporated under Dutch law on October 9, 1992. ICTS’ statutory seat is in Amstelveen, the Netherlands,
and its registered office address is at Walaardt Sacréstraat 425, 5th floor, 1117 BM Schiphol, the Netherlands. ICTS is registered
with the trade register of the Dutch Chamber of Commerce under number 33279300 (ICTS).
As a Dutch public company with limited liability, ICTS is
subject to certain requirements not generally applicable to corporations organized under the laws of jurisdictions within the United States
of America. Set forth below is a summary of the material provisions of the articles of association of ICTS as lastly amended on December
23, 2024 (the Articles of Association) and Dutch law, where appropriate. This summary does not purport to be complete and is qualified
in its entirety by reference to the Articles of Association. All references in this summary to the Netherlands and Dutch law are to the
European part of the Netherlands and its law, respectively, only.
Corporate Objectives
The objectives of ICTS are described in Article 2 of the Articles
of Association and include, without limitation, to advice and render services regarding the security of persons and goods and to provide
security (or having such security provided) on behalf of companies, government institutions and private individuals; in particular but
not exclusively: the installation, management and supervision of security systems for the purpose of crime and terrorism prevention and
control on and around premises, buildings, installations, vessels and aircraft, and to manage and finance businesses, extend loans and
invest capital.
Share Capital
The shares of ICTS are subject to, and have been created under,
the laws of the Netherlands. ICTS’ share capital is divided into common shares (Shares).
The Shares are in registered form (op naam) and are only available
in the form of an entry in ICTS’ shareholders’ register, without share certificates (aandeelbewijzen) or with share certificates,
if so requested by the relevant shareholder.
In accordance with Dutch law, ICTS’ authorized share capital
sets out the maximum amount and number of Shares that it may issue without amending its Articles of Association. The Articles of Association
provide for an authorized share capital in an amount of EUR 1,500,000 divided into 150,000,000 Shares, each Share with a nominal value
of EUR 0.01. As of December 31, 2025, 34,433,333 Shares were outstanding while the Company has additional 3,000,000 million shares as
treasury shares which the Company completed its acquisition in July 2025.
Issue of Shares and Pre-Emptive
Rights
The General Meeting of ICTS (General Meeting) is authorized to
issue Shares or to grant rights to subscribe for Shares and to restrict and/or exclude statutory pre-emptive rights in relation to the
issuance of Shares or the granting of rights to subscribe for Shares. The General Meeting may delegate the authority to issue Shares (or
grant rights to subscribe for Shares) to the supervisory board of ICTS (Supervisory Board) for a specified period not exceeding five years
(which period can be extended from time to time for further periods not exceeding five years) so long as the maximum number of Shares
which may be issued is specified. Shares may not be issued at less than their nominal value and must be fully paid-up upon issue. A resolution
by the General Meeting to issue Shares (or grant rights to subscribe for Shares) or to delegate to the Supervisory Board the authority
as the competent corporate body to issue Shares requires an absolute majority of the votes cast, in a general meeting in which at least
half of the issued share capital of ICTS is represented.
Such resolution was most recently adopted in December 2023 for
a period of five years until December 2028, in which the Supervisory Board was designated by the General Meeting. Designation by resolution
of the General Meeting cannot be withdrawn unless determined otherwise at the time of designation. No resolution is required for the issue
of Shares pursuant to the exercise of a previously granted right to subscribe for Shares.
40
Under Dutch law and the Articles of Association, each holder of
Shares (Shareholder) has a pre-emptive right in proportion to the aggregate nominal value of their shareholding upon the issue of Shares
(or the granting of rights to subscribe for Shares). Exceptions to this pre-emptive right that follow from Dutch law include the issue
of Shares (or the granting of rights to subscribe for Shares): (i) to employees of ICTS or another member of its Group; (ii) against payment-in-kind
(contribution other than in cash) and (iii) to persons exercising a previously-granted right to subscribe for Shares. The pre-emptive
rights in respect of newly issued Shares or the granting of rights to subscribe for Shares may be restricted or excluded by a resolution
of the General Meeting. The General Meeting may delegate the Supervisory Board as another corporate body competent to resolve upon the
restriction or exclusion of the pre-emptive rights if the Supervisory Board has also been delegated as the competent body to resolve upon
the issue of Shares for a specified period not exceeding five years (which period can be extended from time to time for further periods
not exceeding five years). A resolution of the General Meeting to exclude or restrict pre-emptive rights or to authorize the Supervisory
Board to exclude or restrict pre-emptive rights requires an absolute majority of the votes cast, in a general meeting in which at least
half of the issued share capital of ICTS is present or represented. Such resolution of the General Meeting to exclude or restrict pre-emptive
rights or to authorize the Supervisory Board to exclude or restrict pre-emptive rights requires a majority of at least two thirds of the
votes cast, if less than half of the issued share capital of ICTS is present or represented.
Such resolution was adopted in December 2023 for a period of five
years until December 2028, in which the Supervisory Board was designated by the General Meeting. The resolution by which the pre-emptive
rights are excluded or limited needs to be filed with the Netherlands Chamber of Commerce within eight days of such resolution. A resolution
designating another corporate body to resolve upon the restriction or exclusion of the pre-emptive rights cannot be withdrawn unless provided
otherwise in such resolution.
Acquisition of Own Shares
ICTS cannot subscribe for Shares in its own capital at the time
Shares are issued. Subject to the certain provisions of the Articles of Association, ICTS may acquire fully paid-up Shares provided no
consideration is given or provided, (i) ICTS’ net equity less the payment required to pay the acquisition, does not fall below the
sum of called-up and paid-in share capital and any reserves to be maintained by Dutch law and/or the Articles of Association, (ii) the
management board of ICTS (Management Board) has been authorized thereto by the General Meeting and (iii) the nominal value of the Shares
to be acquired and already held in aggregate by ICTS and its subsidiaries does not exceed two-tenths of the issued Shares. Any acquisition
by ICTS of Shares that is not in compliance with the foregoing shall be null and void. Also, any acquisition of Shares that are not fully
paid-up shall be null and void.
The General Meeting’s authorization to the Management Board
to acquire own Shares is valid for a maximum of 18 months. As part of the authorization, the General Meeting must specify the number of
Shares that may be repurchased, the manner in which the Shares may be acquired and the price range within which the Shares may be acquired.
The authorization is not required for the acquisition of Shares for employees of ICTS, under a scheme applicable to such employees.
Shares (or depositary receipt issued for such Shares) held by ICTS
in its own share capital do not carry a right to any distribution. Furthermore, no voting rights may be exercised for any of the Shares
(or depositary receipt issued for such Shares) held by ICTS or its subsidiaries, unless such Shares are subject to the right of usufruct
or to a pledge in favor of a person other than ICTS or its subsidiaries and the voting rights were vested in the pledgee or usufructuary
before ICTS or its subsidiaries acquired such Shares. ICTS or its subsidiaries may not exercise voting rights in respect of Shares for
which ICTS or its subsidiaries have a right of usufruct or a pledge.
Reduction of Share Capital
The General Meeting (at the proposal of the Supervisory Board)
may resolve to reduce the issued share capital by (i) cancellation of Shares or (ii) amending the Articles of Association to reduce the
nominal value of the Shares. In either case, this reduction would be subject to provisions of Dutch law and the Articles of Association.
Only Shares held by ICTS or Shares for which it holds the depositary receipts may be cancelled. Under Dutch law, a resolution of the General
Meeting to reduce the number of Shares must designate the shares to which the resolution applies and must lay down rules for the implementation
of the resolution. A resolution by the General Meeting to reduce the issued share capital of ICTS must be approved by at least a two third
majority of the votes cast, in a meeting in which holders of at least half of ICTS’ issued and outstanding share capital is present
or represented. The resolution to reduce the issued share capital needs to be filed with the Netherlands Chamber of Commerce and an announcement
in a Dutch daily newspaper needs to be published stating that such filings took place (upon which a two-months creditor opposition period
starts).
In December 2024, the Company, by an amendment to its Articles
of Association, reduced the nominal value of its Shares from EUR 0.45 to EUR 0.01. This reduction was recorded by a corresponding reduction
in the issued share capital and an increase to the additional paid-in capital.
41
During the Company’s 2025 annual general meeting, the General
Meeting authorized the Management Board to, among other things, repurchase the 3,000,000 Shares issued to its directors and certain employees
in 2019 (the 2019 Shares) at a price of EUR 0.45 per share (equal to USD 0.506 per share according to the exchange rate at the time).
The Company completed the repurchase of the shares in July 2025.
Under Dutch law, the Company is only allowed to repurchase shares
issued by the Company, to the extent that – on the basis of the Company’s adopted annual accounts – the Company’s
equity (less the price paid for the shares) exceeds the Company’s non-distributable equity, where the non-distributable equity consists
of the issued share capital and the legal reserves required by law and the Articles of Association. This formula is referred to as the
‘equity test’. The reduction in the nominal value of the Shares from EUR 0.45 to EUR 0.01 provided more room to repurchase
the 2019 Shares according this equity test.
Dividends
Pursuant to Dutch law and the Articles of Association, the distribution
of profits will take place following the adoption of ICTS’ annual accounts by the General Meeting, from which ICTS will determine
whether such distribution is permitted. ICTS may make distributions to the Shareholders, whether from profits or from its freely distributable
reserves, only insofar as ICTS’ net equity exceeds the sum of the paid-up and called-up share capital plus the reserves required
to be maintained by Dutch law or pursuant to the Articles of Association.
Subject to Dutch law and the Articles of Association, the Supervisory
Board may determine which part of ICTS’ profits as per its annual accounts for the relevant financial year will be added to the
reserves. The remaining part of the profits will be at the disposal of the General Meeting.
Subject to Dutch law and the Articles of Association, the Management
Board, with the prior approval of the Supervisory Board, may resolve to distribute an interim dividend if it determines such interim dividend
to be justified by ICTS’ profits. For this purpose, the Management Board must prepare an interim statement of assets and liabilities.
Such interim statement shall show the financial position of ICTS not earlier than on the first day of the third month before the month
in which the resolution to make the interim distribution is announced and all Management Board members need to sign the interim statement
of assets and liabilities and if one of them does not so sign, the reason for this omission must be stated. An interim dividend can only
be paid if (a) an interim statement of assets and liabilities is drawn up showing that the funds available for distribution are sufficient,
and (b) ICTS’ net equity exceeds the sum of the paid-up and called-up share capital plus the reserves required to be maintained
by Dutch law or pursuant to the Articles of Association. The interim statement of assets and liabilities needs to be filed with the Netherlands
Chamber of Commerce within 8 days after the date on which the resolution to make the distribution is adopted.
An entitlement to any dividend distribution shall be barred five
years after the date on which those dividends were released for payment.
General
Meeting of Shareholders
Annual General Meeting
The General Meeting will be held at least once a year and no later
than six months from the end of the preceding financial year of ICTS. The purpose of the annual General Meeting is to discuss, among other
things, the annual report, the adoption of the annual accounts, allocation of profits (including the proposal to distribute dividends),
discharge of the Management Board members from liability for their management and the Supervisory Board members from liability for their
supervision thereon, filling of any vacancies and other proposals brought up for discussion by the Management Board and the Supervisory
Board.
Convocation Notice and
Agenda
A General Meeting can be convened by the Management Board or the
Supervisory Board by a convening notice. Notices convening a general meeting will be mailed to holders of registered shares at least 15
days before the General Meeting and otherwise in other countries as required pursuant to the relevant laws where ICTS’ Shares have
been admitted to trading on a trading facility.
All convocations for the General Meetings and all notifications
to Shareholders shall take place by means of letters sent to the addresses listed in the register of Shareholders. Instead of through
notice letters, any Shareholder that gives his consent, may be sent notice of the meeting by means of a legible and reproducible message
electronically sent to the address stated by him for this purpose to ICTS.
42
Extraordinary General
Meeting
Other General meetings may be held as often as deemed necessary
by the Management Board and Supervisory Board and must be held if one or more Shareholders or other persons entitled to attend the general
meeting jointly representing at least 10% of ICTS’ issued share capital make a written request to the Management Board or the Supervisory
Board that a meeting must be held and specifying in detail the business to be dealt with at such meeting.
Agenda
Under Dutch law, one or more Shareholders representing
solely or jointly at least 3% of the ICTS’ issued and outstanding share capital are entitled to request the Management
Board to include items on the agenda of the General Meeting, provided that such request is received by ICTS not later than on the
60th day in advance of the meeting.
Chair
The General Meeting is chaired by the chairman of the Supervisory
Board or, in his absence, by the person designated for that purpose by the Supervisory Board from its midst or otherwise. If none of the
Supervisory Directors is present, the meeting itself shall provide for its Chairmanship.
Place General Meeting
General Meetings are held in Amstelveen, the Netherlands
(the place of the statutory seat of ICTS) or in Amsterdam, Rotterdam, or The Hague, the Netherlands. At a General Meeting held elsewhere
than in the previous sentence, valid resolutions may only be adopted if the entire issued share capital of ICTS is represented.
Admission
Each Shareholder and each person to whom the law grants this right
shall be entitled, either in person or by written proxy, to attend the General Meeting, to address the meeting and, if the voting rights
accrue to him, to exercise his voting rights.
The Management Board may resolve that the powers referred to in
the paragraph above may be exercised by means of electronic communication. If a Shareholder and any person with meeting right participates
by means of electronic communication, it is required that the electronic communication allows for identification of the Shareholder and
any person with meeting right, for such person to directly take notice of the proceedings in the meeting and for the casting of votes
(if applicable). Furthermore, it shall be required that the electronic communication allows for the Shareholder and any person with meeting
right to participate in discussions in the meeting.
In deviation from the first paragraph under this section ‘admission’,
the Management Board may determine that such persons shall be deemed to have the right to vote and the right to attend the General Meeting
as at a time to be determined by the Management Board are registered as Shareholders in one or more registers designated by the Management
Board, regardless of who is entitled to the relevant Shares at the time of the General Meeting. The notice convening the meeting must
state the registration date and also indicate the manner in which registration may take place and the manner in which Shareholders may
exercise their rights. The Management Board determines the manner in which Shareholders may have themselves registered and the manner
in which they may exercise their rights. The registration date shall be determined with due observance of applicable statutory provisions.
Admission to the General Meeting shall be granted to the Supervisory
Board members, the Management Board members and all other persons entitled to admission by law. The General Meeting may grant access to
the meeting to persons other than those referred to above. Management board members and Supervisory Board members shall as such have an
advisory vote in the General Meeting.
Voting Rights
Each Share entitles the holder to cast one vote. Resolutions of
the General Meeting are adopted by an absolute majority of the votes cast in a meeting where at least half of the issued share capital
of ICTS is represented, unless Dutch law or the Articles of Association prescribe a larger majority. Resolutions of the General Meeting
to amend the Articles of Association, to reduce the issued share capital, to dissolve ICTS or to merge shall be passed by a majority of
at least two-thirds of the votes cast representing at least half of the issued share capital.
Blank votes and invalid votes shall be considered votes not cast.
They shall count towards the determination of a quorum. Under Dutch law, no votes may be cast at a General Meeting in respect of Shares
which are held by ICTS itself.
43
Management Structure
ICTS has a two-tier board structure comprising of the Management
Board (bestuur) and the Supervisory Board (raad van commissarissen).
The Management Board is collectively responsible for ICTS’
general affairs and is in charge of the day-to-day management, formulating strategies and policies, and setting and achieving ICTS’
objectives. The Supervisory Board supervises the Management Board and the general affairs of ICTS and the business connected with it and
provides the Management Board with advice.
Management
Board
Powers, Responsibilities
and Function
The Management Board is the executive body of ICTS, collectively
responsible for, among other things, defining and attaining ICTS’ objectives, determining ICTS’ strategy and risk management
policy, the day-to-day management, the ICTS’ general affairs and ICTS’ representation, subject to the supervision of the Supervisory
Board. The Management Board may perform all acts necessary or useful for achieving ICTS’ objectives, with the exception of those
acts that are prohibited by law or by the Articles of Association. Certain Management Board resolutions require the approval of the Supervisory
Board under the Articles of Association. The Management Board may allocate its responsibilities and powers to its individual members.
All Management Board members remain collectively responsible for proper management regardless of the allocation of tasks. In performing
their duties, the Management Board members must carefully consider and shall act in accordance with the interests of ICTS and the business
connected with it, taking into consideration the interests of all corporate stakeholders, such as Shareholders, creditors, employees,
customers, patient populations and suppliers.
Subject to certain exceptions following from Dutch law, the Management
Board as a whole is authorized to represent ICTS. In addition, should the Management Board be comprised of two or more members, two Management
Board members acting jointly are also authorized to represent ICTS.
Composition, Appointment,
Term of Appointment and Dismissal
The Articles of Association provide that the Management Board shall
consist of one or more members and that the General Meeting determines the exact number of Management Board members.
The General Meeting appoints the Management Board members. Management
Board members are appointed by the General meeting for a term of office which shall lapse immediately after the close of the annual meeting
held in the year after their appointment. Management Board members may be reappointed in that annual meeting with due observance of the
term of office.
The General Meeting and the Supervisory Board may suspend Management
Board members at any time, and the General Meeting may dismiss Management Board members at any time. A General Meeting must be held within
three months after a suspension of a Management Board member has taken effect, in which meeting a resolution must be adopted to either
terminate or extend the suspension. Provided if such suspension is not terminated, the suspension does not last longer than three months
in aggregate. The suspended Management Board member must be given the opportunity to account for his or her actions at that meeting. If
neither such resolution is adopted nor the General Meeting has resolved to dismiss the Management Board member, the suspension will cease
after the period of suspension has expired.
In the event of a vacant seat or upon inability to act of one or
more Management Board members, the remaining Management Board members or the only remaining Management Board member shall temporarily
be in charge with the exercise of the duties and powers of the Management Board member(s) in question. In the event all seats are vacant
or upon inability to act of all Management Board members, or the sole Management Board member, as the case may be, the Supervisory Board
shall have the authority to temporarily entrust the exercise of the duties and powers of the Management Board members to one or more persons
(either or not from amongst its mid).
44
Decision-Making
The Management Board decides by majority vote. If there is a tie
in voting, the proposal shall be deemed to have been rejected. The Management Board may also pass resolutions outside of a meeting, provided
they are in writing, all Management Board members have cast their votes and none of them has objected to this manner of decision making.
Conflicts of Interests
A Management Board member shall not participate in deliberations
and the decision-making process in the event of a direct or indirect personal conflict of interest between that Management Board member
and ICTS and the enterprise connected with it. If there is such personal conflict of interest in respect of all, the decision shall be
taken by the Supervisory Board.
Supervisory
Board
Powers, Responsibilities
and Function
The role of the Supervisory Board is to supervise the conduct and
policies of the Management Board and the general affairs of ICTS and the business connected with it as well as to provide the Management
Board with advice. In addition, certain management Board resolutions require the approval of the Supervisory Board under the Articles
of Association. The Supervisory Board members are not authorized to represent ICTS. In performing their duties, the Supervisory Board
members are required to be guided by the interests of ICTS and the business connected with it, and shall consider the interests of the
ICTS’ stakeholders, which include but are not limited to its Shareholders, creditors, employees, customers and suppliers. The Supervisory
Board may, at ICTS’ expense, seek the advice which it deems desirable for the correct performance of its duties. The Supervisory
Board has adopted board regulations governing its tasks and responsibilities, addressing (amongst other items) duties and responsibilities,
its committees, meetings and its relationship with the Management Board and the General Meeting.
Composition, Appointment,
Term of Appointment and Dismissal
The Articles of Association provide that the Supervisory Board
shall consist of one or more members and that the General Meeting determines the exact number of Supervisory Board members. Only individuals
can be appointed as Supervisory Board members.
The members of the Supervisory Board are appointed by the General
Meeting for a term of office which shall lapse immediately after the close of the annual meeting held in the year after their appointment.
Supervisory Board members may be reappointed in that annual meeting with due observance of the term of office.
The General Meeting may suspend and dismiss Supervisory Board members
at any time. A General Meeting must be held within three months after a suspension of a Supervisory Board member has taken effect, in
which meeting a resolution must be adopted to either terminate or extend the suspension, provided that in the case that such suspension
is not terminated, the suspension does not last longer than three months in aggregate. The suspended Supervisory Board member must be
given the opportunity to account for his or her actions at that meeting. If neither such resolution is adopted nor the General Meeting
has resolved to dismiss the Supervisory Board member, the suspension will cease after the period of suspension has expired.
In the event of a vacant seat or upon inability to act of one or
more Supervisory Board members, the remaining Supervisory Board members or the only remaining Supervisory Board member shall temporarily
be in charge with the exercise of the duties and powers of the Supervisory Board member(s)in question. In the event all seats are vacant
or upon inability to act of all Supervisory Board members, or the sole Supervisory Board member, as the case may be, the General Meeting
shall have the authority to temporarily entrust the exercise of the duties and powers of the Supervisory Board members to one or more
persons.
Decision-Making
In a meeting of the Supervisory Board, each Supervisory Board member
is entitled to cast one vote. A Supervisory Board member may grant a written proxy to another Supervisory Board member (if in office)
to represent him at a meeting. All resolutions by the Supervisory Board are adopted by the favorable vote of a majority of the Supervisory
Board members present or represented at the meeting (and in respect of whom no conflict of interest exists). If there is a tie in voting,
the proposal is rejected.
The Supervisory Board may also adopt resolutions outside a meeting,
provided this is done in writing, all Supervisory Board members have cast their votes and none of them has objected to this manner of
decision making.
45
Conflicts of Interests
A Supervisory Board member shall not participate in the deliberations
and decision-making process in the event of a conflict of interest between that Supervisory Board member and ICTS and the enterprise connected
with it. If there is such a personal conflict of interest in respect of all Supervisory Board members, the preceding sentence does not
apply and the Supervisory Board shall maintain its authority.
Financial Year and Annual
Accounts
The financial year of ICTS coincides with the calendar year. Annually
within five months after the end of the financial year, the Management Board prepares the annual accounts, which can be extend by no more
than five months by the General Meeting on the basis of special circumstances. The annual accounts must be accompanied by the Report of
Independent Registered Public Accounting Firm, an annual report, a report by the Management Board and a report by the Supervisory Board
and certain other information required under Dutch law. All Management Board members and Supervisory Board members sign the annual accounts
and if one of them does not so sign, the reason for this omission must be stated. The Management Board must make the annual accounts,
the annual report and other information required under Dutch law available for inspection by the Shareholders and other persons entitled
to attend and address the General Meeting at the offices of ICTS from the day of the notice convening the annual General Meeting. The
annual accounts must be adopted by the General Meeting at the annual General Meeting.
With due observance of Article 19 paragraph 4 of the Articles of
Association, adoption of the annual accounts by the General Meeting without any caveats constitutes discharge for the Management Board
members and the Supervisory Board members from liability for the performance of their respective duties for the past financial year.
In order to discharge the Management Board members and Supervisory
Board members from liability a separate resolution thereto needs to be adopted by the General Meeting (which resolution can be adopted
by separate resolution in the same meeting in which the annual accounts will be adopted).
Under Dutch law, this discharge is not absolute and will not be
effective with respect to matters which are not disclosed to the Shareholders.
Amendment of Articles
of Association
Only the General Meeting may resolve to amend the Articles of Association.
A proposal to amend the Articles of Association must be included in the notice convening the General Meeting. A copy of the proposal containing
the verbatim text of the proposed amendment must be available at ICTS for inspection by every Shareholder of ICTS and every holder of
meeting right until the end of the General Meeting.
A resolution by the General Meeting to amend the Articles of Association
must be approved by at least a two third majority of the votes cast, in a meeting in which holders of more than half of ICTS’ issued
and outstanding share capital is present or represented.
Dissolution and Liquidation
A proposal to dissolve ICTS must be included in the notice convening
the General Meeting. A resolution by the General Meeting to dissolve ICTS must be approved by at least a two third majority of the votes
cast, representing at least half of ICTS’ issued and outstanding share capital.
If the General Meeting has resolved to dissolve ICTS, the Management
Board members will be charged with the liquidation of the business of ICTS in accordance with Dutch law and the Articles of Association
under supervision of the Supervisory Board. During liquidation, the provisions of the Articles of Association will remain in force as
far as possible.
Any surplus remaining after settlement of all debts and liquidation
costs will be distributed to the Shareholders in proportion to the amounts contributed on each Share held by them.
Material contracts
For material contracts See “Item 8 - Financial Information”.
46
Exchange controls
There are no governmental laws, decrees or regulations in The Netherlands,
ICTS’ jurisdiction of organization that restrict ICTS’ export or import of capital in any material respect, including, but
not limited to, foreign exchange controls.
There are no limitations imposed by Dutch corporate law or ICTS’
charter documents on the right of non-resident or foreign owners to hold or vote Shares.
Taxation
The following discussion summarizes the material anticipated U.S.
federal income tax consequences of the acquisition, ownership and disposition of shares by a U.S. Holder (as defined below). This summary
deals only with shares held as capital assets and does not deal with the tax consequences applicable to all categories of investors some
of which (such as tax-exempt entities, banks, broker-dealers, investors who hold shares as part of hedging or conversion transactions
and investors whose functional currency is not the U.S. dollar) may be subject to special rules.
The summary does not purport to be a complete analysis or listing
of all the potential tax consequences of holding shares, nor does it purport to furnish information in the same detail or with the attention
to an investor's specific tax circumstances that would be provided by an investor's own tax adviser. Accordingly, U.S. holders of shares
are advised to consult their own tax advisers with respect to their particular circumstances and with respect to the effects of U.S. federal,
state, local, or other laws to which they may be subject.
As used herein, the term “U.S. Holder” means a beneficial
owner of shares that is (i) for United States federal income tax purposes a citizen or resident of the United States of America, (ii)
a corporation or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii)
a trust if a court within the United States of America is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial decisions of the trust, or (iv) an estate, the income
of which is subject to United States federal income taxation regardless of its source.
The summary is based on the Internal Revenue Code of 1986, as amended
(the “Code”), judicial decisions, administrative pronouncements, and existing and proposed Treasury Department regulations,
changes to any of which after the date of this Annual Report on Form 20-F could apply on a retroactive basis and affect the tax consequences
described herein.
Taxation of Dividends
For U.S. federal income tax purposes, the gross amount of distributions,
if any, (including any withholding tax thereon) made by the Company out of its current or accumulated earnings and profits (as determined
under U.S. federal income tax principles) will be included in the gross income of a direct U.S. Holder as foreign source dividend income
on the date of receipt, but in the case of a U.S. Holder that is a corporation, note that such dividend income generally will not be eligible
for a dividends received deduction unless the Company constitutes a so-called “specified 10%-owned foreign corporation” with
respect to such a U.S. Holder.
Subject to the discussion below regarding passive foreign investment
companies, the Company should be considered to be a “qualified foreign corporation” so that such dividends paid by the Company
should therefore be eligible for taxation at the rates applicable to qualified dividend income, subject to applicable holding-period and
other requirements (at a maximum U.S. federal rate of 20 percent in the hands of a non-corporate U.S. Holder) plus potentially a net investment
income tax (for non-corporate U.S. Holders) at a maximum rate of 3.8%.
Distributions in excess of the earnings and profits of the Company
will be treated, for U.S. federal income tax purposes, first as non-taxable to the extent of the U.S. Holder's basis in the shares (resulting
in a corresponding reduction in such U.S. Holder’s basis, thereby increasing the amount of any gain and decreasing the amount of
any loss realized on the subsequent disposition of such shares) and then as a gain from the sale or exchange of the shares. The amount
of any dividend paid in Euros generally will be determined based on the U.S. dollar value of the Euro on the date of receipt regardless
of whether the U.S. Holder converts the payment into U.S. dollars.
The declaration of dividends will be at the discretion of the Company’s
Supervisory Board of directors and will depend upon the Company’s earnings, capital requirements, financial position, general economic
conditions, and other pertinent factors. The Company cannot assure Holders that dividends will be paid in the future.
47
Foreign Tax Credits
Subject to applicable limitations, U.S. Holders will generally
be entitled to claim a credit against their United States federal income tax liability for the amount of Netherlands dividend withholding
tax imposed on dividends paid to U.S. Holders. See Netherlands Dividend Withholding Tax.
U.S. Holders who are entitled to the benefits of a reduced rate
of Netherlands dividend withholding tax under the tax treaty between the United States of America and the Netherlands will be allowed
a credit for only the amount of withholding tax provided for under the U.S. Tax Treaty (generally 15%).
However, the full amount of the dividend, including any withheld
amounts, generally will be subject to current United States federal income taxation whether or not such Holder is entitled to a tax benefit
for the credit of the amount withheld. In the event the Company pays a dividend to a U.S. Holder out of the earnings of a non-Dutch subsidiary,
however, it is possible that under certain circumstances that such U.S. Holder would not be entitled to claim a credit for a portion of
any Dutch taxes withheld by the Company from such dividend. Based on historic economics, the portion of Dutch withholding tax that may
not be creditable in this instance should equal a maximum of 3% of the gross amount of such dividend (or 20% of the Dutch taxes withheld
in the case of a U.S. Holder entitled to claim a 15% withholding rate under the U.S. Tax Treaty). This limitation would potentially apply
only under circumstances where the Company pays dividends on the shares.
Depending on the particular circumstances of the U.S. Holder, dividends
accrued from shares will generally be classified, for foreign tax credit purposes, as passive income. A U.S. Holder who finds it more
advantageous because of foreign tax credit limitations to claim the Netherlands dividend withholding tax as a deduction instead of a credit
may do so, but only for a year for which such Holder does not claim a credit for any foreign taxes. If the U.S. Holder is a U.S. partnership,
trust, or estate, any tax credit is available only to the extent that the income derived by such partnership, trust, or estate is subject
to U.S. tax on the income of a resident either in its hands or in the hands of its partners or beneficiaries, as the case may be.
Taxation on Sale or Disposition of Shares
Subject to the discussion below regarding passive foreign investment
companies, U.S. Holders will recognize capital gain or loss for U.S. federal income tax purposes on the sale or other disposition of shares
in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. Holder's adjusted tax basis in
the shares. In general, a U.S. Holder's adjusted tax basis in the shares will be equal to the amount paid by the U.S. Holder for such
shares reduced (but not below zero) by any distribution in excess of the earnings and profits of the Company. For shares held for one
year or less, any such gain or loss will generally be treated as short-term gain or loss. Short-term capital gains are taxed at the same
rate as ordinary income.
If the shares have been held for more than a year, any such gain
or loss will generally be treated as long-term capital gain or loss. U.S. Holders are advised to consult a competent tax adviser regarding
applicable capital gains tax provisions and sourcing of capital gains and losses for foreign tax credit purposes.
Gift and Estate Tax
An individual U.S. Holder may be subject to U.S. gift taxes on
a gift of the shares and a U.S. Holder that is a U.S. estate will need to include the value of the shares in calculating its U.S. estate
tax in the same manner and to the same extent as on other types of personal property.
Backup Withholding and Information Reporting
Payments in respect of the shares may be subject to information
reporting to the IRS and to a 24% U.S. backup withholding tax. Backup withholding generally will not apply, however, to a Holder who furnishes
a correct U.S. taxpayer identification number or certificate of foreign status and makes any other required certification or a beneficial
owner who is otherwise exempt from backup withholding. Generally, a U.S. Holder will provide such certification on Form W-9 (Request for
Taxpayer Identification Number and Certification) and a non-US Holder will provide any required certification on a version of Form W-8
(Certificate of Foreign Status).
Passive Foreign Investment Company
Management has determined that the Company has not been a passive
foreign investment company (“PFIC”) for United States federal income tax purposes for prior taxable years and believes that
the Company will not be treated as a PFIC for the current and future taxable years, but this conclusion is a factual determination made
annually and is thus subject to change. The Company would be a PFIC with respect to a U.S. Holder if, for any taxable year in which such
U.S. Holder held shares, either (i) at least 75% of the Company’s gross income for the taxable year is passive income, or (ii) at
least 50% of the Company’s assets are assets that produce or are held for the production of passive income. Under a “look-through”
rule, the Company and its corporate subsidiaries will take into account a pro rata share of the income and the assets of any corporation
in which it owns, directly or indirectly, 25% or more of the stock by value.
48
Passive income generally includes dividends, interest, royalties,
rents (other than rents and royalties derived from the active conduct of a trade or business and not derived from a related person), annuities,
and gains from assets that produce passive income. The 50% asset test would apply to the Company based on fair market values.
If the Company is a PFIC for any taxable year during which a U.S.
Holder holds shares, the U.S. Holder will be subject to special tax rules with respect to any “excess distribution” that
the U.S. Holder receives on shares, which will include any gain the U.S. Holder realizes from a sale or other disposition (including a
pledge) of the shares unless the U.S. Holder makes a “qualified electing fund” or “mark-to-market” election as
discussed below.
With respect to distributions the U.S. Holder receives in a taxable
year, the portion of such distributions that are greater than 125% of the average annual distributions the U.S. Holder received during
the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the shares will be treated as an excess
distribution.
Under these special tax rules relating to excess distributions
received from a PFIC:
| • |
The excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the shares, |
| • |
The amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which the Company was a
PFIC, will be treated as ordinary income, and |
| • |
The amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and an interest charge
generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
The tax liability for the amounts of any “excess distribution”
allocated to years prior to the year of the distribution or disposition cannot be offset by any net operating losses, and gains (but not
losses) realized on the sale of the shares cannot be treated as capital, even if the U.S. Holder holds the shares as capital assets.
If the Company were to become a PFIC, a U.S. Holder may avoid taxation
under the excess distribution rules discussed above by making a “qualified electing fund” election to include the U.S. Holder’s
share of the Company’s income on a current basis. However, a U.S. Holder may make a qualified electing fund election only if the
Company, as a PFIC, furnishes the shareholder annually with certain tax information. Management has not decided whether, or under what
circumstances, the Company would prepare or provide such information. Alternatively, if the Company were to become a PFIC, a U.S. Holder
might, depending on the volume of trading of our stock, make a mark-to-market election to elect out of the excess distribution rules discussed
above.
If a U.S. Holder makes a mark-to-market election for the shares,
the U.S. Holder would include in income each year an amount equal to the excess, if any, of the fair market value of the shares as of
the close of the U.S. Holder’s taxable year over the U.S. Holder’s adjusted basis in such shares on such date. A U.S. Holder
is allowed a deduction for the excess, if any, of the adjusted basis of the shares over their fair market value as of the close of the
taxable year only to the extent of any net mark-to-market gains on the shares included in the U.S. Holder’s income for prior taxable
years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other disposition
of the shares are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss
on the shares, as well as to any loss realized on the actual sale or disposition of the shares, to the extent that the amount of such
loss does not exceed the net mark-to-market gains previously included for such shares. A U.S. Holder’s basis in the shares will
be adjusted to reflect any such income or loss amounts.
The mark-to-market election is available only for stock which is
regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission, or the national market
system established pursuant to section 11A of the Exchange Act, or any exchange or market that the IRS has determined has rules sufficient
to carry out the purposes of the income tax rules. There can be no assurance that the Company will satisfy the requirements so as to allow
the making of a mark-to-market election.
49
Taxes in
the Netherlands
Corporate
income tax
Corporate Income Tax
– General
We are incorporated under the laws of the Netherlands
and are therefore subject to Netherlands corporate income tax. As of 2025, the rates are 19% on profits up to €0.2
million and 25.8%, on the excess.
ICTS and a number of our Netherlands resident subsidiaries
form a fiscal unity for Netherlands corporate income tax purposes. As a result, corporate income tax is levied
from these entities on a consolidated basis at the level of ICTS.
For Netherlands corporate income tax purposes, affiliated
entities should calculate their profits on an “at arm’s length” basis. In case transactions between such affiliated
entities are made or imposed on conditions (transfer prices) which differ from those conditions which would have been made
or imposed between independent entities in the free market, the profits of those entities are adjusted as if the “at arm’s
length” conditions had been agreed.
Pillar Two
The Netherlands have implemented Pillar Two, which establishes
a global minimum tax of 15%, as of 1 January 2024 with the introduction of the Minimum Tax Act 2024. The Dutch legislation is almost entirely
in line with the EU Pillar Two Directive. Entities established in the Netherlands that are part of a (multinational or large domestic)
group will fall within the scope of the new legislation, if that group, in at least two of the four financial years immediately preceding
the financial year, has recorded a turnover of at least €750M per financial year according to the consolidated financial statements
of the ultimate parent entity of the group. Based on the consolidated financial statements of ICTS for 2025, 2024 and 2023, ICTS does
not meet the turnover criterion and therefore should not fall within the scope of the Minimum Tax Act 2024.
Participation Exemption
If the participation exemption is not applicable, income
derived by ICTS from a subsidiary will be taxed at the statutory corporate income tax rates.
Pursuant to the Netherlands participation exemption (“deelnemingsvrijstelling”),
income and capital gains derived from the investment by a parent company in a subsidiary are exempt from corporate
income tax provided that the parent company holds a qualifying participation in the subsidiary, and the subsidiary is not considered
to be a portfolio investment. A qualifying participation exists if the parent company:
(i) owns at least 5 per cent of the nominal paid-up share capital
(or in certain cases at least 5% of the voting power) in the subsidiary, which has a capital divided into shares, or
(ii) holds at least 5% of the units of a fund for joint account,
or
(iii) is a member of a Cooperative, or
(iv) holds profit participating interests of 5% or more in (a)
certain entities that are incorporated according to foreign law and have a legal form that is not comparable with any Dutch legal form
and (b) certain reverse hybrid entities.
A qualifying participation may also exist, subject to conditions,
in case:
(a) the parent company owns less than 5 per cent of the nominal
paid-up share capital, units or share in the subsidiary, whilst
(i) a. the
subsidiary is related (as per the applicable definition in the Dutch Corporate Income Tax Act) to the parent, or
b. an entity related (as per the applicable
definition in the Dutch Corporate Income Tax Act) to the parent has a qualifying participation in the subsidiary, or
(ii) has owned for an uninterrupted period of at
least one year at least 5 per cent of the nominal paid-up share capital, units or share in the subsidiary and three
years have not yet passed after the participating interest of the parent in the subsidiary dropped below 5 per cent.
If the parent company holds its participation in the
subsidiary as a portfolio investment, the participation exemption is not applicable, unless it qualifies as a
“qualifying portfolio investment”. A portfolio investment is a shareholding in a subsidiary that is held
by the parent with the intent of realizing a return on investment that does not exceed the return that can be
expected in the case of normal asset management activities. This is a subjective facts and circumstances test. The specific
purpose for making the investment in the subsidiary must be analyzed on a case-by-case basis taking into account all of
the relevant facts and circumstances.
50
A parent company would generally not be considered to
hold the participation in the subsidiary company as a portfolio investment, if the business carried on by the
subsidiary company is in line with the business carried on by the parent company. This should normally also apply
to a holding company, which, based on its activities on a managerial, policy-making or financial level, performs
a material function for the benefit of the group of companies that it forms part of, or to an intermediate holding
company in case this company plays a linking role between the business activities of its parent company and the business
activities of its subsidiary companies.
The subsidiary would be deemed to be held as a portfolio investment
by the parent company if (i) the assets of the subsidiary usually consist, on a consolidated basis, for
more than 50 per cent of shareholdings (and similar rights) of less than 5 per cent in other entities or (ii) the subsidiary
company’s activities consist for more than 50% of group financing activities. Group financing includes loans, credit instruments
and also leasing of equipment, intangibles and other assets.
If the parent company would (be deemed to) hold the participation in
the subsidiary as a portfolio investment, such portfolio investment may still qualify for the application of
the participation exemption if (i) the subsidiary is subject to an income/profits tax resulting in an effective tax burden
that is realistic under Netherlands principles, or (ii) the assets of the subsidiary, directly or indirectly, usually consist
for less than 50 per cent of low-taxed free investments.
If the parent company would (be deemed to) hold the participation in
the subsidiary as a portfolio investment, in case (i) the parent company - on its own or together with related group
companies - has an interest of at least 25% in the participation, (ii) the participation is not subject to an income/profits
tax resulting in an effective tax burden that is realistic under Netherlands principles, and (iii) the assets of the participation
consist for 90% or more directly or indirectly of low-taxed free investments, the parent company must (re)value the participation
for tax purposes at fair market value annually.
Apart from special provisions in relation to certain
liquidation losses, capital losses incurred in relation to qualifying participations are not deductible for Netherlands corporate
income tax purposes.
Costs related to the acquisition or the disposal of qualifying
participations are generally not deductible. Other expenses relating to participations (e.g., the cost of financing)
are in principle deductible, subject to possible interest deduction limitations.
The participation exemption does not apply to accrued
payments (of dividend, interest, or other) that are tax-deductible in the country of the debtor, whereas the
corresponding income would normally be exempt under the scope of the participation exemption. This will be the case
e.g. if the country of the debtor qualifies the distribution as an interest expense, whereas the Netherlands
qualifies the income as a dividend.
In case the participation exemption is applicable, income
in the hands of ICTS arising from dividends paid by subsidiaries or capital gains from the disposal of its shares
in such subsidiaries are exempt from corporate income tax in the Netherlands.
Controlled Foreign Company
Regulations
The Netherlands has implemented the Controlled Foreign Company
(“CFC”) regulations provided for in the EU Anti-Tax Avoidance Directive (“ATAD”) into
domestic law. Based on these regulations, subject to conditions, certain types of passive income generated by qualifying
CFC’s that are resident in low-tax jurisdictions (i.e., countries with a statutory profit tax rate lower
than 9% that are included on the Dutch list of low-tax countries or jurisdictions that are included on the EU list of non-cooperative jurisdictions),
are taxable at the level of the parent company against the regular Dutch corporate income tax rates mentioned above.
Interest Deduction Limitations
The Netherlands has implemented the generic interest
stripping rule provided for in the EU Anti-Tax Avoidance Directive (“ATAD”) into domestic law. The earnings
stripping rule limits the possibility to deduct “excess” interest costs (i.e., the balance of interest
costs and interest income) to 20% of a taxpayer’s “corrected profit” (EBITDA). The before-mentioned percentage
has been increased to 24.5% as from tax year 2025. The earnings stripping rule generally provides for a €1.0 million threshold,
which means that the deduction of excess interest costs up to €1.0 million will not be restricted.
Besides the earnings stripping rule, Netherlands tax
law includes other anti-abuse provisions in relation to the deductibility of interest. In addition, interest
deductions may be disallowed based on the abuse of law doctrine (“fraud legis”).
51
Loss Compensation
According to Netherlands tax law, losses incurred may
be carried back for one year. As of 1 January 2019, the possibility to carry forward losses was limited from
nine years to six years. As from 1 January 2022, losses can be carried forward indefinitely. The yearly utilization
of carry forward losses will be limited to €1.0 million, plus 50% of taxable income above €1.0 million.
The new rules are also applicable to already existing carry forward losses as per 1 January 2022 (i.e., carry
forward losses from 2013 and subsequent years).
Depreciation Limitations
For Netherlands corporate income tax purposes, restrictions
apply to the depreciation of goodwill, real estate and other business assets. The maximum yearly depreciation
charge for acquired goodwill is 10% of its cost price. Depreciation of real estate property is not allowed in case
the book value of the property falls below 100% of the value used for purposes of the Valuation of Immovable Property Act
(“WOZ value”). The maximum yearly depreciation charge for other business assets is 20% of the cost price
of such assets. In certain situations, it should still, however, be possible to value assets at lower going-concern
value.
Netherlands Tax Considerations of Holding
Shares
The following summary outlines certain Netherlands tax consequences
in connection with the acquisition, ownership and disposal of Shares. All references in this summary to the
Netherlands and Dutch law are to the European part of the Netherlands and its law, respectively, only. The summary
does not purport to present any comprehensive or complete picture of all Netherlands tax aspects that could be
of relevance to the acquisition, ownership and disposal of Shares by a (prospective) holder of Shares who may be subject
to special tax treatment under applicable law. The summary is based on the tax laws and practice of the
Netherlands as in effect on the date of this Prospectus, which are subject to changes that could prospectively or retrospectively affect
the Netherlands tax consequences.
For purposes of Netherlands income and corporate income
tax, Shares legally owned by a third party such as a trustee, foundation or similar entity or arrangement (a Third
Party), may under certain circumstances have to be allocated to the (deemed) settlor, grantor or similar originator (the Settlor) or,
upon the death of the Settlor, his/her beneficiaries (the Beneficiaries) in proportion to their entitlement to
the estate of the Settlor of such trust or similar arrangement (the Separated Private Assets).
The summary does not address the tax consequences of
a holder of Shares who is an individual and who has a substantial interest in ICTS. Generally, a holder of Shares
will have a substantial interest in ICTS if such holder of Shares, whether alone or together with his spouse or partner
and/or certain other close relatives, holds directly or indirectly, or as Settlor or Beneficiary of Separated Private
Assets (i) the ownership of, or certain other rights, such as usufruct, over, or rights to acquire (whether or not
already issued), shares representing 5% or more of the total issued and outstanding capital (or the issued
and outstanding capital of any class of shares) of ICTS or (ii) the ownership of, or certain other rights, such as
usufruct over, profit participating certificates (“winstbewijzen”) that relate to 5% or more of the
annual profit of ICTS or to 5% or more of the liquidation proceeds of ICTS.
In addition, a holder of Shares has a substantial interest
in ICTS if he, whether alone or together with his spouse or partner and/or certain other close relatives, has
the ownership of, or other rights over, shares in, or profit certificates issued by, ICTS that represent less than 5%
of the relevant aggregate that either (a) qualified as part of a substantial interest as set forth above and
where shares, profit certificates and/or rights there over have been, or are deemed to have been, partially disposed
of, or (b) have been acquired as part of a transaction that qualified for non-recognition of gain treatment.
This summary does not address the tax consequences of
a holder of Shares who:
(a) receives income or realizes capital gains in connection with
his or her employment activities; or
(b) in his/her capacity as (former) Management Board
member and/or (former) Supervisory Board member; or
(c) is a resident of any non-European part of the Netherlands; or
(d) for whom the Shares form part of a “lucrative
interest” (see further below).
Prospective holders of Shares should consult their own professional
adviser with respect to the tax consequences of any acquisition, ownership or disposal of Shares in their individual
circumstances.
52
Dividend Withholding Tax
General
ICTS is generally required to withhold dividend withholding
tax imposed by the Netherlands at a rate of 15% on dividends distributed by ICTS in respect of Shares. The expression
“dividends distributed by ICTS” as used herein includes, but is not limited to:
(a) distributions in cash or in kind, deemed and constructive distributions
and repayments of paid-in capital (“gestort kapitaal”) not recognized for Netherlands dividend withholding
tax purposes;
(b) liquidation proceeds, proceeds of redemption of Shares
or, as a rule, consideration for the repurchase of Shares by ICTS in excess of the average paid-in capital recognized
for Netherlands dividend withholding tax purposes;
(c) the par value of Shares issued to a holder
of Shares or an increase of the par value of Shares, to the extent that it does not appear that a contribution,
recognized for Netherlands dividend withholding tax purposes, has been made or will be made; and
(d) partial repayment of paid-in capital, recognized
for Netherlands dividend withholding tax purposes, if and to the extent that there are net profits (“zuivere
winst”), unless (i) the General Meeting has resolved in advance to make such repayment and (ii) the par
value of the Shares concerned has been reduced by an equal amount by way of an amendment of the Articles of Association
of ICTS.
Holders of Shares
Resident in the Netherlands
A holder of Shares who is resident or deemed to be resident
in the Netherlands is generally entitled, subject to the anti-dividend stripping rules described below, to a
full credit against its (corporate) income tax liability, or a full refund, of the Netherlands dividend withholding
tax. As from 1 January 2022, corporate taxpayers can only claim a credit for Netherlands dividend withholding
tax for at maximum the amount of their corporate income tax liability in any given year. Non-credited dividend
withholding tax can be carried forward indefinitely and be credited against the taxpayer’s tax liability
in future years.
Holders of Shares
Resident Outside the Netherlands
A holder of Shares who is resident in a country with
which the Netherlands has a double taxation convention in effect, may, depending on the terms of such double
taxation convention and subject to the anti-dividend stripping rules described below, be eligible for a full or partial
exemption from, or full or partial refund of, Netherlands dividend withholding tax on dividends received.
A holder of Shares that is a legal entity (a) resident
in (i) a Member State of the European Union, (ii) Iceland, Norway or Liechtenstein, or (iii) a country with which
the Netherlands has concluded a tax treaty that includes an article on dividends and (b) that is in its state of residence under
the terms of a double taxation agreement concluded with a third state, not considered to be resident for tax purposes
in a country with which the Netherlands has not concluded a tax treaty that includes an article on dividends
(not being a Member State of the European Union, Iceland, Norway or Liechtenstein), is generally entitled, subject
to the anti-abuse rules and the anti-dividend stripping rules described below, to a full exemption from Netherlands dividend
withholding tax on dividends received if, had the holder of Shares been a Dutch tax resident, the dividends would have been tax exempt
based on the application of the participation exemption, as described above.
The full exemption from Netherlands dividend withholding
tax on dividends received by a holder of Shares that is a legal entity (a) resident in (i) a Member State of
the European Union, (ii) Iceland, Norway or Liechtenstein, or (iii) a country with which the Netherlands has concluded
a tax treaty that includes an article on dividends, is not granted if the interest held by such holder (i)
is held with the avoidance of Netherlands dividend withholding tax of another person as (one of) the main purpose(s)
and (ii) forms part of an artificial structure or series of structures (such as structures which are not put
into place for valid business reasons reflecting economic reality).
Specific (anti-abuse) rules may apply in the case of transparent
entities and/or hybrid entities owning Shares of ICTS.
A holder of Shares that is an entity resident in (i)
a Member State of the European Union, or (ii) Iceland, Norway or Liechtenstein, or (iii) in a jurisdiction which
has an arrangement for the exchange of tax information with the Netherlands (and such holder as described under (iii)
holds the Shares as a portfolio investment, i.e., such holding is not acquired with a view to the establishment
or maintenance of lasting and direct economic links between the holder of Shares and ICTS and does not allow the holder
of Shares to participate effectively in the management or control of ICTS), which is exempt from tax in
its country of residence and does not have a similar function to a qualifying investment institution (“fiscale beleggingsinstelling”)
or a qualifying exempt investment institution (“vrijgestelde beleggingsinstelling”), and that would have
been exempt from Netherlands corporate income tax if it had been a resident of the Netherlands, is generally entitled,
subject to the anti-dividend stripping rules described below, to a full refund of Netherlands dividend withholding
tax on dividends received. This full refund will in general benefit certain foreign pension funds, government
agencies and certain government controlled commercial entities.
53
A holder of Shares who is an individual is generally subject to
15% dividend withholding tax, regardless of whether or not they are resident in a country with which the Netherlands has concluded
a tax treaty, as the tax treaties concluded by the Netherlands do generally not provide for a reduced withholding tax rate for dividends
paid to individual shareholders.
According to the anti-dividend stripping rules, no exemption, reduction,
credit or refund of Netherlands dividend withholding tax will be granted if the recipient of the dividend paid
by the Company is not considered the beneficial owner (“uiteindelijk gerechtigde”) of the dividend as defined in these
rules. A recipient of a dividend is not considered the beneficial owner of the dividend if, as a consequence of a
combination of transactions, (i) a person (other than the holder of the dividend coupon), directly or indirectly, partly
or wholly benefits from the dividend, (ii) such person directly or indirectly retains or acquires a comparable
interest in Shares, and (iii) such person is entitled to a less favorable exemption, refund or credit of dividend withholding tax
than the recipient of the dividend distribution. The term “combination of transactions” includes among others transactions that
have been entered into in the anonymity of a regulated stock market, the sole acquisition of one or more dividend coupons
and the establishment of short-term rights or enjoyment on Shares (e.g., usufruct).
As per 1 January 2024, the new Conditional Withholding
Tax (CWHT) on dividends entered into force. Based on the CWHT, a withholding tax will be levied on (i) dividend payments to corporate
shareholders resident in low-tax jurisdictions (i.e., countries with a statutory profit tax rate lower than 9% that
are on the Dutch list of low-tax countries), (ii) dividend payments to jurisdictions that are included on the EU list of
non-cooperative jurisdictions and (iii) dividend payments to hybrid entities and artificial structures intended
to avoid Dutch withholding tax on dividends (i.e., abuse situations). The rate of the CWHT on dividends is linked
to the highest rate of the Dutch corporate income tax (currently being 25.8%). The CWHT on dividend payments
exists next to the regular Dividend Withholding Tax (rate: 15%). As a result, these taxes may apply simultaneously on
the same dividend payment under certain circumstances. For these situations, the new CWHT rule provides for an
anti-accumulation scheme that could be applied so that effectively a maximum rate of 25.8% is applied.
Holders of Shares
Resident in the U.S.
Dividends paid to certain non-transparent corporate U.S. resident holders
of Shares owning at least 10% of ICTS’ total voting power that are eligible for benefits under the Convention between
the Netherlands and the United States of America for the avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income, dated 18 December 1992 as amended by the protocol of 8 March 2004 (the
U.S. Tax Treaty), are generally subject to a reduced dividend withholding tax rate of 5%. Certain U.S. pension funds
and tax-exempt organizations may qualify for a complete exemption from Netherlands dividend withholding tax.
Under the U.S. Tax Treaty such benefits are generally
available to U.S. residents if such resident is the beneficial owner of the dividends, provided that such shareholder
does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment
or permanent representative in the Netherlands and to which enterprise or part of an enterprise Shares are attributable.
A person may, however, not claim the benefits of the U.S. Tax Treaty if such person’s entitlement to such benefits
is limited by the provisions of Article 26 (the limitation on benefits provision) of the U.S. Tax Treaty. The reduced
dividend withholding tax rate can generally be applied at source upon the distribution of the dividends, provided
that the proper forms have been filed and / or authorizations have been applied for in advance of the distribution. In
the case of certain tax-exempt organizations, as a general rule the so-called refund method applies. Only when certain administrative conditions have
been fulfilled may such tax-exempt organization use the exemption method.
Irrespective of meeting the conditions of the relevant
provisions of the U.S. Tax Treaty, dividends distributed by the Company to a U.S. resident holder (i) who is
a legal entity resident in the U.S. and (ii) that is in the U.S. under the terms of a double taxation agreement with
a third state not considered to be resident for tax purposes in a country with which the Netherlands has not
concluded a tax treaty that includes an article on dividends (not being a Member State of the European Union,
Iceland, Norway or Liechtenstein), are generally, subject to the anti-abuse rules and the anti-dividend stripping rules described
above, fully exempt from Netherlands dividend withholding tax if, had the holder of Shares been a Dutch tax resident, the
dividends would have been tax exempt based on the application of the participation exemption, as described above.
Specific (anti-abuse) rules may apply in the case of transparent
entities and/or hybrid entities owning Shares of ICTS.
Dividends paid to U.S. resident individual holders of Shares
in ICTS are generally subject to 15% dividend withholding tax. The U.S. Tax Treaty does not provide for a reduced withholding
tax rate for dividends paid to U.S. resident individual shareholders.
54
Taxes on Income and Capital Gains
Holders of Shares
Resident in the Netherlands: Individuals
A holder of Shares who is an individual resident or deemed
to be resident in the Netherlands will be subject to regular Netherlands income tax on the income derived from Shares
and any gains realized in relation to Shares by the holder thereof, if:
(a) such holder of Shares has an enterprise
or an interest in an enterprise, to which enterprise Shares are attributable; and / or
(b) such income or capital gain forms “a
benefit from miscellaneous activities” (“belastbaar resultaat uit overige werkzaamheden”) which, for
instance, would be the case if the activities with respect to Shares exceed “normal active asset management” (“normaal,
actief vermogensbeheer”) or if income and gains are derived from the holding, whether directly or indirectly,
of (a combination of) shares, debt claims or other rights (together, a “lucratief belang”) that the holder
thereof has acquired under such circumstances that such income and gains are intended to be remuneration for work
or services performed by such holder (or a related person), whether within or outside an employment relation,
where such lucrative interest provides the holder thereof, economically speaking, with certain benefits that have
a relation to the relevant work or services.
If either of the abovementioned conditions (a) or (b)
applies, income derived from Shares and the gains realized upon the acquisition, redemption and/or disposal of
Shares will in general be subject to Netherlands income tax at the progressive rates up to 49.5%.
If the abovementioned conditions (a) and (b) do not apply,
a holder of Shares who is an individual, resident or deemed to be resident in the Netherlands will not be subject to
taxes on actual income and capital gains in the Netherlands. Instead, such individual is generally taxed at a flat
rate of 36% (rate as from 2024) on notional income from “savings and investments” (“sparen en beleggen”), also
referred to as Box 3 income, which notional income is determined on the basis of the amount included in the individual’s
“yield basis” (“rendementsgrondslag”) at the beginning of the calendar year minus a tax-free threshold. The tax-free threshold
for 2025 is €57,684.
The notional income from portfolio investments (such
as investments in Shares) is determined based on the multiple-years weighted average realized with investments
in bonds, shares and real estate. For 2025 the percentage is 5.88%. A debate has arisen regarding the above taxation system based
on notional return. The Supreme Court of the Netherlands has ruled in June 2024 that only the actual return (on worldwide income) can
be taxed if it is lower than the notional return (on worldwide income). The definition of actual return is not economically based but
it defined within the context and constraints of the Box 3 legislation and, as such, considers gross direct return (interest, dividend,
rental income) and indirect return (any value mutations occurring between January 1st
and December 31st of the year) regardless whether it is
realized or not, and no costs are deducted with the exception of interest on loans. Given the mentioned developments, resident individual
holders of Shares are recommended to consult their own tax adviser to determine the potential effect in their specific situation
to understand whether it is better to be taxed based on the notional or actual return.
Holders of Shares
Resident in the Netherlands: Corporate Entities
A holder of Shares that is resident or deemed to be resident
in the Netherlands for corporate income tax purposes, and that is a corporate taxpayer will in general be subject
to regular corporate income tax, against the regular Dutch income tax rates mentioned above over income derived from Shares
and the gains realized upon the acquisition, redemption and/or disposal of Shares, unless, and to the extent that,
the participation exemption applies.
Holders of Shares
Resident Outside the Netherlands: Individuals
A holder of Shares who is an individual, not resident
or deemed to be resident in the Netherlands will not be subject to any Netherlands taxes on income derived from Shares and
the gains realized upon the acquisition, redemption and/or disposal of Shares (other than the dividend withholding
tax described above), unless:
(a) such holder has an enterprise or
an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment (“vaste inrichting”)
or a permanent representative (“vaste vertegenwoordiger”) in the Netherlands and to which enterprise
or part of an enterprise, as the case may be, Shares are attributable; or
55
(b) such income or capital gain forms a “benefit
from miscellaneous activities in the Netherlands” (“belastbaar resultaat uit overige werkzaamheden in Nederland”)
which would for instance be the case if the activities in the Netherlands with respect to Shares exceed ”normal active
asset management” (“normaal, actief vermogensbeheer”) or if such income and gains are derived from
the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights (together,
a ”lucrative interest” (“lucratief belang”)) that the holder thereof has acquired under such
circumstances that such income and gains are intended to be remuneration for work or services performed by such holder
(or a related person), in whole or in part, in the Netherlands, whether within or outside an employment relation, where
such lucrative interest provides the holder thereof, economically speaking, with certain benefits that have a relation to the relevant
work or services.
If either of the above-mentioned conditions (a) or (b)
applies, income or capital gains in respect of dividends distributed by ICTS or in respect of any gains realized
upon the acquisition, redemption and/or disposal of Shares will in general be subject to Netherlands income tax
at the progressive rates up to 49.5%, unless the Netherlands right to tax is limited by a tax treaty.
Holders of Shares
Resident Outside the Netherlands: Legal and Other Entities
A holder of Shares that is considered as a corporate (non-transparent)
non-Dutch resident taxpayer for corporate income tax purposes (generally, legal entities with a legal form comparable to
certain Dutch legal forms, as well as certain entities with a legal form which is not comparable to any Dutch legal form, which are not
resident of the Netherlands), will not be subject to any Netherlands taxes on income derived from Shares and the gains
realized upon the acquisition, redemption and/or disposal of Shares (other than the dividend withholding tax described
above), unless:
(a) such holder has an enterprise
or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment (“vaste inrichting”) or
a permanent representative (“vaste vertegenwoordiger”) in the Netherlands and to which enterprise
or part of an enterprise, as the case may be, Shares are attributable; or
(b) such holder has a substantial
interest in ICTS, that (i) is held with the avoidance of Netherlands income tax as (one of) the main purpose(s) and
(ii) forms part of an artificial structure or series of structures (such as structures which are not put into
place for valid business reasons reflecting economic reality).
If one of the above-mentioned conditions applies,
income derived from Shares and the gains realized upon the acquisition, redemption and/or disposal of
Shares will, in general, be subject to corporate income tax against the regular Dutch corporate income tax
rates mentioned above, unless, and to the extent that, with respect to a holder as described under (a), the participation exemption
(“deelnemingsvrijstelling”) applies, or the Netherlands right to tax is limited by a tax treaty.
Other withholding taxes
The Netherlands does not levy withholding taxes on interest and
royalties, except in certain abusive situations involving low-tax jurisdictions, similar to the Conditional Withholding Tax on dividends
described above.
Gift, Estate and Inheritance Taxes
Holders of Shares
Resident in the Netherlands
Gift tax may be due in the Netherlands with respect to
an acquisition of Shares by way of a gift by a holder of Shares who is resident or deemed to be resident of the
Netherlands.
Inheritance tax may be due in the Netherlands with respect
to an acquisition or deemed acquisition of Shares by way of an inheritance or bequest on the death of a holder
of Shares who is resident or deemed to be resident of the Netherlands, or by way of a gift within 180 days before
his death by an individual who is resident or deemed to be resident in the Netherlands at the time of his death.
For purposes of Netherlands gift and inheritance tax,
an individual with the Netherlands nationality will be deemed to be resident in the Netherlands if he has been
resident in the Netherlands at any time during the ten years preceding the date of the gift or his death. For purposes
of Netherlands gift tax, only an individual not holding the Netherlands nationality will be deemed to be resident
of the Netherlands if he has been resident in the Netherlands at any time during the twelve months preceding
the date of the gift.
56
Holders of Shares
Resident Outside the Netherlands
No gift, estate or inheritance taxes will arise in the
Netherlands with respect to an acquisition of Shares by way of a gift by, or on the death of, a holder of Shares
who is neither resident nor deemed to be resident of the Netherlands, unless, in the case of a gift of Shares by an individual
who at the date of the gift was neither resident nor deemed to be resident in the Netherlands, such individual
dies within 180 days after the date of the gift, while being resident or deemed to be resident in the Netherlands.
Certain Special Situations
For purposes of Netherlands gift, estate and inheritance
tax, (i) a gift by a Third Party (Separate Private Assets) will be construed as a gift by the Settlor, and (ii) upon the
death of the Settlor, as a rule his/her Beneficiaries will be deemed to have inherited directly from the Settlor.
Subsequently, such Beneficiaries will be deemed the settlor, grantor or similar originator of the Separated Private
Assets for purposes of Netherlands gift, estate and inheritance tax in case of subsequent gifts or inheritances.
For the purposes of Netherlands gift and inheritance
tax, a gift that is made under a condition precedent is deemed to have been made at the moment such condition precedent
is satisfied. If the condition precedent is fulfilled after the death of the donor, the gift is deemed to be made
upon the death of the donor.
Value Added Tax
No Netherlands value added tax will arise in respect
of or in connection with the subscription, issue, placement, allotment or delivery of the Shares.
Other Taxes and Duties
No Netherlands registration tax, capital tax, customs
duty, transfer tax, stamp duty or any other similar documentary tax or duty, other than court fees, will be payable
in the Netherlands in respect of or in connection with the subscription, issue, placement, allotment or delivery of the Shares.
Residency
A holder of Shares will not be treated as a resident,
or a deemed resident, of the Netherlands by reason only of the acquisition, or the holding, of Shares or the
performance by ICTS under the Shares.
Documents on Display
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, the Company files reports and other information with the United
States Securities and Exchange Commission (“SEC”). These materials may be inspected at the Company’s office in Schiphol-Oost,
The Netherlands. Documents filed with the SEC may also be read and copied at the SEC’s public reference room at 100 F Street N.E.
Room 1580 Washington, DC 20549 USA. For further information please call the SEC at 1-800-SEC-0330. All the SEC filings made electronically
by ICTS are available to the public on the SEC web site at http://www.sec.gov (commission file number 0-28542). Those reports are also
available free of charge at www.ictsintl.com.
Subsidiary Information
Not applicable
Item 11.
Quantitative and Qualitative Disclosure About Market Risk
Foreign Currency Exchange Risk - applies to our operations outside
the USA. In 2025, approximately 17% of the Company’s revenues were derived in the United States of America, and approximately 83%
was derived in Europe and the Far East. The Company is subject to market risks associated with foreign currency exchange rate fluctuations.
We utilize some limited derivative instruments to manage the exposure to currency risk relating salaries in Israel. As such, significant
foreign currency exchange rate fluctuations can have a material impact of the Company’s financial position, results of operations,
and cash flows.
Interest Rate Risk – The Company is subject to changes in
interest rates based on Federal Reserve and general market conditions. The Company does not utilize derivative instruments to manage exposure
to interest rate risk. As of December 31, 2025, an increase of 1% in the interest rate would increase the Company’s interest expense
for the Company’s lines of credit, loans and factorings with a maximum effect of $0.2 million.
57
Item 12.
Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults,
Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material
Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable
Item 15. Controls
and Procedures
Management’s report on internal control
over financial reporting
(a) Our management, including our Chief Financial Officer, has
evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(d) and 15d-15(d) of the
Exchange Act) as of the end of the period covered by this annual report (the “Evaluation Date”).
Based on such evaluation, the Chief Financial Officer has concluded
that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective.
(b) Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our
management, including our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) as of the end of the period covered by this report. Based on that evaluation,
our management has concluded that our internal control over financial reporting was effective as of December 31, 2025. Notwithstanding
the foregoing, there can be no assurance that our internal control over financial reporting will detect or uncover all failures of persons
within the Company to comply with our internal procedures and our internal control systems (because all internal control systems, no matter
how well designed, have inherent limitations) may not prevent or detect misstatements.
This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation
by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this
annual report.
(c) On the evaluation conducted by our Chief Financial Officer
pursuant to Rules 13a-15(d) and 15d-15(d) under the Exchange Act, our management has concluded that there was no change in our internal
control over financial reporting that occurred during the year ended December 31, 2025 that materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
Item 16A
Audit Committee Financial Experts
The members of the Audit Committee consist of Gail F. Lieberman,
Ilan Nir and Frans van Westen. All members are independent, with no relationship with management. Ms. Lieberman and Mr. van Westen have
financial expertise. Ms. Lieberman is the Chairman of the Audit Committee.
Item 16B Code
of Ethics
The Company has adopted a Code of Ethics for principal’s
executive officers and senior financial officers.
58
Item 16C
Principal Accountant Fees and Services
The following table sets forth the aggregate fees billed by our
independent registered public accounting firms, Forvis Mazars LLP for services rendered to us during the year ended December 31, 2025
and 2024.
The audit committee has considered whether the provision of these
services is compatible with maintaining the principal accountant’s independence and has concluded that such services are compatible.
All fees were reviewed and pre-approved by the audit committee (U.S. Dollars in thousands).
|
2025 |
2024 |
|||||||
|
Audit fees |
$ |
460 |
$ |
470 |
||||
|
Audit related fees |
- |
- |
||||||
|
Tax fees |
- |
- |
||||||
|
Total fees |
$ |
460 |
$ |
470 |
||||
Item 16D
Exemptions from the Listing Standards for Audit committees
Not applicable.
Item 16E. Purchase
of Equity Securities by the Issuer and Affiliated Purchasers
In July 2025 ICTS purchased 3,000,000 shares of its common stock,
which shares were sold to directors and key executives in 2019, for a purchase price of $0.506 per share, representing the purchase price
paid by the directors and executives at the time. The purchase was approved by shareholders after approval by the Dutch Court.
Item 16F. Change
in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate
Governance
The Company has adopted Dutch law and the U.S. practices.
59
Item 16J. Trading Policy
Item 16K. Cybersecurity
As cybersecurity threats rapidly evolve in sophistication and become more prevalent, especially with the increasing use of artificial intelligence technology, we have implemented a cybersecurity risk management program as part of our oversight, evaluation and mitigation of enterprise-level risks. Our cybersecurity risk management program leverages a combination of processes, technologies and personnel with expertise in cybersecurity to comply with applicable regulations and detect and respond to cyber-attacks, data breaches, security incidents, and compromises of personal information, as well as to regularly and promptly inform management and our Board of Directors of any significant cybersecurity risks and developments. Our cybersecurity risk management program is led by our subsidiaries Chief Information Security Officers (“CISOs), who are dir ectly responsible for establishing cybersecurity strategies, structures and managing ongoing cybersecurity risk management activities and are responsible for the day-to-day identification, monitoring and management of cybersecurity risks. Our CISOs have significant experience in managing cybersecurity risks.
In the ordinary course of our business, we collect and store confidential data, including intellectual property, proprietary business information and personally identifiable information (including of our employees, customers, suppliers and business partners). We rely extensively on information technology systems, including some systems that are managed by third-party service providers , to securely process, store and transmit such confidential data in order to conduct our business. These systems include programs and processes relating to internal and external communications, ordering and managing materials from suppliers, collecting, processing and storing data as processing transactions, processing payments to employees and vendors, generating our financial results for each reporting period, summarizing and reporting results of operations, and complying with information technology security compliance and other regulatory, legal or tax requirements.
In the event that we experience a cybersecurity incident, our subsidiaries have a cybersecurity incident response policy that sets forth the applicable processes, roles, engagements, escalations and notifications to be executed in order to promptly respond to such threats. Depending on its nature and scale, a cybersecurity threat may be managed within our CISOs or escalated to our management , and Board of Directors and Audit Committee, as appropriate
PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
The Consolidated Financial Statements and Financial Statement Schedule of the Company as of December 31, 2025 and 2024 and for each of the three years in the period ended December 31, 2025, including the report of our independent registered public accounting firm thereon are set forth on pages F-1 to F-42.
60
Item 19. Exhibits
| 1. |
Articles of Association of the Company filed as Exhibit to Form 20-F for the year ended December 31, 1999. *
|
| 2. |
Articles of Amendment of the Articles of Association filed as Exhibit to Form 6K dated April 22, 2009. *
|
| 3. |
Articles of Amendment of the Articles of Association filed as exhibit to Form 20-F for the year ended December 31, 2012. *
|
| 4. |
Articles of Amendment of the Articles of Association filed as exhibit to Form 20-F for the year ended December 31, 2020. *
|
| 5. |
Articles of Amendment of the Articles of Association filed as Exhibit to Form 20-F for the year ended December 31, 2023 *
|
| 6. |
Specimen of the Company’s Common Stock filed as Exhibit to Form 20-F for the year ended December 31, 1999. *
|
| 7. |
Revised Code of Ethics for Principal Executive Officers and Senior Financial Officers. Filed as Exhibit to Form 20-F December 13, 2020. *
|
| 11. |
Trading Policy filed as Exhibit to Form 20-F for the year ended December 31, 2024. *
|
| 12.1 |
Certification by the Registrant’s Managing Director pursuant to Rule13a-14(a)
|
| 12.2 |
Certification by the Registrant’s Managing Director and Chief Financial Officer pursuant to Rule13a-14(a)
|
| 13.1 |
Certification by the Registrant’s Managing Director pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
|
| 13.2 |
Certification by the Registrant’s Managing Director and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
|
| * |
Incorporated by reference to the Company’s fillings.
|
61
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
|
By:
|
/s/ Gil Atzmon
|
|
|
Name:
|
Gil Atzmon
|
|
|
Title:
|
Managing Director
|
|
|
Date:
|
April 30, 2026
|
62
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
|
By:
|
/s/ Alon Raich
|
|
|
Name:
|
Alon Raich
|
|
|
Title:
|
Managing Director and Chief Financial Officer
|
|
|
Date:
|
April 30, 2026
|
63
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
2025 ANNUAL REPORT
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
|
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID
|
F-2
|
|
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID
|
F-3
|
|
|
|
|
Consolidated Balance Sheets as of December 31, 2025 and 2024
|
F-4
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2025, 2024 and 2023
|
F-5
|
|
Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2025, 2024 and 2023
|
F-6
|
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023
|
F-8
|
|
|
|
|
Notes to Consolidated Financial Statements
|
F-10
|
|
Financial Statement Schedule:
|
|
|
|
|
|
Valuation and Qualifying Accounts
|
F-42
|
Report of Independent Registered Public Accounting Firm
Supervisory Board of Directors and Stockholders
ICTS International N.V. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ICTS International N.V. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), shareholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the adjustments to the 2023 consolidated financial statements to retrospectively apply the Company’s adoption of ASU 2023‑07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures as presented in Note 18, the adoption of ASU 2023‑09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, as described in Note 2 and presented in Note 15, and the reclassification of cash flows as described in Note 2. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or perform any procedures with respect to the Company’s 2023 consolidated financial statements other than those related to the adjustments described above, and, accordingly, we do not express an opinion or any other form of assurance on the 2023 consolidated financial statements taken as a whole.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2024.
April 30, 2026
F - 2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Supervisory Board of Directors and
Stockholders of ICTS International N.V. and Subsidiaries
Opinion on the Financial Statements
We have audited, before the effects of the adjustments to retrospectively apply the changes in accounting described in Notes 15 and 18, the accompanying consolidated statements of operations and comprehensive income (loss), changes in shareholders' deficit, and cash flows of ICTS International N.V. (the “Company”) for the year ended December 31, 2023, and the related notes and the schedule (collectively referred to as the “consolidated financial statements”) (the 2023 financial statements before the effects of the adjustments to retrospectively apply changes in accounting described in Notes 15 and 18 are not presented herein). In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the changes in accounting (as described in Notes 15 and 18) and the reclassification of cash flows as described in Note 2, present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the changes in accounting as described in Notes 15 and 18 and the reclassification of cash flows as described in Note 2, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by Forvis Mazars, LLP.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Mazars USA LLP
We served as the Company’s auditor from 2022 to 2024.
May 10, 2024
F - 3
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS:
|
||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
|
Restricted cash
|
|
|
||||||
|
Bank deposits
|
|
|
||||||
|
Term deposits
|
|
|
||||||
|
Accounts receivable, net
|
|
|
||||||
|
Prepaid expenses and other current assets
|
|
|
||||||
|
Total current assets
|
|
|
||||||
|
Deferred tax assets, net
|
|
|
||||||
|
Investments
|
|
|
||||||
|
Deposits with customers
|
|
|
||||||
|
Restricted cash
|
|
|
||||||
|
Property and equipment, net
|
|
|
||||||
|
Operating lease right of use assets
|
|
|
||||||
|
Goodwill
|
|
|
||||||
|
Other assets
|
|
|
||||||
|
Total assets
|
$
|
|
$
|
|
||||
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
||||||||
|
CURRENT LIABILITIES:
|
||||||||
|
Financial institutions payable
|
$
|
|
$
|
|
||||
|
Accounts payable
|
|
|
||||||
|
Accrued expenses and other current liabilities
|
|
|
||||||
|
Value added tax (VAT) payable
|
|
|
||||||
|
Income tax and other taxes payable
|
|
|
||||||
|
Operating lease liabilities, current
|
|
|
||||||
|
Total current liabilities
|
|
|
||||||
|
Operating lease liabilities, non-current
|
|
|
||||||
|
Other liabilities
|
|
|
||||||
|
Total liabilities
|
|
|
||||||
|
COMMITMENTS AND CONTINGENCIES (NOTE 17)
|
||||||||
|
REDEEMABLE NON-CONTROLLING INTERESTS (NOTE 11)
|
|
|
||||||
|
SHAREHOLDERS' DEFICIT:
|
||||||||
|
Common stock, €
|
|
|
||||||
|
Additional paid-in capital
|
|
|
||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
|
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
|
Treasury stock at cost (3,000,000 common stock as of December 31, 2025 and 2024)
|
(
|
)
|
(
|
)
|
||||
|
Non-controlling interests in subsidiaries
|
(
|
)
|
|
|||||
|
Total shareholders' deficit
|
(
|
)
|
(
|
)
|
||||
|
Total liabilities and shareholders' deficit
|
$
|
|
$
|
|
||||
See accompanying notes to the consolidated financial statements.
F - 4
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share data)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share data)
|
Years Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
||||||
|
Cost of revenue
|
|
|
|
|||||||||
|
GROSS PROFIT
|
|
|
|
|||||||||
|
Operating expenses:
|
||||||||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling, general and administrative
|
|
|
|
|||||||||
|
Total operating expenses
|
|
|
|
|||||||||
|
OPERATING INCOME (LOSS)
|
(
|
)
|
(
|
)
|
|
|||||||
|
Other income, net
|
|
|
|
|||||||||
|
INCOME (LOSS) BEFORE INCOME TAX EXPENSES
|
(
|
)
|
(
|
)
|
|
|||||||
|
Income tax benefits (expenses)
|
(
|
)
|
|
(
|
)
|
|||||||
|
NET INCOME (LOSS)
|
(
|
)
|
(
|
)
|
|
|||||||
|
Net income (loss) attributable to non-controlling interests
|
(
|
)
|
|
|
||||||||
|
NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
BASIC AND DILUTED NET INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V. PER SHARE
|
||||||||||||
|
Net income (loss) attributable to ICTS International N.V.
|
(
|
)
|
(
|
)
|
|
|||||||
|
Basic weighted average number of shares
|
|
|
|
|||||||||
|
Net income (loss) per share attributable to ICTS International N.V. - basic
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
Diluted weighted average number of shares
|
|
|
|
|||||||||
|
Net income (loss) per share attributable to ICTS International N.V. - diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
COMPREHENSIVE INCOME (LOSS)
|
||||||||||||
|
Net income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
Other comprehensive income (loss) - Translation adjustments
|
(
|
)
|
(
|
)
|
|
|||||||
|
Unrealized gains (loss) on derivative instruments
|
|
(
|
)
|
|
||||||||
|
Comprehensive income (loss)
|
(
|
)
|
(
|
)
|
|
|||||||
|
Comprehensive income (loss) attributable to non-controlling interests
|
(
|
)
|
|
|
||||||||
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ICTS INTERNATIONAL N.V.
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
See accompanying notes to the consolidated financial statements.
F - 5
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(In thousands, except share data)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(In thousands, except share data)
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Loss
|
Treasury
Shares
|
Non
Controlling
Interests
|
Total
Shareholders' Deficit
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
||||||||||||||
|
Net income attributable to ICTS International N.V
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Stock-based compensation – AU10TIX Technologies B.V.
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
|
|
|||||||||||||||||||||||
|
Unrealized gain on derivatives instruments
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Additional payment for shares issued in previous years (see note 17)
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Commitment to purchase shares from certain directors and officers (see note 17)
|
-
|
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2023
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||
|
Net loss attributable to ICTS International N.V
|
-
|
|
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||
|
Reduce of nominal value shares
|
-
|
(
|
)
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
|
Unrealized loss on derivatives instruments
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
|
Stock-based compensation – AU10TIX Technologies B.V.
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Exercise of options – AU10TIX Technologies B.V
|
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
|
Dividend to AU10TIX Technologies B.V shareholders
|
-
|
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2024
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||
F - 6
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(In thousands, except share data)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(In thousands, except share data)
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Loss
|
Treasury
Shares
|
Non
Controlling
Interests
|
Total
Shareholders' Deficit
|
||||||||||||||||||||||||||
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2024
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||
|
Net loss attributable to ICTS International N.V
|
-
|
|
|
(
|
)
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||
|
Translation adjustment
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
|
Unrealized gain on derivatives instruments
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Stock-based compensation – AU10TIX Technologies B.V.
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Exercise of options – AU10TIX Technologies B.V
|
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2025
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$ |
(
|
)
|
$ |
(
|
)
|
$
|
(
|
)
|
||||||||||||
See accompanying notes to the consolidated financial statements.
F - 7
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
|
Years Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net income (loss)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Gain from sale of investment
|
|
|
(
|
)
|
||||||||
|
Bad debt expense
|
|
|
|
|||||||||
|
Deferred income taxes
|
|
|
(
|
)
|
||||||||
|
Stock-based compensation
|
|
|
|
|||||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Accounts receivable
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Prepaid expenses and other current assets
|
|
(
|
)
|
|
||||||||
|
Deposits with customers
|
(
|
)
|
|
|
||||||||
|
Other assets
|
(
|
)
|
(
|
)
|
|
|||||||
|
Accounts payable
|
(
|
)
|
|
(
|
)
|
|||||||
|
Accrued expenses and other current liabilities
|
(
|
)
|
|
|
||||||||
|
VAT payable
|
(
|
)
|
(
|
)
|
|
|||||||
|
Income and other taxes payable
|
(
|
)
|
(
|
)
|
|
|||||||
|
Operating lease accounts, net
|
|
|
(
|
)
|
||||||||
|
Other liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by (used in) operating activities
|
(
|
)
|
(
|
)
|
|
|||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Increase of term deposits
|
(
|
)
|
|
|
||||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Capitalization of software costs
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from sale of investments
|
|
|
|
|||||||||
|
Purchase of investments
|
(
|
)
|
(
|
)
|
|
|||||||
|
Deposits (withdraws) regarding employees’ severance
|
(
|
)
|
(
|
)
|
|
|||||||
|
Net cash used in investing activities
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
F - 8
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
|
Years Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Loans received
|
$
|
|
$
|
|
$
|
|
||||||
|
Loans repaid
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Withdraws under factoring agreements
|
|
|
|
|||||||||
|
Repayments under factoring agreements
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Withdraws under line of credit
|
|
|
|
|||||||||
|
Dividend paid to AU10TIX shareholders
|
|
(
|
)
|
|
||||||||
|
Repayments of convertible notes payable to a related party
|
|
|
|
|||||||||
|
Net cash provided by (used in) financing activities
|
|
(
|
)
|
|
||||||||
|
EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES ON CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS
|
|
(
|
)
|
|
||||||||
|
DECREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS
|
(
|
)
|
(
|
)
|
|
|||||||
|
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS BEGINNING OF YEAR
|
|
|
|
|||||||||
|
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND BANK DEPOSITS END OF YEAR
|
$
|
|
$
|
|
$
|
|
||||||
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||||||
|
Additional payment for shares issued in previous years (see note 17)
|
$
|
|
$
|
|
$
|
|
||||||
|
Commitment to purchase shares from certain directors and officers (see note 17)
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
|
||||||||||||
|
Cash paid during the year for:
|
||||||||||||
|
Interest
|
$
|
|
$
|
|
$
|
|
||||||
See accompanying notes to the consolidated financial statements.
F - 9
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 1 - ORGANIZATION
Description of Business
ICTS International N.V. (“ICTS”) was registered at the Department of Justice in Amstelveen, Netherlands on October 9, 1992. ICTS and subsidiaries (collectively referred to as “ICTS” or the “Company”) operate in three reportable segments: (a) airport security (b) other aviation related services and (c) authentication technology. The Company also incurs general corporate expenses and costs which are not allocated to the reportable business segments but have been included in the “unallocated corporate” component which does not generate revenue from customers and contains primarily non-operational expenses. The Airport Security segment provides security services primarily to airport authorities and airlines, predominantly in Europe. The Other Aviation Services segment provides services primarily to airlines and airport authorities in the United States of America. The Authentication Technology segment provides authentication services to financial and other companies, predominantly in the United States of America and Singapore.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The significant accounting policies are as follows:
Functional Currency
The accompanying consolidated financial statements are presented in United States Dollars. The Company has determined that the functional currency of its subsidiaries is usually the local currency, except AU10TIX Technologies B.V. and its subsidiaries (“AU10TIX”) whose functional currency is United States Dollars. For financial reporting purposes, the assets and liabilities of such subsidiaries are translated into United States Dollars using exchange rates in effect at the balance sheet date. The revenue and expenses of such subsidiaries are translated into United States Dollars using average exchange rates in effect during the reporting period. Resulting translation adjustments are presented as a separate category in shareholders' deficit called accumulated other comprehensive loss.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of ICTS International N.V. and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments to be cash and cash equivalents with an original maturity of three months or less when purchased.
Restricted Cash and Bank Deposits
Short term restricted cash as of December 31, 2025 consists of: (a) $249 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities, and (b) $861 short term bank deposits secured for derivative instruments.
Short term restricted cash as of December 31, 2024 consists of: (a) $142 held in bank accounts that serve as cash collateral for outstanding letters of credit and guarantees, (b) $1,872 held in several bank accounts in the Netherlands, which is restricted for payments to local tax authorities, and (c) $844 short term bank deposits secured for derivative instruments.
F - 10
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Restricted Cash and Bank Deposits (Continued)
Long term restricted cash as at December 31, 2025 and 2024 consists of $1,669 and $1,795 , respectively, held in bank accounts that serve as risk collateral for long term outstanding letters of credit and guarantees.
Bank deposits consist of short term interest-bearing deposits held in banks and financial institutions.
The following table provides a reconciliation of cash and restricted cash reported on the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.
|
Year Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Restricted cash - short term
|
|
|
|
|||||||||
|
Bank deposits
|
|
|
|
|||||||||
|
Restricted cash - long term
|
|
|
|
|||||||||
|
Total cash, cash equivalents, restricted cash and bank deposits shown in the statement of cash flows
|
$
|
|
$
|
|
$
|
|
||||||
Term Deposits
Term deposits consist of interest-bearing deposits held in banks and financial institutions.
Accounts Receivable
Accounts receivable represent amounts due to the Company for services rendered and are recorded net of an allowance for credit losses. The allowance for credit losses represents the current estimate of lifetime expected credit losses over the remaining duration of existing accounts receivable and is based on historical collection experience, factors related to specific customers, current economic trends and conditions as of the balance sheet date. The Company writes off accounts receivable when they are determined to be uncollectible and are recognized as a reduction to the allowance for credit losses. As of December 31, 2025 and 2024, the allowance for credit losses is $1,468 and $1,351 , respectively.
The Company elected to apply the practical expedient provided in ASU 2025-05 with no material effect on the Company’s consolidated financial statements upon adoption.
Fair Value Measurements
The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 820, “Fair Value Measurement”. Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Topic 820 defines fair value as 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 should be based on assumptions that market participants would use.
In determining the fair value, the Company assesses the inputs used to measure fair value using a three-tier hierarchy, as follows:
| Level 1 - |
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Companies have the ability to access at the measurement date.
|
| Level 2 - |
Inputs to the valuation methodology include:
|
| • |
Quoted prices for similar assets or liabilities in active markets;
|
| • |
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
| • |
Inputs other than quoted prices that are observable for the asset or liability;
|
| • |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
F - 11
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurements (Continued)
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
| Level 3 - |
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
Deposits with Customers
Deposits with customers consist of long-term cash deposits provided to customers and suppliers which serve as cash collateral in order to guarantee the performance and quality of services provided to the customers or to secure the future payments to suppliers. The deposits are repaid to the Company at the end of the contract or the engagement with the customers or the suppliers.
Investments
The Company accounts for investments in the equity securities of companies which represent an ownership interest of 20 % to 50 % and the ability to exercise significant influence, provided that ability does not represent control, using the equity method. The equity method requires the Company to recognize its share of the net income (loss) of its investees in the consolidated statements of operations until the carrying value of the investment is zero.
Equity investments for which the Company does not have significant influence with readily determinable fair values are measured at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative).
The Company records investments in the equity securities of privately held companies which represent an ownership interest of less than 20% using the measurement alternative.
Derivative Instruments
Derivative instruments are measured at their fair value and recorded as either assets or liabilities. Changes in the fair value of derivatives designated as cash flow hedging instruments are initially recorded in other comprehensive income. A corresponding amount is reclassified out of other comprehensive income into earnings when the underlying transactions are recognized in the consolidated statements of operations and comprehensive income (loss).
The Company maintains a risk management strategy, that may incorporate the use of put options and forward exchange contracts, to minimize significant fluctuation in cash flows and/or earnings that are caused by exchange rate or interest rate volatility.
Property and Equipment
Equipment and furniture, leasehold improvements and vehicles are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives used in determining depreciation are as follows:
|
Years
|
|||
|
Equipment and furniture
|
|
||
|
Internal use software
|
|
||
|
Vehicles
|
|
Leasehold improvements are amortized using the straight-line method over the shorter of the total term of the lease or the estimated useful lives of the assets.
Capitalized Internal-Use Software Costs
The Company capitalizes certain costs incurred in developing internal-use software when capitalization requirements have been met. Costs prior to meeting the capitalization requirements are expensed as incurred. Costs, such as maintenance and training are also expensed as incurred. Capitalized costs are included in property and equipment, and amortized on a straight-line basis over the estimated useful life of the software. Amortization expense, which is included in depreciation expense, amounted to $449 , $782 and $947 during the years ended December 31, 2025, 2024 and 2023, respectively.
F - 12
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
Goodwill represents the excess purchase price over the fair value of the net tangible and intangible assets of an acquired business. Goodwill is assessed for impairment by reporting unit on an annual basis or when events or changes in circumstances indicate that the fair value of a reporting unit is less than its carrying amount. The Company would record a goodwill impairment charge for the difference between the carrying value and the fair value of the goodwill, not to exceed the carrying amount of the goodwill. During the years ended December 31, 2025, 2024, and 2023, the Company has not recorded any impairment charges on its goodwill.
Long-Lived Assets
The Company reviews long-lived assets, other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset is not recoverable, it measures any impairment based on the fair value of the asset as compared to its carrying value. During the years ended December 31, 2025, 2024, and 2023, the Company did not record any impairment charges on its long-lived assets.
Employee Rights Upon Severance
The Company is required to make severance payments to its Israeli employees upon dismissal of an employee or upon a termination of employment in certain circumstances. The Israeli pension and severance pay liability to the employees is covered mainly by deposits made at insurance companies. For its employees who are employed under the Section 14 of the Israeli Severance Pay Law, 1963 (“Section 14”), the Company makes deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employees’ rights upon termination. In addition, the related obligation and amounts deposited on behalf of the applicable employees for such obligations are not presented on the Company’s consolidated balance sheets, as the amounts funded are not under the control of management of the Company and the Company is legally released from the obligation to pay any severance payments to the employees once the required deposit amounts have been paid.
For employees not covered under Section 14, severance liabilities are recorded based on the length of service and their latest monthly salary. The Company’s liabilities for the Israeli employees amounted to $1,507 and $1,385 as of December 31, 2025 and 2024, respectively, and are included in other liabilities in the Company’s consolidated balance sheets. The deposits made at insurance companies to cover these liabilities amounted to $1,190 and $938 as of December 31, 2025 and 2024, respectively, and are included in other assets in the Company’s consolidated balance sheets.
Leases
The Company as a lessee
Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statements of operations. A lease is a finance lease if it meets any one of the criteria below, otherwise the lease is an operating lease:
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
The lease term is for the major part of the remaining economic life of the underlying asset.
The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of lease term.
Based on the criteria above, all of the Company's leases are classified as operating leases.
Operating lease Rights of Use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, while the ROU assets are also adjusted for any prepaid or accrued lease payments. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments. The Company does not recognize ROU assets or lease liabilities for leases with a term shorter than 12 months.
F - 13
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Leases (Continued)
The Company as a lessee (Continued)
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termination option if it reasonably certain that the Company will exercise the option.
After lease commencement, the Company measures the lease liability as the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event).
The Company subsequently measures the ROU asset as the present value of the remaining lease payments, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if relevant and any unamortized initial direct costs. Lease expenses are recognized on a straight-line basis over the lease term. Lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will exercise or not exercise the option to renew or terminate the lease.
Variable lease payments that depend on an index or a rate
On the commencement date, the lease payments shall include variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), initially measured using the index or rate at the commencement date.
The Company does not remeasure the lease liability for changes in future lease payments arising from changes in an index or rate unless the lease liability is remeasured for another reason. Therefore, after initial recognition, such variable lease payments are recognized in profit or loss as they are incurred.
Convertible Debt Instruments
The Company evaluates convertible debt instruments at the time of issuance to determine whether the embedded conversion option needs to be bifurcated from the debt instrument and accounted for as a freestanding derivative instrument. An embedded conversion option is considered to be a freestanding derivative when: (a) the economic characteristics and risks of the embedded conversion option are not clearly and closely related to the economic characteristics and risks of the host instrument, (b) the hybrid instrument that embodies both the embedded conversion option and the host instrument is not re-measured at fair value under otherwise applicable US GAAP with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded conversion option would be considered a derivative instrument subject to certain requirements.
Contingent Liabilities
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the normal course of its business activities. Liabilities for such contingencies are recognized when: (a) information available prior to the issuance of the consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated.
Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The Company's comprehensive income (loss) consists of the Company’s net income (loss), foreign currency translation adjustments and changes in fair value of derivative instruments as cash flow instruments. Accumulated other comprehensive loss consists of the Company’s accumulated foreign exchange currency translation adjustments and changes in fair value of derivative instruments.
F - 14
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
Stock-based compensation to employees and non-employees, including stock options, are measured as the fair value of the award on the date of grant based on the estimated number of awards that are ultimately expected to vest. The compensation expense resulting from stock-based compensation to management and administrative employees is recorded over the vesting period of the award in selling, general and administrative expense on the accompanying consolidated statements of operations and comprehensive income (loss). Compensation expense resulting from stock-based compensation to operational employees is recorded over the vesting period of the award in cost of revenue.
Non-Controlling Interests
The Company’s non-controlling interests represent the minority shareholder’s ownership interests related to the Company’s subsidiaries. The Company reports its non-controlling interests in subsidiaries as a separate component of equity in the consolidated balance sheets and reports net income (loss) attributable to the non-controlling interests in the consolidated statements of operations and comprehensive income (loss).
Redeemable Non-Controlling Interests
When the Company or its subsidiaries issues preferred shares, it considers the provisions of FASB ASC 480 –“Distinguishing Liabilities from Equity” (Topic 480) in order to determine whether the preferred share should be classified as a liability. If the instrument is not within the scope of Topic 480, the Company further analyses the instruments characteristics in order to determine whether it should be classified within temporary equity (mezzanine) or within permanent equity in accordance with the provisions of Topic 480-10-S99. AU10TIX’s redeemable convertible preferred shares are not mandatorily or currently redeemable. However, it includes a liquidation or deemed liquidation events which constitutes a redemption event that is outside of the Company’s control. As such, all shares of redeemable preferred shares have been presented outside of permanent equity. The Company has not adjusted the carrying values of the redeemable preferred shares to the deemed liquidation values of such shares since a liquidation event was not probable at any of the balance sheet dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
Revenue Recognition
Revenue is recognized when the promised services are performed for the Company’s clients, and the amount that reflects the consideration the Company is entitled to receive in exchange for those services, is determined. The Company’s revenues are recorded net of any sales taxes.
In order to determine the revenue, the Company (1) identifies the contract with the client, (2) identifies the performance obligations, usually based on the hours spent, (3) determines the transaction price, (4) allocates the transaction price to the performance obligation and (5) recognizes revenue as the performance obligation is satisfied.
A performance obligation is a promise in a contract to transfer a distinct service to the client and it is the unit of account for revenue recognition. The majority of the Company’s contracts have a single performance obligation as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, is not distinct.
The following table presents the Company’s revenues according to the Company’s segments:
|
Years ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Airport security
|
$
|
|
$
|
|
$
|
|
||||||
|
Other aviation related services
|
|
|
|
|||||||||
|
Authentication technology
|
|
|
|
|||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
||||||
F - 15
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
The following table presents the Company’s revenues generated from customers by geographical area based on the geographical location of the customers invoicing address:
|
Years ended December 31,
|
||||||||||||||||||||||||
|
2025
|
2024
|
2023
|
||||||||||||||||||||||
|
Germany
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||
|
Spain
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
|
The Netherlands
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
|
United States
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
|
Other countries
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
|
Total revenue
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||
Airport Security and Other Aviation Services Segments
In the airport security and other aviation services, for performance obligations that are satisfied over time, revenues are recognized by consistently applying a method of measuring hours spent on that performance obligation. ICTS generally utilizes an output method of time (hours and attendance for specific time framed service like specific flights) of the service provided. Performance obligations are satisfied over the course of each month and continue to be performed until the contract has been terminated or cancelled.
Pricing and Reduction to Revenues
The Company generally determines standalone selling prices based upon the prices included in the client contracts, using expected costs plus margin or other observable prices. The price as specified in client contracts is generally considered the standalone selling price as it is an observable input that depicts the price as if sold to a similar client in similar circumstances. Certain client contracts have variable provisions including quality thresholds or other similar items that could reduce the transaction price. These amounts may be constrained and revenue is recorded to the extent the Company does not expect a significant reversal or when the uncertainty associated with the variable provision is resolved. Variable provision amounts, if any, are not material, and the Company does not expect significant changes to its estimates.
Contracts
The Company’s client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which it operates. The payment terms vary by the type and location of our clients and services offered. Client payments are typically due in 30 to 60 days after invoicing but may be a shorter or longer term depending on the contract. Our contracts with main customers are generally long-term between two to five years. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Revenue Service Types
The following is a description of the Company’s revenue service types, including airport security, airline security, cargo security, other airport services, general security services and other services.
F - 16
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
Airport Security
Staffing or manning for specialized airport security are usually based on a long-term contract issued via a public tender process. the Company recognizes revenue given the unit of measure (hours) provided in the given time period and the specific price for specific hours agreed upon in the contracts. Quality and criteria of staffing are described in the contracts and are measured in the given time period. Deviations, if any, are discussed with the customer before invoicing and are reflected in the invoice showing the approved hours and other cost elements as agreed upon price.
Most contracts have an hourly rate that reflects an all-in price based on a full cost price calculation. In some of the contracts, the hourly rates are split between a component based on hours and a component based on specific costs in a specific time period but always linked to the service provided in given time period. Revenue is recognized based on the realized hours and contractually agreed upon rate.
Airline Security
Staffing or manning for airline security is usually based on long-term contracts issued via a public tender procedure. The Company recognizes revenue according to the unit of measure provided (usually attendance for specific time framed service such as specific flights). When the manning for the security of these flights is delivered, the Company invoices the customer according to the agreed upon flight price.
Cargo Security
Staffing or manning for specialized cargo security are usually based on a long-term contract, sometimes publicly tendered. Contracts are based on hourly planned and executed screening services. Revenue is recognized based on the realized screening hours and contractually agreed upon hourly rate.
Other Airport Services
Other airport services include wheelchair attendants, pre-departure skycaps, bag-runners, agents, guards, charter security screening, janitorial, and cabin cleaning for major U.S. and foreign carriers in airports throughout the United States of America. The Company’s contracts may include either single or multiple performance obligations and vary by airport and airline. ICTS recognizes revenue given the unit of measure (usually hours) provided in the given time period and the specific price for specific hours or attendance for specific event, time framed service as agreed upon in the contracts.
General Security Services
General security services include providing armed and unarmed guards to private schools and places of worship, video surveillance and patrol. Contracts for general security services generally include only a single performance obligation. The Company recognizes revenue for security guard services given the unit of measure (hours) provided in the given time period. Revenue from video surveillance and patrol is recognized based upon a fixed monthly rate.
Other Services
Other services include revenues from incidental specialized security manning services, training services and ad hoc work performed on and off airports. Revenue is recognized over time as services are being performed, using the input of service delivered during the time period according to the contractual agreed price.
F - 17
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
Authentication Technology Segment
In the authentication technology segment, the Company offers authentication services on a cost per click basis, with a minimum yearly commitment which means the customer pays the Company according to the higher of (a) number of times the customer used the system in order to authenticate IDs (recognized at a point of time) or (b) according to the yearly minimum commitment (recognized over time). According to the agreement with the customers, each chargeable click has an agreed price and revenue is being recognized accordingly.
Pricing and Reduction to Revenues
The Company determines standalone selling prices based upon the prices included in the client contracts using expected costs plus margin, or other observable prices. The price as specified in our client contracts is considered the selling price as agreed with the customer. The Company’s variable consideration amounts, if any, are not material, and the Company does not expect significant changes to our estimates. The Company does not expect a significant reversal when the uncertainty associated with the variable consideration is resolved. A customer may or may not be offered a tier-based pricing scheme but in any event of usage above the committed amount, the pricing will remain unchanged.
Contracts
Client contracts generally include standard payment terms acceptable in each of the countries, states and territories in which the company operates, and are typically set to a three-year duration. The payment terms vary by the type and location of our clients and services offered. The minimum commitment is usually paid in advance. Client payments are typically due 30 days after invoicing, but may be a shorter or longer term depending on the contract. Client contracts usually range from one to three years with a convenience exit every twelve months period, and at the end of the contract, there is a renewal option. The timing between satisfaction of the performance obligation, invoicing and payment is not significant.
Deferred Revenues
The Company records deferred revenues when cash payments are received or due in advance of our performance. Deferred revenues at December 31, 2025 and 2024 were $2,939 and $3,527 , respectively shown as part of the accrued expenses. Revenue recognized for the years ended December 31, 2025, 2024 and 2023 that was included in the deferred revenue at the beginning of each year was $3,527 , $4,938 and $3,570 , respectively.
The Company’s payment terms vary by the type and location of the customer and the products or services offered. The term between invoicing and when payment is due is not significant.
Capitalized Contract Costs
As part of obtaining contracts with certain customers in the authentication technology segment, the Company incurs upfront costs such as sales commissions. The Company capitalizes these costs which are subsequently amortized on a straight-line basis over the estimated life of the relationship with the customer. The Company applies the practical expedient that allows it to determine this estimate for a portfolio of contracts that have similar characteristics in terms of type of service, contract term and pricing. This estimate is reviewed by management at the end of each reporting period as additional information becomes available. Capitalized contract costs as of December 31, 2025 and 2024 were $5 and $58 , respectively. Amortization expense for capitalized contract costs for the years ended December 31, 2025, 2024 and 2023 were $53 , $88 and $52 , respectively.
Cost of Revenue
Cost of revenue represents primarily payroll and employee related costs associated with employees who provide services under the terms of the Company’s contractual arrangements, insurance and depreciation and amortization.
F - 18
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of payroll and related costs, professional services, consulting services and non-capitalized costs associated with the development of technologies.
Advertising Costs
Advertising costs are expensed as incurred and consist of costs associated with promoting the Company, its products and services as well as participation in conferences and publication costs. Advertising costs during the years ended December 31, 2025, 2024 and 2023 were $2,288 , $2,934 and $3,107 , respectively.
Value Added Tax
Certain of the Company’s operations are subject to Value Added Tax (“VAT”) applied to the services sold in those respective countries. The Company is required to remit the VAT collected to the tax authorities but may deduct the VAT paid on certain eligible purchases.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities resulting from a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established when realization of net deferred tax assets is unlikely to be considered more likely than not.
Uncertain income tax positions are determined based upon the likelihood of the positions being sustained upon examination by taxing authorities. The benefit of a tax position is recognized in the consolidated financial statements in the period during which management believes it is more-likely-than-not that the position will not be sustained. Income tax positions taken are not offset or aggregated with other positions. Income tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of income tax benefit that is more than 50 percent likely of being realized if challenged by the applicable taxing authority. The portion of the benefits associated with income tax positions taken that exceeds the amount measured is reflected as income taxes payable.
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share is determined in the same manner as basic income (loss) per share, except that the number of shares is increased to include potentially dilutive securities using the treasury stock method.
The Company had a net loss for the years ended December 31, 2025 and 2024. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common share is anti-dilutive due to the net loss. Due to the net loss during those years, potentially dilutive securities were excluded from the computation of diluted loss per share.
The Company had net income for the year ended December 31, 2023. Potentially dilutive securities were included in the computation of diluted income per share as the conversion rate of the convertible note payable to related party was lower than the weighted average computed price of the Company’s stock during 2023.
F - 19
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income (Loss) Per Share (Continued)
The number of shares of common stock attributable to potentially dilutive securities for the years ended December 31, 2025, 2024 and 2023 were 0 , 5,566 and 1,990,173 shares. As of December 31, 2025 and 2024, potentially dilutive shares were excluded from the loss per share calculation due to being anti-dilutive. In computing diluted earnings per share in 2023, the Company took into its calculation additional conversion of the convertible note using the conversion method and 1,990,173 shares of common stock attributable to potentially dilutive securities that could occur upon the exercise of options granted under employee stock compensation plans using the treasury stock method.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents, restricted cash, bank deposits, accounts receivable, prepaid expenses and other current assets, notes payable – financial institutions payable, accounts payable, accrued expenses and other current liabilities, income tax and other taxes payable and VAT payable approximate their carrying values due to the short-term nature of the instruments. The carrying value of the severance pay in other liabilities is not readily determinable because: (a) these instruments are not traded and, therefore, no quoted market prices exist upon which to base an estimate of fair value and (b) there were no readily determinable similar instruments on which to base an estimate of fair value.
Concentration of Credit Risk
Financial instruments which are subject to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, bank deposits and accounts receivable.
The Company maintains cash, cash equivalents, restricted cash and bank deposits in accounts with financial institutions in the United States of America, Europe, Japan and Israel. As of December 31, 2025 and 2024, accounts at financial institutions located in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 1,507 and $1,128 , respectively, are being held in the United States of America, of which $1,007 and $828 , respectively, are uninsured. Cash, cash equivalents, restricted cash and bank deposits located in Europe, Japan and Israel, totaling $59,230 and $86,276 as of December 31, 2025 and 2024, respectively, are uninsured.
The Company renders services to a limited number of airlines and airports through service contracts and provides credit without collateral. Some of these airlines and airports may have difficulties in meeting their financial obligations, which can have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows. To mitigate this risk, the Company regularly reviews the creditworthiness of its customers through its credit evaluation process.
Revenue from three customers represented 50 % of total revenue for the year ended December 31, 2025 and 37 % of total accounts receivable as of December 31, 2025, of which customer A accounted for 20 % from total revenue and 16 % of total accounts receivable. Customer B accounted for 15 % from total revenue and 10 % of total accounts receivable and customer C accounted for 15 % from total revenue and 11 % of total accounts receivable. Accounts receivable from these three customers represented 37 % of total accounts receivable as of December 31, 2025. Revenue from these three customers is presented under the airport security segment of the Company.
Revenue from three customers represented 47 % of total revenue for the year ended December 31, 2024 and 24 % of total accounts receivable as of December 31, 2024, of which customer A accounted for 18 %, from total revenue and 13 % of total accounts receivable. Customer B accounted for 17 %, from total revenue and 1 % of total accounts receivable and customer C accounted for 12 % from total revenue and 9 % of total accounts receivable. Revenue from these three customers is presented under the airport security segment of the Company.
Revenue from two customers represented 34 % of total revenue for the year ended December 31, 2023 and 20 % of total accounts receivable as of December 31, 2023, of which customer A accounted for 20 % from total revenue and 13 % of total accounts receivable, and customer B accounted for 14 % of total revenue and 7 % of total accounts receivable. Revenue from these two customers is presented under the airport security segment of the Company.
F - 20
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Risks and Uncertainties
The Company is currently engaged in direct operations in numerous countries and is therefore subject to risks associated with international operations (including economic and/or political instability, trade restrictions and strikes). Such risks can cause the Company to have significant difficulties in connection with the sale or provision of its services in international markets and have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
The Company is subject to changes in interest rates based on Central Banks Federal Reserve actions and general market conditions. The Company does not utilize derivative instruments to manage its exposure to interest rate risk.
Furthermore, as a result of its international operations, the Company is subject to market risks associated with foreign currency exchange rate fluctuations. The Company does not utilize derivative instruments to manage its exposure to such market risk except in one of its subsidiaries. As such, significant foreign currency exchange rate fluctuations can have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
Reclassification
Certain amounts have been reclassified within the year ended December 31, 2023 consolidated statements of cash flows to conform with current period presentation.
Recently Issued Accounting Pronouncements
Accounting Standards Update 2025-12
In December 2025, the FASB issued ASU 2025-12 “Codification Improvements” to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
Accounting Standards Update 2025-11
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements.” The amendments in this Update clarify interim disclosure requirements and the applicability of Topic 270. The objective of the update is to provide clarity about current interim requirements. The amendments in this update also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in this ASU are required to be adopted for interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
Accounting Standards Update 2025-09
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The update expands the ability to apply hedge accounting to more diverse risk management strategies and simplifies the requirements for grouping forecasted transactions. The guidance is effective for the Company beginning January 1, 2027, with early adoption permitted. The Company has evaluated the amendments and determined that while they may simplify certain documentation procedures, the adoption of this update is not expected to have a material impact on its consolidated financial statements.
Accounting Standards Update 2025-08
In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. This update introduces the "purchased seasoned loan" (PSL) category, which allows acquired loans that meet certain age and "involvement" criteria to use a gross-up approach for the credit loss allowance, rather than recording an immediate "Day 1" loss in earnings. The guidance is effective for fiscal years beginning after December 15, 2026. The adoption of this update is not expected to have a material impact on its consolidated financial statements.
F - 21
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements (Continued)
Accounting Standards Update 2025-06
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). This update modernizes the accounting for software costs by removing legacy "development stages" and instead requiring capitalization to begin when it is probable that a software project will be completed and used for its intended function. The guidance is effective for the Company for annual periods beginning after December 15, 2026. The Company is evaluating the impact of this ASU in its financial statements.
Accounting Standards Update 2025-05
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Practical Expedient for Estimating Expected Credit Losses. The update provides a practical expedient allowing entities to assume that current economic conditions at the balance sheet date will remain constant over the remaining life of the asset when estimating credit losses for trade receivables and contract assets. The guidance is effective for fiscal years beginning after December 15, 2025. The Company intends to elect this practical expedient upon early adoption and does not expect it to have a material impact on its allowance for credit losses or consolidated financial statements.
Accounting Standards Update 2024-03
In November 2024, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2024-03 "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)" which expands annual and interim disclosure requirements for certain costs and expenses, primarily through enhanced disclosures. ASU 2024-03 is effective for our annual periods beginning December 15, 2026, and for interim periods beginning December 15, 2027, with early adoption permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.
Accounting Standards Update 2023-09
In December 2023, the FASB issued ASU 2023-09 Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company implemented the new income tax disclosures retrospectively. The implementation of ASU 2023-09 affected disclosures only and had no impact on the Company’s financial condition or results of operations (See Note 15 Income Taxes).
NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are as following:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Receivable from the German authorities (1)
|
$
|
|
$
|
|
||||
|
Income tax receivable
|
|
|
||||||
|
Interest from bank deposits
|
|
|
||||||
|
Value Added Tax (VAT) receivable
|
|
|
||||||
|
Prepaid uniforms
|
|
|
||||||
|
Prepaid insurance
|
|
|
||||||
|
Prepaid licenses
|
|
|
||||||
|
Prepaid rent
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total prepaid expenses and other current assets
|
$
|
|
$
|
|
||||
| (1) |
In Germany, the employees are eligible for payroll support. The Company pays their full salary to its German employees and the Company is reimbursed by the German government for the payroll support amount.
|
F - 22
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 4 - INVESTMENTS
A summary of investments in unconsolidated subsidiaries and affiliates as of December 31, 2025 and 2024 is as follows:
|
December 31,
|
December 31,
|
|||||||||||||||
|
2025
|
2024
|
|||||||||||||||
|
Measurement Method
|
Carrying Value
|
Ownership Percentage
|
Carrying Value
|
Ownership Percentage
|
||||||||||||
|
Manuka, Inc. (Previously Artemis Therapeutics, Inc.) (1)
|
|
$
|
|
|
$
|
|
|
|||||||||
|
Mesh Technologies, Inc. (2)
|
|
|
|
|
|
|||||||||||
|
Arrow Ecology & Engineering Overseas (1999) (3)
|
|
|
|
|
|
|
|
|||||||||
|
GreenFox Logistics LLC. (2)
|
|
|
|
|
|
|||||||||||
|
SardineAI Corp. (2) (4)
|
|
|
|
|
|
|||||||||||
|
Silver Circle One (2)(5)
|
|
|
|
|
|
|||||||||||
|
Bring it On Games Ltd (2)
|
|
|
|
|
|
|||||||||||
|
Justt Fintech Ltd (previously Acrocharge Ltd) (2)
|
|
|
|
|
|
|||||||||||
|
Nilus OS Ltd (2)
|
|
|
|
|
|
|||||||||||
|
Total investments in unconsolidated subsidiaries and affiliates
|
$
|
|
$
|
|
||||||||||||
F - 23
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 4 – INVESTMENTS (Continued)
| (1) |
The market value of the Company’s investment in MNKA is $
|
| (2) |
Private, closely held company, with no active market for the investment. Therefore, the Company applies the measurement alternative and measures the investment at cost less impairment.
|
| (3) |
The investment includes various classes of shares representing
|
The Company has an agreement with an entity related to its main shareholder, according to which, if the value of the investment decreases, the related party entity has guaranteed to repurchase this full investment at a minimum amount of $1,750 . The guarantee is effective immediately as of the date of purchase and terminates on January 1, 2027. Some Directors, managers and shareholders of Arrow are related parties of the Company.
| (4) |
On January 2023, the Company sold approximately
|
| (5) |
A capital fund which aims to invest in private emerging companies with focus on consumer, commerce and technology companies. The Company committed to invest up to $
|
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment is as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Office, equipment and facilities
|
$
|
|
$
|
|
||||
|
Internal use software
|
|
|
||||||
|
Vehicles
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
Total cost of property and equipment
|
|
|
||||||
|
Less: accumulated depreciation and amortization
|
|
|
||||||
|
Total property and equipment, net
|
$
|
|
$
|
|
||||
Depreciation and amortization expenses are $2,101 , $2,371 and $2,679 for the years ended December 31, 2025, 2024 and 2023 respectively.
F - 24
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 6 - LEASES
Lessee Arrangements
The Company enters into leases in the normal course of business primarily as part of its operations in the different airports, back-office operations, research and development offices and headquarters offices.
The table below presents the effects on the amounts relating to the Company’s total lease cost:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Operating lease cost
|
$
|
|
$
|
|
$
|
|
||||||
|
Short term lease cost
|
|
|
|
|||||||||
|
Total lease cost
|
$
|
|
$
|
|
$
|
|
||||||
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Operating cash flows from operating leases
|
$
|
|
$
|
|
$
|
|
||||||
|
Right of use assets obtained in exchange for new operating lease liabilities
|
|
|
|
|||||||||
|
Weighted-average remaining lease term-operating leases
|
|
|
|
|||||||||
|
Weighted-average discount rate
|
|
%
|
|
%
|
|
%
|
||||||
Balance sheet information related to operating leases was as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Operating lease ROU assets
|
$
|
|
$
|
|
||||
|
Operating lease liabilities - current
|
$
|
|
$
|
|
||||
|
Operating lease liabilities - non-current
|
|
|
||||||
|
Total operating lease liabilities
|
$
|
|
$
|
|
||||
F - 25
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 6 - LEASES (CONTINUED)
Future undiscounted lease payments for operating leases with initial terms of more than one year as of December 31, 2025 are as follows:
|
Year ending December 31,
|
||||
|
2026
|
$
|
|
||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
Thereafter
|
|
|||
|
Total future minimum lease payments
|
|
|||
|
Less: imputed interest
|
|
|||
|
Total
|
$
|
|
||
NOTE 7 - GOODWILL
All of the Company’s goodwill relates to its airport security segment. The change in goodwill during the year is as follows:
|
2025
|
2024
|
|||||||
|
Balance as of the beginning of the year
|
$
|
|
$
|
|
||||
|
Exchange rate effect
|
|
(
|
)
|
|||||
|
Balance as of the end of the year
|
$
|
|
$
|
|
||||
At December 31, 2025 and 2024, the Company performed qualitative assessments to determine if it was more likely than not that the fair value of the reporting units exceeded carrying values, including goodwill. The qualitative assessments indicated that it was more likely than not that the fair value exceeded the carrying value of the reporting unit.
During the years ended December 31, 2025, 2024 and 2023, the Company did not recognize any impairment charges.
F - 26
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 8 - FINANCIAL INSTITUTIONS PAYABLE
United States of America
The Company’s U.S subsidiary secured a three-year credit facility with its primary bank in September 2023. The credit facility has a maximum borrowing base limit of $7,500 . The borrowing base limitation is equivalent to: (i) 85% of eligible non-investment grade receivables and 90% of eligible investment grade receivables, plus (ii) 80% of direct labor payroll for the previous two pay periods plus 20%. The Company is required to maintain a fixed charge ratio of 1.00. Borrowings on the credit facility are subject to interest at SOFR plus 2.65% (6.52% as of December 31, 2025) and a minimum annual interest charge of $60 . In April 2026 the credit facility was extended until April 2029. As of December 31, 2025 and 2024, the outstanding balances under the credit facility were $31 and $0 , respectively and the unused available amount of the line is $7,469 and $7,500 , respectively.
Europe
The Company has a factoring arrangement in Sweden to provide it with up to 4,000 SEK ($434 as of December 31, 2025) in borrowings. Borrowings under the agreement bear annual interest of 4.9 % and are subject to an annual extension by the financial institution. The factoring agreement is secured by accounts receivable of the Swedish subsidiary . As of December 31, 2025 and 2024, the Company had 771 SEK and 2,212 SEK ($84 and $201 as of December 31, 2025 and 2024) respectively in outstanding borrowings under the credit facility. The weighted average interest rate for this loan during the years ended December 31, 2025, 2024 and 2023, was 4.9 %, 5.3 % and 2.8 % respectively.
In November 2023, the Company entered into a loan agreement with a commercial bank in Spain to provide it with up to €1,000 ($1,173 as of December 31, 2025). The loan agreement is secured by accounts receivable of the Spanish subsidiary. The interest rate is determined by the bank at the time the loan is taken. The loan agreement was renewed in November 2024 and still in place. As of December 31, 2025 and 2024, the Company had no
In December 2023, an agreement was signed with the same commercial bank in Spain, to provide loans up to €1,500 ($1,760 as of December 31, 2025). These loans can be used only for paying different taxes to the Spanish tax authorities. The interest rate is determined at the time the loans are taken. During the periods ending December 31, 2025 and 2024 the loans taken ranged between €1,000 and €1,500 ($1,173 and $1,760 as of December 31, 2025) for periods of three months. As of December 31, 2025 and December 31, 2024 the outstanding balances were €334 and €1,000 ($392 and $1,041 respectively), with an average interest rate of 3.96 % and 5.25 %, respectively.
In June 2024, the Company signed a factoring agreement with a commercial bank in Germany for an unlimited period. According to the agreement, the Company factors accounts receivable related to invoices issued to certain customers up to the amount of €11,550 ($13,552 as of December 31, 2025). The amounts can be used only for payroll related costs in Germany. The Company is charged fees until the collection date equal to Euribor plus 3.00 % (4.95 % as of December 31, 2025). The Company is also subject to a 1.5 % annual fee on the total factoring amount. As of December 31, 2025 and 2024, the outstanding balances were €6,207 and €1,863 ($7,254 and $1,939 as of December 31, 2025 and 2024), respectively. In February 2026, the financial institution agreed to increase the availability up to €15,850 .
In July 2025, an agreement with a commercial bank in Spain was signed, to provide loans up to €150 ($176 as of December 31, 2025). These loans can be used only for paying different taxes to the Spanish tax authorities. The Company pays a commission that is determined at the time the loans are taken, without additional interest. As of December 31, 2025, there is no outstanding balance under the loan agreement.
F - 27
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 8 - FINANCIAL INSTITUTIONS PAYABLE (CONTINUED)
The following table summarizes the different loans mentioned above and as reflected in the Company’s financial liabilities:
|
Maximum Availability as of December 31, 2025 *
|
Debt Balance as of December 31, 2025
|
Interest rate as of December 31, 2025
|
Maximum Availability as of December 31, 2024 *
|
Debt Balance as of December 31, 2024
|
Interest rate as of December 31, 2024
|
|||||||||||||||||||
|
Line of Credit
|
$
|
|
$
|
|
|
%
|
$
|
|
$
|
|
|
%
|
||||||||||||
|
Factoring
|
|
|
|
%
|
|
|
|
%
|
||||||||||||||||
|
Revolving Loans
|
|
|
|
%
|
|
|
|
%
|
||||||||||||||||
|
Revolving Loans **
|
|
|
|
%
|
|
|
|
%
|
||||||||||||||||
|
Revolving Loans**
|
|
|
|
%
|
|
|
|
|||||||||||||||||
|
Factoring
|
|
|
|
%
|
|
|
|
%
|
||||||||||||||||
|
Total
|
$
|
|
$
|
|
|
%
|
$
|
|
$
|
|
|
%
|
||||||||||||
* Maximum availability is subject to terms and conditions according to the agreements with the different financial institutions.
** Loans can be used only for payment of taxes in Spain.
In March 2024, the Company signed a non-recourse factoring agreement with a commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to €3,000 ($3,519 as of December 31, 2025). The maximum amount provided by the bank cannot exceed 75 % of the monthly invoice for that customer. In March 2025 the agreement was extended for one year and the facility was increased up to €4,000 ($4,692 as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit risks associated with the purchased receivables and the Company has no further obligation related to their collection. Accordingly, the factored receivables are derecognized from the Company’s balance sheet once the funds are received by the Company. The arrangement does not create any liability and therefore no loan or financing obligation is recorded in the Company’s financial statements. The Company is also subject to a 0.2 % fee for every factored invoice issued under the agreement and with interest equal Euribor plus 0.60 % (2.55 % as of December 31, 2025) until the date the payment is anticipated. In January 2026, the agreement was renewed for additional year under the same terms and conditions.
In July 2025, the Company signed a non-recourse factoring agreement with another commercial bank under which it factors certain accounts receivable related to invoices issued to a specific customer up to €750 ($880 as of December 31, 2025). Under the terms of this agreement, the factor assumes all rewards and credit risks associated with the purchased receivables and the Company has no further obligation related to their collection. Accordingly, the factored receivables are derecognized from the Company’s balance sheet once the funds are received by the Company. The arrangement does not create any liability and therefore no loan or financing obligation is recorded in the Company’s financial statements. The interest rate is Euribor of the month plus 0.90 % (2.85 % as of December 31, 2025).
F - 28
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Accrued payroll and related costs
|
$
|
|
$
|
|
||||
|
Accrued vacation
|
|
|
||||||
|
Deferred revenue
|
|
|
||||||
|
Advanced payment from a customer
|
|
|
||||||
|
Commitment to purchase shares from directors and officers
|
|
|
||||||
|
Accrued VAT differences
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total accrued expenses and other liabilities
|
$
|
|
$
|
|
||||
NOTE 10 - OTHER LIABILITIES
Other liabilities are as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Deferred wage tax and social security (1)
|
$
|
|
$
|
|
||||
|
Deferred VAT (1)
|
|
|
||||||
|
Severance pay liability
|
|
|
||||||
|
Total other liabilities
|
$
|
|
$
|
|
||||
| (1) |
Deferred VAT, deferred wage tax and social security relate to governmental support provided by the Dutch government, where they postponed all VAT payable for the years 2021 and 2020 and all wage tax and social security payable for the months March - December 2021 to be paid in 60 installments until October 2027. In January 2026, the Dutch authorities agreed to extend the monthly payments of the balance by two years until October 2029 (see note 12).
|
F - 29
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 11 - REDEEMABLE NON-CONTROLLING INTERESTS
In 2019, AU10TIX entered into several agreements with certain investors, according to which AU10TIX has issued for a net consideration of approximately $74,000 , a total of 4,000,000 Series A Preferred Shares ("Series A Shares") and 330,709 Series A-1 Preferred Shares ("Series A-1 Shares" and together with Series A Shares – "the Preferred Shares") representing approximately 31.401 % of the outstanding share capital of AU10TIX and 30.22 % of the fully-diluted share capital of AU10TIX as of the date of the agreements.
In 2021, certain investors purchased 2,267,717 AU10TIX Series A Preferred shares from other investors. In connection with such purchases, all outstanding AU10TIX’s Series A Preferred Shares and Series A-1 Preferred Shares were re-designated as New Series A Preferred Shares and the class A ordinary shares (“Ordinary Shares”) owned by ICTS were re-designated as Class B Ordinary Shares.
According to the agreements with the investors, AU10TIX had the right to issue up to 1,000,000 Class A Ordinary Shares under its existing employee stock option plan. In 2026 the amount increased to 1,400,000 .
As of December 31, 2025 and following exercise of options by employees, the holdings in AU10TIX are as follows: : (i) ICTS owned 66.30 % of the outstanding share capital of AU10TIX in the form of Class B Ordinary Shares; (ii) Oak owned 12.42 % of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares; (iii) GF owned 10.55 % of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares (iv) TPG owned 7.25 % of the outstanding share capital of AU10TIX in the form of New Series A Preferred Shares and (v) Other shareholders owned 3.48 % of the outstanding share capital of AU10TIX in the form of Class B Ordinary Shares.
The Share Holders Agreement (“SHA”) and the Articles (as amended by the Deed of Amendment) provide for the following material matters with respect to the rights attaching to the New Series A Preferred Shares and the Ordinary Shares and the ongoing governance of AU10TIX:
The New Series A Preferred Shares are entitled to one vote per share and rank equally with the Ordinary Shares in regards to dividends. The Ordinary Shares are divided into two classes: Class A Ordinary Shares and Class B Ordinary Shares, which rank equally as to dividends. The Class A Ordinary Shares are entitled to one vote per share. The Class B Ordinary Shares are entitled to three votes per share and may only be held by ICTS and its permitted transferees.
F - 30
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 11 - REDEEMABLE NON-CONTROLLING INTERESTS (CONTINUED)
The holders of New Series A Preferred Shares (“Series A Holders”) are entitled to a liquidation preference upon the occurrence of a certain events (as defined in the SHA), The Ordinary Shares rank equally in liquidation. The New Series A Preferred Shares are subject to conversion into Class A Ordinary Shares on a 1:1 basis (subject to adjustments for certain events affecting the capital of AU10TIX) at the option of the New Series A Holder; and immediately prior to a qualifying IPO of AU10TIX. The Class B Ordinary Shares are convertible into Class A Ordinary Shares at any time upon the written request of a holder of Class B Ordinary Shares on a 1:1 basis, subject to adjustments for certain events affecting the capital of AU10TIX.
Exit Rights: At any time from and after July 3, 2026, upon written request by Series A Holders holding at least 60 % of the then outstanding New Series A Preferred Shares (the “Preferred Majority”), AU10TIX is required to use reasonable endeavors to facilitate a sale of AU10TIX within six months after such written request, and, thereafter, the Preferred Majority has the right to step-in and require AU10TIX to facilitate a sale or IPO. On the exercise of such step-in right, each other shareholder (including ICTS) is required to cooperate with the Preferred Majority regarding such sale or IPO and the Preferred Majority has the right to exercise drag along rights over the shares held by other shareholders in order to facilitate such exit event.
Shares of redeemable convertible preferred stock are not mandatorily or currently redeemable. However, the Exit Right would constitute a contingent redemption event that is outside of AU10TIX’s control. As such, New Series A Shares have been presented outside of permanent equity as redeemable non-controlling interests.
The Preferred Shares Rights
The following table sets forth for the movement in the redeemable non-controlling interests:
|
Year Ended December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Balance as of the beginning of the year
|
$
|
|
$
|
|
||||
|
Net Income (loss)
|
(
|
)
|
|
|||||
|
Other Comprehensive Income - Translation adjustment
|
|
(
|
)
|
|||||
|
Paid dividend
|
|
(
|
)
|
|||||
|
Balance as of the end of the year
|
$
|
|
$
|
|
||||
NOTE 12 - GOVERNMENTAL SUPPORT
In the Netherlands, wage tax, social security and VAT payments for the period March 2020 until September 2021 were postponed as part of the government assistance regarding COVID - 19 and were set to be paid in 60 monthly installments beginning October 2022. Beginning July 2022, the debt incurs annual interest of 1% and increases every six months to a maximum of 4% subsequent to January 1, 2024. In November 2025, the Company filed a request with the tax authorities to extend the installments from 60 to 84 monthly installments. In January 2026, the request was approved. As of December 31, 2025 and 2024, the Company accumulated debt of €12,156 and €18,245 ($14,260 and $18,984 as of December 31, 2025 and 2024), respectively, to the Dutch tax authorities, of which €1,335 and €2,671 ($1,566 and $2,779 as of December 31, 2025 and 2024) is presented in VAT payable, €1,985 and €3,971 ($2,329 and $4,132 as of December 31, 2025 and 2024) is presented in income tax and other taxes payable and €8,836 and €11,603 ($10,379 and $12,085 as of December 31, 2025 and 2024) are presented as other liabilities.
F - 31
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 13 - STOCK-BASED COMPENSATION
AU10TIX Technologies B.V, has a Stock Option Plan which reserved 1,400,000 Ordinary Shares in the capital of AU10TIX Technologies B.V for its option issuances. The Plan grants rights to subscribe ordinary shares to employees, directors, consultants and service providers of AU10TIX Technologies B.V. and / or any related entity (as defined in the plan) at an exercise price as determined by the subsidiary’s board of directors with expiration terms of not more than ten years after the date such option is granted. Options granted under the plan generally vest over a period of four years.
The following is a summary of the AU10TIX Technologies B.V. stock options issued and outstanding:
|
Number of options
|
Weighted average exercise price
|
Weighted average remaining contractual term
|
|||||||
|
Options outstanding as of December 31, 2023
|
|
$
|
|
|
|||||
|
Options granted
|
|
|
|||||||
|
Options exercised
|
(
|
)
|
|
||||||
|
Forfeited
|
(
|
)
|
|
||||||
|
Options outstanding as of December 31, 2024
|
|
$
|
|
|
|||||
|
Options granted
|
|
|
|||||||
|
Options exercised
|
(
|
)
|
|
||||||
|
Forfeited
|
(
|
)
|
|
||||||
|
Options outstanding, as of December 31, 2025
|
|
$
|
|
|
|||||
Options exercisable as of December 31, 2025 and 2024 were 48,375 options and 191,900 , respectively.
As of December 31, 2025 and 2024 the non-vested options are 52,000 and 475,450 , respectively.
During the years ended December 31, 2025, 2024 and 2023, there was $58 , $859 and $714 of compensation expenses.
As of December 31, 2025 and 2024, the Company has $135 and $1,816 , respectively of unrecognized compensation cost related to stock options.
F - 32
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 14 - OTHER INCOME, NET
Other income, net, is summarized as follows:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Interest expense to related parties
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||
|
Interest expense and other bank charges
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Interest expense to tax authorities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Interest income
|
|
|
|
|||||||||
|
Foreign currency gain (loss)
|
|
(
|
)
|
|
||||||||
|
Gain from sale of investments
|
|
|
|
|||||||||
|
Other income (expense)
|
|
|
(
|
)
|
||||||||
|
Total other income, net
|
$
|
|
$
|
|
$
|
|
||||||
NOTE 15 - INCOME TAXES
The components of income (loss) before income tax benefit (expense) are as follows:
|
Year Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
The Netherlands
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Germany
|
(
|
)
|
(
|
)
|
|
|||||||
|
United States of America
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Spain
|
(
|
)
|
|
|
||||||||
|
Israel
|
(
|
)
|
|
|
||||||||
|
Other locations
|
|
|
|
|||||||||
|
Income (loss) before income tax expenses
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
The current income tax expense from subsidiaries outside of the Netherlands is $(408 ), $(357 ) and $(2,299 ), for the years ended December 31, 2025, 2024 and 2023, respectively. The current income tax expense for the Netherlands was $0 , $0 and $248 for the years ended December 31, 2025, 2024 and 2023.
The deferred income tax benefit (expenses) from subsidiaries outside of the Netherlands is $(801 ), $(333 ) and $48 , for the years ended December 31, 2025, 2024 and 2023, respectively. There was no deferred income tax expense for the Netherlands for the years ended December 31, 2025, 2024 and 2023.
Additionally, tax benefits (expenses) from subsidiaries outside the Netherlands include $(435 ), $800 and $754 , for the years ended December 31, 2025, 2024 and 2023, respectively, of tax related to previous years. The tax benefits (expenses) for the Netherlands was $0 , $248 and $0 for the years ended December 31, 2025, 2024 and 2023.
F - 33
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 15 - INCOME TAXES (CONTINUED)
The components of deferred tax assets and liabilities are as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Operating loss carry forwards
|
$
|
|
$
|
|
||||
|
Interest loss carry forward
|
|
|
||||||
|
Allowance for credit losses
|
|
|
||||||
|
Tax credit carry forwards
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
Research and development expenses, net
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total deferred tax assets
|
|
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Depreciation of property and equipment
|
(
|
)
|
(
|
)
|
||||
|
|
|
|||||||
|
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
|
Deferred tax assets, net
|
$
|
|
$
|
|
||||
The ultimate realization of the net deferred tax assets in each jurisdiction where the Company does business is dependent upon the generation of future taxable income in that jurisdiction during the periods in which net operating loss carry forwards are available and items that gave rise to the net deferred tax assets become deductible. At present, the Company does not have a sufficient history of generating taxable income in various jurisdictions where it does business or positive expected core earnings to conclude that it is more likely than not that the Company will be able to realize some of its net deferred tax assets in the near future. Therefore, a valuation allowance was established for the carrying value of those net deferred tax assets, with the exception of a few locations, which are currently generating taxable income. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion of the valuation allowance.
As of December 31, 2025, the Company has net operating losses carry forwards of $29,269 and carry forward interest of $2,689 in the Netherlands. These losses and interest can be carried forward and do not expire but the annual utilization is limited to one million Euro plus 50% of the excess taxable income. As of December 31, 2025, the Company has net operating loss carry forwards of $7,549 in the United States of America, which will expire in 2032 through 2037 except $3,476 which does not expire and can be used to offset up to 80% of taxable income every year. In addition, in the United States, the Company has interest expense of $4,986 which can be carried forward and does not expire.
As of December 31, 2025, the Company has $372 in tax credits for the welfare to work and work opportunity programs in the United States of America that expire in 2026 through 2029.
During the years ended December 31, 2025 and 2024, the valuation allowance increased by $3,294 and $3,268 , respectively.
F - 34
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 15 - INCOME TAXES (CONTINUED)
The difference between the tax provision at the statutory federal income tax rate of 25.8
|
Year Ended December 31,
|
||||||||||||||||||||||||
|
2025
|
2024
|
2023
|
||||||||||||||||||||||
|
Netherlands statutory tax rate
|
$
|
(
|
)
|
|
%
|
$
|
(
|
)
|
|
%
|
$
|
|
|
%
|
||||||||||
|
Foreign tax effects
|
||||||||||||||||||||||||
|
United States
|
||||||||||||||||||||||||
|
Changes in valuation allowance
|
(
|
)
|
|
%
|
|
(
|
)%
|
|
|
%
|
||||||||||||||
|
Other
|
|
(
|
)%
|
|
(
|
)%
|
|
|
%
|
|||||||||||||||
|
Germany
|
||||||||||||||||||||||||
|
Foreign tax rate differential
|
|
(
|
)%
|
|
(
|
)%
|
(
|
)
|
(
|
)%
|
||||||||||||||
|
State and local taxes
|
(
|
)
|
|
%
|
(
|
)
|
|
%
|
|
|
%
|
|||||||||||||
|
Changes in valuation allowance
|
|
(
|
)%
|
|
(
|
)%
|
|
|
%
|
|||||||||||||||
|
Other
|
(
|
)
|
|
%
|
|
(
|
)%
|
(
|
)
|
(
|
)%
|
|||||||||||||
|
Spain
|
||||||||||||||||||||||||
|
Changes in valuation allowance
|
|
(
|
)%
|
(
|
)
|
|
%
|
(
|
)
|
(
|
)%
|
|||||||||||||
|
Other
|
|
(
|
)%
|
|
(
|
)%
|
|
|
%
|
|||||||||||||||
|
Japan
|
||||||||||||||||||||||||
|
Changes in valuation allowance
|
|
|
(
|
)
|
|
%
|
(
|
)
|
(
|
)%
|
||||||||||||||
|
Other
|
|
(
|
)%
|
(
|
)
|
|
%
|
|
|
%
|
||||||||||||||
|
Israel
|
||||||||||||||||||||||||
|
Foreign tax rate differential
|
|
(
|
)%
|
(
|
)
|
|
%
|
(
|
)
|
(
|
)%
|
|||||||||||||
|
Preferred technological enterprise (1)
|
|
(
|
)%
|
(
|
)
|
|
%
|
(
|
)
|
(
|
)%
|
|||||||||||||
|
Changes in valuation allowance
|
|
(
|
)%
|
|
|
%
|
|
|
%
|
|||||||||||||||
|
Other
|
|
(
|
)%
|
|
(
|
)%
|
(
|
)
|
(
|
)%
|
||||||||||||||
|
Other foreign jurisdictions
|
|
(
|
)%
|
|
(
|
)%
|
(
|
)
|
(
|
)%
|
||||||||||||||
|
Changes in valuation allowances
|
|
(
|
)%
|
(
|
)
|
|
%
|
(
|
)
|
(
|
)%
|
|||||||||||||
|
Return to provision adjustments
|
|
|
%
|
(
|
)
|
|
%
|
|
|
%
|
||||||||||||||
|
Other
|
|
|
%
|
|
(
|
)%
|
(
|
)
|
(
|
)%
|
||||||||||||||
|
Income tax expense (benefit)
|
|
(
|
)%
|
$
|
(
|
)
|
|
%
|
$
|
|
|
%
|
||||||||||||
|
(1)
|
Preferred technological enterprise refers to deduction of 11% on the tax rate the Company has to pay in Israel, totaling 12% compared to regular tax rate of 23%.
|
F - 35
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 15 - INCOME TAXES (CONTINUED)
Cash paid for income taxes, net of refunds, were as follows:
|
Year Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
The Netherlands
|
$
|
|
$
|
|
$
|
|
||||||
|
Foreign:
|
||||||||||||
|
Germany
|
|
|
|
|||||||||
|
Spain
|
(
|
)
|
|
|
||||||||
|
Israel
|
(
|
)
|
|
|
||||||||
|
Other foreign jurisdictions
|
|
|
|
|||||||||
|
Total cash paid for income taxes, net of refunds
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
Uncertain tax positions
The Company is subject to income taxes in the Netherlands, and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determine its provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax related uncertainties based on estimates of whether and the extent to which additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged despite evidence supporting the position. The Company adjusts this reserve in light of changing facts and circumstances, such as the outcome of income tax authority examinations. The Company recognizes tax benefits only when it is more likely than not that the tax position will be sustained upon examination by the relevant tax authorities, and the provision for income taxes includes the impact of reserve positions and changes to reserves based on this standard.
As of December 31, 2025 and 2024, there are $113 and $86 , respectively of unrecognized tax benefits that if recognized would reduce the effective tax rate. Interest and penalties assessed by taxing authorities on an underpayment of income taxes are included as components of income tax provision in the consolidated statements of operations and comprehensive income (loss).
A reconciliation of the Company’s unrecognized tax benefits is as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Balance at beginning of year
|
$
|
|
$
|
|
||||
|
Additions based on tax positions taken in prior years
|
|
|
||||||
|
Balance at end of year
|
$
|
|
$
|
|
||||
The Company files income tax returns in the Netherlands and other foreign jurisdictions. Income tax returns for the years since 2019 are subject to examination in the Netherlands. In the United States of America, income tax returns for the years since 2022 are subject to examination. Income tax returns for the tax years since 2020 are subject to examination in foreign jurisdictions.
F - 36
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 16 – RELATED PARTY TRANSACTIONS
Legal services were provided to the Company by an entity related to one of the Company’s former Supervisory Board members who served until August 2024. Legal expense related to these services $26 , $39 and $46 for the years ended December 31, 2025, 2024 and 2023, respectively.
The Chairman of the board is related to a trust which is an indirect main shareholder of the Company. The Company incurred expenses of $872 , $60 and $50 for the years ended December 31, 2025, 2024 and 2023, respectively for his services as the Chairman including a one time grant of $625 in 2025. In addition, in 2025, 2024 and 2023, the Company incurred salary expenses of $268 , $833 and $103 , respectively for the services he provided to AU10TIX. The salary expenses of 2024 include retroactively salary adjustment since 2019 as approved by the AU10TIX board during 2024.
The Company engaged the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling and management services to the authentication technology segment. The Company incurred expenses of $621 , $723 and $929 for such services for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the outstanding balances due for these services were $0 and $103 , respectively, included in accrued expenses and other current liabilities. In January 2026, it was agreed between the Company and the individual that the employment agreement will be terminated as of December 31, 2027. In addition, the individual serves as a supervisory board member of the Company and was paid an amount of $52 , $48 and $36 as supervisory board fees, for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company engaged the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling and administrative services to its authentication technology segment. The Company incurred expenses of $365 , $345 and $341 for such services for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, the individual served as a supervisory board member of the Company until July 2025 and was paid an amount of $29 , $48 and $38 as supervisory board fees for the years ended December 31, 2025, 2024 and 2023, respectively. In July 2025, the individual was elected to be a joint managing director of the Company and was paid an amount of $88 for the year ended December 31, 2025.
The Company engages the services of an individual who is a beneficiary of a trust, which is an indirect main shareholder of the Company, to provide certain selling services to its authentication technology segment. The Company incurred expenses of $199 , $198 and $176 for such services for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, the individual served since July 2025 as a supervisory board member of the Company and was paid an amount of $24 as supervisory board fees, for the year ended December 31, 2025.
The Company engages the services of an individual which is a family member of the Chairman of the Board and the main shareholder, to provide services as a Managing Director of one of the Company’s subsidiaries. The Company incurred expenses of $473 , $645 and $468 for such services for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company engages the services of an individual who is a family member of a beneficiary of a trust which is an indirect main shareholder of the Company to provide certain administration services. The Company incurred expenses of $123 , $115 and $114 for such services for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company engaged the services of Spencer Corporation, a main shareholder of the Company to provide administrative services. The Company incurred expenses of $323 , $0 and $0 for such services for the years ended December 31, 2025, 2024 and 2023, respectively. The expenses of 2025 include a one time expense of $215 approved in 2025, regarding costs incurred by Spencer in previous years.
The Company had an agreement with an entity which is related to the main shareholder of the Company to provide it with revolving loans up to $2,000 0 , $0 and $21 , respectively.
As of December 31, 2024, the Company included a liability for a purchase of shares from certain directors and officers of the Company in the amount of $1,518 (see note 17). The purchase transaction was completed in July 2025.
F - 37
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Letters of Credit and Guarantees
As of December 31, 2025, the Company has $3,152 in outstanding letters of credit and guarantees. Letters of credit and guarantees are being secured either by the same amounts in restricted cash with commercial banks (see note 2) or with deposits provided to customers which serve as cash collateral in order to guarantee the performance and quality of services provided to the customers.
As of December 31, 2025, the Company has commercial guarantees of €1,700 ($1,994 as of December 31, 2025) which is not secured by restricted cash or deposits provided to a customer. The guarantee is part of an agreement between the Company and one of its customers to guarantee the performance and quality of the services provided to that customer.
Legal Proceedings
General
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. These claims are primarily related to grievances filed by current and former employees for unfair labor practices or discrimination and for passenger aviation claims. Management recognizes a liability for any matter when the likelihood of an unfavorable outcome is deemed to be probable and the amount is able to be reasonably estimated. Management has concluded that such claims, in the aggregate, are not reasonably possible to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.
Inquiry Proceedings
In June 2021, a minority shareholder initiated proceedings by requesting the Enterprise Chamber of the Amsterdam Court of Appeal to order an inquiry into seven aspects of the policy and affairs of the Company that have been previously disclosed by the Company in its periodic filings with the SEC for the fiscal years 2020 and 2019. In June 2022, the Enterprise Chamber rendered its judgment and (i) it accepted the Company’s defense on all items except two and ordered an investigation into those two aspects of the policy and affairs of the Company, being (a) the issuance of shares to directors and certain employees at USD 0.40 in May 2019 and (b) the adjustment of the conversion price under a convertible shareholder loan to USD 0.40 in May 2019, and (ii) appointed an investigator for this purpose.
Following the filing of the investigation report with the Enterprise Chamber in November 2023, the minority shareholder filed three new requests with the Enterprise Chamber, including a request to establish mismanagement on the basis of the investigation report and to order certain definitive measures at the Company. Each of these requests were dismissed in full.
As part of the above procedures the Company committed in 2023 to repurchase the shares issued under the May 2019 issuance for the same price they were issued, thereby undoing the issuance. As of December 31, 2024 the Company included a liability for this purchase in the amount of $1,518 0.45 to EUR 0.01 per share in order to be able to purchase the shares. Consequently, the authorized capital of the Company was reduced to a total of EUR 1,500 resulting in a decrease of $18,760 in common stock and increase of the same amount in additional paid-in capital. The nominal value per share has been reduced as referred to in Section 2:99 paragraph 1 of the Dutch Civil Code without repayment to the shareholders. The Company concluded that the capital reduction did not result a value transfer to or from the shareholders. The Company recorded such capital reduction by a corresponding reduction in the common stock and an increase to additional paid-in capital. The purchase transaction was completed in July 2025.
In February 2025, the minority shareholder appealed the Enterprise Chamber’s judgment on its request to establish mismanagement on the basis of the investigation report and to order certain definitive measures at the Company to the Dutch Supreme Court. In March 2026 the Dutch Supreme Court dismissed the minority shareholder’s appeal. With the Supreme Court’s decision, the Enterprise Chamber’s judgment is now final, and the proceedings have been resolved in the Company’s favor.
F - 38
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 17 – COMMITMENTS AND CONTINGENCIES (CONTINUED)
Legal Proceedings (continued)
Class Action Lawsuit
AU10TIX is currently named as a defendant in a class action lawsuit pending in U.S. federal court (Case No. 1:24-cv-08122, U.S. District Court for the Northern District of Illinois). The complaint asserts two claims. First, the plaintiff alleges that AU10TIX violated the Illinois Biometric Privacy Act, 740 ILCS 14/1 et seq. by collecting biometric information without obtaining necessary consent. Second, the plaintiff alleges that AU10TIX violated the Illinois Driver’s License Act, 625 ILCS 5/6-117.1 by using end-user driver’s licenses for machine learning to improve AU10TIX’s products. The plaintiff seeks to represent two classes consisting of Illinois residents in relation to both claims. AU10TIX denies that it violated either statute. On February 13, 2025, Au10tix filed a motion seeking dismissal of all claims.
Agency Agreement
In April 2013, prior to the purchase of one of the current subsidiaries in Europe, the Company entered into an agency agreement with a third party to assist it with this transaction. According to the agreement, in the event that the operations in that country are sold in the future, the third-party agent is entitled to a payment of €3,000 ($3,519 as of December 31, 2025).
NOTE 18 – SEGMENT AND GEOGRAPHICAL INFORMATION
The Company operates in three reportable segments: (a) airport security (b) other aviation related services and (c) authentication technology. The Company also incurs general corporate expenses and costs which are not allocated to the reportable business segments but have been included in the “unallocated corporate” component which does not generate revenue and contains primarily non-operational expenses. The airport security segment includes the I-SEC International group. The airport security segment provides security services primarily to airlines and airport authorities in Europe. The other aviation related services segment includes Huntleigh USA. The other aviation related services segment provides various services to airlines within airports in the United States of America. The authentication technology represents the AU10TIX Technologies group. The authentication technology segment provides authentication services to financial and other companies, predominantly in the United States of America. The Company’s operating segments are the same as its reportable segments.
The Company’s Managing Directors and CFO are our chief operating decision makers (CODMs), who are the highest level of management responsible for assessing the Company’s overall performance. The CODMs allocate resources to and assess the performance of each operating segment using information about the operating segment's revenue and income (loss) from operations. Our CODMs do not evaluate operating segments using asset or liability information.
The CODMs consider monthly results and use that information when making decisions about the allocation of operating and capital resources to each segment. The CODMs are regularly provided with disaggregates expense information at the segment level which includes the corporate expenses, which are included in ‘other segment items’ in the following tables reconciliation purposes.
Revenue and costs and expenses are directly attributed to the segments they belong. All inter-segment transactions are eliminated in consolidation. The accounting policies of the segments are the same as the accounting policies of the Company as a whole.
F - 39
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 18 – SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
The following table sets forth our segment information of revenue, labor costs, depreciation and amortization, other costs and expenses, net income (loss), goodwill and total assets:
The operating results of these reportable segments are regularly reviewed by the chief operating decision.
|
Unallocated Corporate
|
Airport
Security
|
Other
Aviation Related
Services
|
Authentication
Technology
|
Total
|
||||||||||||||||
|
Year ended December 31, 2025:
|
||||||||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Labor costs (1)
|
|
|
|
|
|
|||||||||||||||
|
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
|
Other costs and expenses
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||
|
Goodwill
|
|
|
|
|
|
|||||||||||||||
|
Total assets
|
|
|
|
|
|
|||||||||||||||
|
Year ended December 31, 2024:
|
||||||||||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Labor costs (1)
|
|
|
|
|
|
|||||||||||||||
|
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
|
Other costs and expenses
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
|
||||||||||||
|
Goodwill
|
|
|
|
|
|
|||||||||||||||
|
Total assets
|
|
|
|
|
|
|||||||||||||||
|
Year ended December 31, 2023:
|
||||||||||||||||||||
|
Revenue
|
$
|
|
$
|
|
|
$
|
|
$
|
|
|||||||||||
|
Labor costs (1)
|
|
|
|
|
|
|||||||||||||||
|
Depreciation and amortization
|
|
|
|
|
|
|||||||||||||||
|
Other costs and expenses
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
(
|
)
|
|
|
|
|
||||||||||||||
|
Goodwill
|
|
|
|
|
|
|||||||||||||||
|
Total assets
|
|
|
|
|
|
|||||||||||||||
| (1) |
Labor costs includes employee payroll, share-based compensation, bonus, and employee benefits, insurances and other.
|
The following table sets forth, for the periods indicated, revenue generated from customers by geographical area based on the geographical location of the customer’s invoicing address:
|
Year Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Germany
|
$
|
|
$
|
|
$
|
|
||||||
|
Spain
|
|
|
|
|||||||||
|
The Netherlands
|
|
|
|
|||||||||
|
United States
|
|
|
|
|||||||||
|
Other countries
|
|
|
|
|||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
||||||
F - 40
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
NOTE 18 – SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
The following table sets forth, for the periods indicated, property and equipment, net of accumulated depreciation and amortization, by country:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Germany
|
$
|
|
$
|
|
||||
|
Spain
|
|
|
||||||
|
The Netherlands
|
|
|
||||||
|
United States
|
|
|
||||||
|
Other countries
|
|
|
||||||
|
Total property and equipment, net
|
$
|
|
$
|
|
||||
Property and equipment, net, in other countries include $1,438 and $1,479 property and equipment in Israel, as of December 31, 2025 and 2024, respectively.
F - 41
ICTS INTERNATIONAL N.V. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE
(In thousands, except share data)
FINANCIAL STATEMENT SCHEDULE
(In thousands, except share data)
Valuation and Qualifying Accounts
|
Beginning
of year |
Charges
to Costs and Expenses |
Charges
to other accounts |
Deductions
|
End of
Year |
||||||||||||||||
|
Allowance for credit losses (1):
|
||||||||||||||||||||
|
Year ended December 31, 2023
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
|
Year ended December 31, 2024
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
|
Year ended December 31, 2025
|
$
|
|
|
(
|
)
|
|
$
|
|
||||||||||||
|
Allowance for net deferred tax assets:
|
||||||||||||||||||||
|
Year ended December 31, 2023
|
$
|
|
|
|
|
$
|
|
|||||||||||||
|
Year ended December 31, 2024
|
$
|
|
|
|
|
$
|
|
|||||||||||||
|
Year ended December 31, 2025
|
$
|
|
|
|
|
$
|
|
|||||||||||||
(1) Write-off net of recoveries for the allowance for credit losses.
F - 42