We are a leader in
additively manufactured electronics, printed electronics and micro additive manufacturing. We believe our flagship proprietary
DragonFly® IV system serves cross-industry High-Performance-Electronic-Devices (Hi-PEDs®) fabrication needs by
simultaneously depositing proprietary conductive and dielectric substances, while integrating in-situ capacitors, antennas, coils,
transformers, and electromechanical components. We have been actively developing our additive manufacturing technology since 2014.
With our unique additive manufacturing technology for additively manufactured electronics, we are targeting the growing market for
smart electronic devices that rely on printed circuit boards, connected devices, radio frequency, or RF, components and antennas,
sensors, and smart products, including Internet of Things (IoT).
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
A. [Removed and reserved]
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
You
should carefully consider the risks described below, together with all of the other information in this annual report on Form 20-F. The
risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial may also materially and adversely affect our business operations. If any of these risks actually occurs, our business
and financial condition could suffer and the price of our ADSs could decline.
Summary
of Risk Factors
Risks
Related to Our Financial Condition and Capital Requirements
| ● | We
are investing significant resources in research and development of our products and have a limited operating history on which to assess
the prospects for our business, have incurred losses since the date of inception of Nano Dimension Technologies Ltd., and anticipate
that we will continue to incur significant losses until we are able to successfully commercialize our products; |
| ● | We
have generated limited revenues from the sale of our current products and may never be profitable; |
| ● | Our
non-financial assets may continue to lead to significant impairments in the future. |
Risks
Related to Our Business and Industry
| ● | We
depend on the commercial success of our DragonFly IV system and ink products, as well as the commercial success of other products sold
by our subsidiaries, and we may not be able to successfully scale up their commercialization; |
| ● | We
may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems
in response to changing technology and end-user needs; |
| ● | We
may not be able to successfully manage our planned growth and expansion; |
| ● | We
face business disruption and related risks resulting from the recent outbreak of COVID-19, which could have a material adverse effect
on our business and results of our operations; |
| ● | We
have been engaged, and continue to engage, in mergers and acquisitions to diversify or expand our business, which may pose risks to our
business and dilute the ownership of our existing shareholders, and we may not realize the anticipated benefits of these mergers or acquisitions. |
Risks
Related to Our Intellectual Property
| ● | If
we are unable to obtain and maintain effective patent rights for our products, we may not be able to compete effectively in our markets.
If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used to compete
against us; |
| ● | If
we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets; |
| ● | We
gave been subject, and may in the future be subject to further claims that our employees, consultants, or independent contractors have
wrongfully or unavoidably used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed
alleged trade secrets of their former employers. |
Risks
Related to the Ownership of the ADSs or our Ordinary Shares
| ● | As
a “foreign private issuer” we follow certain home country corporate governance practices instead of otherwise applicable
SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S.
issuers. |
Risks
Related Israeli Law and Our Operations in Israel
| ● | Our
operations are subject to currency and interest rate fluctuations; |
| ● | Provisions
of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or acquisition
of, our company, which could prevent a change of control, even when the terms of such transaction are favorable to us and our shareholders; |
| ● | Our
headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political,
economic and military instability in Israel; |
| ● | We
received Israeli government grants for certain of our research and development activities. The terms of those grants may require us to
pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may
be required to pay penalties in addition to repayment of the grants. |
Risks
Related to Our Financial Condition and Capital Requirements
We
are investing significant resources in research and development of our products and have a limited operating history on which to assess
the prospects for our business, have incurred significant losses since the date of inception of Nano Dimension Technologies Ltd., and
anticipate that we will continue to incur significant losses until we are able to successfully commercialize our products.
We
have been operating as a development-stage company since August 25, 2014 and have a limited operating history on which to assess the
prospects for our business, have incurred significant losses, and anticipate that we will continue to incur significant losses for the
foreseeable future.
Since
the date of inception of Nano Dimension Technologies Ltd., or the Subsidiary, and as of December 31, 2021, we have incurred net losses
of approximately $309 million.
Since
the date of the Merger, we have devoted substantially all of our financial resources to develop our products and in our acquisitions.
To date, we have generated limited revenues from the sale and lease of our products. Since the Merger, we have financed our operations
primarily through the issuance of equity securities. The amount of our future net losses and our ability to finance our operations will
depend, in part, on completing the development of our products, the rate of our future expenditures, our ability to generate significant
revenues from the sales of our products and our ability to obtain funding through the issuance of our securities, strategic collaborations
or grants. We expect to continue to incur significant losses until we are able to generate significant revenues from the sales of our
products. We anticipate that our expenses will increase substantially if and as we:
| ● | continue
the development of our products; |
| ● | establish
a sales, marketing, and distribution infrastructure to successfully commercialize our products; |
| ● | seek
to identify, assess, license, and/or develop other products and subsequent generations of our current products; |
| ● | seek
to acquire other entities; |
| ● | seek
to maintain, protect, and expand our intellectual property portfolio; |
| ● | seek
to attract and retain skilled personnel; and |
| ● | create
additional infrastructure to support our operations as a public company and our product development and planned future commercialization
efforts. |
We
have generated limited revenues from the sale of our current products and may never be profitable.
We
began commercializing our products in the fourth quarter of 2017 and have generated limited revenues since the date of the Merger. Our
ability to generate significant revenues and achieve profitability depends on our ability to successfully complete the development of,
and to commercialize, our products. Our ability to generate future revenue from product sales depends heavily on our success in many
areas, including but not limited to:
| ● | completing
development of our products; |
| ● | establishing
and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products
to support market demand for our products; |
| ● | launching
and commercializing products, either directly or with a collaborator or distributor; |
| ● | addressing
any competing technological and market developments; |
| ● | identifying,
assessing, acquiring and/or developing new products; |
| ● | negotiating
favorable terms in any collaboration, licensing or other arrangements into which we may enter; |
| ● | maintaining,
protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and |
| ● | attracting,
hiring and retaining qualified personnel. |
Our
non-financial assets may continue to lead to significant impairments in the future.
We
regularly review our non-financial assets, including intangible assets, goodwill and property, plant and equipment, for impairment. Goodwill
is subject to impairment review on an annual basis and whenever potential impairment indicators are present. In addition, we also review
our cash-generating units, or CGUs, for impairment whenever events or changes in circumstances (triggering events) indicate that the
carrying amount of such CGUs may not be recoverable. The amount of goodwill, intangible assets and property, plant and equipment on our
consolidated balance sheet may increase following acquisitions or other collaboration agreements. Changes in market conditions or other
changes in the future outlook of value may lead to further impairments in the future.
The
market price of our ADSs has been, and may continue to be, highly volatile, and such volatility could cause the market price of our ADSs
to decrease and could cause you to lose some or all of your investment in our ADSs.
During
2021, the market price of our common stock fluctuated from a high of $16.72 per share to a low of $3.76 per ADS, and our share price
continues to fluctuate. The market price of our ADSs may continue to fluctuate significantly in response to numerous factors, some of
which are beyond our control, such as:
| ● | our
ability to grow our revenue and customer base; |
| ● | the
announcement of new products or product enhancements by us or our competitors; |
| ● | variations
in our and our competitors’ results of operations; |
| ● | successes
or challenges in any future collaborative, licensing, or other arrangements or alternative funding sources; |
| ● | developments
in the additively manufactured electronics (AME) / printed electronics (PE) industries; |
| ● | future
issuances of ADSs or other securities; |
| ● | the
addition or departure of key personnel; |
| ● | announcements
by us or our competitors of acquisitions, investments or strategic alliances; and |
| ● | general
market conditions and other factors, including factors unrelated to our operating performance and the effects of the COVID-19 pandemic. |
These
and other market and industry factors may cause the market price and demand for our ADSs to fluctuate substantially, regardless of our
actual operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect
the liquidity of our ADSs. In addition, the stock market in general, and technology-based companies in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In
the past, when the market price of a security has been volatile, holders of that security have sometimes instituted securities class
action litigation against the issuer. If any of the holders of our ADSs were to bring such a lawsuit against us, we could incur substantial
costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse
determination in litigation could also subject us to significant liabilities.
Risks
Related to Our Business and Industry
We
depend on the commercial success of our DragonFly IV system and ink products, as well as the commercial success of other products sold
by our subsidiaries, and we may not be able to successfully scale up their commercialization.
We
have invested the majority of our efforts and financial resources in the research and development of our products. As a result, our business
is entirely dependent on our ability to successfully commercialize our DragonFly IV system and ink products. In the fourth quarter of
2017, we initiated commercial sales of our DragonFly system and in November 2021 we launched our DragonFly IV system and FLIGHT software
platform. We cannot assure you that our commercialization efforts will lead to meaningful sales of our products.
We
may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems
in response to changing technology and end-user needs.
The
markets in which we operate are subject to rapid and substantial innovation and technological change, mainly driven by technological
advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Our ability to compete in
the 3D printing and electronics production markets will depend, in large part, on our future success in enhancing our existing products
and developing new 3D printing systems that will address the increasingly sophisticated and varied needs of prospective end-users, and
respond to technological advances and industry standards and practices on a cost-effective and timely basis or otherwise gain market
acceptance.
It
is likely that new systems and technologies that we develop will eventually supplant our existing systems or that our competitors will
create systems that will replace our systems. As a result, any of our products may be rendered obsolete or uneconomical by our or others’
technological advances.
We
may not be able to successfully manage our planned growth and expansion.
We
expect to continue to make investments in our DragonFly IV system and our related ink products. We are also expecting to develop additional
3D printers in order to deliver environmentally responsible and economically efficient solutions for industry 4.0. We expect that our
annual operating expenses will continue to increase as we invest in sales and marketing, research and development, manufacturing and
production infrastructure, and develop customer service and support resources for future customers. Our failure to expand operational
and financial systems timely or efficiently could result in operating inefficiencies, which could increase our costs and expenses more
than we had planned and prevent us from successfully executing our business plan. We may not be able to offset the costs of operation
expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and contract manufacturers. Additionally,
if we increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, our
financial results will be negatively impacted.
If
our business grows, we will have to manage additional product design projects, materials procurement processes, and sales efforts and
marketing for an increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors
and end customers. If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs,
which may negatively impact our operating results. Additionally, in our efforts to be first to market with new products with innovative
functionality and features, we may devote significant research and development resources to products and product features for which a
market does not develop quickly, or at all. If we are not able to predict market trends accurately, we may not benefit from such research
and development activities, and our results of operations may suffer.
As
our future development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales,
marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our
day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively
manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business
opportunities, failure to deliver and timely deliver our products to customers, loss of employees and reduced productivity among remaining
employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects,
such as the development of additional new products. If our management is unable to effectively manage our growth, our expenses may increase
more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.
Our
operating results and financial condition may fluctuate.
Even
if we are successful in introducing our products to the market, the operating results and financial condition of our company may fluctuate
from quarter to quarter and year to year and are likely to continue to vary due to a number of factors, many of which will not be within
our control. If our operating results do not meet the guidance that we provide to the market place or the expectations of securities
analysts or investors, the market price of our Ordinary Shares will likely decline. Fluctuations in our operating results and financial
condition may be due to a number of factors, including those listed below and those identified throughout this “Risk Factors”
section:
| ● | the
degree of market acceptance of our products and services; |
| ● | the
mix of products and services that we sell during any period; |
| ● | changes
in the amount that that we spend to develop, acquire or license new products, consumables, technologies or businesses; |
| ● | changes
in the amounts that we spend to promote our products and services; |
| ● | changes
in the cost of satisfying our warranty obligations and servicing our installed base of systems; |
| ● | delays
between our expenditures to develop and market new or enhanced systems and consumables and the generation of sales from those products; |
| ● | development
of new competitive products and services by others; |
| ● | difficulty
in predicting sales patterns and reorder rates that may result from a multi-tier distribution strategy associated with new product categories; |
| ● | litigation
or threats of litigation, including intellectual property claims by third parties; |
| ● | changes
in accounting rules and tax laws; |
| ● | the
geographic distribution of our sales; |
| ● | our
responses to price competition; |
| ● | general
economic and industry conditions that affect end-user demand and end-user levels of product design and manufacturing; |
| ● | changes
in interest rates that affect returns on our cash balances and short-term investments; |
| ● | changes
in dollar-shekel exchange rates that affect the value of our net assets, future revenues and expenditures from and/or relating to our
activities carried out in those currencies; and |
| ● | the
level of research and development activities by our company. |
Due
to all of the foregoing factors, and the other risks discussed in this annual report on Form 20-F, you should not rely on quarter-to-quarter
comparisons of our operating results as an indicator of our future performance.
The
markets in which we participate are competitive. Our failure to compete successfully could cause any future revenues and the demand for
our products not to materialize or to decline over time.
We
aim to compete for customers with a wide variety of manufacturers that create a variety of Hi-PEDs®. Our principal current competition
consists of companies that produce prototype Printed Circuit Board, or PCBs, by traditional reductive manufacturing means, which include
etching, pressing and drilling. Many of these companies have extensive track records and relationships within the electronics industry.
While we are not aware of any other company that currently offers an in-house 3D printer that is capable of printing multilayer electronics
devices, there are a large number of companies engaged in additive manufacturing and 3D printing solutions.
Many
of our current and potential competitors have longer operating histories and more extensive name recognition than we have and may also
have greater financial, marketing, manufacturing, distribution and other resources than we have. Current and future competitors may be
able to respond more quickly to new or emerging technologies and changes in end-user demands and to devote greater resources to the development,
promotion and sale of their products than we can. Our current and potential competitors may develop and market new technologies that
render our existing or future products obsolete, unmarketable or less competitive (whether from a price perspective or otherwise). We
cannot assure you that we will be able to maintain a competitive position or to compete successfully against current and future sources
of competition.
Defects
in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses,
diversion of management time and attention, and damage to our reputation.
Even
if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing,
are not discovered until after a product has been used. This could result in delayed market acceptance of those products, claims from
distributors, end-users or others, increased end-user service and support costs and warranty claims, damage to our reputation and business,
or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims
that could lead to significant expenses as we need to compensate affected end-users for costs incurred related to product quality issues.
This
risk of product liability claims may also be greater due to the use of certain hazardous chemicals used in the manufacture of certain
of our products. In addition, we may be subject to claims that our additive manufacturing systems have been, or may be, used to create
parts that are not in compliance with legal requirements.
Any
claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and
damage to our reputation, and could cause us to fail to retain or attract customers. Currently, we maintain minimal product liability
insurance. Our product liability insurance is subject to significant deductibles and there is no guarantee that such insurance will be
available or adequate to protect against all such claims. Costs or payments made in connection with warranty and product liability claims
and product recalls or other claims could materially affect our financial condition and results of operations.
If
our relationships with suppliers for our products and services, especially with single source suppliers of components of our products,
were to terminate or our manufacturing arrangements were to be disrupted, our business could be interrupted.
We
purchase component parts and raw materials that are used in our DragonFly IV system and ink products from third-party suppliers, some
of whom may compete with us. While there are several potential suppliers of most of these component parts and raw materials that we use,
we currently choose to use only one or a limited number of suppliers for several of these components and materials. Our reliance on a
single or limited number of vendors involves a number of risks, including:
| ● | potential
shortages of some key components; |
| ● | product
performance shortfalls, if traceable to particular product components, since the supplier of the faulty component cannot readily be replaced; |
| ● | discontinuation
of a product on which we rely; |
| ● | potential
insolvency of these vendors; and |
| ● | reduced
control over delivery schedules, manufacturing capabilities, quality and costs. |
In
addition, we require any new supplier to become “qualified” pursuant to our internal procedures. The qualification process
involves evaluations of varying durations, which may cause production delays if we were required to qualify a new supplier unexpectedly.
We generally assemble our systems and parts based on our internal forecasts and the availability of raw materials, assemblies, components
and finished goods that are supplied to us by third parties, which are subject to various lead times. If certain suppliers were to decide
to discontinue production of an assembly, component or raw material that we use, the unanticipated change in the availability of supplies,
or unanticipated supply limitations, could cause delays in, or loss of, sales, increased production or related costs and consequently
reduced margins, and damage to our reputation. If we were unable to find a suitable supplier for a particular component, material or
compound, we could be required to modify our existing products or the end-parts that we offer to accommodate substitute components, material
or compounds.
Discontinuation
of operations at our manufacturing sites could prevent us from timely filling customer orders and could lead to unforeseen costs for
us.
We
currently assemble and test the systems that we sell, and produce consumables for our systems, at a single facility. Because of our reliance
on all of these production facilities, a disruption at any of those facilities could materially damage our ability to supply systems
or consumable materials to the marketplace in a timely manner. Depending on the cause of the disruption, we could also incur significant
costs to remedy the disruption and resume product shipments. Such disruptions may be caused by, among other factors, earthquakes, fire,
flood and other natural disasters. Accordingly, any such disruption could result in a material adverse effect on our revenue, results
of operations and earnings, and could also potentially damage our reputation.
Our
international operations expose us to additional market and operational risks, and failure to manage these risks may adversely affect
our business and operating results.
We
derive a substantial percentage of our sales from international markets. Accordingly, we face significant operational risks from doing
business internationally, including:
| ● | fluctuations
in foreign currency exchange rates; |
| ● | potentially
longer sales and payment cycles; |
| ● | potentially
greater difficulties in collecting accounts receivable; |
| ● | potentially
adverse tax consequences; |
| ● | reduced
protection of intellectual property rights in certain countries, particularly in Asia and South America; |
| ● | difficulties
in staffing and managing foreign operations; |
| ● | laws
and business practices favoring local competition; |
| ● | costs
and difficulties of customizing products for foreign countries; |
| ● | compliance
with a wide variety of complex foreign laws, treaties and regulations; |
| ● | an
outbreak of a contagious disease, such as COVID-19, which may cause us, third party vendors and manufacturers and/or customers to temporarily
suspend our or their respective operations in the affected city or country; |
| ● | tariffs,
trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets;
and |
| ● | being
subject to the laws, regulations and the court systems of many jurisdictions. |
Our
failure to manage the market and operational risks associated with our international operations effectively could limit the future growth
of our business and adversely affect our operating results.
Under
applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors
from benefiting from the expertise of some of our former employees.
We
generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with
us or working for our competitors or clients for a limited period after they cease working for us. We may be unable to enforce these
agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors
from benefiting from the expertise that our former employees or consultants developed while working for us. For example, Israeli courts
have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities
of the former employee will harm one of a limited number of material interests of the employer that have been recognized by the courts,
such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot
demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our
former employees or consultants and our ability to remain competitive may be diminished.
We
are subject to environmental laws due to the import and export of our products, which could subject us to compliance costs and/or potential
liability in the event of non-compliance.
The
export of our products internationally from our production facilities subjects us to environmental laws and regulations concerning the
import and export of chemicals and hazardous substances such as the U.S. Toxic Substances Control Act and the Registration, Evaluation,
Authorization and Restriction of Chemical Substances. These laws and regulations require the testing and registration of some chemicals
that we ship along with, or that form a part of, our systems and other products. If we fail to comply with these or similar laws and
regulations, we may be required to make significant expenditures to reformulate the chemicals that we use in our products and materials
or incur costs to register such chemicals to gain and/or regain compliance. Additionally, we could be subject to significant fines or
other civil and criminal penalties should we not achieve such compliance.
Our
future success depends in part on our ability to retain our executive officers and to attract, retain and motivate other qualified personnel.
We
are highly dependent on Yoav Stern, our Chairman and Chief Executive Officer, Zivi Nedivi, our President, Hanan Gino, our Chief Product
Officer and Head of Strategic M&A, and Zvi Peled, our Chief Operating Officer. The loss of their services without a proper replacement
may adversely impact the achievement of our objectives. Messrs. Stern, Nedivi, Gino, and Peled may leave our employment at any time subject
to contractual notice periods, as applicable. Recruiting and retaining other qualified employees, consultants, and advisors for our business,
including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel
in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be
high. We may not be able to attract and retain personnel on acceptable terms given the competition in the industry in which we operate.
The inability to recruit and retain qualified personnel, or the loss of the services of our executive officers, without proper replacement,
may impede the progress of our development and commercialization objectives. There is no assurance that any equity or other incentives
that we grant to our employees will be adequate to attract, retain and motivate employees in the future. Moreover, certain of our competitors
or other technology businesses may seek to hire our employees.
We
face business disruption and related risks resulting from the COVID-19 pandemic, which has had a material adverse effect on our business
and results of operations.
Our
operations and business have been disrupted and affected by COVID-19. The pandemic has caused states of emergency to be declared in various
countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies
being closed. The COVID-19 has also adversely affected our ability to conduct our business effectively due to disruptions to our capabilities,
availability and productivity of personnel, while we simultaneously attempt to comply with rapidly changing restrictions, such as travel
restrictions, curfews and others. In particular, in November 2021, the Government of Israel announced that non-Israeli residents or citizens,
except for non-nationals whose lives are based in Israel, are not allowed to enter Israel. Simultaneously, the Ministry of Health in
the State of Israel issued guidelines to clarify that, effective from November 29, 2021, a Green Pass will be required for indoor gatherings
of more than 50 people.
Employers
(including us) are also required to prepare and increase as much as possible the capacity and arrangement for employees to work remotely.
In addition, effective November 29, 2021, the U.S. government has restricted travel to the United States from foreign nationals who were
physically present in Botswana, Eswatini, Lesotho, Malawi, Mozambique, Namibia, South Africa, and Zimbabwe during the 14-day period preceding
their entry or attempted entry into the United States. Although to date these restrictions have not impacted our operations, the effect
on our business, from the spread of COVID-19 and the actions implemented by the governments of the State of Israel, the United States
and elsewhere across the globe, may worsen over time.
The
spread of COVID-19 may also result in the inability of our suppliers to deliver supplies to us on a timely basis. In addition, as a result
of COVID-19, our sales and operations, and those of our customers and suppliers, have experienced delays or disruptions, such as difficulty
obtaining components and temporary delay in sales. Although, as of the date of this annual report on Form 20-F, we do not expect any
material impact on our long-term activity, the extent to which COVID-19 impacts our business will depend on future developments, which
are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the
actions to contain COVID-19 or treat its impact, among others. We are actively monitoring the pandemic and we are taking any necessary
measures to respond to the situation in cooperation with the various stakeholders.
We
have been engaged, and will continue to engage, in mergers and acquisitions to diversify or expand our business, which may pose risks
to our business and dilute the ownership of our existing shareholders, and we may not realize the anticipated benefits of these mergers
or acquisition.
As
part of our growth and product diversification strategy, we have engaged in mergers and acquisitions and will continue to evaluate opportunities
to acquire or invest in other businesses or existing businesses, intellectual property or technologies and expand the breadth of markets
we can address or enhance our technical capabilities. For example, we acquired all of the issued and outstanding share capital of DeepCube
Ltd., or DeepCube, and NanoFabrica Ltd., or NanoFabrica, in April 2021, all of the issued and outstanding share capital of Essemtec AG,
or Essemtec, in November 2021, and all of the issued and outstanding share capital of Global Inkjet Systems Ltd., or GIS, in January
2022. Mergers or acquisitions, such as the DeepCube, NanoFabrica, Essemtec and GIS share acquisitions, that we have entered into and
may enter into in the future entail a number of risks that could materially and adversely affect our business, operating and financial
results, including, among others:
| ● | problems
integrating the acquired operations, technologies or products into our existing business and products; |
| ● | diversion
of management’s time and attention from our core business; |
| ● | adverse
effect on our existing business relationships with customers; |
| ● | need
for financial resources above our planned investment levels; |
| ● | failures
in realizing anticipated synergies; |
| ● | difficulties
in retaining business relationships with suppliers and customers of the acquired company; |
| ● | risks
associated with entering markets in which we lack experience; |
| ● | potential
loss of key employees of the acquired company; and |
| ● | potential
write-offs of acquired assets. |
Our
failure to address these risks successfully may have a material adverse effect on our financial condition and results of operations.
Any such acquisition or investment will likely require a significant amount of capital investment, which would decrease the amount of
cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for acquisitions, the
value of our ADSs and the underlying Ordinary Shares may be diluted. If we borrow funds to finance acquisitions, such debt instruments
may contain restrictive covenants that can, among other things, restrict us from distributing dividends. Please refer to “Item
4. Information on the Company—4.A. History and Development of the Company” for further details about the DeepCube, NanoFabrica,
Essemtec and GIS share acquisitions.
Risks
Related to Our Intellectual Property
If
we are unable to obtain and maintain effective patent rights for our products, we may not be able to compete effectively in our markets.
If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others
to compete against us.
Since
October 2014, we have sought patent protection for certain of our products, systems, designs and applications. Our success depends in
large part on our ability to obtain, maintain, monitor and enforce patent and other intellectual property protection in the United States
and in other countries with respect to our proprietary technology and new products.
We
have sought to protect our proprietary position and sustain our competitive advantage by filing patent applications in the United States
and in other countries, where our production and sales take place. Patent prosecution in the United States and the rest of the world
is uncertain, expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and
development output before it is too late to obtain patent protection.
We
have an ever growing portfolio of 116 provisional and non-provisional pending patent applications, with a robust pipeline. These are
filed with the U.S. Patent and Trademark Office, or USPTO, the World Intellectual Property Organization, or WIPO, and various patent
offices around the world, such as China, Japan, Taiwan, Europe, and South Korea. The patent applications, where available, were filed
through the Paris Convention Treaty, or PCT, and nine for which we have issued U.S., Chinese, and South Korean patents, with three more
applications that were indicated as allowed but have not issued yet. We cannot offer any assurances about which, if any of the pending
patent applications will issue, the scope of protection of any such patent or whether any issued patents will be found invalid and/or
unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed
to us after patent issuance could deprive us of rights necessary for the successful commercialization of any new products that we may
develop.
We
have two patents and their continuations and foreign counterparts licensed exclusively from the Hebrew University covering some of our
underlying core technology. To the extent the licensed patents are found to be invalid or unenforceable, we may be limited in our ability
to compete and market our products. The terms of our license with Hebrew University leave full control of any and all enforcement of
the licensed patents with Hebrew University. If Hebrew University elects to not enforce any or all of the licensed patents it could significantly
undercut the value of any of our products, which would materially adversely affect our future revenue, financial condition and results
of operations. Moreover, fluctuating currency rates may create inconsistencies in the royalty payments we have under the license.
Further,
there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate
a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such
patents cover our products, third parties may challenge their validity, enforceability, or scope, which may result in such patents being
narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents
may not adequately protect our intellectual property, provide exclusivity for our new products, or prevent others from designing around
our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact
on our business.
If
we cannot obtain and maintain effective patent rights for our products, we may not be able to compete effectively, and our business and
results of operations would potentially be harmed.
If
we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.
In
addition to the protection afforded by any patents currently owned and that may be granted, historically, we have relied on trade secret
protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes
and helpful devices (jigs) that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult
to monitor and/or enforce and any other elements of our product development processes, that involve proprietary know-how, as well as
information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our
proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific
advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property
by maintaining physical security of our premises and physical and electronic security of our information technology systems, as well
as implementing various operating procedures designed to maintain that integrity. Agreements or security measures may be breached, and
we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known
or be independently discovered by competitors.
We
cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation
of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially
equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual
property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken
to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties
for misappropriating any trade secret.
Intellectual
property rights of third parties could adversely affect our ability to successfully commercialize our products, and we might be required
to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could
be costly or not available on commercially reasonable terms.
It
is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position
may be adversely affected if existing patents or patents resulting from patent applications issued to third parties or other third party
intellectual property rights are held to cover our products or elements thereof, or our manufacturing or uses relevant to our development
plans. In such cases, we may not be in a position to develop or commercialize products or our product candidates unless we successfully
pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with
the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications
that if they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should be
brought and be successful, we may be required to pay substantial damages, be forced to abandon our new products or seek a license from
any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.
It
is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. patent applications
filed before September 29, 2018 and certain U.S. patent applications filed after that date that will not be filed outside the United
States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18
months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority
date. Therefore, patent applications covering our new products or platform technology could have been filed by others without our knowledge.
Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner
that could cover our platform technologies, our new products or the use of our new products. Third party intellectual property right
holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise
resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required
to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays
in pursuing the development of and/or marketing our new products. If we fail in any such dispute, in addition to being forced to pay
damages, we may be temporarily or permanently prohibited from commercializing our new products that are held to be infringing. We might,
if possible, also be forced to redesign our new products so that we no longer infringe the third-party intellectual property rights.
Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources
that we would otherwise be able to devote to our business.
Third-party
claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our
commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing
new products. As our industries expand and more patents are issued, the risk increases that our products may be subject to claims of
infringement of the patent rights of third parties.
Third
parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent
applications with claims to materials, designs or methods of manufacture related to the use or manufacture of our products. There may
be currently pending patent applications that may later result in issued patents that our products may infringe. In addition, third parties
may obtain patents in the future and claim that use of our technologies infringes upon these patents.
If
any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for designs, or
methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product
candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either
case, such a license may not be available on commercially reasonable terms or at all.
Parties
making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop
and commercialize one or more of our products. Defense of these claims, regardless of their merit, would involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement
against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay
royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial
time and monetary expenditure.
Patent
policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of any issued patents.
Changes
in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any
patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may
not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature
often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published
until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention
claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection
of such inventions. Assuming all other requirements for patentability are met, in the United States prior to 2013, the first to make
the claimed invention without undue delay in filing, was entitled to the patent, while outside the United States, the first to file a
patent application is entitled to the patent. Since 2013, the United States has moved to a first to file system. Changes in the way patent
applications will be prosecuted could increase the uncertainties and costs surrounding the prosecution of our patent applications and
the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.
We
may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors
may infringe our intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one
of our new products, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds
for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness
or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent
withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The validity of U.S. patents may also
be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is
unpredictable.
Derivation
proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with
respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related
technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does
not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if
successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated
with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue
our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring
our new products to market.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements
of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, it could have a material adverse effect on the price of our Ordinary Shares.
We
have been subject, and may in the future be subject to further claims that our employees, consultants, or independent contractors have
wrongfully or unavoidably used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed
alleged trade secrets of their former employers.
In
the past, we have been subject to litigation disputes involving the ownership of our intellectual property. In 2015, a claim was filed
in the District Court in Tel-Aviv Jaffa alleging that certain of our officers and employees misappropriated commercial secrets and technology
while employed at a previous employer. While this claim was settled without material effects to our business, we continue to employ individuals
who were previously employed at our competitors or potential competitors. We try to ensure that our employees, consultants, and independent
contractors do not use the proprietary information or know-how of others in their work for us, but we may nevertheless be subject to
claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual
property, including trade secrets or other proprietary information, of any of our employees’ former employers or other third parties.
Litigation may result and be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if
we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and
other employees.
We
may be subject to claims challenging the inventorship of our intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with
respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For
example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing
our products. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to
compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse
effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and
be a distraction to management and other employees.
We
may not be able to protect our intellectual property rights throughout the world.
Filing,
prosecuting, and defending patents on products, processes, and computerized business methods, as well as monitoring their infringement
in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries can be
less restrictive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property
rights to the same extent as federal and state laws in the United States.
Competitors
may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export
otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United
States and our ability to stop that importation may be limited. These products may compete with our products. Future patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets,
and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products in violation
of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could
result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at
risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties
to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may
not be commercially meaningful. Accordingly, our efforts to monitor and enforce our intellectual property rights around the world may
be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Risks
Related to the Ownership of Our ADSs or Ordinary Shares
We
do not anticipate paying any dividends.
No
dividends have been paid on our Ordinary Shares. We do not intend to pay cash dividends on our Ordinary Shares in the foreseeable future,
and anticipate that profits, if any, received from operations will be reinvested in our business. Any decision to pay dividends will
depend upon our profitability at the time, cash available and other relevant factors including, without limitation, the conditions set
forth in the Israeli Companies Law of 1999, or the Companies Law.
As
a “foreign private issuer” we follow certain home country corporate governance practices instead of otherwise applicable
SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S.
issuers.
Our
status as a foreign private issuer also exempts us from compliance with certain SEC laws and regulations and certain regulations of the
Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as
independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required under
the Securities Exchange Act of 1934, as amended, or the Exchange Act, to file current reports and financial statements with the SEC as
frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be
exempt from filing quarterly reports with the SEC. Also, although the Companies Law, requires us to disclose the annual compensation
of our five most highly compensated senior officers on an individual basis, this disclosure is not as extensive as that required of a
U.S. domestic issuer. For example, the disclosure required under Israeli law would be limited to compensation paid in the immediately
preceding year without any requirement to disclose option exercises and vested stock options, pension benefits or potential payments
upon termination or a change of control. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation
FD (Fair Disclosure) promulgated under the Exchange Act.
These
exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
We
may be a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in the current taxable year
or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S. taxpayers that are holders
of our ADSs or Ordinary Shares if we are or were to become a PFIC.
Based
on the projected composition of our income and valuation of our assets, we do not expect to be a PFIC for 2021, and we do not expect
to become a PFIC in the future, although there can be no assurance in this regard. The determination of whether we are a PFIC is made
on an annual basis and will depend on the composition of our income and assets from time to time. We will be treated as a PFIC for U.S.
federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income”
or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive
income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities
and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes
amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a
non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually, and it is difficult
to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend
in part on the market value of our ADSs or Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will
not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds our ADSs or Ordinary Shares,
such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make
an election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess
distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of our ADSs or Ordinary Shares by the
U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the ADSs or Ordinary Shares; (2) the
amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC
would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest
rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would
be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue
Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may
be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held our ADSs or Ordinary Shares
during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject
to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing
the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers
that hold our ADSs or Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers
to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed
in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries
are a PFIC. U.S. taxpayers that hold our ADSs or Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules,
including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election
with respect to our ADSs or Ordinary Shares in the event that we are a PFIC. See “Item 10.E. Taxation — U.S. Federal Income
Tax Considerations — Passive Foreign Investment Companies” for additional information.
ADSs
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
results to the plaintiff(s) in any such action.
The
deposit agreement governing the ADSs representing our Ordinary Shares provides that holders and beneficial owners of ADSs irrevocably
waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including
claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial
waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with
a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated
by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New
York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction
over matters arising under the deposit agreement, applying such law. In determining whether to enforce a jury trial waiver provision,
New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently
prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit
agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or
counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s
demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the
case of the deposit agreement or the ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver
by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws.
If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising
under the deposit agreement or the ADSs, you or such other holder or beneficial owner may not be entitled to a jury trial with respect
to such claims, which may have the effect of limiting and discouraging lawsuits against us and / or the depositary. If a lawsuit is brought
against us and / or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court,
which would be conducted according to different civil procedures and may result in different results than a trial by jury would have
had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature
of the claims, the judge or justice hearing such claims, and the venue of the hearing.
ADS
holders may not have the same voting rights as the holders of our Ordinary Shares and may not receive voting materials in time to be
able to exercise the right to vote.
Holders
of the ADSs are not be able to exercise voting rights attaching to the Ordinary Shares underlying the ADSs on an individual basis. Instead,
holders of the ADSs will only be able to exercise the voting rights attaching to the Ordinary Shares represented by ADSs indirectly by
giving voting instructions to the depositary in accordance with and subject to the provisions of the deposit agreement. Holders of ADSs
may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold their
ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the depositary
will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect
of any such vote. As a result, you may not be able to exercise voting rights and may lack recourse if your ADSs are not voted as requested.
ADS
holders may be subject to limitations on transfer of their ADSs.
ADSs
are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time
when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer
or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary
deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.
ADS
holders may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited
circumstances, they may not receive dividends or other distributions on our Ordinary Shares and they may not receive any value for them,
if it is illegal or impractical to make them available to ADS holders.
The
depositary for the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our Ordinary
Shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions
in proportion to the number of Ordinary Shares your ADSs represent. However, the depositary is not responsible if it decides that it
is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution
to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended, or the Securities
Act, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into
U.S. dollars from foreign currency that was part of a dividend or distribution made in respect of deposited Ordinary Shares may require
the approval or license of, or a filing with, a government or an agency thereof, which may be unobtainable. In these cases, the depositary
may determine not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend
or distribution, including net cash proceeds from the sale of the dividends or distributions in accordance with the terms of the deposit
agreement. We have no obligation to register under U.S. securities laws any ADSs, Ordinary Shares, rights or other securities received
through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares,
rights or anything else to holders of ADSs. In addition, the depositary may withhold from such dividends or distributions its fees and
an amount on account of taxes or other governmental charges. This means that you may not receive the same distributions or dividends
as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, you may not receive any value for such distributions
or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in
the value of the ADSs.
Risks
Related to Israeli Law and Our Operations in Israel
Our
operations are subject to currency and interest rate fluctuations.
We
incur expenses in U.S. dollars and NIS, but our functional currency is the U.S. dollar and our financial statements are denominated in
U.S. dollars. The U.S. dollar is the currency that represents the principal economic environment in which we operate. As a result, we
are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. As a result, we are exposed
to the risk that the U.S. dollar may appreciate relative to the NIS, or, if the U.S. dollar instead devalues relative to the NIS, that
the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing of such devaluation may lag behind inflation
in Israel. In any such event, the NIS cost of our operations in Israel would increase and our dollar-denominated results of operations
would be adversely affected.
Provisions
of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition
of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
Provisions
of Israeli law and our amended and restated articles of association could have the effect of delaying or preventing a change in control
and may make it more difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors,
even if doing so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing
to pay in the future for our ordinary shares. Among other things:
| ● | Israeli
corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company
are purchased; |
| ● | Israeli
corporate law does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a
general meeting of shareholders; |
| ● | our
amended and restated articles of association divide our directors into three classes, each of which is elected once every three years; |
| ● | our
amended and restated articles of association require a vote of the holders of a majority of our outstanding ordinary shares entitled
to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of
a limited number of provisions, such as the provision dividing our directors into three classes, requires a vote of the holders of 70%
of our outstanding ordinary shares entitled to vote at a general meeting; and |
| ● | our
amended and restated articles of association provide that director vacancies may be filled by our board of directors. |
Further,
Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence
does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax
law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including
a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating
companies are restricted. See “Item 10.E. Taxation—Israeli Tax Considerations and Government Programs” for additional
information.
It
may be difficult to enforce a judgment of a United States court against us and our officers and directors in Israel or the United States,
to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.
We
were incorporated in Israel. Most of our executive officers and directors reside outside of the United States, and all of our assets
and most of the assets of these persons are located outside of the United States. Service of process upon us or our non-U.S. resident
directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive
officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult
to assert claims under U.S. securities laws in original actions instituted in Israel, or obtain a judgment based on the civil liability
provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against
us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even
if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law
is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process.
Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters
described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments
rendered against us or our non-U.S. officers and directors.
Moreover,
an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of
judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of
the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that
was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a
court or tribunal in Israel at the time the foreign action was brought.
Our
headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political,
economic and military instability in Israel.
Our
executive offices are located in Israel. In addition, most of our officers and directors are residents of Israel. Accordingly, political,
economic and military conditions in Israel may directly affect our business. Any armed conflicts, political instability, terrorism, cyberattacks
or any other hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners
could affect adversely our operations. Ongoing and revived hostilities in the Middle East or other Israeli political or economic factors,
could harm our operations and solution development and cause any future sales to decrease.
In
addition, instability in the region may lead to deterioration in the political and trade relationships that exist between the State of
Israel and certain other countries. Any armed conflicts, terrorist activities or political instability in the region could adversely
affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with
whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative
arrangements when necessary in order to meet our business partners face to face. Several countries, principally in the Middle East, still
restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel
and Israeli companies if hostilities in Israel or political instability in the region continues or increases. Similarly, Israeli companies
are limited in conducting business with entities from several countries. For instance, in 2008, the Israeli legislature passed a law
forbidding any investments in entities that transact business with Iran. In addition, the political and security situation in Israel
may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their
commitments under those agreements pursuant to force majeure provisions in such agreements.
Our
war, terrorism and political violence insurance covers losses that may occur as a result of events associated with war, malicious damage,
riots, strikes, civil commotion, invasion, acts of foreign enemies, hostilities and terrorism in the sum of NIS 10 million (approximately
$3 million) for any occurrence and in the aggregate. Additionally, the Israeli government currently covers the reinstatement value of
direct damages that are caused by terrorist attacks or acts of war. However, we cannot assure you that this government coverage will
be maintained or that it will sufficiently cover our potential damages in case our war, terrorism and political violence insurance does
not provide sufficient coverage. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed
conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business
with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating
results, financial conditions or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken
against Israel, which could also adversely impact our business.
Finally,
many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until
they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a
military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant
call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could
be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely
affect our business, prospects, financial condition and results of operations.
Your
rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights
and responsibilities of shareholders of U.S. companies.
We
are incorporated under Israeli law. The rights and responsibilities of holders of our Ordinary Shares are governed by our amended and
restated articles of association and the Companies Law. These rights and responsibilities differ in some respects from the rights and
responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law, each shareholder of an Israeli
company has to act in good faith and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward
the Company and other shareholders and to refrain from abusing his or her power in the Company, including, among other things, in voting
at the general meeting of shareholders, on amendments to a company’s articles of association, increases in a company’s authorized
share capital, mergers and certain transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling
shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote
or who has the power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company
has a duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is little
case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
We
received Israeli government grants for certain of our research and development activities. The terms of those grants may require us to
pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may
be required to pay penalties in addition to repayment of the grants.
Our research and development efforts have been financed in part through
royalty-bearing grants in an aggregate amount of approximately $3,843,000 that we received from Israel’s Innovation Authority, or
the IIA, as of March 30, 2022. As of December 31, 2021, our contingent liabilities regarding IIA grants received by us were in an aggregate
amount of $1,988,000. With respect to the royalty-bearing grants we are committed to pay royalties at a rate of 3% to3.5% on sales proceeds
from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing
interest at an annual rate of London Interbank Offered Rate, or LIBOR, applicable to U.S. dollar deposits. The United Kingdom’s
Financial Conduct Authority, or the FCA, which regulates the LIBOR, announced in July 2017 that it will no longer persuade or require
banks to submit rates for LIBOR after 2021. In March 2021, the FCA confirmed that all of the LIBOR settings for Euro and Swiss Francs
and some of the LIBOR settings for Japanese Yen, Sterling and U.S. dollars will cease in December 2021 and the remainder of the LIBOR
settings for U.S. dollars will cease in June 2023. In September 2021, the Bank of Israel, which determines annual interest rates, published
a directive which stated that annual interest at a variable rate linked to the LIBOR rate for loans in U.S. dollars will be replaced by
the Secured Overnight Financing Rate, or the SOFR, in June 2023. While it is not currently possible to determine precisely whether, or
to what extent, the replacement of LIBOR with SOFR would affect us, the implementation of SOFR may increase our financial liabilities
to the IIA. This reform may cause such liabilities to perform differently than in the past, or to have consequences which cannot be predicted.
Any such consequence could have a material adverse effect on us. Management continues to monitor the status and discussions regarding
SOFR. We are not yet able to reasonably estimate the expected impact.
Regardless
of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Industrial Research and
Development Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company
develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such
know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without
the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer to third
parties inside or outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies.
We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to
transfer technology or development out of Israel.
The
transfer of IIA-supported technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the
value of the transferred technology or know-how, our research and development expenses, the amount of IIA support, the time of completion
of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell
or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with
respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction
involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction)
may be reduced by any amounts that we are required to pay to the IIA.
General
Risk Factors
Raising
additional capital would cause dilution to our existing shareholders, and may affect the rights of existing shareholders.
We
may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic
and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities,
your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights
as a holder of our ADSs.
Significant
disruptions of our information technology systems or breaches of our data security could adversely affect our business.
A
significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with
authorized or unauthorized access could negatively impact our business and operations. We could also experience business interruption,
information theft and/or reputational damage from cyber-attacks, which may compromise our systems and lead to data leakage either internally
or at our third party providers. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks.
Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing
compromise and/or disruption of our information technology systems and related data.
We
may be subject to securities litigation, which is expensive and could divert management attention.
In
the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action
litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs
and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation
could also subject us to significant liabilities.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they
adversely change their recommendations or publish negative reports regarding our business or our ADSs or Ordinary Shares, and the price
and trading volume of our ADSs or Ordinary Shares could decline.
The
trading market for our ADSs or Ordinary Shares will be influenced by the research and reports that industry or securities analysts may
publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any
assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation
regarding our ADSs or Ordinary Shares, or provide more favorable relative recommendations about our competitors, the price of our ADSs
or Ordinary Shares would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our ADSs or
Ordinary Shares to decline.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Our
legal and commercial name is Nano Dimension Ltd. We were incorporated in the State of Israel in December 1960, and are subject to the
Companies Law. From March 7, 2014, until August 25, 2014, we did not have any business activity, excluding administrative management.
On August 25, 2014, we closed the Merger with the Subsidiary, whereby we acquired 100% of the share capital of the Subsidiary. The Subsidiary
was incorporated in the State of Israel in July 2012. The Merger resulted in a change of control whereby the management of the Company
was replaced by the management of the Subsidiary.
On
April 23, 2021, we acquired all of the issued and outstanding share capital of DeepCube. DeepCube technology applies numerous patented
breakthrough algorithms to improve data analysis and deployments of advanced Deep Learning-based artificial intelligence systems. The
machine learning application includes faster and more accurate training of deep learning models, and drastically improves inference performance
and real-time metrics. Its proprietary framework can be deployed on top of any hardware, especially fitting edge devices and real-time
applications. DeepCube’s artificial intelligence/machine learning/deep learning solutions demonstrate 10 times speed improvements
and memory reduction, making it the only technology which allows efficient deployment of deep leaning models on edge devices and for
real-time applications. We are currently in the process of merging DeepCube with the Subsidiary.
On
April 26, 2021, we acquired all of the issued and outstanding share capital of NanoFabrica. NanoFabrica is a prominent player in the
field of precision digital manufacturing. Its industrial additive manufacturing systems have an unprecedented micron-resolution with
ultra-fine features, details, accuracy, and precision – enabled by the innovative micro adaptive projection technology. NanoFabrica
brings the power of additive manufacturing to applications that require high precision, overlapping our typical target markets of Nano
Dimension, such as aerospace, aviation, high-end electronics and automotive, medical, optics, research, education and more. NanoFabrica’s
technology and machines are designed to enable digital mass manufacturing of precise and complex parts. We are currently in the process
of merging NanoFabrica with the Subsidiary.
On
November 2, 2021, we acquired all of the issued and outstanding share capital of Essemtec. Essemtec is a leader in adaptive highly flexible
surface mount technology, or SMT, pick-and-place equipment, sophisticated dispenser suitable for both high-speed and micro-dispensing,
and intelligent production material storage and logistic system. Its products are equipped with a sophisticated software package which
makes extensive and efficient material management possible.
On
January 4, 2022, we acquired all of the issued and outstanding share capital of GIS. GIS is a leading developer and supplier of high-performance
control electronics, software, and ink delivery systems. GIS is well known for inventing and delivering state-of-the-art 2D and 3D printing
inkjet hardware and unique operating software. GIS has more than 130 customers around the world with a focus on high-value, precision-oriented
applications such as specialized direct-to-container packaging, printed electronics functional fluids, and 3D printing, which can all
be controlled by the proprietary software system.
ADSs
representing our Ordinary Shares currently trade in the United States on the Nasdaq Capital Market under the symbol “NNDM.”
Our
registered office and principal place of business is located at 2 Ilan Ramon St., Ness Ziona 7403635, Israel. Our telephone number in
Israel is +972 -73-7509142.
Our
website address is www.nano-di.com. The information contained on our website or available through our website is not incorporated by
reference into and should not be considered a part of this annual report on Form 20-F, and the reference to our website in this annual
report on Form 20-F is an inactive textual reference only. The SEC also maintains an Internet website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will
also be available to the public through the SEC’s website at www.sec.gov. Nano USA is our agent in the United States, and its address
is 13798 NW 4th Street, Suite 315, Sunrise, FL 33325.
We
are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer
also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including
the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight
of the nomination of directors and executive compensation. In addition, we will not be required to file annual, quarterly and current
reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.
Our
cash used in investing activities for 2019, 2020 and 2021 amounted to $641,000, $86,763,000 and $496,680,000, respectively. The cash
was used primarily for investment in bank deposits and purchases of fixed assets. Our purchases of fixed assets primarily include buildings,
leasehold improvements, computers, and equipment used for the development of our products, and we financed these expenditures primarily
from cash on hand.
B. Business Overview
We
are a leader in additively manufactured electronics, printed electronics and micro additive manufacturing. We believe our flagship proprietary
DragonFly IV system serves cross-industry Hi-PEDs® fabrication needs by simultaneously depositing proprietary conductive and dielectric
substances, while integrating in-situ capacitors, antennas, coils, transformers, and electromechanical components. We have been actively
developing our additive manufacturing technology since 2014. With our unique additive manufacturing technology for additively manufactured
electronics, we are targeting the growing market for smart electronic devices that rely on printed circuit boards, connected devices,
RF components and antennas, sensors, and smart products, including IoT.
We
also develop complementary production equipment for Hi-PEDs® and PCB assembly (Puma, Fox, Tarantula, Spider etc.). The core competitive
edge for this technology is in its adaptive, highly flexible surface-mount technology pick-and-place equipment, materials dispenser suitable
for both high-speed dispensing and micro-dispensing, as well as an intelligent production material storage and logistics system.
Serving
similar users of Hi-PEDs®, Nano Dimension’s Fabrica 2.0 micro additive manufacturing system enables the production of microparts
based on a Digital Light Processor engine that achieves repeatable micron levels resolution. The Fabrica 2.0 is engineered with a patented
array of sensors that allows a closed feedback loop, using proprietary materials to achieve very high accuracy while remaining a cost-effective
mass manufacturing solution. It is used in the areas of micron-level resolution of medical devices, micro-optics, semiconductors, micro-electronics,
micro-electro-mechanical systems, microfluidics, and life sciences instruments.
Additive
manufacturing industry analysts predict that 3D printed electronics is likely to be the next high-growth application for product innovation,
with its market size forecasted to reach $2.4 billion by 2025 based on a market study.
Traditionally,
electronic circuitry is developed through a back-and-forth process that involves design, trial and error and third-party manufacturer
outsourcing. We believe that the traditional process for developing complex and advanced electronics is outdated. Until now, additive
manufacturing technology has been unable to offer a solution for the electronics market, mainly because of the difficulty of printing
multiple layers of electrically conductive and dielectric materials at a high resolution that is suitable for professional electronics.
We are the first to develop an integrated solution for additive manufacturing of electronics. We are disrupting, leading, and defining
how electronics are made.
Our
DragonFly IV precision system for additive manufacturing of printed electronics uses our proprietary liquid nano-conductive and dielectric
inks that are designed specifically to print multilayer circuitry and 3D electronics. We believe that our DragonFly IV precision system
will obviate the reliance on third-party manufacturers during the development, short run manufacturing and prototyping of smart connected
products, such as sensors, conductive geometries, antennas and RF components, professional multilayer PCBs and molded connected devices
for rapid prototyping and custom additive manufacturing.
In
2021, 2020 and 2019, we increased our sales and commercialization efforts and sold 36 systems worldwide during those years. As a part
of scaling our operations, we have offices spanning across the United States, Hong Kong, Germany and Israel. The regional offices are
designed to accelerate the adoption of additive manufacturing for electronics development and serve as customer and training facilities
and sales support centers.
Industry
Overview
Additive
manufacturing of 3D Printed electronics as part of Industry 4.0
Additive
manufacturing or 3D printing in general is a process of making a three-dimensional solid object from a digital model. 3D printing is
achieved using an additive process, where successive layers of material are laid down in different shapes. 3D printing is also considered
distinct from traditional machining techniques, which mostly rely on the removal of material by methods such as cutting or drilling (subtractive
processes).
We
perceive that additive manufacturing is at a defining inflection point by worldwide commitment to industry 4.0 transformation by companies
large and small. To underscore the potential of additive manufacturing, several Fortune 500 and other tier one companies operating across
a number of distinct industries have made substantial investments to decisively enter the additive manufacturing market. Examples include
leading companies in aerospace and defense, dental/cosmetics and apparel and footwear. With the production world increasingly depending
on additive manufacturing, we see exciting new printing technologies in metal and in liquid-polymers.
The
industry 4.0 manufacturing revolution includes the electrification of products across multiple industries and refers to the connectivity,
the sensors and electronic circuitry which are crucial in every product, from satellites to sneakers, smart cars and IoT devices. This
electrification is the horizon of Nano Dimension and that is where we elevate industry 4.0 – by making additive manufacturing complete
with the 3D printing of smart products made digitally. We believe that fully 3D printed smart connected products are the next phase of
industry 4.0.
Traditional
Printed Circuit Boards (“PCB”)
A
conventional PCB is a board containing a pattern of conducting material, such as copper, which becomes an electrical circuit when electrical
components are attached to it. It is the basic platform used to interconnect electronic components and can be found in most electronic
products, including computers and computer peripherals, communications equipment, cellular phones, high-end consumer electronics, automotive
and aeronautical components and medical and industrial equipment. Conventional PCBs are more product-specific than other electronic components
because generally they are unique for a specific electronic device or appliance. Conventional PCBs can be classified as single-sided,
double-sided and multilayer boards.
A
multilayer electronic circuit contains two or more different conductive layers, while an older single-layer circuit contains only one
layer of conductors. In the past, in inexpensive circuits, there were single or dual layer circuits. Advanced circuits, which are required
for modern products (such as mobile phones, computer cards and more), contain advanced multilayer circuits with a much larger number
of layers. Modern electronics have become more complex and often contain thousands of connections between various components of the same
electronic circuit. In order to enable this complexity in a limited area and to prevent electronic short circuits, the connections are
divided into a number of layers that are connected within the same multilayer electronic circuit. Our DragonFly IV system is designed
to efficiently print prototype PCBs, circuits and antennas that conform to the requirements of modern complex electronics.
One
of the main issues with the traditional process of PCB prototype development is the outsourced manufacturing delay. Modern and advanced
PCBs are complex and are often comprised of more than ten layers. As a general rule, the time for manufacturing depends on the complexity
and number of layers that a PCB contains. Consequently, the time it takes to receive an advanced PCB prototype from a third party manufacturer
may reach several weeks. While the life cycle of modern products is shortening, the need for rapid prototyping increases. Our DragonFly
IV system offers a solution to the pain of a slow time-to-market turnaround of advanced PCB prototypes, and enables developers of PCBs
the freedom to innovate and painlessly employ an efficient trial-and-error process on a day to day basis.
Another
issue with the traditional process of PCB prototyping is confidentiality. The usage of outsource services in order to produce a PCB prototype
forces the developer to share the PCB design files of a future product months before the product is expected to reach the market. Our
DragonFly IV system is intended to be an in-house solution to this issue.
Market
Opportunity
The
future of the 3D printed electronics market looks promising with opportunities in IoT connected products, communication, computer/peripheral,
and defense, automotive industries and in aerospace. We estimate market potential by looking at several market references including the
3D printed electronics market, the total PCB market, and PCB software design market. The current industry practices present challenges
to PCB manufacturing, including poor energy efficiency, slow production time and high costs and long time to get to market and potential
risks for IP theft.
IDTechEX
market research predict that the total market for 3D printed electronics with be worth $3 billion by 2030 and will be dominated by professional
PCB. Technavio’s market research analysts predict that the total PCB market will grow from 2021 at a compound annual growth rate,
or CAGR, of more than 3.60% by 2026. Other analysts estimate that the PCB market will reach an estimated $72.6 billion by 2022.
Within
the total PCB market is the more specific market of PCB design software. We believe that many users of design software would benefit
from the use of an in-house additive manufacturing system. Future Market Insights forecasts the global PCB design software market to
increase at a 14.9% CAGR during 2022 to 2029, and reach $7.92 billion in revenues by the end of 2029.
Additive
manufacturing industry analysts predict that 3D printed electronics is likely to be the next high-growth application for product innovation,
with its market size forecasted to reach approximately $2.4 billion by 2025. Many industry leaders expect the 3D printed electronics
industry to expand quickly as manufacturing companies and consumer industries discover new methods and applications for 3D printed electronic
technology. The chart below gives an indication of the size of the 3D printed electronics market, and illustrates that it is both large
and growing.
Strategy
By
creating our own installed-base of printers that require our own dedicated inks – we are establishing a “Razor and Blades”
business model in which our customers buy the printer first and then continue to purchase the dedicated inks and maintenance over time.
We
market and sell our products and services worldwide, primarily to companies that develop products with electronic components, including
companies in the defense industry, including the U.S. Armed Forces, the automotive sector, consumer electronics, semiconductor, aerospace,
and medical industries and to research institutes. Our primary market is the U.S., though we have also experienced growth in Asia Pacific
and Europe and expect that trend to continue.
Our
goal is to expedite our growth and to further advance our breakthrough technologies and commercialization efforts. To achieve these objectives,
we plan to:
| ● | Increase
sales. We are advancing our commercialization efforts and infrastructure, and allocating more resources to activities executed by our
U.S. and Hong Kong headquarters, including increasing sales manpower. |
| ● | Increase
amount of applications and advanced electronics applicable use cases. In collaboration with our customers, create applications that can
expedite the usage of our products for production grade products and consequently increase our sales. Our main focus is on collaboration
with customers in the fields of automotive, aerospace, medical devices and defense. |
| ● | Form
alliances with industry leaders. We plan to collaborate with companies in the fields of design and manufacturing in order to expedite
the adoption of our technology by the market. |
| ● | Capitalize
on our nano-conductive and dielectric inks, and software technology products. We plan to exploit our inks as supplemental products to
our DragonFly IV system. We also plan to increase the software options and enable levels of licensing that we could monetize. |
Our
strategic growth plan includes the following:
| ● | Accelerated
research and development and product development |
| ● | Accelerated
materials development |
| ● | Customer-centric
Go-to-Market strategy |
| ● | Synergetic
M&A: We are focusing on four types of acquisition targets: |
| 1. | Customer
access- will connect us to our potential customers |
| 2. | Technology-
to advance our AME 3-D printing capabilities |
| 3. | Capital
equipment- for the PCB and Printed Circuit Board Assembly, or PCBA, industries |
| 4. | M&A
which will allow us to apply our deal-learning to the greatest challenges of additive manufacturing |
Products
Our
products currently consist of three main product lines – our DragonFly IV precision system, proprietary ink products and software.
In
November 2021, we introduced our new DragonFly IV printer and FLIGHT software platform. The new DragonFly IV system, combined with FLIGHT
software, delivers new levels of quality, efficiency, and print resolution in the 3D printed electronics sector - providing increased
flexibility to design any 3D geometry and create innovative new products. DragonFly IV is a dielectric and conductive-materials additive
manufacturing system aimed for fabrication of high-performance electronic devices by depositing the proprietary materials simultaneously,
while concurrently integrating in-situ capacitors, antennas, coils, transformers, and electro-mechanical components. Our new FLIGHT software
suite provides a comprehensive first-of-a-kind ability to incorporate electronic computer-aided designs into real 3D mechanical computer-aided
designs, as well as intelligent verification, slicing, and job control solutions. FLIGHT enables the 3D design of electrical and mechanical
features in 3-dimensions while ensuring that the new product designs comply with the system’s requirements and can then proceed
directly to fabrication on the DragonFly IV. In December 2021, we sold the first two DragonFly IV 3D additively manufactured printers,
in addition to the two machines that have completed beta sites processes with other leading customers.
DragonFly
IV Precision System for additive manufacturing of printed electronics
Our
DragonFly IV can print sensors, conductive geometries, RF devices, antennas, professional multilayer PCBs, and molded connected devices
for rapid prototyping and custom additive manufacturing.
Our
DragonFly IV system and specialized materials serve cross-industry Hi-PEDs® fabrication needs by simultaneously depositing proprietary
conductive and dielectric substances, while integrating in-situ capacitors, antennas, coils, transformers, and electromechanical components.
The outcomes are Hi-PEDs® which are critical enablers of autonomous intelligent drones, cars, satellites, smartphones, and in vivo
medical devices. In addition, these products enable iterative development, IP safety, fast time-to-market, and device performance gains
Our
DragonFly IV system is designed to print electronic conductors and dielectric (non-conductive) layers based on a user’s specific
design plan. Our DragonFly IV system uses at least two types of ink (i.e. conductive and dielectric) in order to lay down successive
layers that literally build ready-to-use electronics. The printer receives digital files as input and converts them into print jobs in
order to build the multilayer PCB, sensors, antenna or circuit. No cutting or drilling is required in the process of additive manufacturing
of a multilayer PCB with our DragonFly IV precision system.
Our
DragonFly IV system includes our dedicated and proprietary software suite, which provides a comprehensive first-of-a-kind ability to
incorporate Electronic Computer-Aided, or ECAD, designs into real 3D Mechanical Computer Aided Design, or 3D MCAD, designs, as well as
intelligent verification, slicing, and job control solutions. Our FLIGHT software platform enables the 3D design of electrical and mechanical
features in 3-dimensions while ensuring that the new product designs comply with the system’s requirements and can then proceed
directly to fabrication on the DragonFly IV.
The
FLIGHT Software Suite consists of 3 components:
1-FLIGHT
Plan: Allows designers to develop viable 3D AME using both existing 2D design data, and novel 3D data. Tests show that this reduces the
3D AME design time by up to 10 times.
| ● | Integrates
3D MCAD and ECAD capabilities for 3D Electro-Mechanical design |
| ● | Imports
existing designs from major ECAD systems |
| ● | Enables
the use of customers’ existing design tools |
2-FLIGHT
Check: This application enables design rule checks so that the designs meet the DragonFly IV requirements and are ready for printing.
| ● | Unifies
design rules for ECAD that meet the constraints of DragonFly IV |
| ● | Reduces
design iteration cycles |
3-FLIGHT
Control: Delivers an entirely new pre-production solution that enables concurrent fabrication of both 2D and 3D multi-material Hi- PEDs®,
improving productivity.
| ● | Integrates
system and job management toolsets |
| ● | Supports
new file formats (STL & ODB++) |
| ● | Improves
user experience through better rendering accuracy and user interface |
Additionally,
we are offering different levels of product warranty and after-sales services. We provide dedicated account management services, both
in terms of support and servicing, which are fee or subscription-based.
Our
DragonFly IV system has multiple advantages, including:
| ● | In-house
prototypes and low volume production. Our DragonFly IV system offers its users an efficient, quick, available, accessible and immediate
solution for prototype production of smart products such as encapsulated sensors, antennas, multilayer PCBs and free-form geometry 3D
circuits. Currently, electronics companies and others engaged in the development of products based on PCBs are forced to rely on service
suppliers that manufacture PCBs through a complex and inefficient process. |
Turn-around
of multilayer advanced smart parts can often take weeks and involves significant costs. Also, for electronics in development, several
cycles of prototyping are often necessary until the specs of the final electronic part are created. This means that a developer of a
new electronic product may have to repeat the process of going through a service supplier several times during lab testing – which
may increase cost and slow the momentum of product development.
Our
DragonFly IV system obviates the reliance on external service suppliers and provides electronics companies and others the luxury of an
office-friendly system in their in-house research laboratory with the ability to print prototypes of PCBs as required for electronic
device development – all during a relatively short period of time.
| ● | Information
security and professional secrecy. Contracting with external service suppliers (outsourcing) in order to create prototypes of PCBs during
early stages of the development process of novel electronic devices may unnecessarily compromise the security of sensitive and confidential
information. Currently, however, there is hardly a practical solution. By allowing companies to bring prototype development in-house,
our DragonFly IV system offers a practical solution to this issue. |
| ● | Industry
first. We believe that we are a pioneer and a leader in our industry. We are not aware of any other company in the global electronics
market that currently offers a 3D printer that prints professional grade smart parts. |
As
a part of our NanoFabrica acquisition, we have acquired its 3D additively manufacturing printing system. In August 2021, NanoFabrica
was renamed Fabrica Group and its 3D additively manufacturing printing system renamed Fabrica 2.0 System. In October 2021, we delivered
the Fabrica 2.0 System for micro precision additive manufacturing to a leading Western homeland security agency.
As
a result of our acquisition of Essemtec, we acquired production equipment for placing and assembling electronic components on PCBs. Additionally,
we also acquired adaptive highly SMT pick-and-place equipment, sophisticated dispenser suitable for both high-speed and micro-dispensing,
and intelligent production material storage and logistic system. These products are equipped with a sophisticated software package which
makes extensive and efficient material management possible. The uniqueness of this high-tech solution is that it can be adjusted quickly
and easily to meet wide ranging requirements, they are able to respond to all manner of customer needs, particularly in high-mix-low-volume
production environment.
Supplementary
Products
Our
acquisition of GIS added high-performance control electronics, software, and ink delivery systems to our portfolio of products.
The
foundation of our vision is to provide advanced, digital production technologies for additive manufacturing and 3D printed electronics
that meet the speed and efficiency standards of Industry 4.0 fabrication demands. The acquired ink delivery technology and software are
essential to any ink deposition methodology within our additively manufactured electronics and additive manufacturing solutions and enables
us to improve our technology’s performance and time to market.
Conductive
Ink
We
have developed a uniquely formulated nano-conductive ink for use in our systems. Using advanced nano-technology, we have developed a
liquid ink that contains nano-particles of conductive materials such as silver and copper. Nano-particles are particles between 1 and
100 nanometers in size. By employing this technology, we are able to create a liquid ink that maintains its transport properties and
electric conductivity. The liquid properties of our nano-conductive ink allow us to take advantage of inkjet printing technology for
fast and efficient 3D printing of PCBs.
Our
wet-chemistry approach to making silver nano-particles starts with a raw material compound containing silver which may be acquired from
a number of chemical suppliers. The patented process, licensed from the Hebrew University, is highly efficient and very clean. We can
reliably extract 10 to 100 nanometer sized particles of pure silver. We are able to control the size, shape and dispersion of the silver
nano-particles in accordance with specific printing requirements. We can also formulate inks for a variety of substrates and printing
profiles.
In
addition, in July 2016, we filed a patent application with the USPTO, which is still pending, for the development of a new nano metric
conductive ink, which is based on a unique synthesis. The new nano-particle synthesis further minimizes the size of the silver nano-particles
in our ink products. The new process achieves silver nano-particles as small as 4 nano-meters. We believe that accurate control of nano-particles’
size and surface properties will allow for improved performance of our DragonFly IV system. The innovative ink enables lower melting
temperatures and more complete sintering (fusing of particles into solid conductive trace), leading to an even higher level of conductivity.
The innovative ink has the potential to accelerate printing speeds and save ink for the 3D printing of electronics.
Dielectric
Ink
Our
proprietary dielectric ink is a unique ink that contains dielectric and dielectric materials that are not electrically conductive. The
use of non-conductive ink is crucial in the production of multilayer circuit boards, as the conducting layers that are placed on top
of each other must be separated by dielectric layers. Our internally developed, proprietary dielectric ink is a unique one-part-epoxy
material. The dielectric ink can withstand high temperature (e.g., five hundred degrees Fahrenheit and more) without distorting its shape,
which is a necessary requirement for professional PCBs and electronics components.
Both
our nano-conductive and dielectric ink products have completed development stages and we have begun to manufacture these products in-house.
We plan to commercialize these ink products as a supplementary product to our systems. Based on our proprietary technology, our ink products
may be adjusted specifically for additional uses.
Software
Our
proprietary software, the ‘FLIGHT’, is used to manage the design file and printing process. The software suite enables seamless
transition into an additive manufacturing workflow.
In
July 2016, we completed the development of the initial version of our software package and we have been adding features and improvements
to it from time to time. The software supports customary formats in the electronics industry such as Gerber files, as well as vertical
interconnect access (VIA) and DRILL files. The Switch® software presents a unique interface that displays Gerber files and an accurate
and detailed description of the PCB’s structure, which facilitates a highly precise conversion to a 3D file format.
Multilayer
3D files can be prepared from standard file formats, with the software allowing for adjustments in numerous parameters such as layer
order and thickness.
When
the print-job is ready the user simply loads the design file from Switch straight into the DragonFly IV printer and uses the FLIGHT software
to manage and control the print.
Intellectual
Property
We
seek patent protection as well as other effective intellectual property rights for our products and technologies in the United States
and internationally. Our policy is to pursue, maintain and defend intellectual property rights developed internally and to protect the
technology, inventions and improvements that are commercially important to the development of our business.
We
have an ever growing portfolio of 25 issued U.S. and foreign patents and 116 provisional and non-provisional patent applications with
the USPTO, WIPO filed through the PCT, and with the respective patent offices of China, Europe, South Korea, Japan and Taiwan. A provisional
patent application is a preliminary application that can be filed less formally than a non-provisional application, and establishes a
priority date for the patenting process for the invention disclosed therein.
Our
growing patent portfolio can be divided into five main areas:
1.
Mechanical: covering printer components and peripherals, for example- granted U.S. patents (9,227,444, 9,259,933, and 9,878,549), as
well as several patent applications, directed to components and systems varying from print heads regeneration systems, print heads cleaning
and ink recycling systems.
2.
Chemical: covering ink compositions and related nanoparticles, both dielectric and conducting. For example, several were granted in the
U.S. (10,385,175, 10,626,233, 11,155,004), Chinese (201580058899.5) and South Korean (10-2017-7013551) patent offices. Other chemical
applications are directed to flexible ink (indicated as allowable), oxidation-resistant conductive inks, and support inks.
3.
Applications: covering 3D printing applications and computer applications. The 3D printing applications are directed to various methods
of printing additive manufacturing electronics, flexible printed circuits (FPCs) and high-density interconnects (HDIs) circuits with
embedded components. Additional filings were directed inter-alia to composite printing, shielded traces (10,905,017) cooling pads and
infrastructures, bridging members between integrated circuits, vertically embedded integrated circuit (IC) wells and their interconnectivity,
as well as coreless transformers.
4.
Industrial Design/Design: covering the ornamental aspects of the printer and various printer components. While currently there are no
design patents granted, or pending, we intend to file design patents when appropriate, for example for Ink containers.
5.
Artificial Intelligence/ Deep Learning: Covering an efficient technique of machine learning that is provided for training a plurality
of convolutional neural networks (CNNs) with increased speed and accuracy using a genetic evolutionary model (US 10,339,450); storing
sparse neural network (US 10,366,322); approximating multi-synaptic/filters neural network that can be partially-activated by iteratively
executing partial pathways to generate partial outputs (US 10,515,306, 10,878,321); mimicking pre-trained target model without access
to the pre-trained target model or its original training dataset (US 10,699,194); training or prediction of a neural network (US 11,055,617);
and training or prediction of neural networks using a cluster-connected neural networks (US 11,164,084).
In
addition to patent applications, in September 2014, we entered into an exclusive license agreement with the Research and Development
Company of the Hebrew University of Jerusalem, Ltd., or Yissum, for two patents that cover the unique method of manufacturing our consumable
nano-conductive ink for the 3D printing of electronic circuits. The agreement was amended and restated in April 2015. Pursuant to the
license agreement, we will be required to pay Yissum low to mid-single digit percentage royalties on sales of our conductive ink. The
exclusive license agreement is in effect for the longer of remaining usable life of the patents and patent applications, or 15 years
from the first commercial sale of a product relating to the licensed technology in the country in which the first commercial sale occurred.
In
addition, we have identified several trade secrets associated with chemical formulations, combination of jigs, and preferred suppliers.
Competition
Many
companies providing 3D printing services concentrate their efforts on printing prototypes in resin polymers or other plastics. We differentiate
ourselves from these companies by focusing on the niche market of in-house PCB printing using a combination of nano-conductive and dielectric
inks, and to that extent we consider ourselves a pioneer in our industry. However, it may be possible for more developed 3D printing
companies to adapt their products to print PCBs. Accordingly, our competitors may include other companies providing 3D printing services
with substantial customer bases and working history. Older, well-established companies providing 3D printing and rapid prototyping services
with records of success currently attract customers. There can be no assurance that we can maintain a competitive position against current
or future competitors, particularly those with greater financial, marketing, service, technical and other resources. Our failure to maintain
a competitive position within the market could have a material adverse effect on our business, financial condition and results of operations.
We
also compete with companies that use traditional prototype development of PCBs and customized manufacturing technologies, and expect
future competition to arise from the development of new technologies or techniques.
To
the best of our knowledge, our additive manufacturing system is the first and only one of its kind, and as of the date of this annual
report on Form 20-F, there are no three-dimensional ink injection printers that print multilayer electronic circuits for the purposes
of in-house PCB prototype development. However, there are many companies worldwide that manufacture PCBs.
In
the United States and globally, we face many competitors that specialize in contract electronic manufacturing, and specifically the manufacturing
of prototype PCBs. We estimate that there are approximately 1,800 companies in the United States that manufacture or provide PCBs on
a per-order basis.
Research
and Development
From
time to time we explore the application of our technology to additional areas within 3D printing and other industries.
In
April 2019, we successfully shortened and simplified the assembly process for ball grid arrays and other SMT components used for integrated
circuits, from days to one hour.
In
April 2019, we created the first fully functional, 3D printed communication device, at a faster speed than has ever been achieved to
date with traditionally made devices. This first ever additively manufactured (3D printed) IoT device developed by us, enables companies
and research institutions to create and test their ‘smart’ products and other prototypes faster and more easily than ever
before.
In
May 2019, we received a grant approval from the IIA for developing hardware, in cooperation with Harris Corporation, that will fly on
the International Space Station, or ISS, and communicate with Harris’ ground based satellite tracking station in Florida. This
project provides a systematic analysis of 3D printed materials for RF space systems, especially for Nano-satellites. In March 2021, we
announced that the first ever integrated RF circuit fabricated by us and designed and integrated by L3Harris Technologies (NYSE: LHX)
(formerly known as Harris Corporation), has been flown to the ISS. In June 2019, we announced a strategic collaboration with HENSOLDT,
a leading global security and defense electronics firm. Under this collaboration, HENSOLDT’s engineers work closely with our engineering
team to develop innovative applications for HENSOLDT’s security and defense business. In May 2020, together with HENSOLDT, we achieved
a major breakthrough on our way to utilizing 3D printing in the development process of high-performance electronics components.
In
July 2019, we introduced our DragonFly LightsOut Digital Manufacturing (LDM®) printing technology, the industry’s only comprehensive
additive manufacturing platform for round-the-clock 3D printing of electronic circuitry.
In
September 2019, we developed 3D printed capacitors with our pioneering DragonFly additive manufacturing system. These capacitors are
embedded in the body of the additively manufactured PCBs, saving space and eliminating the need for assembly.
In
April 2020, we announced that our technology, DragonFly LDM system and materials were used to develop a 3D printed sealed packaging with
electrical pads for Micro-Electromechanical Systems.
In
May 2020, we succeeded in printing a 3D touch sensor. With the 3D electronic device, premium polymer products can be transformed into
back-lit human-machine-interface surfaces. Thus, functionality and convenience are increased – all with a very sleek design.
In
May 2021, we launched our next-generation DragonFly LDM 2.0 system, a comprehensive update to our flagship product that introduces
improved print quality, optimized ink utilization and smarter management for printer uptime.
In
September 2021, we announced a collaboration with the Fraunhofer Institute for Manufacturing Engineering and Automation IPA, one of Fraunhofer-Gesellschaft’s
largest institutes.
In
November 2021, we introduced the new DragonFly IV printer and FLIGHT software platform. The new DragonFly IV system, combined with FLIGHT
software, delivers new levels of quality, efficiency, and print resolution in the 3D printed electronics sector - providing increased
flexibility to design any 3D geometry and create innovative new products.
For
the years ended December 31, 2019, 2020 and 2021, we incurred $8,082,000, $9,878,000 and $41,686,000, respectively, of research and development
expenses.
Grants
from Israel’s Innovation Authority
Our research and development efforts are financed in part through royalty-bearing
grants from the IIA. As of December 31, 2021, we have received the aggregate amount of $3,843,000 from the IIA for the development of
our additive manufacturing system and nano-inks. With respect to such grants we are committed to pay royalties of 3% to 3.5% on sales
proceeds from our products that were developed under IIA programs up to the total grant amount plus annual interest calculated at a rate
based on 12-month LIBOR. Regardless of any royalty payment, we are further required to comply with the requirements of the Research Law,
with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants
and the Research Law restrict the transfer of such know-how, change of control transactions and the transfer of manufacturing or manufacturing
rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. In addition, any change of
control and any change of ownership of our Ordinary Shares that would make a non-Israel citizen or resident an “interested party,”
as defined in the Research Law, requires prior written notice from the IIA. We do not believe that these requirements will materially
restrict us in any way.
Production
and Manufacturing
We
purchase the raw materials required for the production of our products, including components of additive manufacturing systems and materials
to produce our nano-inks products. To date, all of our printers, including our DragonFly IV, are manufactured in-house.
With
respect to our ink products, we intend to keep full control of the value chain, from research and development through self-manufacturing
and global sales. We have a production facility to support the commercialization and production of our proprietary nano-conductive ink
and dielectric ink for our DragonFly additive manufacturing system. We believe that the size and capacity of this facility, located in
the same building as our offices, will be sufficient to support our future commercialization activities. We have achieved certification
for three international standards- the OHSAS 18001:2007 for occupational health and safety within the workplace, the ISO 14001:2015 Standard
– EMS (Environmental Management System) and the ISO 9001:2015 for quality throughout in our production processes.
Sales
and Marketing
We
began commercializing our first professional grade 3D Printer, the DragonFly Pro 3D printer, during the fourth quarter of 2017. In July
2019, we introduced our new DragonFly LDM printing technology. In November 2021, we introduced our new DragonFly IV printer and FLIGHT
software platform. We are now focused on accelerating our direct reach to end-customers through direct sales.
Potential
Material Impact of COVID-19
The
COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant
volatility and disruption of financial markets. Although to date the COVID-19 pandemic has mainly affected our current revenues and has
not had a material adverse effect on us, and we do not expect any material impact on our long-term activity, the COVID-19 pandemic may
have a material adverse effect on our business and financial performance in the future. The extent of the impact of the COVID-19 pandemic,
including our ability to execute our business strategies as planned, will depend on future developments, including the duration and severity
of the pandemic (and variants thereof), which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. See “Item 3.D. Risk
Factors – We face business disruption and related risks resulting from the COVID-19 pandemic, which has had a material adverse
effect on our business and results of operations.”
C.
Organizational Structure
We
currently have eight wholly owned subsidiaries: GIS, which was incorporated in the United Kingdom, Essemtec, which was incorporated in
Switzerland and has three subsidiaries, Nano Dimension Technologies Ltd., which was incorporated in the State of Israel, NanoFabrica,
which was incorporated in the State of Israel, DeepCube, which was incorporated in the State of Israel, Nano Dimension IP Ltd., which
was incorporated in the State of Israel, Nano Dimension USA Inc., which was incorporated in Delaware, Nano Dimension GmbH, which was
incorporated in Germany, and Nano Dimension (HK) Limited, which was incorporated in Hong Kong, and other insignificant subsidiaries.
D.
Property, Plant and Equipment
Our
offices, research and development facility and in-house laboratory are located at our headquarters at 2 Ilan Ramon, Ness Ziona 74036,
Israel, where we currently occupy approximately 54,000 square feet. We lease our headquarters under six separate leases. Four of the
leases, which account for about 71% of our office space, end on August 31, 2024, the fifth lease, which accounts for about 24% of our
office space, ends on December 31, 2023, and the sixth lease, which accounts for about 5% of our office space, ends on November 30, 2026.
We have an option to extend two of the lease agreements for an additional five years with a 10% increase of the monthly rental fee. The
total monthly rent payment for the facilities in Israel is currently approximately $100,000. We also have a facility in Azrieli Center,
Tel-Aviv, Israel, where we currently lease and occupy approximately 5,500 square feet. The total monthly rent payment for the facilities
in Tel-Aviv is currently approximately $25,000. Our U.S. office is in Sunrise, Florida, where we currently lease and occupy approximately
5,300 square feet. The total monthly rent payment for the facilities in Florida is currently approximately $10,000. In addition, in March
2022, we opened an additional office in Boston to house expanded sales operations and customer support. We currently lease and occupy
12,375 square feet in our Boston office, and our monthly rent payment for the facilities is approximately $45,000. We also have smaller
offices in Hong Kong Science Park and in Munich, Germany. Essemtec AG has offices in Aesch, Switzerland, which are owned by the Group.
GIS, which we purchased in January 2022, has offices in Cambridge, UK.
We
consider that our current office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the
conduct of our business.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations
The
following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in
this annual report on Form 20-F. This discussion and other parts of this annual report on Form 20-F contain forward-looking statements
based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ
materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under
“Item 3.D. Risk Factors” and elsewhere in this annual report in Form 20-F. We report financial information under IFRS as
issued by the IASB and none of the financial statements were prepared in accordance with generally accepted accounting principles in
the United States. Our discussion and analysis for the year ended December 31, 2020 can be found in our annual report on Form 20-F for
the fiscal year ended December 31, 2020, filed with the SEC on March 11, 2021.
Overview
To
date, we have generated limited revenues from the sale and lease of our products. In the fourth quarter of 2017 we begun commercializing
our products and our ability to generate significant revenues and achieve profitability depends on our ability to successfully complete
the development of, and to commercialize, our products. As of December 31, 2021, we had an accumulated deficit of $309,234,000. Our financing
activities are described below under “Liquidity and Capital Resources.” We currently estimate that we have the necessary
capital in order to establish our commercial infrastructure.
5.
A Operating Results
Operating
Expenses
Our
current operating expenses consist of three components – research and development expenses, sales and marketing expenses, and general
and administrative expenses.
Research
and Development Expenses, net
Our
research and development expenses consist primarily of salaries and related personnel expenses, subcontractor expenses, patent registration
fees, rental fees, materials, and other related research and development expenses.
The
following table discloses the breakdown of research and development expenses:
| |
Year ended December 31, | |
(in thousands of U.S dollars) | |
2020 | | |
2021 | |
Payroll | |
| 4,849 | | |
| 14,604 | |
Share-based payment expenses | |
| 1,682 | | |
| 14,238 | |
Subcontractors | |
| 258 | | |
| 2,864 | |
Patent registration | |
| 160 | | |
| 441 | |
Materials | |
| 940 | | |
| 2,764 | |
Rental fees and maintenance | |
| 173 | | |
| 559 | |
Depreciation | |
| 1,588 | | |
| 5,697 | |
Other expenses | |
| 249 | | |
| 637 | |
Grants | |
| (21 | ) | |
| (118 | ) |
Total | |
| 9,878 | | |
| 41,686 | |
Subcontractor
expenses include expenses for development consultants and service providers, which are not employees. The services provided by these
consultants and service providers include, but are not limited to, chemistry consulting, software and electronics subcontractors and
consulting and chip processing consulting.
Our
development expenses are presented net of government grants.
Sales
and Marketing Expenses
Sales
and marketing expenses consist primarily of salaries, marketing, commissions and advertising services, depreciation, rental fees, and
travel.
The
following table discloses the breakdown of sales and marketing expenses:
| |
Year ended December 31, | |
(in thousands of U.S dollars) | |
2020 | | |
2021 | |
Payroll | |
| 3,336 | | |
| 8,283 | |
Share-based payment expenses | |
| 1,990 | | |
| 8,569 | |
Marketing, commissions and advertising | |
| 577 | | |
| 4,053 | |
Depreciation | |
| 223 | | |
| 318 | |
Travel abroad | |
| 235 | | |
| 749 | |
Rental fees and maintenance | |
| 201 | | |
| 365 | |
Other expenses | |
| 35 | | |
| 376 | |
Total | |
| 6,597 | | |
| 22,713 | |
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries, professional service fees, office expenses, depreciation, travel expenses,
and other general and administrative expenses.
The
following table discloses the breakdown of general and administrative expenses:
| |
Year ended
December 31, | |
(in thousands of U.S dollars) | |
2020 | | |
2021 | |
Payroll | |
| 1,377 | | |
| 2,880 | |
Share-based payments | |
| 16,837 | | |
| 6,974 | |
Fees | |
| 22 | | |
| 33 | |
Professional services | |
| 1,064 | | |
| 6,993 | |
Office expenses | |
| 386 | | |
| 1,065 | |
Depreciation | |
| 76 | | |
| 210 | |
Travel abroad | |
| 44 | | |
| 461 | |
Rental fees and maintenance | |
| 46 | | |
| 97 | |
Other expenses | |
| 435 | | |
| 931 | |
Total | |
| 20,287 | | |
| 19,644 | |
Comparison
of the year ended December 31, 2021 to the year ended December 31, 2020
Results
of Operations
| |
Year ended December 31, | |
U.S dollars in thousands | |
2020 | | |
2021 | |
Consolidated Statements of Operations Data | |
| | |
| |
Revenues | |
| 3,399 | | |
| 10,493 | |
Cost of revenues | |
| 1,563 | | |
| 5,730 | |
Cost of revenues – amortization of intangible | |
| 771 | | |
| 3,641 | |
Gross profit | |
| 1,065 | | |
| 1,122 | |
Research and development expenses, net | |
| 9,878 | | |
| 41,686 | |
Sales and marketing expenses | |
| 6,597 | | |
| 22,713 | |
General and administrative expenses | |
| 20,287 | | |
| 19,644 | |
Impairment losses | |
| - | | |
| 140,290 | |
Operating loss | |
| 35,697 | | |
| 223,211 | |
Finance expense (income), net | |
| 12,797 | | |
| (17,481 | ) |
Loss before taxes | |
| 48,494 | | |
| 205,730 | |
Taxes benefit | |
| - | | |
| 4,906 | |
Loss for the year | |
| 48,494 | | |
| 200,824 | |
Loss attributable to non-controlling interests | |
| - | | |
| (47 | ) |
Loss attributable to owners | |
| 48,494 | | |
| 200,777 | |
Revenues
Our
revenues for the year ended December 31, 2021 amounted to $10,493,000, representing an increase of $7,094,000 or 209%, compared to $3,399,000
for the year ended December 31, 2020. The increase is attributed mostly to the consolidation of Essemtec, which we purchased in November
2021.
Cost
of Revenues
Our
cost of revenues for the year ended December 31, 2021 amounted to $9,371,000, representing an increase of $7,037,000 or 301%, compared
to $2,334,000, for the year ended December 31, 2020. Cost of revenues consists mainly of $3,280,000 in respect of the cost of hardware
sold, $1,437,000 in respect of service costs, and $720,000 for ink and other consumables. An additional $3,641,000 is attributed to cost
of revenues resulting from amortization of assets recognized in business combinations and technology. The increase resulted primarily
from the above-mentioned increase in revenues, as well as higher amortization of intangibles from the acquisitions that we conducted
during 2021.
Gross
Profit
Our
gross profit for the year ended December 31, 2021, amounted to $1,122,000, compared to a gross profit of $1,065,000 for the year ended
December 31, 2020. The increase resulted from an increase in the Group’s revenues.
Research
and Development Expenses, net
Our
research and development expenses for the year ended December 31, 2021 amounted to $41,686,000, representing an increase of $31,808,000
or 322%, compared to $9,878,000 for the year ended December 31, 2020. The increase resulted primarily from an increase of $9,755,000
in payroll and related expenses due to more research and development resources, as well as an increase of $12,556,000 in share-based
payments expenses.
Our
research and development expenses for the year ended December 31, 2021 are presented net of government grants in the amount of $118,000.
Our research and development expenses for the year ended December 31, 2020 are presented net of government grants in the amount of $21,000.
Sales
and marketing Expenses
Our sales and marketing expenses totaled $22,713,000 for the year ended
December 31, 2021, an increase of $16,116,000 or 244%, compared to $6,597,000 for the year ended December 31, 2020. The increase resulted
primarily from an increase of $4,947,000 in payroll and related expenses, an increase of $6,579,000 in share-based payments expenses,
as well as an increase of $3,476,000 in marketing, commissions and advertising expenses. During 2021, we decided to invest increased resources
in sales and marketing activities, thus we increased the number of our sales and marketing personnel.
General
and Administrative Expenses
Our general and administrative expenses totaled $19,644,000 for the
year ended December 31, 2021, a decrease of $643,000 or 3%, compared to $20,287,000 for the year ended December 31, 2020. The decrease
resulted primarily from a decrease of $9,863,000 in share-based payment expenses, mainly as a result of the issuance of warrants to our
Chairman and Chief Executive Officer in 2020. This decrease was offset by an increase of $5,929,000 in professional services and an increase
of $1,503,000 in payroll and related expenses.
Impairment
losses
During
2021, there was a decline in our share price, such that as of December 31, 2021, our fair value, which is based on the share price, is
lower than our book value of equity. Hence, we checked the value of our CGUs to which goodwill is allocated. Given the recoverable amount
of the said CGUs, determined on the basis of the value in use of the units, the goodwill, intangibles and property, plant and equipment
relating to the groups of the said cash-generating units was reduced by approximately $140 million.
Operating
Loss
As
a result of the foregoing, our operating loss for the year ended December 31, 2021 was $223,211,000, as compared to an operating loss
of $35,697,000 for the year ended December 31, 2020, an increase of $187,514,000 or 525%.
Finance
Expense and Income
Finance
expense and income mainly consist of revaluation of financial liabilities and lease liabilities, fundraising expenses, revaluation of
liability in respect of government grants, bank fees, and exchange rate differences.
We recognized net financial income of $17,481,000 for the year ended
December 31, 2021, compared to net financial expense of $12,797,000 for the year ended December 31, 2020. The change is primarily due
to an increase of $23,433,000 in income from revaluation of financial liabilities, which are measured at fair value.
Total
Loss
As a result of the foregoing, our loss for the year ended December
31, 2021 was $200,824,000, as compared to $48,494,000 for the year ended December 31, 2020, an increase of $152,330,000 or 314%.
5.B
Liquidity and Capital Resources
Overview
Since our inception through December 31, 2021, we have funded our operations
principally with $1,550,642 from the issuance of Ordinary Shares, warrants and convertible notes. As of December 31, 2021, we had $853,626,000
in cash and an additional $501,969,000 in short- and long-term bank deposits.
The
table below presents our cash flows:
| |
December 31, | |
| |
2020 | | |
2021 | |
| |
(in thousands of U.S. dollars) | |
| |
| | |
| |
Operating activities | |
| (9,646 | ) | |
| (42,579 | ) |
| |
| | | |
| | |
Investing activities | |
| (86,763 | ) | |
| (496,680 | ) |
| |
| | | |
| | |
Financing activities | |
| 677,726 | | |
| 804,179 | |
| |
| | | |
| | |
Net increase in cash | |
| 581,444 | | |
| 268,288 | |
Operating
Activities
Net cash used in operating
activities of $42,579,000 during the year ended December 31, 2021 was primarily used for payment of salaries and related personnel expenses,
payments for materials, rent, travel, professional services and other miscellaneous expenses.
Net
cash used in operating activities of $9,646,000 during the year ended December 31, 2020 was primarily used for payment of salaries and
related personnel expenses, payments for materials, rent, travel, professional services and other miscellaneous expenses.
Investing
Activities
Net
cash used in investing activities of $496,680,000 during 2021 was primarily used for investments of our cash in bank deposits and fixed
assets, as well as acquisitions of subsidiaries.
Net
cash used in investing activities of $86,763,000 during 2020 was primarily used for investments of our cash in fixed assets.
Financing
Activities
Net
cash provided by financing activities of $804,179,000 in the year ended December 31, 2021 was mainly from the issuance of Ordinary Shares.
Net
cash provided by financing activities of $677,726,000 in the year ended December 31, 2020 was mainly from the issuance of Ordinary Shares,
warrants and convertible notes.
On
February 7, 2020, pursuant to an underwriting agreement with ThinkEquity, a Division of Fordham Financial Management, Inc., or ThinkEquity,
as the underwriter for a public offering of our ADSs that were offered pursuant to a shelf takedown under a registration statement on
Form F-3 (Registration No. 333-217173), we issued 2,588,318 ADS, at a price per ADS of $1.50. The gross proceeds to us from the sale
of the ADSs were approximately $3,882,477.
On
April 28, 2020, pursuant to an underwriting agreement with ThinkEquity, as the underwriter for a public offering of our ADSs that were
offered pursuant to a registration statement on Form F-1 (Registration No. 333-237222), we issued 17,858,000 ADS or pre-funded ADS purchase
warrants, or the Pre-Funded Warrants, each to purchase one ADS in lieu thereof. Additionally, 1,204,114 ADSs were sold pursuant to a
partial exercise of the underwriter’s over-allotment option. Each ADS was sold to the public at a price per ADS of $0.70. Each
Pre-Funded Warrant was sold to the public at a price per Pre-Funded Warrant of $0.6999, exercisable at any time after the date of issuance
upon payment of the exercise price of $0.0001 per ADS. All of the Pre-Funded Warrants were exercised in May 2020. The gross proceeds
to us from the sale of the ADSs were approximately $13,343,000.
Between
May 2020 and February 2021, we entered into several securities purchase agreements, or the Purchase Agreements, with certain investors
for the purchase and sale of an aggregate of 216,422,015 ADS, in several registered direct offerings, or the RD Offerings, offered pursuant
to several shelf takedowns under certain registration statements on Form F-3 (Registration Nos. 333-237668, 333-249184, 333-249559, 333-251004
and 333-251155). The aggregate gross proceeds to us from the sale of the ADSs in the RD Offerings were approximately $1,525,766,803.
With each RD Offering we also entered into an agreement, or the Placement Agency Agreement, with ThinkEquity, as sole placement agent,
or the Placement Agent, pursuant to which the Placement Agent agreed to serve as the placement agent for us in connection with that RD
Offering. We agreed to pay the Placement Agent a cash placement fee that ranged between 3.00% to 7.00% of the gross proceeds received
for the ADSs in that specific RD Offering. In addition, pursuant to the Placement Agency Agreement in certain of the RD Offerings, we
agreed to issue to the Placement Agent or its designees warrants to purchase designated percentages of the ADSs sold such RD Offerings.
On
April 23, 2021, we acquired all of the issued and outstanding share capital of DeepCube. DeepCube technology applies numerous patented
breakthrough algorithms to improve data analysis and deployments of advanced Deep Learning-based artificial intelligence systems. We
paid the shareholders of DeepCube approximately $40 million in cash and $30 million in our ADSs, based on the volume weighted average
price of the last 30 trading days prior to the closing of the transaction, subject to certain escrow and indemnity provision contained
in the share purchase agreement. Of said consideration, approximately $10.25 million was paid to AWZ HLS Fund II, LP (AWZ) in cash
only, pursuant to a separate secondary agreement. AWZ was not subject to any escrow, holdback or other limitations. In accordance with
the terms of the acquisition agreement, 892,465 of our Ordinary Shares will be issued to Eli David, one of the founders of DeepCube,
with a share price protection mechanism. The granting of these shares is subject to conditions related to the continued employment of
Mr. David as Chief Technology Officer of DeepCube. In addition, as part of the acquisition agreement, we exchanged equity-settled share-based
payment awards held by employees of DeepCube for 299,455 of our restricted share units (RSUs). The equity awards of DeepCube’s
employees were granted during the years 2018 to 2021 and were generally subject to a 4-year vesting schedule. Our RSUs were granted on
the acquisition date and are subject to a 3-year vesting schedule.
On
April 26, 2021, we acquired all of the issued and outstanding share capital of NanoFabrica. NanoFabrica is a prominent player in the
field of precision digital manufacturing. We will pay an aggregate amount of approximately $54.9 million to $59.4 million, payable in
cash and in ADSs. The cash payments were distributed in such manner that approximately $23 million was paid at the closing and distributed
among all shareholders, approximately $1.13 million due to the founders of NanoFabrica will be paid as a deferred payment, and approximately
$3.36 million will be a contingent payment to the founders as an earn-out payment, based on a progressive formula of NanoFabrica’s
products’ performance with revenue of approximately $2.8 million (the “Revenue”) and gross profit of approximately
$1.74 million (the “Gross Profit”) for the period from June 1, 2021 to May 30, 2022. The cash payments concerning the earn-out
are held by a paying agent and will return (in whole or in part) to us if NanoFabrica’s products do not fully reach the Revenue
and the Gross Profit. In addition, as part of the acquisition agreement, we exchanged equity-settled share-based payment awards held
by employees of NanoFabrica for 76,928 of our RSUs. The equity awards of DeepCube’s employees were granted during the years 2017
to 2020 and were generally subject to a 4-year vesting schedule. Our RSUs were granted on the acquisition date and are subject to a 3-year
vesting schedule.
On
November 2, 2021, we acquired all of the issued and outstanding share capital of Essemtec. Essemtec is a leader in adaptive highly flexible
SMT pick-and-place equipment, sophisticated dispenser suitable for both high-speed and micro-dispensing, and intelligent production material
storage and logistic system. We paid the selling shareholders for the shares approximately CHF
11,392,000 in cash (approximately $12.42 million) in immediately available funds, of which CHF 2,000,000 (approximately $2.18 million)
were deposited in escrow for a period of eighteen months in connection with certain indemnification obligations of the selling shareholders
pursuant to the share purchase agreement. In addition, the selling shareholders may be entitled to an earn-out consideration (the “Earn-Out
Consideration”) in an aggregate amount of up to CHF 8,900,000 (approximately $9.7 million), subject to meeting certain EBITDA and
gross profit performance targets in the fiscal year ending on December 31, 2021 and December 31, 2022, respectively. In addition, at
the closing of the transaction, certain selling shareholders sold, transferred and assigned to us all their rights and accrued interest
in certain existing loans by such selling shareholders to Essemtec (“Shareholders Loans”) and we acquired the Shareholder
Loans and became the lender thereunder in consideration for the principal amount and accrued interest thereon until the closing, which
was equal to approximately CHF 2,450,000 (approximately $2.67 million). In addition, we also acquired, through Nano Dimension
Swiss, from a third party, the property from which Essemtec facilities are operated. Hence, as of the end of November 2021, Essemtec
rents its offices from Nano Dimension Swiss under terms similar to those that Essemtec rented the facilities from the third party that
owned the facilities before this acquisition.
On
January 4, 2022, we acquired all of the issued and outstanding share capital of GIS. GIS is a leading developer and supplier of high-performance
control electronics, software, and ink delivery systems. At the closing, we paid the selling shareholders
for their shares £17,441,000 in cash (approximately $23,371,0000) in immediately available funds, of which £2,200,000 (approximately
$2,948,000) was deposited in escrow for a period of 36 months in connection with certain indemnification obligations of the selling shareholders
pursuant to the share purchase agreement. In addition, the selling shareholders are entitled to deferred consideration of £1,000,000
(approximately $1,340,000), to be paid on April 1, 2024 and may be entitled to an earn-out consideration in an aggregate amount of up
to £7,000,000 (approximately $9,380,000), subject to meeting certain EBITDA performance targets in the fiscal year ending on March
31, 2022, and revenues and gross profit performance targets in the fiscal year ending on March 31, 2023. Additionally, the Selling Shareholders
identified as key management need to remain engaged by the Company during the aforementioned earn-out/deferred compensation period(s).
Current
Outlook
To
date, we have not achieved profitability and have sustained net losses in every fiscal year since our inception, and we have financed
our operations primarily through proceeds from issuance of our Ordinary Shares. Our primary requirements for liquidity and capital resources
are to finance working capital, capital expenditures, general corporate purposes and to advance our M&A strategy. We believe that
our current resources will be sufficient to meet our business needs for at least the next 12 months.
In
addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional
funds sooner than planned. Our future capital requirements will depend on many factors, including:
|
● |
the
progress and costs of our research and development activities; |
|
|
|
|
● |
the
progress in the launch of the commercial DragonFly IV system; |
|
|
|
|
● |
the
costs of manufacturing our DragonFly IV system and ink products; |
|
|
|
|
● |
the
costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
|
|
|
|
● |
the
potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities
internally; and |
|
|
|
|
● |
the
magnitude of our general and administrative expenses. |
5.C
Research and development, patents and licenses, etc.
For
a description of our research and development programs and the amounts that we have incurred over the last two years pursuant to those
programs, please see “Item 5. Operating and Financial Review and Prospects— A. Operating Results— Operating Expenses—
Research and Development Expenses, net” and “Item 5. Operating and Financial Review and Prospects— A. Operating Results—
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020— Research and Development Expenses, net.”
5.D
Trend Information
The
trends impacting us are described elsewhere in this annual report on Form 20-F, including in Items 5.B. and 7.B. As noted therein, among
other trends, we have been engaged, and will continue to engage, in mergers and acquisitions to diversify or expand our business, which
may pose risks to our business, and we may not realize the anticipated benefits of these mergers or acquisition. We are also subject
to potential earn-out commitments in connection with our recent acquisitions of NanoFabrica, Essemtec and GIS. The COVID-19 pandemic
has impacted companies in Israel and around the world, and as its trajectory remains highly uncertain, we cannot predict the duration
and severity of the outbreak and its containment measures. Further, we cannot predict impacts, trends and uncertainties involving the
pandemic’s effects on economic activity, the size of our labor force, our third-party partners, our investments in marketable securities,
and the extent to which our revenue, income, profitability, liquidity, or capital resources may be materially and adversely affected.
See also “Item 3.D. – Risk Factors– We face business disruption and related risks resulting from the COVID-19 pandemic,
which has had a material adverse effect on our business and results of operations.”
5.E
Critical Accounting Estimates
We
describe our significant accounting policies more fully in Note 3 to our financial statements for the year ended December 31, 2021, included
elsewhere in this annual report on Form 20-F. We believe that the accounting policies described in Note 3 to our financial statements
are critical in order to fully understand and evaluate our financial condition and results of operations.
We
prepare our financial statements in accordance with IFRS as issued by the IASB. At the time of the preparation of the financial statements,
our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the
amounts reported for assets, obligations, income, and expenses. Any estimates and assumptions are continually reviewed. The changes to
the accounting estimates are credited during the period in which the change to the estimate is made.
Other
financial and operating data:
| |
Year Ended December 31, 2021 | |
(in thousands of U.S. dollars) | |
| |
EBITDA | |
| 194,745 | |
Adjusted EBITDA | |
| 38,392 | |
EBITDA
is a non-IFRS measure and is defined as earnings before interest expense (income), income tax, depreciation and amortization. We believe
that EBITDA, as described above, should be considered in evaluating the company’s operations. EBITDA facilitates operating performance
comparisons from period to period and company to company by backing out potential differences caused by variations in capital structures
(affecting interest expenses (income), net), and the age and depreciation charges and amortization of fixed and intangible assets, respectively
(affecting relative depreciation and amortization expense, respectively) and EBITDA is useful to an investor in evaluating our operating
performance because it is widely used by investors, securities analysts and other interested parties to measure a company’s operating
performance without regard to the items mentioned above.
Adjusted
EBITDA is a non-IFRS measure and is defined as earnings before other financial expense (income), income tax, depreciation and amortization,
impairment losses and share-based payments. Other financial expense (income), net includes exchange rate differences, finance income
for revaluation of liability in respect of government grants, finance expense for revaluation of liability in respect of warrants, as
well as changes in lease liability. We believe that Adjusted EBITDA, as described above, should also be considered in evaluating the
company’s operations. Like EBITDA, Adjusted EBITDA facilitates operating performance comparisons from period to period and company
to company by backing out potential differences caused by variations in capital structures (affecting other financial expenses (income),
net), and the age and depreciation charges and amortization of fixed and intangible assets, respectively (affecting relative depreciation
and amortization expense, respectively), as well as from share-based payment expenses, and Adjusted EBITDA is useful to an investor in
evaluating our operating performance because it is widely used by investors, securities analysts and other interested parties to measure
a company’s operating performance without regard to non-cash items, such as expenses related to share-based payments.
The
following is a reconciliation of net loss to EBITDA and Adjusted EBITDA:
| |
Year Ended December 31, 2021 | |
(in thousands of U.S. dollars) | |
| |
Net loss | |
| 200,777 | |
Interest Income | |
| 3,832 | |
Depreciation and amortization (*) | |
| (9,864 | ) |
EBITDA | |
| 194,745 | |
Exchange rate differences | |
| 3,444 | |
Finance expense for revaluation of liability in respect of government grants | |
| (96 | ) |
Finance income for revaluation of liability in respect of warrants | |
| 10,608 | |
Finance expense for revaluation of changes in lease liability | |
| (237 | ) |
Share-based payments | |
| (29,782 | ) |
Impairment losses | |
| (140,290 | ) |
Adjusted EBITDA | |
| 38,392 | |
(*) | Including amortization of assets recognized in business combination
and technology |
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors
and Senior Management
The
following table sets forth information regarding our executive officers, key employees and directors as of March 30, 2022:
Name |
|
Age |
|
Position |
Yoav
Stern |
|
68 |
|
Chief
Executive Officer, Chairman of the Board of Directors |
|
|
|
|
|
Amit
Dror |
|
46 |
|
Customer
Success Officer, Director |
|
|
|
|
|
Hanan
Gino |
|
63 |
|
Chief
Product Officer and Head of Strategic M&A |
|
|
|
|
|
Zivi
Nedivi |
|
64 |
|
President |
|
|
|
|
|
Dr.
Jaim Nulman |
|
66 |
|
Chief
Technology Officer and Executive Vice President, Products |
|
|
|
|
|
Zvi
Peled |
|
73 |
|
Chief
Operating Officer |
|
|
|
|
|
Yael
Sandler |
|
35 |
|
Chief
Financial Officer |
|
|
|
|
|
Simon
Anthony-Fried |
|
48 |
|
Director |
|
|
|
|
|
Yaron
Eitan (1) (2) (3) |
|
66 |
|
Director |
|
|
|
|
|
Oded
Gera (1) |
|
70 |
|
Director |
|
|
|
|
|
Roni
Kleinfeld (1) (3) |
|
65 |
|
Director |
|
|
|
|
|
J.
Christopher Moran (1) (2) |
|
62 |
|
Director |
|
|
|
|
|
Nira
Poran (1) (2) (3) |
|
65 |
|
Director |
|
|
|
|
|
Igal
Rotem (1) |
|
61 |
|
Director |
(1) |
Indicates independent
director under Nasdaq Stock Market rules. |
(2) |
Member of our Audit Committee
and Financial Statements Examination Committee. |
(3) |
Member of our Compensation
Committee. |
Yoav
Stern, Chief Executive Officer and Chairman of the Board of Directors
Mr.
Yoav Stern has served as our Chief Executive Officer since January 2020. Mr. Stern has served as our Chairman of the board of directors
since May 2021. Mr. Stern has been an investor, chief executive officer and/or chairman of hi-tech companies. Mr. Stern has led companies
in the fields of software and IT, video surveillance, audio and voice over IP, semiconductors equipment, fiber optics, defense-technologies,
communication solutions, aerospace, and homeland security. Mr. Stern spent most of his business career in the United States, running
both public and private companies with global operations including in United Kingdom, Germany, Australia, India and Singapore. Since
1997, Mr. Stern has also served as the Co-Chairman of Bogen Communication International and Bogen Corporation, and prior to joining Nano
Dimension, from 2011 to 2016, Mr. Stern was the president and chief executive officer of DVTEL Inc., headquartered in New Jersey, USA.
Mr. Stern has a B.Sc. in Mathematics and Computer Science, a Diploma in Automation and Mechanical Engineering and an M.A. in International
Relations from New York University. Mr. Stern is a graduate of the Israeli Air Force Academy and served as an F-15 Pilot and D. Squadron
Commander, as well as the Commander of the Combat Operational Training Unit of the Israeli Air Force.
Amit
Dror, Customer Success Officer, Director
Mr.
Amit Dror has served as our Chief Customer Satisfaction Officer since January 2020. Prior to that, Mr. Dror served as our Chief Executive
Officer from August 2014 until January 2020. Mr. Dror has also served on our board of directors since August 2014. Mr. Dror co-founded
Eternegy Ltd. in 2010 and served as its chief executive officer and a director from 2010 to 2013. Mr. Dror also co-founded the Milk &
Honey Distillery Ltd. in 2012. He developed vast experience in project, account and sales management across a range of roles at ECI Telecom
Ltd., Comverse Technology, Inc., Eternegy Ltd. and Milk & Honey Distillery Ltd. Mr. Dror has a background that covers technology
management, software, business development, fundraising and complex project execution. Mr. Dror is a Merage Institute Graduate.
Hanan
Gino, Chief Product Officer and Head of Strategic M&A
Mr.
Hanan Gino has served as our Chief Product Officer and Head of Strategic M&S since April 2021. Mr. Gino has been a leading senior
executive in leading international technology corporations. From February 2013 to June 2016, he was the President of Verint Systems Inc.
(Nasdaq: VRNT) global Security Intelligence business. Mr. Gino was the chief executive of Verint Systems Ltd. from April 2018 to May
2021. Prior to joining Verint, he spent 23 years at Orbotech Ltd. (Nasdaq: KLAC), a global technology company whose products are used
in consumer and industrial electronics and adjacent industries. From 2006 to 2010, Mr. Gino was the president of the PCB division of
Orbotech.
Zivi
Nedivi, President
Mr.
Zivi Nedivi has served as our President since April 2021. Mr. Nedivi has been the chief executive officer of several technology companies,
including Cyalume Technologies Inc., a world leader in chemical-lighting solutions that manufactures chemiluminescent ammunition and
infra-red devices used by U.S. and NATO military forces as well as law enforcement agencies. He was also the chief operating officer
of Lumenis Ltd., a developer of innovative energy-based technologies. From 1990 to 2005, he was the chief executive officer of Kellstrom
Industries, Inc., an advanced data management company. A graduate of the Israel Air Force Academy, he was a F-15 fighter pilot for seven
years and held the rank of major.
Dr.
Jaim Nulman, Chief Technology Officer and Executive Vice President, Products
Dr.
Jaim Nulman has served as our Chief Technology Officer and Executive Vice President Products since May 2018. Dr. Nulman was a vice
president with Applied Materials, Inc. in Santa Clara, California, where he served for 15 years in a variety of positions at both the
product divisions and corporate levels developing and driving commercialization of semiconductor manufacturing technology, applications,
and equipment. While at Applied Materials he drove the development of ionized metal physical vapor deposition for enhance step coverage.
Dr. Nulman pioneered rapid thermal processing technologies for ultra-thin gate dielectrics in semiconductors. Dr. Nulman is also co-founder
and chairman of Yali Pharmaceuticals Group, LLC., a company developing medicines for treatment of pathogen induced inflammation of the
body. Dr. Nulman also founded eTe Solutions, LLC, a company engaged in consulting services for commercialization of high tech technology.
He holds several patents in the area of semiconductor processing and equipment. Dr. Nulman is a Senior member of the Institute for Electrical
and Electronic Engineers (IEEE). He holds a B.Sc. degree in Electrical Engineering from the Technion – Israel Institute of Technology,
M.Sc. and Ph.D. in Electrical Engineering with focus on semiconductor devices and technology from Cornell University, and an Executive
M.B.A. from Stanford University. Dr. Nulman also served as instructor for NATO’s Advanced Technology summer programs and the University
of Berkeley Extension in the area of Rapid Thermal Processing.
Zvi
Peled, Chief Operating Officer
Mr.
Zvi Peled has served as our Chief Operating Officer since May 2020. From 2015 to 2020, Mr. Peled was the VP Sales-Americas, of the
Security Business Unit in FLIR Systems Inc., a public company focused on intelligent sensing solutions for defense, industrial, and commercial
applications. Previously, Mr. Peled was the chief operating officer and chief revenues officer of DVTEL Inc., a video surveillance and
artificial intelligence software and hardware high-tech company, which was acquired by FLIR Systems Inc. in 2015. Previously, Mr. Peled
was the President and chief executive officer of Apollo Network Services Ltd., a private company that manages large projects in the field
of defense, energy and transportation for Finmeccanica. He was also the chief executive officer of Flash Networks Ltd., a technological
leader offering mobile data access gateway. Earlier in his career, Mr. Peled spent 20 years with Elbit Systems Ltd., an international
defense company engaged in a wide range of electronics related programs worldwide.
Yael
Sandler, Chief Financial Officer
Ms.
Yael Sandler has served as our Chief Financial Officer since June 2015. From 2014 until 2015, Ms. Sandler served as the Group Controller
of RealMatch Ltd. From 2011 through December 2014, Ms. Sandler held various positions at Somekh-Chaikin (KPMG Israel), where she gained
valuable experience working with public companies and companies pursuing initial public offerings. Ms. Sandler completed the professional
course of the Israeli Navy in 2005 and served as a submarine simulator instructor and commander until 2007. Ms. Sandler is a Certified
Public Accountant in Israel. Ms. Sandler earned a B.A. with honors in Accounting and Economics from the Hebrew University of Jerusalem
and a M.B.T. with honors from the College of Management in Rishon LeZion.
Simon
Anthony-Fried, Director
Mr.
Simon Fried has served on our board of directors since August 2014. Mr. Anthony-Fried is one of our co-founders and served as our
Chief Business Officer from August 2014 until December 2017. In January 2018, Mr. Anthony-Fried relocated to California, and was appointed
as the President of our wholly-owned subsidiary, Nano Dimension USA Inc. In June 2019, Mr. Anthony-Fried returned to Israel and served
as our Chief Business Officer until December 2019. Mr. Anthony-Fried was a co-founder of Diesse Solutions Ltd., a project management,
risk and marketing consultancy, and served as its chief executive officer from 2004 to 2014. He has worked as a risk management and corporate
governance consultant to the Financial Services Authority in the United Kingdom and as a senior strategy consultant at Monitor Company,
a Boston based boutique strategy consulting firm from 2000 to 2002. Mr. Anthony-Fried has a background that covers marketing and sales
strategy, management, business development, financial services regulation, fundraising and c-suite consulting. Mr. Anthony-Fried has
worked extensively on global projects in both the B2B and B2C markets driving significant strategic change to global marketing organizations.
He also currently serves as a director of the Milk & Honey Distillery Ltd. Mr. Anthony-Fried holds a B.Sc. in Experimental Psychology
from University College London, an M.Sc. in Judgment and Risk from Oxford University and an M.B.A. from SDA Bocconi in Milan.
Yaron
Eitan, Director
Mr.
Yaron Eitan has served on our board of directors since February 2020. Mr. Eitan is a technology entrepreneur, founder and investor
with over 30 years of experience building and running privately held and publicly traded companies in the United States and Israel. From
January 2018 to April 2021, Mr. Eitan served as the chief executive officer and co-founder of DeepCube, a deep learning software accelerator
for inference. Mr. Eitan is also the co-founder and since December 2018 has served as the Chairman of both Emporus Technologies Ltd.,
which deploys deep learning in capital markets, and Marpai Health Inc., a company utilizing advanced analytics in healthcare. Mr. Eitan
is also a co-founder and since April 2014 has served as the co-Chairman of 340Basics Technologies, Inc., a healthcare IT company. Previously,
Mr. Eitan founded and from 1998 until today was the chief executive officer of Selway Capital, a venture capital incubator for high tech
start-up companies. Mr. Eitan founded and from 2002 until 2015 acted as a Chairman and/or chief executive officer for DVTEL, Inc., Magnolia
Broadband, Inc., and Geotek Communications Inc., a publicly traded company in wireless communications. From 2013 until April 2018, Mr.
Eitan was also a partner at CNTP, a $300 million technology venture fund. Mr. Eitan has a B.A. in Economics from Haifa University and
an M.B.A. from the Wharton School of Business of the University of Pennsylvania.
Oded
Gera, Director
Mr.
Oded Gera has served on our board of directors since April 2021. Mr. Gera has served as Senior Global Advisor in Rothschild &
Co. Global Advisory from 2018. He is the former Chairman and Founder of Rothschild & Co. in Israel. Mr. Gera has served as Lord Jacob
Rothschild’s Entrepreneur in Residence from 2004 to 2007, as well as an advisor to the board of directors of Robeco Sustainable
Private Equity Fund from 1998 to 2006. Prior to his service at Rothchild & Co., Mr. Gera was the Chief Executive Officer of The Israel
Diamond Exchange, which was subsequently bought by a public company in 1996. Previously, he was the founder and owner of the Oded Gera
fashion house, which became a household name in Israel.
Roni
Kleinfeld, Director
Mr.
Roni Kleinfeld has served on our board of directors since November 2012. He has over 25 year experience as a chief executive officer
in public and private companies. He was the chief executive officer of Maariv Holdings Ltd. from 1993 to 2002, the chief executive officer
of Hed Artzi Records Ltd. from 2002 to 2007, the chief executive officer of Maariv- Modiin Publishing House Ltd. from 2007 to 2010, and
the chief executive officer of OMI Ltd. from 2010 to 2011. Mr. Kleinfeld has also served as director of many companies over the past
ten years, including: Excite Ltd. from 2007 to 2011, Makpel Ltd. from 2007 to 2010, Elbit Imaging Ltd. (Nasdaq: EMITF) since 2010, Elran
Ltd. from 2010 to 2016, Dancher Ltd. from 2012 to 2014, Mendelson Ltd. from 2012 to 2016, White Smoke Ltd. since 2012, Edri – El
Ltd. since 2015, Cofix Group Ltd. since 2015, and Luzon Group since 2017. Mr. Kleinfeld has a B.A. in economics from the Hebrew University
in Jerusalem.
J.
Christopher Moran, Director
Mr.
J. Christopher Moran has served on our board of directors since February 2020. Mr. Moran is a Vice-President of Lockheed Martin Corporation
and the Executive Director and General Manager of Lockheed Martin Ventures, the venture capital investment arm of Lockheed Martin Corporation.
Mr. Moran is responsible for leading the corporation’s investments in small technology companies, which support Lockheed Martin’s
strategic business objectives. Prior to joining Lockheed Martin in 2016, and from 1984 to 2016, Mr. Moran served in a variety of increasingly
responsible positions at Applied Materials, Inc. Most recently, Mr. Moran was the head of the Business Systems and Analytics group in
the Applied Global Services Organization. Mr. Moran was with Applied for over 32 years, including as the head of Corporate Strategy and
the General Manager of Applied Ventures LLC, the strategic investing arm of Applied Materials. Mr. Moran is a graduate of the Massachusetts
Institute of Technology where he obtained both his Bachelor and Master degrees in Mechanical Engineering.
Nira
Poran, Director
Ms.
Nira Poran has served on our board of directors since February 2020. Ms. Poran has extensive experience in managing content-technology-companies,
international business initiatives and corporate and communal business development efforts. From 1992 to 1994, Ms. Poran served as an
Adviser of Public Affairs for the Prime Minister of Israel where she supervised the Status of Women portfolio. In this role, she was
involved in various committees and activities, including different parliament committees. She also represented the State of Israel in
UN conferences in Vienna and New York. Ms. Poran is the Executive Director of the Association of Corporate Counselors, Israel Chapter.
From 2012 to 2014, she was a legal adviser in the firm ZAG/JUN ZEJUN, a cooperation between an Israeli and Chinese law firm. Prior to
that, from 2005 to 2013, Ms. Poran was the co-founder and chief executive officer and later the Chairperson of the Board of Mars Interactive
Games Ltd. Ms. Poran earned a MA with honors in Gender Studies and an LLM, International and Public Law, from Tel Aviv University and
Northwestern University in Chicago, IL.
Igal
Rotem, Director
Mr.
Igal Rotem has served on our board of directors since February 2022. Mr. Rotem is the Chief Executive Officer of Ceradorax Inc.,
a global financial institution active in the eCommerce space. Between 2010 to 2015. Mr. Rotem was the executive chairman of Ceradorax
Inc., and he also co-founded PowerDsine (Nasdaq:PDSN) in 1995 and served as Chief Executive Officer and a director from inception until
January 2007. . Prior to co-founding PDSN, Mr. Rotem was the Chief Executive Officer of Butterfly VLSI Ltd., which was later sold to
Texas Instruments Incorporated (Nasdaq: TXN). From 1981 until 1992, Mr. Rotem served as a Major in an elite R&D center within Israeli
Defense Forces (81) Intelligence Corps. Mr. Rotem holds an MBA from Tel Aviv University specializing in industrial management, and a
B.Sc. in Electrical Engineering from Tel Aviv University, from which he graduated Magna Cum Laude.
Family
Relationships
There
are no family relationships between any members of our executive management and our directors.
Arrangements
for Election of Directors and Members of Management
There
are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive
management or our directors were selected.
B. Compensation
The
following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year
ended December 31, 2021. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing
us with services during this period.
All
amounts reported in the tables below reflect the cost to the Company, in thousands of U.S. dollars, for the year ended December 31, 2021.
Amounts paid in NIS are translated into U.S. dollars at the rate of NIS 3.11 = U.S.$1.00, based on the rate of exchange between the NIS
and the U.S. dollar as reported by the Bank of Israel in December 31, 2021.
| |
Salary and Related
Benefits, including
Pension, Retirement
and Other Similar
Benefits | | |
Share-Based Compensation | |
All directors and senior management as a group, consisting of 15 persons (1) | |
$ | 2,907 | | |
$ | 14,674 | |
(1) |
Includes
Mr. Eli David, who resigned from our board of directors in February 2022. |
In
accordance with the Companies Law, the table below reflects the compensation granted to our five most highly compensated officers and
directors during or with respect to the year ended December 31, 2021.
Annual
Compensation- in thousands of U.S. dollars - Convenience Translation (*)
Executive Officer and Directors | |
Salary and Related Benefits, including Pension, Retirement and Other Similar Benefits | | |
Share-Based Compensation(1) | | |
Total | |
Yoav Stern | |
$ | 696 | | |
$ | 3,725 | | |
$ | 4,421 | |
| |
| | | |
| | | |
| | |
Hanan Gino | |
$ | 227 | | |
$ | 2,749 | | |
$ | 2,976 | |
| |
| | | |
| | | |
| | |
Zvi Peled | |
$ | 328 | | |
$ | 1,053 | | |
$ | 1,381 | |
| |
| | | |
| | | |
| | |
Yael Sandler | |
$ | 330 | | |
$ | 795 | | |
$ | 1,125 | |
| |
| | | |
| | | |
| | |
Zivi Nedivi | |
$ | 558 | | |
$ | 1,978 | | |
$ | 2,536 | |
(*) | Using
the exchange rate as of December 31, 2021, which was 3.11 (NIS/USD). |
(1) |
Computed
based on Black-Scholes-Merton formula or binomial pricing model. |
Employment
Agreements with Executive Officers
We
have entered into written employment or services agreements with each of our executive officers. All of these agreements contain customary
provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the
noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer
and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities
are not covered by directors and officers insurance. Some members of our senior management are eligible for bonuses each year. The bonuses
are payable upon meeting objectives and targets that are set by our chief executive officer and approved annually by our board of directors
that also set the bonus targets for our chief executive officer.
For
a description of the terms of our options and option plans, see “Item 6.E. Share Ownership” below.
Directors’
Service Contracts
Other
than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for
benefits upon the termination of his employment with our company.
C. Board
Practices
Introduction
Our
board of directors presently consists of nine members. We believe that Ms. Poran and Messrs. David, Eitan, Gera, Kleinfeld and Moran
are “independent” for purposes of Nasdaq Stock Market rules. Our amended and restated articles of association provides that
the number of board of directors’ members shall be set by the general meeting of the shareholders provided that it will consist
of not less than three and not more than twelve members. Pursuant to the Companies Law, the management of our business is vested in our
board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our
shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities
established by our board of directors. Pursuant to the Companies Law, our Chief Executive Officer is appointed by, and serves at the
discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers
are appointed by our Chief Executive Officer. Their terms of employment are subject to the approval of the board of directors’
compensation committee and of the board of directors, and if such terms of employment are not consistent with our compensation policy,
then such terms require the approval of our shareholders, and are subject to the terms of any applicable employment agreements that we
may enter into with them.
Our
directors (other than the external directors, when applicable) are divided into three classes that are each elected at the third annual
general meeting of our shareholders, in a staggered fashion (such that one class is elected each annual general meeting), and serve on
our board of directors unless they are removed by a vote of 70% of the total voting power of our shareholders at a general meeting of
our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our amended and restated articles
of association.
In
addition, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our
board of directors or in addition to the acting directors (subject to the limitation on the number of directors), until the next annual
general meeting or special general meeting in which directors may be appointed or terminated.
Under
the Companies Law, nominations for directors may be made by any shareholder holding at least one percent of our outstanding voting power.
However, any such shareholder may make such a nomination only if a written notice of such shareholder’s intent to make such nomination
has been given to our board of directors. Any such notice must include certain information, the consent of the proposed director nominee(s)
to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring that there is no limitation under the Companies
Law preventing their election and that all of the information that is required to be provided to us in connection with such election
under the Companies Law has been provided.
Under
the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial
expertise. In determining the number of directors required to have such expertise, our board of directors must consider, among other
things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the
minimum number of directors of our company who are required to have accounting and financial expertise is two.
The
board of directors may elect one director to serve as the chairman of the board of directors to preside at the meetings of the board
of directors, and may also remove that director as chairman. Pursuant to the Companies Law, neither the chief executive officer nor any
of his or her relatives is permitted to serve as the chairman of the board of directors, and a company may not vest the chairman or any
of his or her relatives with the chief executive officer’s authorities. In addition, a person who reports, directly or indirectly,
to the chief executive officer may not serve as the chairman of the board of directors; the chairman may not be vested with authorities
of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position
in the company or a controlled company, but he or she may serve as a director or chairman of a controlled company. However, the Companies
Law permits a company’s shareholders to determine, for a period not exceeding three years from each such determination, that the
chairman or his or her relative may serve as chief executive officer or be vested with the chief executive officer’s authorities,
and that the chief executive officer or his or her relative may serve as chairman or be vested with the chairman’s authorities.
Such determination of a company’s shareholders requires either: (1) the approval of at least two-thirds of the shares of those
shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination);
or (2) that the total number of shares opposing such determination does not exceed 2% of the total voting power in the company. Currently,
we have a separate chairman and chief executive officer.
The
board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the board,
and it may, from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations.
Unless otherwise expressly provided by the board of directors, the committees shall not be empowered to further delegate such powers.
The composition and duties of our audit committee, financial statement examination committee and compensation committee are described
below.
The
board of directors oversees how management monitors compliance with our risk management policies and procedures, and reviews the adequacy
of the risk management framework in relation to the risks faced by us. The board of directors is assisted in its oversight role by an
internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results
of which are reported to our audit committee.
External
Directors
Under
the Companies Law, except as provided below, companies incorporated under the laws of the State of Israel that are publicly traded, including
Israeli companies with shares listed on the Nasdaq, are required to appoint at least two external directors who meet the qualification
requirements set forth in the Companies Law. The definitions of an external director under the Companies Law and independent director
under Nasdaq Stock Market rules are similar such that it would generally be expected that our two external directors will also comply
with the independence requirement under Nasdaq Stock Market rules.
Pursuant
to regulations under the Companies Law, the board of directors of a company such as us is not required to have external directors if:
(i) the company does not have a controlling shareholder (as such term is defined in the Companies Law); (ii) a majority of the directors
serving on the board of directors are “independent,” as defined under Nasdaq Rule 5605(a)(2); and (iii) the company follows
Nasdaq Rule 5605(e)(1), which requires that the nomination of directors be made, or recommended to the board of directors, by a Nominating
Committee of the board of directors consisting solely of independent directors, or by a majority of independent directors. The Company
meets all these requirements. On November 20, 2017, our board of directors resolved to adopt the corporate governance exemption set forth
above, and accordingly we no longer have external directors as members of our board of directors.
Fiduciary
Duties of Office Holders
The
Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company.
The
term “office holder” is defined in the Companies Law as a general manager, chief business manager, deputy general manager,
vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title,
a director and any other manager directly subordinate to the general manager.
The
duty of care requires an office holder to act with the level of skill with which a reasonable office holder in the same position would
have acted under the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:
|
● |
information
on the advisability of a given action brought for his or her approval or performed by him or her by virtue of his or her position;
and |
|
|
|
|
● |
all
other important information pertaining to these actions. |
The
duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit of the company, and includes a
duty to:
|
● |
refrain
from any conflict of interest between the performance of his or her duties in the company and his performance of his other duties
or personal affairs; |
|
|
|
|
● |
refrain
from any action that constitutes competition with the company’s business; |
|
|
|
|
● |
refrain
from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and |
|
|
|
|
● |
disclose
to the company any information or documents relating to the company’s affairs which the office holder has received due to his
or her position as an office holder. |
Approval
of Related Party Transaction under Israeli Law
General
Under
the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described
above, if:
| ● | the
office holder acts in good faith and the act or its approval does not cause harm to the company; and |
| ● | the
office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company
at a reasonable time before the company’s approval of such matter. |
Disclosure
of Personal Interests of an Office Holder
The
Companies Law requires that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at
which the transaction is first discussed, any direct or indirect personal interest that he or she may have and all related material information
known to him or her relating to any existing or proposed transaction by the company. If the transaction is an extraordinary transaction,
the office holder must also disclose any personal interest held by:
|
● |
the
office holder’s relatives; or |
|
|
|
|
● |
any
corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director
or general manager or has the right to appoint at least one director or the general manager. |
Under
the Companies Law, an extraordinary transaction is a transaction:
|
● |
not
in the ordinary course of business; |
|
|
|
|
● |
not
on market terms; or |
|
|
|
|
● |
that
is likely to have a material effect on the company’s profitability, assets or liabilities. |
The
Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders
to make such disclosures to our board of directors.
Under
the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve a transaction
between the company and an office holder, or a third party in which an office holder has a personal interest, unless the articles of
association provide otherwise and provided that the transaction is not detrimental to the company’s interest. If the transaction
is an extraordinary transaction, first the audit committee and then the board of directors, in that order, must approve the transaction.
Under specific circumstances, shareholder approval may also be required. A director who has a personal interest in an extraordinary transaction,
which is considered at a meeting of the board of directors or the audit committee, may not be present at this meeting or vote on this
matter, unless a majority of the board of directors or the audit committee, as the case may be, has a personal interest. If a majority
of the board of directors has a personal interest, then shareholder approval is generally also required.
Under
the Companies Law, all arrangements as to compensation of office holders require approval of the compensation committee and board of
directors, and compensation of office holders who are the Chief Executive Officer or directors must be also approved, subject to certain
exceptions, by the shareholders, in that order.
Disclosure
of Personal Interests of a Controlling Shareholder
Under
the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company.
Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a
private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether
directly or indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions
concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder
or an employee, require the approval of the audit committee or the compensation committee, as the case may be, the board of directors
and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’
meeting. In addition, the shareholder approval must fulfill one of the following requirements:
|
● |
at
least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting
must be voted in favor of approving the transaction, excluding abstentions; or |
|
|
|
|
● |
the
shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more
than 2% of the voting rights in the company. |
In
addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest
with a term of more than three years requires the abovementioned approval every three years; however, such transactions not involving
the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer
term is reasonable under the circumstances. Under the Companies Law regulations, subject to certain terms, such transactions can be extended
or approved after three years only by the audit committee and the Board.
The
Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction
with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in
the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.
The
term “controlling shareholder” is defined in the Companies Law as a shareholder with the ability to direct the activities
of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder
holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general
manager. In certain related party transactions, a shareholder who holds 25% or more of the voting rights at the general meeting of the
company will be referred to as the “controlling shareholder”, if no other shareholder holds more than 50% of the voting rights
in the company.
Duties
of Shareholders
Under
the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable
manner in exercising its rights and performing its obligations to the company and other shareholders, including, among other things,
voting at general meetings of shareholders on the following matters:
|
● |
amendment
of the articles of association; |
|
|
|
|
● |
increase
in the company’s authorized share capital; |
|
|
|
|
● |
merger;
and |
|
|
|
|
● |
the
approval of related party transactions and acts of office holders that require shareholder approval. |
A
shareholder also has a general duty to refrain from oppressing other shareholders.
The
remedies generally available upon a breach of contract will also apply to a breach of the above mentioned duties, and in the event of
oppression of other shareholders, additional remedies are available to the injured shareholder.
In
addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any
shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder,
or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not
describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in
the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.
Committees
of the Board of Directors
Our
board of directors has established three standing committees, the audit committee, the compensation committee and the financial statement
examination committee.
Audit
Committee
Under
the Companies Law, we are required to appoint an audit committee. Our audit committee, acting pursuant to a written charter, is comprised
of Ms. Poran and Messrs. Eitan and Moran.
Our
audit committee acts as a committee for review of our financial statements as required under the Companies Law, and in such capacity
oversees and monitors our accounting; financial reporting processes and controls; audits of the financial statements; compliance with
legal and regulatory requirements as they relate to financial statements or accounting matters; the independent registered public accounting
firm’s qualifications, independence and performance; and provides the board of directors with reports on the foregoing.
Under
the Companies Law, our audit committee is responsible for:
| (i) | determining
whether there are deficiencies in the business management practices of our company, and making
recommendations to the board of directors to improve such practices; |
| (ii) | determining
whether to approve certain related party transactions (including transactions in which an
office holder has a personal interest and whether such transaction is extraordinary or material
under Companies Law) (see “Item 7.B. Approval of Related Party Transactions under Israeli
Law”); |
| (iii) | examining
our internal controls and internal auditor’s performance, including whether the internal
auditor has sufficient resources and tools to dispose of its responsibilities; |
| (iv) | examining
the scope of our auditor’s work and compensation and submitting a recommendation with
respect thereto to our board of directors or shareholders, depending on which of them is
considering the appointment of our auditor; and |
| (v) | establishing
procedures for the handling of employees’ complaints as to the management of our business
and the protection to be provided to such employees. |
Our
audit committee may not conduct any discussions or approve any actions requiring its approval (see “Item 7.B. Approval of Related
Party Transactions under Israeli Law”), unless at the time of the approval a majority of the committee’s members are present.
Nasdaq
Stock Market Requirements for Audit Committee
Under
the Nasdaq Stock Market rules, we are required to maintain an audit committee consisting of at least three members, all of whom are independent
and are financially literate and one of whom has accounting or related financial management expertise.
As
noted above, the members of our audit committee include Mr. Yaron Eitan, Mr. Christopher Moran and Ms. Nira Poran, each of whom is “independent,”
as such term is defined in under Nasdaq Stock Market rules. Mr. Kleinfeld serves as the chairman of our audit committee. All members
of our audit committee meet the requirements for financial literacy under the Nasdaq Stock Market rules. Our board of directors has determined
that each member of our audit committee is an audit committee financial expert as defined by the SEC rules and has the requisite financial
experience as defined by the Nasdaq Stock Market rules.
Financial
Statement Examination Committee
Under
the Companies Law, the board of directors of a public company in Israel must appoint a financial statement examination committee, which
consists of members with accounting and financial expertise or the ability to read and understand financial statements. According to
a resolution of our board of directors, the audit committee has been assigned the responsibilities and duties of a financial statement
examination committee, as permitted under relevant regulations promulgated under the Companies Law. From time to time as necessary and
required to approve our financial statements, the audit committee holds separate meetings, prior to the scheduled meetings of the entire
board of directors regarding financial statement approval. The function of a financial statement examination committee is to discuss
and provide recommendations to its board of directors (including the report of any deficiency found) with respect to the following issues:
(1) estimations and assessments made in connection with the preparation of financial statements; (2) internal controls related to the
financial statements; (3) completeness and propriety of the disclosure in the financial statements; (4) the accounting policies adopted
and the accounting treatments implemented in material matters of the company; and (5) value evaluations, including the assumptions and
assessments on which evaluations are based and the supporting data in the financial statements. Our independent registered public accounting
firm and our internal auditor are invited to attend all meetings of the audit committee when it is acting in the role of the financial
statement examination committee.
Compensation
Committee
Under
the Companies Law, the board of directors of any public company must establish a compensation committee. Under the Nasdaq rules, we are
required to maintain a Compensation Committee consisting entirely of independent directors (or the determination of such compensation
solely by the independent members of our board of directors).
Our
compensation committee is acting pursuant to a written charter, and consists of Mr. Yaron Eitan, Mr. Roni Kleinfeld and Ms. Nira Poran,
each of whom is “independent,” as such term is defined under Nasdaq rules. Our compensation committee complies with the provisions
of the Companies Law, the regulations promulgated thereunder, and our amended and restated articles of association. Our compensation
committee also complies with committee membership and charter requirements prescribed under the Nasdaq Stock Market rules.
Our
compensation committee reviews and recommends to our board of directors: (1) the annual base compensation of our executive officers and
directors; (2) annual incentive bonus, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance
arrangements, and change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits,
compensation, compensation policies or arrangements.
The
duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms
of engagement of office holders, to which we refer as a compensation policy. That policy must be adopted by the company’s board
of directors, after considering the recommendations of the compensation committee. The compensation policy is then brought for approval
by our shareholders. On December 26, 2018, our shareholders approved our compensation policy, which was further approved on July 7, 2020,
for three more years.
The
compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers
and directors, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment
or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s
business and its long-term strategy, and creation of appropriate incentives for executives. It must also consider, among other things,
the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following
additional factors:
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the
knowledge, skills, expertise and accomplishments of the relevant director or executive; |
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the
director’s or executive’s roles and responsibilities and prior compensation agreements with him or her; |
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the
relationship between the terms offered and the average and median compensation of the other employees of the company; |
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the
impact of disparities in salary upon work relationships in the company; |
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the
possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit
on the exercise value of non-cash variable compensation; and |
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as
to severance compensation, the period of service of the director or executive, the terms of his or her compensation during such service
period, the company’s performance during that period of service, the person’s contribution towards the company’s
achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
The
compensation policy must also include the following principles:
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the
link between variable compensation and long-term performance and measurable criteria; |
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the
relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; |
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the
conditions under which a director or executive would be required to repay compensation paid to him or her if it was later shown that
the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements; |
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the
minimum holding or vesting period for variable, equity-based compensation; and |
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maximum
limits for severance compensation. |
The
compensation policy must also consider appropriate incentives from a long-term perspective and maximum limits for severance compensation.
The
compensation committee is responsible for (1) recommending the compensation policy to a company’s board of directors for its approval
(and subsequent approval by our shareholders) and (2) duties related to the compensation policy and to the compensation of a company’s
office holders as well as functions previously fulfilled by a company’s audit committee with respect to matters related to approval
of the terms of engagement of office holders, including:
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recommending
whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval
of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); |
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recommending
to the board of directors periodic updates to the compensation policy; |
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assessing
implementation of the compensation policy; and |
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determining
whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders. |
Nasdaq
Stock Market Requirements for Compensation Committee
Under
Nasdaq rules, we are required to maintain a compensation committee consisting of at least two members, all of whom are independent. In
addition, in affirmatively determining the independence of any director who will serve on the compensation committee of a board of directors,
the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the company
which is material to that director’s ability to be independent from management in connection with the duties of a compensation
committee member.
As
noted above, the members of our compensation committee include Ms. Poran and Messrs. Eitan and Kleinfeld, each of whom is “independent,”
as such term is defined under Nasdaq rules. Mr. Roni Kleinfeld serves as the chairman of our compensation committee.
Internal
Auditor
Under
the Companies Law, the board of directors must also appoint an internal auditor nominated by the audit committee. Our internal auditor
is Daniel Spira. The role of the internal auditor is to examine whether a company’s actions comply with the law and proper business
procedure. The internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder,
and may not be a member of the company’s independent accounting firm or its representative. The Companies Law defines an interested
party as a holder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint
at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company.
Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.
Remuneration
of Directors
Under
the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors
and thereafter by the general meeting of the shareholders. If the remuneration of the directors is in accordance with the regulations
applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting
of the shareholders.
Insurance
Under
the Companies Law, a company may obtain insurance for any of its office holders for:
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a
breach of his or her duty of care to the company or to another person; |
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a
breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause
to assume that his or her act would not prejudice the company’s interests; and |
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a
financial liability imposed upon him or her in favor of another person concerning an act performed by such office holder in his or
her capacity as an officer holder. |
We
currently have directors’ and officers’ liability insurance, providing total coverage of $15 million for the benefit of all
of our directors and officers, in respect of which we paid a twelve-month premium of approximately $815,000, which expires on November
4, 2022.
Indemnification
The
Companies Law provides that a company may indemnify an office holder against:
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a
financial liability imposed on him or her in favor of another person by any judgment concerning an act performed in his or her capacity
as an office holder; |
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reasonable
litigation expenses, including attorneys’ fees, expended by the office holder as a result of an investigation or proceeding
instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment
(as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (2) no
financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her as
a result of such investigation or proceeding, or, if such financial liability was imposed, it was imposed with respect to an offense
that does not require proof of criminal intent; and |
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reasonable
litigation expenses, including attorneys’ fees, expended by the office holder or charged to him or her by a court relating
to an act performed in his or her capacity as an office holder, in connection with: (1) proceedings that the company institutes,
or that another person institutes on the company’s behalf, against him or her; (2) a criminal charge of which he or she was
acquitted; or (3) a criminal charge for which he or she was convicted for a criminal offense that does not require proof of criminal
thought. |
Our
amended and restated articles of association allow us to indemnify our office holders up to a certain amount. The Companies Law also
permits a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability
imposed on him or her, as described above, then the undertaking should be limited:
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to
categories of events that the board of directors determines are likely to occur in light of the operations of the company at the
time that the undertaking to indemnify is made; and |
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in
amount or criterion determined by the board of directors, at the time of the giving of such undertaking to indemnify, to be reasonable
under the circumstances. |
We
have entered into indemnification agreements with certain of our directors and with certain members of our senior management. Each such
indemnification agreement provides the office holder with indemnification permitted under applicable law and up to a certain amount,
and to the extent that these liabilities are not covered by directors and officers insurance.
Exculpation
Under
the Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but
may exculpate in advance an office holder from his or her liability to the company, in whole or in part, for a breach of his or her duty
of care (other than in relation to distributions). Our amended and restated articles of association provide that we may exculpate any
office holder from liability to us to the fullest extent permitted by law. Under the indemnification agreements, we exculpate and release
our office holders from any and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted
by law.
Limitations
The
Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide
coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty
unless (in the case of indemnity or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis
to believe that the act would not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried
out intentionally or recklessly (as opposed to merely negligently); (3) any action taken with the intent to derive an illegal personal
benefit; or (4) any fine levied against the office holder.
The
foregoing descriptions summarize the material aspects and practices of our board of directors. For additional details, we also refer
you to the full text of the Companies Law, as well as of our amended and restated articles of association, which are exhibits to this
annual report on Form 20-F and are incorporated herein by reference.
There
are no service contracts between us or our subsidiaries, on the one hand, and our directors in their capacity as directors, on the other
hand, providing for benefits upon termination of service.
D. Employees.
As
of December 31, 2019, we had three senior management, full-time employees, one of whom also serves as a director in our Company. In addition,
we had 65 full-time employees. Six employees are located in Hong Kong, Four employees were located in the United States and the rest
were located in Israel.
As
of December 31, 2020, we five senior management, full-time employees, one of whom also serves as a director in our Company. In addition,
we had 87 full-time employees. Four employees are located in Hong Kong, three employees were located in Europe, nine employees were located
in the United States and the rest were located in Israel.
As of December 31, 2021, we had seven senior management, full-time
employees, two of whom also serves as a directors in our Company. In addition, we had 338 employees. 10 employees are located in Hong
Kong and China, 95 employees were located in Europe, 31 employees were located in the United States and the rest were located in Israel.
None
of our employees are represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations
with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent
rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance
with relevant labor laws by the Israeli Ministry of Economy and which apply such agreement provisions to our employees even though they
are not part of a union that has signed a collective bargaining agreement.
E. Share
Ownership.
The
following table lists as of March 30, 2022, the number of our shares beneficially owned by each of our directors, our executive officers
and our directors and executive officers as a group:
| |
Number of Ordinary Shares Beneficially Owned (1) | | |
Percent
of Class (2) | |
Executive Officers and Directors | |
| | |
| |
Simon Anthony-Fried | |
| 90,961 | (3) | |
| * | |
Amit Dror | |
| 331,499 | (4) | |
| * | |
Yaron Eitan | |
| 1,339,686 | (5) | |
| * | |
Oded Gera | |
| 3,333 | (6) | |
| * | |
Hanan Gino | |
| 500,000 | (7) | |
| * | |
Roni Kleinfeld | |
| 34,913 | (8) | |
| * | |
Christopher Moran | |
| 24,750 | (9) | |
| * | |
Zivi Nedivi | |
| 300,000 | (10) | |
| * | |
Dr. Jaim Nulman | |
| 628,420 | (11) | |
| * | |
Zvi Peled | |
| 320,833 | (12) | |
| * | |
Nira Poran | |
| 25,750 | (13) | |
| * | |
Yael Sandler | |
| 428,467 | (14) | |
| * | |
Yoav Stern | |
| 33,259,040 | (15) | |
| 11.5 | % |
Igal Rotem | |
| - | | |
| - | |
All
directors and executive officers as a group (14 persons) | |
| 37,287,652 | | |
| 13.09 | % |
| (1) | Beneficial
ownership is determined in accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities. Ordinary Shares relating to options currently
exercisable or exercisable within 60 days of the date of this table are deemed outstanding
for computing the percentage of the person holding such securities but are not deemed outstanding
for computing the percentage of any other person. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table above have sole
voting and investment power with respect to all shares shown as beneficially owned by them. |
| (2) | The
percentages shown are based on 257,413,092 Ordinary Shares issued and outstanding as of March
30, 2022 plus Ordinary Shares relating to options currently exercisable or exercisable within
60 days of the date of this table, which are deemed outstanding for computing the percentage
of the person holding such securities but are not deemed outstanding for computing the percentage
of any other person. |
| (3) | Consists
of options to purchase 5,000 Ordinary Shares at an exercise price of NIS 275 per share, options
to purchase 5,830 Ordinary Shares at an exercise price of NIS 27.55 per share, options to
purchase 27,708 Ordinary Shares at an exercise price of $0.70 per share, and options to purchase
8,666 Ordinary Shares at an exercise price of $9.33 per share that are exercisable within
60 days. In addition, Mr. Anthony-Fried holds options to purchase 530 Ordinary Shares at
an exercise price of NIS 27.55, options to purchase 7,292 Ordinary Shares at an exercise
price of $0.70 per share and options to purchase 17,334 Ordinary Shares at an exercise price
of $9.33 per share that are not exercisable within 60 days. Mr. Anthony-Fried’s options
have expiration dates ranging from July 2024 to May 2028. |
| (4) | Consists
of options to purchase 5,500 Ordinary Shares at an exercise price of NIS 275 per share, options
to purchase 21,010 Ordinary Shares at an exercise price of NIS 27.55 per share, and options
to purchase 291,666 Ordinary Shares at an exercise price of $0.70 per share, that are exercisable
within 60 days. In addition, Mr. Dror holds options to purchase 1,910 Ordinary Shares at
an exercise price of NIS 27.55, options to purchase 208,334 Ordinary Shares at an exercise
price of $0.70 per share that are not exercisable within 60 days. Mr. Dror’s options
have expiration dates ranging from July 2024 to July 2027. |
| (5) | Consists
of warrants to purchase 750,000 Ordinary Shares at an exercise price of $2.25 per share that
are exercisable within 60 days. In addition, Mr. Eitan holds warrants to purchase 750,000
Ordinary Shares at an exercise price of $2.25 per share that are not exercisable within 60
days. Mr. Eitan’s warrants have expiration date of September 2027. In addition, Mr.
Eitan holds options to purchase 58,333 Ordinary Shares at an exercise price of $0.70 per
share and options to purchase 10,000 Ordinary Shares at an exercise price of $9.33 per share
that are exercisable within 60 days. In addition, Mr. Eitan holds options to purchase 41,667
Ordinary Shares at an exercise price of $0.70 per share and options to purchase 20,000 Ordinary
Shares at an exercise price of $9.33 per share that are not exercisable within 60 days. Mr.
Eitan’s options have expiration dates ranging from July 2025 to May 2028 |
| (6) | Consists
of options to purchase 3,333 Ordinary Shares at an exercise price of $7.69 per share that
are exercisable within 60 days. In addition, Mr. Gera holds options to purchase 6,667 Ordinary
Shares at an exercise price of $7.69 per share that are not exercisable within 60 days. Mr.
Gera’s options have expiration dates ranging from May 2026 2024 to May 2028. |
| (7) | Mr.
Gino holds options to purchase 500,000 Ordinary Shares at an exercise price of $6.00 per
share that are exercisable within 60 days. In addition, Mr. Gino holds options to purchase
1,000,000 Ordinary Shares at an exercise price of $6.00 per share that are not exercisable
within 60 days. Mr. Gino’s options have expiration dates ranging from May 2026 to May
2028. |
| (8) | Mr.
Kleinfeld holds options to purchase 5,830 Ordinary Shares at an exercise price of NIS 27.55
per share, 20,416 options to purchase Ordinary Shares at an exercise price of $0.70 per share,
and 8,666 options to purchase Ordinary Shares at an exercise price of $9.33 per share that
are exercisable within 60 days. In addition, Mr. Kleinfeld holds options to purchase 530
Ordinary Shares at an exercise price of NIS 27.55, options to purchase 14,584 Ordinary Shares
at an exercise price of $0.70 per share and options to purchase 17,334 Ordinary Shares at
an exercise price of $9.33 per share that are not exercisable within 60 days. Mr. Kleinfeld’s
options have expiration dates ranging from July 2024 to May 2028. |
| (9) | Mr.
Moran holds 20,416 options to purchase Ordinary Shares at an exercise price of $0.70 per
share, and 4,333 options to purchase Ordinary Shares at an exercise price of $9.33 per share
that are exercisable within 60 days. In addition, Mr. Moran holds options to purchase 14,583
Ordinary Shares at an exercise price of $0.70 per share and options to purchase 8,667 Ordinary
Shares at an exercise price of $9.33 per share that are not exercisable within 60 days. Mr.
Moran’s options have expiration dates ranging from July 2025 to May 2028. |
| (10) | Mr.
Nedivi holds options to purchase 300,000 Ordinary Shares at an exercise price of $6.00 per
share that are exercisable within 60 days. In addition, Mr. Nedivi holds options to purchase
1,200,000 Ordinary Shares at an exercise price of $6.00 per share and options to purchase
1,000,000 Ordinary Shares at an varied exercise price that are not exercisable within 60
days. Mr. Nedivi’s options have expiration dates ranging from April 2026 to April 2030. |
| (11) | Includes
options to purchase 5,500 Ordinary Shares at an exercise price of NIS 50.70 per share, options
to purchase 22,920 Ordinary Shares at an exercise price of NIS 25.80 per share and options
to purchase 600,000 Ordinary Shares at an exercise price of $0.70 per share that are exercisable
within 60 days. In addition, Mr. Nulman holds options to purchase 300,000 Ordinary Shares
at an exercise price of $0.70 per share that are not exercisable within 60 days. Mr. Nulman’s
options have expiration dates ranging from May 2023 to May 2027. |
| (12) | Mr.
Peled holds options to purchase 300,000 Ordinary Shares at an exercise price of $0.70 per
share and options to purchase 20,833 Ordinary Shares at an exercise price of $7.50 per share
that are exercisable within 60 days. In addition, Mr. Nulman holds options to purchase 300,000
Ordinary Shares at an exercise price of $0.70 per share and options to purchase 29,167 Ordinary
Shares at an exercise price of $7.50 per share that are not exercisable within 60 days. Mr.
Peled’s options have expiration dates ranging from May 2025 to January 2028. |
| (13) | Ms.
Poran holds 20,416 options to purchase Ordinary Shares at an exercise price of $0.70 per
share, and 5,333 options to purchase Ordinary Shares at an exercise price of $9.33 per share
that are exercisable within 60 days. In addition, Mr. Moran holds options to purchase 14,583
Ordinary Shares at an exercise price of $0.70 per share and options to purchase 10,667 Ordinary
Shares at an exercise price of $9.33 per share that are not exercisable within 60 days. Ms.
Poran’s options have expiration dates ranging from July 2025 to May 2028. |
| (14) | Includes
options to purchase 200 Ordinary Shares at an exercise price of NIS 83.07 per share, options
to purchase 5,000 Ordinary Shares at an exercise price of NIS 275 per share, options to purchase
19,100 Ordinary Shares at an exercise price of NIS 27.55 per share, options to purchase 333,333
Ordinary Shares at an exercise price of $0.70 per share, options to purchase 50,000 Ordinary
Shares at an exercise price of $1.58 per share, and options to purchase 20,833 Ordinary Shares
at an exercise price of $7.50 per share that are exercisable within 60 days. In addition,
Ms. Sandler holds options to purchase 166,667 Ordinary Shares at an exercise price of $0.70
per share, options to purchase 50,000 Ordinary Shares at an exercise price of $1.58 per share,
options to purchase 29,167 Ordinary Shares at an exercise price of $7.50 per share, and options
to purchase 25,000 Ordinary Shares at an exercise price of $6.50 per share that are not exercisable
within 60 days. Ms. Sandler’s options have expiration dates ranging from May 2022 to
July 2028 |
| (15) | Includes
warrants to purchase 3,440,202 Ordinary Shares at an exercise price of $0.75 per share that
are exercisable within 60 days, and 27,742,103 Series B warrants to purchase Ordinary Shares
at an exercise price of $6.16 per share exercisable within 60 days. In addition, Mr. Stern
holds warrants to purchase 1,376,080 Ordinary Shares, held by Stern YOI Ltd. Partnership,
at an exercise price of $0.75 per share that are not exercisable within 60 days. Stern YOI
Ltd. Partnership’s warrants have an expiration date in August 2027. Stern YOI Ltd.
Partnership is a Nevada limited partnership. Mr. Stern is a managing member of Stern YOI
Ltd. Partnership. |
2015
Stock Option Plan
We maintain one equity incentive plan – our Employee Stock Option
Plan (2015), or the 2015 Plan. As of March 29, 2022, the number of Ordinary Shares reserved for the exercise of options granted under
the plan was 25,000,000. In addition, options to purchase 20,089,130 Ordinary Shares were issued and outstanding as of such date.
Our
2015 Plan was adopted by our board of directors in February 2015, and expires in February 2025. Our employees, directors, officer, consultants,
advisors, suppliers and any other person or entity whose services are considered valuable to us are eligible to participate in this plan.
Our
2015 Plan is administered by our board of directors, regarding the granting of options and the terms of option grants, including exercise
price, method of payment, vesting schedule, acceleration of vesting and the other matters necessary in the administration of these plan.
Eligible Israeli employees, officers and directors, would qualify for provisions of Section 102(b)(2) of the Israeli Income Tax Ordinance,
or the Tax Ordinance. Pursuant to such Section 102(b)(2), qualifying options and shares issued upon exercise of such options are held
in trust and registered in the name of a trustee selected by the board of directors. The trustee may not release these options or shares
to the holders thereof for two years from the date of the registration of the options in the name of the trustee. Under Section 102,
any tax payable by an employee from the grant or exercise of the options is deferred until the transfer of the options or ordinary shares
by the trustee to the employee or upon the sale of the options or ordinary shares, and gains may qualify to be taxed as capital gains
at a rate equal to 25%, subject to compliance with specified conditions. Our Israeli non-employee service providers and controlling shareholders
may only be granted options under Section 3(9) of the Tax Ordinance, which does not provide for similar tax benefits. The 2015 Plan also
permits the grant to Israeli grantees of options that do not qualify under Section 102(b)(2).
Upon
termination of employment for any other reason, other than in the event of death, disability, all unvested options will expire and all
vested options will generally be exercisable for 3 months following termination, or such other period as determined by the plan administrator,
subject to the terms of the 2015 Plan and the governing option agreement.
Upon
termination of employment due to death or disability, all the vested options at the time of termination will be exercisable for 12 months,
or such other period as determined by the plan administrator, subject to the terms of the 2015 Plan and the governing option agreement.
On
March 13, 2019, our board of directors adopted an appendix to the 2015 Plan for U.S. residents. Under this appendix, the 2015 Plan provides
for the granting of options to U.S. residents in compliance with the U.S. Internal Revenue Code of 1986, as amended. On July 3, 2019,
our shareholders approved the adoption of the 2015 Plan together with the appendix for U.S. residents.
ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major
Shareholders
We
are not aware of any beneficial owner of 5% or more of our outstanding Ordinary Shares, other than Mr. Stern (see “Item 6.E. Share
Ownership”).
Changes
in Percentage Ownership by Major Shareholders
Over
the course of 2021, Mr. Stern’s beneficial ownership changed from 12.1% to 12.7%. We are not aware of any increases/decreases in
the percentage ownership of other significant shareholders.
Over
the course of 2020, there were decreases in the percentage ownership of some of our former significant shareholders: Laurence W. Lytton
(from 9.3% to 0%) and (ii) AIGH Capital Management, LLC, AIGH Investment Partners, L.L.C. and Mr. Orin Hirschman, or AIGH (from 6.9%
to 2.5%).
Over
the course of 2019, there were decreases in the percentage ownership of some of our former significant shareholders: (i) entities affiliated
with AIGH (from 9.6% to 6.9%); (ii) Iroquois Capital Management L.L.C., Richard Abbe and Kimberly Page (from 13.2% to 0.1%) and (iii)
Itshak Sharon (Tshuva), Delek Group Ltd. and Phoenix Holdings Ltd., or Hapheonix Group (from 10.1% to 4.5%).
Record
Holders
Based
upon a review of the information provided to us by The Bank of New York Mellon, the depository of the ADSs, as of March 1, 2022, there
were 135 holders of record of the ADSs on record with the Depository Trust Company.
These
numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders
reside, since many of these shares were held of record by brokers or other nominees.
The
Company is not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein,
and there are no arrangements known to the Company which would result in a change in control of the Company at a subsequent date.
B. Related
Party Transactions
Acquisition
of DeepCube
On
April 20, 2021, we and our subsidiary, Nano Dimension Technologies Ltd., entered into a definitive share purchase agreement (Share Purchase
Agreement) with DeepCube to purchase DeepCube, by way of a share purchase of all of the issued and outstanding share capital of DeepCube.
We paid the shareholders of DeepCube approximately $40 million in cash and $30 million in our ADSs, based on the volume weighted average
price of the last 30 trading days prior to the closing of the transaction, subject to certain escrow and indemnity provision contained
in the Share Purchase Agreement. Of said consideration, approximately $10.25 million was paid to AWZ HLS Fund II, LP (AWZ) in cash
only, pursuant to a separate secondary agreement. AWZ was not subject to any escrow, holdback or other limitations. The closing of the
transaction occurred on April 23, 2021.
Pursuant
to the Share Purchase Agreement, all selling shareholders of DeepCube entered into a six months lock-up agreement. However, (i) the ADSs
issued to Anakhnu LLC, in favor of Mr. Yaron Eitan (who also serves as a director on our board of directors) and Mr. Andy Intrater, is
subject to a 12 months lock-up, and (ii) the ADSs issued to Dr. Eli David (who also served on our board of directors at the time of the
transaction) is subject to a progressive 36 months holdback.
Except
for Dr. David, who has a separate arrangement, all the selling shareholders received the ADSs in return for their shares of DeepCube
are entitled to a price protection, such that if the price of the ADS falls below 70% of the ADS price set for the transaction during
12 months after the closing, then for any such ADS not sold by such selling shareholder during such time, the selling shareholder shall
be entitled to cash or equity compensation by us (at our election), covering such balance. For Dr. David, the protection will be per
each year of his lock-up period, whereby for the first year, the protected price will be 60%, for the second year - 50%, and for the
third year – 40%.
DeepCube’s
vested options and warrants at the closing were exercised automatically and included in the price of the transaction. Unvested options
expired and exchanged for our RSUs.
Finally,
Dr. David, Chief Technology Officer and co-founder of DeepCube, entered into an amendment to the existing consulting agreement between
DeepCube and Evolint Ltd., dated June 15, 2020, as amended, and became the DeepCube’s Chief Technology Officer of Artificial Intelligence/Deep
Learning/Machine Learning on a full-time basis. Dr. David is entitled to a monthly compensation in the gross amount of NIS 69,000 (approximately
$18,649) plus VAT. Additionally, the Company will pay Dr. David an annual bonus in the gross amount of up to NIS 300,000 (approximately
$81,081) for all or a portion of any year, which will be based on achieving annual revenue and/or gross margins goals, and/or any other
measurable goals, as set by our Chief Executive Officer, or any other person nominated by the our board of directors in the end of each
fiscal year and based on our audited year-end financial statements.
Employment
Agreements
We
have entered into written employment agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition
provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director
pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered
by directors’ and officers’ insurance.
Options
Since
our inception we have granted options to purchase our Ordinary Shares to our officers and certain of our directors. Such option agreements
may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. We describe our option plans
under “Share Ownership—2015 Stock Option Plan.” If the relationship between us and an executive officer or a director
is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally remain exercisable
for 90 days after such termination.
Warrants
In
August 2020, following the approval of our shareholders, in consideration for his services as our Chief Executive Officer, and as appropriate
incentive, we entered into a private placement of warrants, or the Stern Transaction, with our Chief Executive Officer, Mr. Yoav Stern.
In consideration of $150,000, we issued to Mr. Stern warrants to purchase 6,880,402 ADSs of the Company. The warrants have an exercise
price of $0.75 per ADS, will vest over a period of two and a half years and will expire after 7 years. The warrants are held in the name
of Stern YOI Ltd. Partnership, of which Mr. Stern is a managing partner. Simultaneously with the issuance of the warrants, Mr. Stern
forfeited options to purchase 581,000 ADSs, previously granted to him. In addition, as long as Mr. Stern is employed by the Company or
is a member of the Company’s board of directors, Mr. Stern may invest an additional amount up to $50,000 to buy Series B Warrants,
in an amount equal to 10% of the Company’s fully diluted capital. The exercise price per ADS under the Series B Warrants will be
the average of the daily volume weighted average price of the ADSs for the 10 consecutive trading days ending on the trading day that
is immediately prior to the date of the applicable notice to purchase the Series B Warrants. In the same general meeting of shareholders
that approved the Stern Transaction, the Company’s shareholders approved the amended terms of compensation of the Company’s
Chairman and Chief Executive Officer.
C. Interests
of Experts and Counsel
Not
applicable.
ITEM
8. FINANCIAL INFORMATION.
A. Consolidated
Statements and Other Financial Information.
See
“Item 18. Financial Statements.”
Legal
Proceedings
From
time to time, we are involved in various routine legal proceedings incidental to the ordinary course of our business. We do not believe
that the outcomes of these legal proceedings have had in the recent past, or will have (with respect to any pending proceedings), significant
effects on our financial position or profitability.
Dividends
We
have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable
future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing
conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects
and other factors our board of directors may deem relevant.
Payment
of dividends may be subject to Israeli withholding taxes. See “Item 10.E. Taxation”, for additional information.
B. Significant
Changes
No
significant change, other than as otherwise described in this annual report on Form 20-F, has occurred in our operations since the date
of our consolidated financial statements included in this annual report on Form 20-F.
ITEM
9. THE OFFER AND LISTING
A. Offer
and Listing Details
Our
ADSs, which represent our Ordinary Shares, are traded on the Nasdaq Capital Market under the symbol “NNDM.” Each ADS currently
represents one Ordinary Share.
B.
Plan of Distribution
Not
applicable.
C.
Markets
Our
ADSs are listed on the Nasdaq Capital Market.
D. Selling
Shareholders
Not
applicable.
E. Dilution
Not
applicable.
F. Expenses
of the Issue
Not
applicable.
ITEM
10. ADDITIONAL INFORMATION
A. Share
Capital
Not
applicable.
B. Memorandum
and Articles of Association
A
copy of our amended and restated articles of association is attached as Exhibit 1.1 to this annual report on Form 20-F. The information
called for by this Item is set forth in Exhibit 2(d) to this annual report on Form 20-F and is incorporated by reference into this annual
report on Form 20-F.
C. Material
Contracts
The
following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which
we are or have been a party, for the two years immediately preceding the date of this annual report on Form 20-F:
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Nano
Dimension Ltd. Amended and Restated Executive Officers Compensation Policy, filed as Exhibit A to Exhibit 99.1 to Form 6-K filed
on June 2, 2020. See Item 6 “Directors, Senior Management and Employees” for more information about this document. |
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Securities
Purchase Agreement, dated August 5, 2020, between Nano Dimension Ltd. and Stern YOI Ltd. Partnership, filed as Exhibit 4.4 to Form
F-3 (File No. 333-252848), filed on February 8, 2021. See Item 7.B “Related Party Transactions – Warrants” for
more information about this document. |
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Form
of Series A Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated August 5, 2020, between Nano Dimension
Ltd. and Stern YOI Ltd. Partnership, filed as Exhibit 4.5 to Form F-3 (File No. 333-252848), filed on February 8, 2021. See Item
7.B “Related Party Transactions – Warrants” for more information about this document. |
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Securities
Purchase Agreement, dated September 6, 2020, between Nano Dimension Ltd. and YEDNE LLC, filed as Exhibit 4.6 to Form F-3 (File No.
333-252848), filed on February 8, 2021. See Item 7.B “Related Party Transactions – Warrants” for more information
about this document. |
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Form
of Warrant to purchase Ordinary Shares Represented by American Depositary Shares, dated September 6, 2020, between Nano Dimension
Ltd. and YEDNE LLC, filed as Exhibit 4.7 to Form F-3 (File No. 333-252848), filed on February 8, 2021. See Item 7.B “Related
Party Transactions – Warrants” for more information about this document. |
| ● | Share
Purchase Agreement, dated April 19, 2021, by and among Nano Dimension Ltd., Nano Dimension Technologies Ltd., DeepCube Ltd., Shareholder
Representative Services, and the Selling Shareholders, filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on April
26, 2021. See Item 7.B “Related Party Transactions – Acquisition of DeepCube” for more information about this document. |
| ● | Share
Purchase Agreement, dated April 26, 2021, by and among Nano Dimension Ltd, NanoFabrica Ltd., Perrylion Ltd., As Holder Representative,
and the Selling Shareholders, filed as Exhibit 10.1 to Report on Form 6-K (File No. 001-37600), filed on April 28, 2021. See Item 5.B
“Liquidity and Capital Resources– Financing Activities” for more information about this document. Share Purchase
Agreement, dated November 2, 2021, by and among Nano Dimension Ltd. and the Selling Shareholders, filed as Exhibit 10.1 to Report on
Form 6-K (File No. 001-37600), filed on November 3, 2021. See Item 5.B “Liquidity and Capital Resources– Financing Activities”
for more information about this document. |
| ● | Share
Purchase Agreement, dated January 4, 2022, by and among Nano Dimension Ltd. and the Selling Shareholders, filed as Exhibit 10.1 to Report
on Form 6-K (File No. 001-37600), filed on January 5, 2022. See Item 5.B “Liquidity and Capital Resources– Financing Activities”
for more information about this document. |
D. Exchange
Controls
There
are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our Ordinary Shares
or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding
certain transactions. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action
at any time.
The
ownership or voting of our Ordinary Shares by non-residents of Israel, except with respect to citizens of countries that are in a state
of war with Israel, is not restricted in any way by our memorandum of association or amended and restated articles of association or
by the laws of the State of Israel.
E. Taxation.
Israeli
Tax Considerations and Government Programs
The
following is a description of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also
contains a description of material relevant provisions of the current Israeli income tax structure applicable to companies in Israel,
with reference to its effect on us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial
or administrative interpretation, there can be no assurance that the tax authorities will accept the views expressed in the discussion
in question. The discussion is not intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all
possible tax considerations.
The
following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition
of our Ordinary Shares and ADSs. Shareholders should consult their own tax advisors concerning the tax consequences of their particular
situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
General
Corporate Tax Structure in Israel
Israeli
companies are generally subject to corporate tax. As of January 2016, the corporate tax rate was 25%. As of January 1, 2017, the corporate
tax rate was reduced to 24% and as of January 1, 2018, the corporate tax rate was further reduced to 23%. However, the effective tax
rate payable by a company that derives income from a Preferred Enterprise (as discussed below) may be considerably less. Capital gains
derived by an Israeli company are generally subject to the prevailing corporate tax rate.
Law
for the Encouragement of Industry (Taxes), 5729-1969
The
Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax
benefits for “Industrial Companies.”
The
Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income
in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial
Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.
The
following corporate tax benefits, among others, are available to Industrial Companies:
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amortization
of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement of the
company, over an eight-year period, commencing on the year in which such rights were first exercised; |
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under
limited conditions, an election to file consolidated tax returns with related Israeli companies; and |
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expenses
related to a public offering are deductible in equal amounts over three years. |
Tax
Benefits and Grants for Research and Development
Under the Research Law, programs which meet specified criteria and
are approved by the IIA are eligible for grants of up to 85% of the project’s expenditure, as determined by the research committee,
in exchange for the payment of royalties from the revenues generated from the sale of products and related services developed, in whole
or in part pursuant to, or as a result of, a research and development program funded by the IIA. The royalties are generally at a range
of 3.0% to 3.5% of revenues until the entire IIA grant is repaid, together with an annual interest generally equal to the 12 month LIBOR
applicable to dollar deposits that is published on the first business day of each calendar year.
The
terms of the Research Law also require that the manufacture of products developed with government grants be performed in Israel. The
transfer of manufacturing activity outside Israel may be subject to the prior approval of the IIA. Under the regulations of the Research
Law, assuming we receive approval from the IIA to manufacture our IIA funded products outside Israel, we may be required to pay increased
royalties. The increase in royalties depends upon the manufacturing volume that is performed outside of Israel as follows:
Manufacturing Volume Outside of Israel | |
Royalties to the IIA as a Percentage of Grant | |
Up to 50% | |
| 120 | % |
between 50% and 90% | |
| 150 | % |
90% and more | |
| 300 | % |
If
the manufacturing is performed outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured
outside of Israel will increase by 1% over the regular rates. If the manufacturing is performed outside of Israel by a third party, the
rate of royalties payable by us on those revenues will be equal to the ratio obtained by dividing the amount of the grants received from
the IIA and our total investment in the project that was funded by these grants. The transfer of no more than 10% of the manufacturing
capacity in the aggregate outside of Israel is exempt under the Research Law from obtaining the prior approval of the IIA. A company
requesting funds from the IIA also has the option of declaring in its IIA grant application an intention to perform part of its manufacturing
outside Israel, thus avoiding the need to obtain additional approval. On January 6, 2011, the Research Law was amended to clarify that
the potential increased royalties specified in the table above will apply even in those cases where the IIA approval for transfer of
manufacturing outside of Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of
total capacity or when the company received an advance approval to manufacture abroad in the framework of its IIA grant application.
The
know-how developed within the framework of the IIA plan may not be transferred to third parties outside Israel without the prior approval
of a governmental committee charted under the Research Law. The approval, however, is not required for the export of any products developed
using grants received from the IIA. The IIA approval to transfer know-how created, in whole or in part, in connection with an IIA-funded
project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of a redemption
fee to the IIA calculated according to a formula provided under the Research Law that is based, in general, on the ratio between the
aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the
transaction consideration. The transfer of such know-how to a party outside Israel where the transferring company ceases to exist as
an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between the aggregate IIA grants to
the total financial investments in the company, multiplied by the transaction consideration. According to the January 2011 amendment,
the redemption fee in case of transfer of know-how to a party outside Israel will be based on the ratio between the aggregate IIA grants
received by the company and the company’s aggregate R&D expenses, multiplied by the transaction consideration. According to
regulations promulgated following the 2011 amendment, the maximum amount payable to the IIA in case of transfer of know how outside Israel
shall not exceed 6 times the value of the grants received plus interest, and in the event that the receiver of the grants ceases to be
an Israeli corporation such payment shall not exceed 6 times the value of the grants received plus interest, with a possibility to reduce
such payment to up to 3 times the value of the grants received plus interest if the R&D activity remains in Israel for a period of
three years after payment to the IIA.
Transfer
of know-how within Israel is subject to an undertaking of the recipient Israeli entity to comply with the provisions of the Research
Law and related regulations, including the restrictions on the transfer of know-how and the obligation to pay royalties, as further described
in the Research Law and related regulations.
These
restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our know-how
outside Israel and may require us to obtain the approval or the IIA for certain actions and transactions and pay additional royalties
to the IIA. In particular, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israeli citizen
or resident an “interested party,” as defined in the Research Law, requires a prior written notice to the IIA in addition
to any payment that may be required of us for transfer of manufacturing or know-how outside Israel. If we fail to comply with the Research
Law, we may be subject to criminal charges.
Tax
Benefits for Research and Development
Israeli
tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they
are incurred. Expenditures are deemed related to scientific research and development projects, if:
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The
expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
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The
research and development must be for the promotion of the company; and |
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The
research and development is carried out by or on behalf of the company seeking such tax deduction. |
The
amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific
research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is
related to an expense invested in an asset depreciable under the general depreciation rules of the income Tax Ordinance, 1961. Expenditures
not so approved are deductible in equal amounts over three years.
From
time to time we may apply the Office of the IIA for approval to allow a tax deduction for all research and development expenses during
the year incurred. There can be no assurance that such application will be accepted.
Law
for the Encouragement of Capital Investments, 5719-1959
The
Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives
for capital investments in production facilities (or other eligible assets).
Tax
Benefits
The
Investment Law grants tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise”
(as such terms are defined in the Investment Law) The definition of a Preferred Company includes a company incorporated in Israel that
is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed
from Israel. A Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived by its Preferred
Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 7.5% as of January
1, 2017.
Dividends
paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such
lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required
to be withheld.
Taxation
of our Shareholders
Capital
Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident who derives capital gains from the sale of shares
in an Israeli resident company should be exempt from Israeli tax so long as the shares were not held through a permanent establishment
that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli
residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled
to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
Additionally,
a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax
treaty. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel
with respect to Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares
by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to
claim the benefits afforded to such a resident by the U.S.-Israel Tax Treaty, or Treaty U.S. Resident, is generally exempt from Israeli
capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in
Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising
from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty
U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period
preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel
for 183 days or more during the relevant taxable year.
In
some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration
may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax
on their capital gains in order to avoid withholding at source at the time of sale.
Taxation
of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents are generally subject to Israeli income tax on the receipt
of dividends paid on our Ordinary Shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty
between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder”
at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. A “substantial
shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with
such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation.
“Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive
assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. However,
a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 20% if the dividend is distributed
from income attributed to a Preferred Enterprise, unless a reduced tax rate is provided under an applicable tax treaty. For example,
under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our
Ordinary Shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated
by a Preferred Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout
the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25%
of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends
distributed from income attributed to an Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject
to a withholding tax rate of 15% for a shareholder that is a U.S. corporation, provided that the condition related to our gross income
for the previous year (as set forth in the previous sentence) is met. If the dividend is attributable partly to income derived from a
Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions
of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce
shareholders’ tax liability.
U.S.
Tax Considerations
U.S.
Federal Income Tax Considerations
THE
FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR
TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITORY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL,
FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.
Subject
to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences
to a “U.S. Holder” arising from the purchase, ownership and sale of the Ordinary Shares and ADSs. For this purpose, a “U.S.
Holder” is a holder of Ordinary Shares or ADSs that is: (1) an individual citizen or resident of the United States, including an
alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under U.S.
federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership
(other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under
the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is
includable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all
substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided
in U.S. Treasury regulations.
This
summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income
tax considerations that may be relevant to a decision to purchase our Ordinary Shares or ADSs. This summary generally considers only
U.S. Holders that will own our Ordinary Shares or ADSs as capital assets. Except to the limited extent discussed below, this summary
does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable
to determine a taxpayer’s status as a U.S. Holder. This summary is based on the provisions of the Internal Revenue Code of 1986,
as amended, or the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial
interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to
change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS
with regard to the U.S. federal income tax treatment of an investment in our Ordinary Shares or ADSs by U.S. Holders and, therefore,
can provide no assurances that the IRS will agree with the conclusions set forth below.
This
discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based
on such holder’s particular circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state,
local, excise or foreign tax considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a
U.S. Holder who is: (1) a bank, life insurance company, regulated investment company, or other financial institution or “financial
services entity:” (2) a broker or dealer in securities or foreign currency; (3) a person who acquired our Ordinary Shares or ADSs
in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax;
(5) a U.S. Holder that holds our Ordinary Shares or ADSs as a hedge or as part of a hedging, straddle, conversion or constructive sale
transaction or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment
trusts or grantor trusts; (8) a U.S. Holder that expatriates out of the United States or a former long-term resident of the United States;
or (9) a person having a functional currency other than the U.S. dollar. This discussion does not address the U.S. federal income tax
treatment of a U.S. Holder that owns, directly or constructively, at any time, Ordinary Shares or ADSs representing 10% or more of our
voting power. Additionally, the U.S. federal income tax treatment of partnerships (or other pass-through entities) or persons who hold
Ordinary Shares or ADSs through a partnership or other pass-through entity are not addressed.
In
general, for U.S. federal income tax purposes, U.S. Holders of our ADSs will be treated as owning the underlying Ordinary Shares represented
by those ADSs. Accordingly, exchanges of Ordinary Shares for ADSs, and ADSs for Ordinary Shares will not be subject to U.S. federal income
tax.
Each
prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing,
holding or disposing of our Ordinary Shares or ADSs, including the effects of applicable state, local, foreign or other tax laws and
possible changes in the tax laws.
Taxation
of Dividends Paid on Ordinary Shares or ADSs
We
do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under
the heading “Passive Foreign Investment Companies” below and the discussion of “qualified dividend income” below,
a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid on Ordinary Shares or
ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not
exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution
which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax
basis for the Ordinary Shares to the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings
and profits under U.S. federal income tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution
generally will be reported as dividend income.
In
general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders
that are individuals, estates or trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received
from a “qualified foreign corporation.” A “qualified foreign corporation” is a corporation that is entitled to
the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS has stated
that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.
In
addition, our dividends will be qualified dividend income if our Ordinary Shares or ADSs are readily tradable on the Nasdaq Capital Market
or another established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated,
in the year the dividend is paid or in the prior year, as a PFIC, as described below under “Passive Foreign Investment Companies.”
A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has not held our Ordinary Shares or ADSs for at least
61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend date, or (2) to the extent the U.S. Holder
is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished
its risk of loss on our Ordinary Shares or ADSs are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who
elect to treat the dividend income as “investment income” pursuant to Code section 163(d)(4) will not be eligible for the
preferential rate of taxation.
The
amount of a distribution with respect to our Ordinary Shares or ADSs will be measured by the amount of the fair market value of any property
distributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by
us in NIS will be included in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the
date the dividend is includible in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal
income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise
disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary
exchange gain or loss.
Taxation
of the Disposition of Ordinary Shares or ADSs
Except
as provided under the PFIC rules described below under “Passive Foreign Investment Companies,” upon the sale, exchange or
other disposition of our Ordinary Shares or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference
between such U.S. Holder’s tax basis for the Ordinary Shares or ADSs in U.S. dollars and the amount realized on the disposition
in U.S. dollar (or its U.S. dollar equivalent determined by reference to the spot rate of exchange on the date of disposition, if the
amount realized is denominated in a foreign currency). The gain or loss realized on the sale, exchange or other disposition of Ordinary
Shares or ADSs will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at the time of the
disposition. Individuals who recognize long-term capital gains may be taxed on such gains at reduced rates of tax. The deduction of capital
losses is subject to various limitations.
Gain
realized by a U.S. Holder on a sale, exchange or other disposition of Ordinary Shares or ADSs will generally be treated as U.S. source
income for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of Ordinary
Shares or ADSs is generally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition
of Ordinary Shares or ADSs is subject to limitations. An additional 3.8% net investment income tax (described below) may apply to gains
recognized upon the sale, exchange or other taxable disposition of our Ordinary Shares or ADS by certain U.S. Holders who meet certain
income thresholds.
Passive
Foreign Investment Companies
Special
U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for
U.S. federal income tax purposes for any taxable year that either:
|
● |
75%
or more of our gross income (including our pro rata share of gross income for any company, in which we are considered to own 25%
or more of the shares by value), in a taxable year is passive; or |
|
|
|
|
● |
At
least 50% of our assets, averaged over the year and generally determined based upon fair market value (including our pro rata share
of the assets of any company in which we are considered to own 25% or more of the shares by value) are held for the production of,
or produce, passive income. |
For
this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities
transactions and from notional principal contracts. Cash is treated as generating passive income.
We
do not expect that we will be treated as a PFIC for the current taxable year. The tests for determining PFIC status are applied annually,
and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our
PFIC status may depend in part on the market value of our Ordinary Shares or ADSs. Accordingly, there can be no assurance that we currently
are not or will not become a PFIC.
If
we currently are or become a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon
receipt of certain distributions by us and upon disposition of our Ordinary Shares or ADSs at a gain: (1) have such distribution or gain
allocated ratably over the U.S. Holder’s holding period for the Ordinary Shares or ADSs, as the case may be; (2) the amount allocated
to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as
ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in
effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with
respect to the resulting tax attributable to each such other taxable year. In addition, when shares of a PFIC are acquired by reason
of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of
the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized
by the decedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.
The
PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has
held the Ordinary Shares or ADSs while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S.
Holder who has made such a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s
pro rata share of our ordinary earnings as ordinary income and such U.S. Holder’s pro rata share of our net capital gains as long-term
capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only
if we make available certain required information. The QEF election is made on a shareholder-by-shareholder basis and generally may be
revoked only with the consent of the IRS. We do not intend to furnish U.S. Holders annually with information needed in order to complete
IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore,
the QEF election will not be available with respect to our Ordinary Shares or ADSs.
In
addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a mark-to-market election. A U.S. Holder
of our Ordinary Shares or ADSs which are regularly traded on a qualifying exchange, including the Nasdaq Capital Market, can elect to
mark the Ordinary Shares or ADSs to market annually, recognizing as ordinary income or loss each year an amount equal to the difference
as of the close of the taxable year between the fair market value of the Ordinary Shares or ADSs and the U.S. Holder’s adjusted
tax basis in the Ordinary Shares or ADSs. Losses are allowed only to the extent of net mark-to-market gain previously included income
by the U.S. Holder under the election for prior taxable years.
U.S.
Holders who hold our Ordinary Shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease
to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules.
Tax
on Net Investment Income
Subject
to certain adjustments under the PFIC rules, U.S. Holders who are individuals, estates or trusts will generally be required to pay a
3.8% Medicare tax on their net investment income (including dividends on and gains from the sale or other disposition of our Ordinary
Shares or ADSs), or in the case of estates and trusts on their net investment income that is not distributed. In each case, the 3.8%
Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.
Tax
Consequences for Non-U.S. Holders of Ordinary Shares or ADSs
Except
as provided below, an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally
will not be subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of,
our Ordinary Shares or ADSs.
A
non-U.S. Holder may be subject to U.S. federal income tax on a dividend paid on our Ordinary Shares or ADSs or gain from the disposition
of our Ordinary Shares or ADSs if: (1) such item is effectively connected with the conduct by the non-U.S. Holder of a trade or business
in the United States and, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place
of business in the United States; or (2) in the case of a disposition of our Ordinary Shares or ADSs, the individual non-U.S. Holder
is present in the United States for 183 days or more in the taxable year of the disposition and other specified conditions are met. Any
dividend income or gain described in clause (1) above will be subject to U.S. federal income tax on a net income tax basis in the same
manner as a U.S. Holder and, with respect to corporate holders, a branch profits tax imposed at a rate of 30% (or such lower rate as
may be specified by an applicable income tax treaty) may also apply to its effectively connected earnings and profits (subject to adjustments).
Any dividend income or gain described in clause (2) above that is not effectively connected with the conduct by a Non-U.S. Holder of
a trade or business within the U.S. generally will be subject to 30% withholding tax (or such lower rate as may be specified by an applicable
income tax treaty) net of certain U.S. source capital losses.
In
general, non-U.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares or
ADSs if payment is made through a paying agent, or office of a foreign broker outside the United States. However, if payment is made
in the United States or by a U.S. related person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides
an applicable IRS Form W-8 (or a substantially similar form) certifying its foreign status, or otherwise establishes an exemption.
The
amount of any backup withholding from a payment to a non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal
income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Information
Reporting and Withholding
A
U.S. Holder may be subject to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of Ordinary
Shares or ADSs. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures.
Backup withholding will not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt
organizations. Backup withholding is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability
of a U.S. Holder, provided that the required information is timely furnished to the IRS.
F. Dividends
and Paying Agents
Not
applicable.
G. Statement
by Experts
Not
applicable.
H. Documents
on Display
We
are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those
requirements will file reports with the SEC. The SEC maintains an Internet website that contains reports and other information regarding
issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through the SEC’s website
at www.sec.gov.
As
a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements,
and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports
and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the
Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required
by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm,
and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.
We
maintain a corporate website http://www.nano-di.com. Information contained on, or that can be accessed through, our website and the other
websites referenced above do not constitute a part of this annual report on Form 20-F. We have included these website addresses in this
annual report on Form 20-F solely as inactive textual references.
I. Subsidiary
Information.
Not
applicable.
ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In
the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and
interest rates.
Quantitative
and Qualitative Disclosure About Market Risk
We
are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial
position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank
deposits with banks that have a credit rating of at least A-minus. Accordingly, a substantial majority of our cash is held in deposits
that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced.
Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in the following paragraph.
Foreign
Currency Exchange Risk
Our results of operations and cash flow are subject to fluctuations
due to changes in NIS/U.S. dollar currency exchange rates. The vast majority of our liquid assets is held in U.S. dollars, and a certain
portion of our expenses is denominated in NIS. Changes of 5% and 10% in the U.S. Dollar/NIS exchange rate would increase/decrease our
loss for 2021 by 0.8% and 1.5%, respectively. However, these historical figures may not be indicative of future exposure, as we expect
that the percentage of our NIS denominated expenses will materially decrease in the near future, therefore reducing our exposure to exchange
rate fluctuations. Our functional and presentation currency is the U.S. dollar.
We
hedge our foreign currency exchange risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal
operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt
Securities.
Not
applicable.
B. Warrants
and rights.
Not
applicable.
C. Other
Securities.
Not
applicable.
D. American
Depositary Shares
Fees
and Expenses
Persons
depositing or withdrawing shares or ADS holders must pay: |
|
For: |
$5.00
(or less) per 100 ADSs (or portion of 100 ADSs). |
|
Issuance
of ADSs, including issuances resulting from a distribution of shares or rights or other property. Cancellation of ADSs for the purpose
of withdrawal, including if the deposit agreement terminates. |
|
|
|
$.05
(or less) per ADS. |
|
Any cash
distribution to ADS holders. |
|
|
|
A fee
equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for
issuance of ADSs. |
|
Distribution
of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders. |
|
|
|
$.05
(or less) per ADS per calendar year. |
|
Depositary
services. |
|
|
|
Registration
or transfer fees. |
|
Transfer
and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw
shares. |
|
|
|
Expenses
of the depositary. |
|
Cable,
telex and facsimile transmissions (when expressly provided in the deposit agreement). Converting foreign currency to U.S. dollars. |
|
|
|
Taxes
and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer
taxes, stamp duty or withholding taxes. |
|
As necessary. |
|
|
|
Any charges
incurred by the depositary or its agents for servicing the deposited securities. |
|
As necessary. |
The
depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the
purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect
its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry
system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable
(or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary
may generally refuse to provide fee-attracting services until its fees for those services are paid.
From
time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and
maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees
collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency
or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.
Notes
to the Consolidated Financial Statements
Note
1 – General
Nano
Dimension Ltd. (the “Company”) is an Israeli resident company incorporated in Israel. The address of the Company’s
registered office is 2 Ilan Ramon St., Ness Ziona, Israel. The consolidated financial statements of the Company as of December 31, 2021,
comprise the Company and its subsidiaries in Israel, in the United States, in Switzerland, in Germany and in Hong Kong (together referred
to as the “Group”). The Company engages, by means of the subsidiary Nano Dimension Technologies Ltd. (“Nano-Technologies”),
in the development of a three-dimensional (“3D”) additive manufacturing system and nanotechnology based conductive and dielectric
inks, which are supplementary products to the additive manufacturing system. Since March 2016, the Company’s American Depositary
Shares (“ADSs”) have been trading on the Nasdaq Capital Market. The Ordinary Shares of the Company were registered for trade
on the Tel Aviv Stock Exchange (TASE). On May 20, 2020, the Company voluntary delisted its Ordinary Shares from the TASE.
|
Since August 25, 2014,
the Company has devoted substantially all of its financial resources to develop its products and has financed its operations primarily
through the issuance of equity securities. The amount of the Company’s future net profits or losses will depend, in part, on
the rate of its future expenditures, its ability to generate significant revenues from the sale of its products, and its ability
to obtain funding through the issuance of securities, strategic collaborations or grants. Starting in the fourth quarter of 2017,
the Group began to commercialize its products and has generated revenues, mainly from sales of its 3D printers. The Group’s
ability to generate revenue and achieve profitability depends on its ability to successfully commercialize its products. |
B. |
Material events in the
reporting period |
During
2020 and 2021, the Company conducted several public offerings in the United States, with aggregate gross proceeds of approximately $1,543,000,000,
before deducting underwriting discounts and commissions and other offering-related expenses.
|
(2) |
Effect of the spread
of the coronavirus pandemic on the Group’s business |
Following
the outbreak of the coronavirus (COVID-19) in China in December 2019, and it spreading to many other countries as well at the beginning
of 2020, there was a decrease in economic activity in many areas around the world, including Israel, the U.S., Europe and Asia-Pacific.
The spread of the virus has led, inter alia, to a disruption in the supply chain, a decrease in global transportation, restrictions on
travel and work that were announced by the State of Israel and other countries around the world and a decrease in the value of financial
assets and commodities on the markets in Israel and the world.
As a result of the COVID-19 pandemic’s
global effects, many entities held off on capital expenses during 2020 and 2021; thus, the Company witnessed a significant decrease in
the Group’s revenues. Nevertheless, during 2021, there was an evident trend of recovery from the crisis that is due to the high vaccination
rate of the population. This recovery made it possible to ease travel restrictions at various destinations around the world, including
return to normal business activity. As a result, the Group gradually returned to operating on a higher scale and it believes that it will
be able to continue operating normally in the future.
Since this event is not under the control
of the Group, the Group is continuing to regularly follow the changes on the markets in Israel and the world and is examining the Mid-term
and long-term effects on the business results of the Group.
|
(3) |
Acquisition of Subsidiaries |
In the reporting period, the Group acquired
100% of the shares and voting interests of DeepCube Ltd., NanoFabrica Ltd. and Essemtec AG (“Essemtec”). For further information,
see Note 9.
Note
2 – Basis of Preparation
A. |
Statement of compliance |
The
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board.
The
consolidated financial statements were authorized for issue by the Company’s board of directors on March 31, 2022.
B. |
Functional and presentation
currency |
These
consolidated financial statements are presented in U.S. dollars (“USD”), which is the Company’s functional currency,
and have been rounded to the nearest thousand, except when otherwise indicated. The USD is the currency that represents the principal
economic environment in which the Company operates.
The
consolidated financial statements have been prepared on the historical cost basis, except when otherwise indicated.
The
operating cycle period of the Group is 12 months.
The
preparation of financial statements in conformity with IFRS as issued by the International Accounting Standards Board requires management
to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
The preparation of accounting estimates
used in the preparation of the Group’s financial statements requires management of the Company to make assumptions regarding circumstances
and events that involve considerable uncertainty. The Company’s management prepares the estimates on the basis of past experiences, various
facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are
revised and in any future periods affected.
Information
about assumptions made by the Group with respect to the future and other reasons for uncertainty with respect to estimates that have
a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next financial year are
included in the following notes:
| - | Acquisitions
of subsidiary |
The Group measures the fair value of
the consideration transferred (including contingent consideration) and fair value of the assets acquired and liabilities assumed, in business
combination transactions. For information on details on fair value measurement in acquisition of subsidiaries, see Note 9 regarding business
combinations.
|
- |
Estimated
impairment of non-financial assets |
The Group examines on an annual basis
whether there is an impairment of goodwill, intangibles and property, plant and equipment that are allocated to cash generating units,
in accordance with the accounting policy presented in Note 3 below. Recoverable amounts of cash-generating units are determined on the
basis of value-in-use calculations. These calculations require the use of estimates.
During 2021, there has been a decline in the value of groups of cash-generating
units to which goodwill is allocated. Given the recoverable amount of the said cash-generating units, determined on the basis of the value
in use of the units, the goodwill, intangibles and property, plant and equipment relating to the groups of the said cash-generating units
was reduced by approximately $140 million.
For information on key assumptions used
in calculation of the recoverable amount, see Note 8.E regarding intangible assets and Note 7 regarding property, plant and equipment.
|
- |
Fair value measurement
of financial instruments |
The Company accounts for financial liabilities
relating to contingent liabilities arising from a business combination, warrants and related derivatives at fair value through profit
or loss. The fair values of these instruments are determined by using the Monte Carlo simulation method and the Black-Scholes model and
assumptions regarding unobservable inputs used in the valuation model including the probability of meeting revenue targets, and weighted
average cost of capital, all of which can lead to profit or loss from a change in the fair value of these instruments.
When determining the fair value of
an asset or liability, the Group uses observable market data as much as possible. There are three levels of fair value measurements in
the fair value hierarchy that are based on the data used in the measurement, as follows:
|
● |
Level 1: |
quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|
● |
Level 2: |
inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly. |
|
● |
Level 3: |
inputs that are not based on observable market data (unobservable inputs). |
For information on details regarding
fair value measurement at Level 2 and level 3 and sensitivity analysis see Note 20.D regarding financial instruments.
|
- |
Share-based payment
transactions |
Estimating fair value for share-based
payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the
grant. This estimate also requires determination of the most appropriate inputs to the valuation model, including the expected life of
the share option and volatility and making assumptions about them. For the measurement of the fair value of equity-settled transactions
at the grant date, the Company uses the Black-Scholes formula or the Binomial pricing model. For information on Share-based payment transactions,
see Note 19.
Note
3 – Significant Accounting Policies
The
accounting policies of the Group set out below have been applied consistently for all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities.
A. | Basis of consolidation |
The
Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition
of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business,
the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether
the acquired set has the ability to produce outputs. The acquisition date is the date on which the acquirer obtains control over the
acquiree. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the acquiree and it
has the ability to affect those returns through its power over the acquiree. Substantive rights held by the Group and others are taken
into account when assessing control.
The Group recognizes goodwill on an acquisition
according to the fair value of the consideration transferred, including any amounts recognized in respect of rights that do not confer
control in the acquiree as well as the fair value at the acquisition date of any pre-existing equity right of the Group in the acquiree,
less the net amount of the identifiable assets acquired and the liabilities assumed. Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related
to the issue of debt or equity securities.
The
consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally
recognized in profit or loss.
Any
contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that
meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within
equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair
value of the contingent consideration are recognized in profit or loss.
If
share-based payment awards (“replacement awards”) are required to be exchanged for awards held by the acquiree’s employees
(“acquiree’s awards”), then all or a portion of the amount of the acquirer’s replacement awards is included in
measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement
awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to
pre-combination service.
Subsidiaries
are entities controlled by the Group. The financial statements of the subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control is lost. The accounting policies of the subsidiaries are aligned with
the policies adopted by the Group.
|
(3) |
Non-controlling interest |
Non-controlling
interests comprise the equity of a subsidiary that cannot be attributed, directly or indirectly, to the parent company and they include
additional components such as: the equity component of convertible debentures of subsidiaries, share-based payments that will be settled
with equity instruments of subsidiaries and share options of subsidiaries.
Measurement
of non-controlling interests on the date of the business combination
Non-controlling interests that are instruments
that give rise to a present ownership interest and entitle the holder to a share of net assets in the event of liquidation (for example:
ordinary shares), are measured at the date of the business combination at either fair value, or at their proportionate interest in the
identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. This accounting policy choice does not apply
to other instruments that meet the definition of non-controlling interests (for example: options to acquire ordinary shares). Such instruments
will be measured at fair value or in accordance with other relevant IFRS.
Allocation
of profit or loss and other comprehensive income to the shareholders
Profit
or loss and any part of other comprehensive income are allocated to the owners of the Company and the non-controlling interests. Total
profit or loss and other comprehensive income is allocated to the owners of the Company and the non-controlling interests even if the
result is a negative balance of non-controlling interests.
|
(4) |
Transactions eliminated
on consolidations |
Intra-group
balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that
there is no evidence of impairment.
|
(1) |
Foreign currency transactions |
Transactions in currencies other than
the USD are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at
that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at
the beginning of the year, adjusted for effective interest and payments during the year, and the amortized cost in foreign currency translated
at the exchange rate at the end of the year.
Non-monetary
items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign
currency differences arising on translation are recognized in profit or loss.
|
(2) |
Index linked financial
items |
Financial
assets and liabilities which according to their terms are linked to changes in the Israeli Consumer Price Index (the “Index”)
are adjusted according to the relevant Index on every reporting date in accordance with the terms of the agreement. Linkage differences
deriving from said adjustment are recorded to profit and loss.
The assets and liabilities of foreign
operations, including goodwill and fair value adjustments arising upon acquisition, are translated to USD at exchange rates at the reporting
date. The income and expenses of foreign operations are translated to USD at exchange rates at the dates of the transactions.
Foreign
currency differences are recognized in other comprehensive income and are presented in equity in the foreign currency translation reserve
(hereinafter – “translation reserve”).
When a foreign operation is disposed
of such that control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit
or loss as a part of the gain or loss on disposal.
Furthermore,
when the Group’s interest in a subsidiary that includes a foreign operation changes, while retaining control in the subsidiary,
a proportionate part of the cumulative amount of the translation difference that was recognized in other comprehensive income is reattributed
to non-controlling interests.
Generally, foreign currency differences
from a monetary item receivable from or payable to a foreign operation, including foreign operations that are subsidiaries, are recognized
in profit or loss in the consolidated financial statements.
Foreign
exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are
recognized in other comprehensive income, and are presented within equity as part of the translation reserve.
|
(4) |
Below are details regarding the exchange rate of the New Israeli Shekel (“NIS”), Swiss Franc (“CHF”) and the Euro and the Consumer Price Index of the NIS: |
| |
Consumer Price Index | | |
Euro | | |
CHF | | |
NIS | |
December 31, 2021 | |
| 102.6 | | |
| 1.13 | | |
| 1.09 | | |
| 0.32 | |
December 31, 2020 | |
| 101.1 | | |
| 1.22 | | |
| 1.13 | | |
| 0.31 | |
December 31, 2019 | |
| 101.8 | | |
| 1.12 | | |
| 1.03 | | |
| 0.29 | |
Change in percentages: | |
| | | |
| | | |
| | | |
| | |
Year ended December 31, 2021 | |
| 1.48 | | |
| (7.38 | ) | |
| (3.54 | ) | |
| 3.23 | |
Year ended December 31, 2020 | |
| (0.69 | ) | |
| (8.93 | ) | |
| 9.71 | | |
| (6.9 | ) |
Year ended December 31, 2019 | |
| 0.6 | | |
| (2 | ) | |
| 2 | | |
| (7.4 | ) |
|
(1) |
Non-derivative financial
assets |
Initial
recognition and measurement of financial assets
The
Group initially recognizes trade receivables on the date that they are created. All other financial assets are recognized initially on
the trade date at which the Group becomes a party to the contractual provisions of the instrument. A financial asset is initially measured
at fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset. A trade receivable
without a significant financing component is initially measured at the transaction price. Receivables originating from contract assets
are initially measured at the carrying amount of the contract assets on the date classification was changed from contract asset to receivables.
Derecognition
of financial assets
Financial
assets are derecognized when the contractual rights of the Group to the cash flows from the asset expire, or the Group transfers the
rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards
of ownership of the financial asset were transferred. When the Group retains substantially all of the risks and rewards of ownership
of the financial asset, it continues to recognize the financial asset.
Classification
of financial assets into categories and the accounting treatment of each category
Financial assets are classified at initial
recognition to the measurement category of amortized cost; fair value through other comprehensive income – investments in debt instruments;
fair value through other comprehensive income – investments in equity instruments; or fair value through profit or loss.
The
Group has balances of cash, trade and other receivables and deposits that are held within a business model whose objective is collecting
contractual cash flows. The contractual cash flows of these financial assets represent solely payments of principal and interest that
reflect consideration for the time value of money and the credit risk. Accordingly, these financial assets are measured at amortized
cost.
Cash
includes cash balances available for immediate use. Deposits include short-term deposits with banking corporations (with original maturities
of three months or more) that are readily convertible into known amounts of cash and are exposed to insignificant risks of change in
value.
At
each reporting date, the Group assesses whether financial assets carried at amortized cost and debt instruments at fair value through
other comprehensive income are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have
a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Provisions
for expected credit losses of financial assets measured at amortized cost are deducted from the gross carrying amount of the financial
assets. For investments in debt instruments at fair value through other comprehensive income, the provision for expected credit losses
is recognized in other comprehensive income and it does not reduce the carrying amount of the financial asset.
C. |
Financial instruments
(Continued) |
|
(2) |
Non-derivative financial
liabilities |
Non-derivative
financial liabilities include trade and other payables.
Initial
recognition of financial liabilities
The
Group initially recognizes financial liabilities on the trade date at which the Group becomes a party to the contractual provisions of
the instrument.
Subsequent
measurement of financial liabilities
Financial
liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition
these financial liabilities are measured at amortized cost using the effective interest method. Transaction costs directly attributable
to an expected issuance of an instrument that will be classified as a financial liability are recognized as an asset in the framework
of deferred expenses in the statement of financial position. These transaction costs are deducted from the financial liability upon its
initial recognition, or are amortized as financing expenses in the statement of profit or loss and other comprehensive income when the
issuance is no longer expected to occur.
Derecognition
of financial liabilities
Financial
liabilities are derecognized when the obligation of the Group, as specified in the agreement, expires or when it is discharged or cancelled.
Offset
of financial instruments
Financial
assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company
currently has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the
liability simultaneously.
|
(3) |
Derivative financial
liabilities |
Measurement
of derivative financial instruments
Derivatives are recognized initially
at fair value attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives
are measured at fair value, and changes therein are recognized in profit or loss, as financing income or expense. Inter alia, the Group
implements the said accounting treatment to changes in the fair value of warrants that contain a cashless exercise mechanism. For further
information, see Note 20.
D. | Property plant and equipment |
Property
plant and equipment are presented according to cost, including directly attributed acquisition costs, minus accumulated depreciation
and losses from accrued decrease in value. Improvements and upgrades are included in the assets’ costs whereas maintenance and
repair costs are recognized in profit and loss as accrued.
Gains
and losses on disposal of a fixed asset item are determined by comparing the net proceeds from disposal with the carrying amount of the
asset, and are recognized in their corresponding section, in profit or loss.
The
cost of printers used for internal purposes, which are classified as property, plant and equipment, includes the cost of materials and
direct labor, and any other costs directly attributable to bringing the assets to a working condition for their intended use.
Depreciation
is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset,
or other amount substituted for cost, less its residual value. An asset is depreciated from the date it is ready for use, meaning the
date it reaches the location and condition required for it to operate in the manner intended by management. Depreciation is recognized
in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed asset item, since this most closely
reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
The
estimated useful lives for the current and comparative periods are as follows:
| |
% | |
Machinery and equipment (mainly 7%) | |
| 7 – 25 | |
Computers | |
| 20 – 33 | |
Office furniture and equipment | |
| 7 – 15 | |
Leasehold Improvements | |
| 7 – 34 | |
Printers leased to customers | |
| 25 | |
Buildings | |
| 3.5 | |
Depreciation
methods, useful lives and residual values are reviewed at the end of each reporting year and adjusted if appropriate.
Goodwill
that arises upon the acquisition of subsidiaries is presented as part of intangible assets. For information on measurement of goodwill
at initial recognition, see paragraph A(1) of this note.
In
subsequent periods, goodwill is measured at cost less accumulated impairment losses.
|
(2) |
Research and development |
Expenditure
on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized
in profit or loss when incurred.
Development
activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure
is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future
economic benefits are probable, and the Group has the intention and sufficient resources to complete development and to use or sell the
asset.
The
expenditure capitalized in respect of development activities includes the cost of materials, direct labor and overhead costs that are
directly attributable to preparing the asset for its intended use.
In
the fourth quarter of 2016, the Group ceased to capitalize development expenses and began to amortize the intangible asset arising from
capitalization of development expenses, upon the initiation of its beta program. In subsequent periods, capitalized development expenditure
is measured at cost less accumulated amortization and accumulated impairment losses.
|
(3) |
Other intangible assets |
Other
intangible assets that are acquired by the Group are measured at cost less accumulated amortization and accumulated impairment losses.
|
(4) |
Subsequent expenditure |
Subsequent
expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All
other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
Amortization
is a systematic allocation of the amortizable amount of an intangible asset over its useful life. The amortizable amount is the cost
of the asset less its residual value.
Amortization
is recognized in profit or loss on a straight-line basis, over the estimated useful lives of the intangible assets from the date they
are available for use, since these methods most closely reflect the expected pattern of consumption of the future economic benefits embodied
in each asset.
The
estimated useful lives for the current period are as follows:
|
|
% |
|
Technology |
|
|
11 – 14 |
|
Trademark |
|
|
25 |
|
Capitalized development costs |
|
|
10 |
|
Customer relationships |
|
|
25 |
|
Amortization methods, useful lives and
residual values are reviewed at the end of each reporting year and adjusted if appropriate.
Inventories
are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted averages method, and includes
expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their existing location and condition. In
the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal
operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses.
G. | Impairment of non-financial assets |
Timing of impairment testing
The carrying amounts of the Group’s
non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated.
Once a year and on the same date, or
more frequently if there are indications of impairment, the Group estimates the recoverable amount of each cash generating unit that contains
goodwill.
Determining cash-generating units
For the purpose of impairment testing,
assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
Measurement of recoverable amount
The recoverable amount of an asset
or cash-generating unit is the greater of its value in use and its fair value, less costs of disposal. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the assessments of market
participants regarding the time value of money and the risks specific to the asset or cash-generating unit, for which the estimated future
cash flows from the asset or cash-generating unit were not adjusted.
Allocation of goodwill to cash-generating
units or a group of cash-generating units
For the purposes of goodwill impairment
testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed
reflects the lowest level at which goodwill is monitored for internal reporting purposes.
Goodwill acquired in a business combination
is allocated to a group of cash-generating units, including those existing in the Group before the business combination, that are expected
to benefit from the synergies of the combination. Therefore, the Group tests the goodwill acquired from the acquisitions of DeepCube Ltd.
(“DeepCube”), NanoFabrica Ltd. (“NanoFabrica”) and Essemtec, at the Group’s level, since the goodwill cannot
be allocated to individual cash-generating units.
The Group’s corporate assets
The Group recognizes technology assets,
including technology assets recognized in business combinations, as corporate assets that do not generate separate cash inflows and are
utilized by more than one cash-generating unit. Those technology assets cannot be allocated reasonably and consistently to cash-generating
units and therefore are allocated to the Group level.
Recognition of impairment loss
An impairment loss is recognized if
the carrying amount of an asset or a cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in
profit or loss. Impairment losses recognized in respect of a group of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the cash-generating units
on a pro rata basis.
Reversal of impairment loss
An impairment loss in respect of goodwill
is not reversed. In respect of other assets, for which impairment losses were recognized in prior periods, an assessment is performed
at each reporting date for any indications that these losses have decreased or no longer exist. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization,
if no impairment loss had been recognized.
A provision for claims is recognized
if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable
that an outflow of economic benefits will be required to settle the obligation. When the value of time is material, the provision is measured
at its present value.
A provision for warranties is recognized
when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible
outcomes against their associated probabilities.
I. | Treasury shares and Ordinary Shares |
When share capital recognized as equity
is repurchased by the Group, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects,
is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued
subsequently, the amount received is recognized as an increase in equity, and the resulting surplus on the transaction is carried to share
premium, whereas a deficit on the transaction is deducted from retained earnings.
Ordinary Shares are classified as equity.
Incremental costs directly attributable to the issuance of Ordinary Shares and share options are recognized as a deduction from equity,
net of any tax effects.
The Group recognizes revenue when the
customer obtains control over the promised goods or services. The revenue is measured according to the amount of the consideration to
which the Group expects to be entitled in exchange for the goods or services promised to the customer, other than amounts collected for
third parties.
The Group accounts for a
contract with a customer only when the following conditions are met:
|
(a) |
The parties to the contract have approved the contract (in writing, orally or according to other customary business practices) and they are committed to satisfying the obligations attributable to them; |
|
|
|
|
(b) |
The Group can identify the rights of each party in relation to the goods or services that will be transferred; |
|
(c) |
The Group can identify the payment terms for the goods or services that will be transferred; |
|
|
|
|
(d) |
The contract has a commercial substance (i.e. the risk, timing and amount of the entity’s future cash flows are expected to change as a result of the contract); and |
|
|
|
|
(e) |
It is probable that the consideration, to which the Group is entitled to in exchange for the goods or services transferred to the customer, will be collected. |
If a contract with a customer does
not meet all of the above criteria, consideration received from the customer is recognized as a liability until the criteria are met or
when one of the following events occurs: the Group has no remaining obligations to transfer goods or services to the customer and any
consideration promised by the customer has been received and cannot be returned; or the contract has been terminated and the consideration
received from the customer cannot be refunded.
On the contract’s inception date,
the Group assesses the goods or services promised in the contract with the customer and identifies as a performance obligation any promise
to transfer to the customer goods or services (or a bundle of goods or services) that are distinct.
The Group identifies goods or services
promised to the customer as being distinct when the customer can benefit from the goods or services on their own or in conjunction with
other readily available resources and the Group’s promise to transfer the goods or services to the customer is separately identifiable
from other promises in the contract. The Group’s identified performance obligations include: printer, ink, maintenance (which is
generally provided for a period of up to one year), training and installation.
J. |
Revenue recognition (Continued) |
In some cases the Group recognizes
a warranty as a distinct service to the customer and is therefore a distinct performance obligation.
Revenue is allocated among performance
obligations in a manner that reflects the consideration that the Group expects to be entitled to for the promised goods based on the standalone
selling prices (“SSP”) of the goods or services of each performance obligation. SSP are estimated for each distinct performance
obligation and judgment may be required in their determination. The best evidence of SSP is the estimated price of a product or service
if the Group would sell them separately in similar circumstances and to similar customers.
The Group allocates the transaction
price to the identified performance obligations based on the residual approach, while allocating the estimated standalone selling prices
for performance obligations relating to maintenance, training and installation services, and the residual is allocated to the printer.
Revenues allocated to the printers,
installation and training, and ink and other consumables are recognized when the control is passed in accordance with the contract terms
at a point in time.
Maintenance revenue is recognized ratably,
on a straight-line basis, over the period of the services. Revenue from training and installation is recognized during the time of performance.
Revenues from the provision of development
services, which are contingent on the existence of milestones, are recognized solely on the existence of the relevant milestone.
A contract asset is recognized when
the Group has a right to consideration for goods or services it transferred to the customer that is conditional on other than the passing
of time, such as future performance of the Group. Contract assets are classified as receivables when the rights in their respect become
unconditional.
A contract liability is recognized
when the Group has an obligation to transfer goods or services to the customer for which it received consideration (or the consideration
is payable) from the customer.
Government grants are recognized initially
at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with
the grant.
Grants from the Israeli Innovation
Authority (the “Innovation Authority”), with respect to research and development projects, are accounted for as forgivable
loans according to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government
Assistance. Grants received from the Innovation Authority are recognized as a liability according to their fair value on the date of their
receipt, unless it is reasonably certain, on that date, that the amount received will not be refunded. The amount of the liability is
reexamined each period, and any changes in the present value of the cash flows discounted at the original interest rate of the grant are
recognized in profit or loss. The difference between the amount received and the fair value on the date of receiving the grant is recognized
as a deduction of research and development expenses. Expenses related to revaluation of the liability in respect of government grants
were recognized in the statements of profit or loss and other comprehensive income as finance expenses.
Determining whether an arrangement
contains a lease
On the inception date of the lease,
the Group determines whether the arrangement is a lease or contains a lease, while examining if it conveys the right to control the use
of an identified asset for a period of time in exchange for consideration. In its assessment of whether an arrangement conveys the right
to control the use of an identified asset, the Group assesses whether it has the following two rights throughout the lease term:
| (a) | The
right to obtain substantially all the economic benefits from use of the identified asset; and |
| (b) | The
right to direct the identified asset’s use. |
For lease contracts that contain non-lease
components, such as services or maintenance, that are related to a lease component, the Group elected to account for the contract as a
single lease component without separating the components.
Leased assets and lease
liabilities
Contracts that award the Group control
over the use of a leased asset for a period of time in exchange for consideration, are accounted for as leases. Upon initial recognition,
the Group recognizes a liability at the present value of the balance of future lease payments (these payments do not include certain variable
lease payments), and concurrently recognizes a right-of-use asset at the same amount of the lease liability, adjusted for any prepaid
or accrued lease payments, plus initial direct costs incurred in respect of the lease.
Since the interest rate implicit in
the Group’s leases is not readily determinable, the incremental borrowing rate of the lessee is used. Subsequent to initial recognition,
the right-of-use asset is accounted for using the cost model, and depreciated over the shorter of the lease term or useful life of the
asset.
The Group has elected to apply the
practical expedient by which short-term leases of up to one year and/or leases in which the underlying asset has a low value, are accounted
for such that lease payments are recognized in profit or loss on a straight-line basis, over the lease term, without recognizing an asset
and/or liability in the statement of financial position.
The lease term
The lease term is the non-cancellable
period of the lease plus periods covered by an extension or termination option if it is reasonably certain that the lessee will or will
not exercise the option, respectively.
Variable lease payments
Variable lease payments that depend
on an index or a rate, are initially measured using the index or rate existing at the commencement of the lease and are included in the
measurement of the lease liability. When the cash flows of future lease payments change as the result of a change in an index or a rate,
the balance of the liability is adjusted against the right-of-use asset.
Other variable lease payments that
are not included in the measurement of the lease liability are recognized in profit or loss in the period in which the event or condition
that triggers payment occurs.
Note 3 – Summary of Significant Accounting Policies
(Continued)
Depreciation of right-of-use asset
After lease commencement, a right-of-use
asset is measured on a cost basis less accumulated depreciation and accumulated impairment losses and is adjusted for re-measurements
of the lease liability. Depreciation is calculated on a straight-line basis over the useful life or contractual lease period, whichever
is earlier, as follows:
| ● | Buildings | 1-5 years |
| ● | Motor vehicles | 3 years |
Reassessment of lease liability
Upon the occurrence of a significant
event or a significant change in circumstances that is under the control of the Group and had an effect on the decision whether it is
reasonably certain that the Group will exercise an option, which was not included before in the lease term, or will not exercise an option,
which was previously included in the lease term, the Group re-measures the lease liability according to the revised leased payments using
a new discount rate. The change in the carrying amount of the liability is recognized against the right-of-use asset, or recognized in
profit or loss if the carrying amount of the right-of-use asset was reduced to zero.
Lease modifications
When a lease modification increases
the scope of the lease by adding a right to use one or more underlying assets, and the consideration for the lease increased by an amount
commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect
the contract’s circumstances, the Group accounts for the modification as a separate lease.
In all other cases, on the initial
date of the lease modification, the Group allocates the consideration in the modified contract to the contract components, determines
the revised lease term and measures the lease liability by discounting the revised lease payments using a revised discount rate.
For lease modifications that decrease
the scope of the lease, the Group recognizes a decrease in the carrying amount of the right-of-use asset in order to reflect the partial
or full cancellation of the lease, and recognizes in profit or loss a profit (or loss) that equals the difference between the decrease
in the right-of-use asset and re-measurement of the lease liability.
For other lease modifications, the
Group re-measures the lease liability against the right-of-use asset.
M. | Financing income and expenses |
Financing income is comprised of interest
income on deposits, revaluation of liability in respect of government grants, foreign currency gains and fair value changes of financial
liabilities through profit and loss.
Financing expenses are comprised of
bank fees, exchange rate differences, revaluation of liability in respect of government grants and fair value changes of financial liabilities
through profit and loss.
Foreign currency gains and losses on
financial assets and financial liabilities are reported on a net basis as either financing income or financing expenses depending on whether
foreign currency movements are in a net gain or net loss position.
Income tax comprises current and deferred tax.
Current tax and deferred tax are recognized in profit or loss except to the extent that they relate to a business combination, or are
recognized directly in equity or in other comprehensive income to the extent they relate to items recognized directly in equity or in
other comprehensive income.
Current taxes
Current tax is the expected tax payable (or receivable)
on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Current taxes also include
taxes in respect of prior years and any tax arising from dividends.
Deferred taxes
Deferred tax is recognized in respect of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for the following temporary differences:
|
● |
The initial recognition of goodwill; or |
|
● |
Differences relating to investments in subsidiaries, joint arrangements and associates, to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future, either by way of selling the investment or by way of distributing dividends in respect of the investment. |
The measurement of deferred tax reflects the tax
consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax is measured at the tax rates that
are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted
by the reporting date.
A deferred tax asset is recognized for unused
tax losses, tax benefits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available
against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
Deferred tax assets that were not recognized are
reevaluated at each reporting date and recognized if it has become probable that future taxable profits will be available against which
they can be utilized.
Offset of deferred tax assets and liabilities
Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on
a net basis or their current tax assets and liabilities will be realized simultaneously.
Inter-company transactions
Deferred tax in respect of inter-company transactions
in the consolidated financial statements is recognized according to the tax rate applicable to the buying company.
Post-employment benefits
The Group’s liability for severance
pay for its employees is mainly calculated pursuant to Israeli Severance Pay Law (1963) (the “Severance Pay Law”). The Group’s
liability is covered by monthly deposits with severance pay funds and insurance policies. For most of the Group’s employees, the
payments to pension funds and to insurance companies exempt the Group from any obligation towards its employees, in accordance with Section
14 of the Severance Pay Law, which is accounted for as a defined contribution plan (as defined below). Accumulated amounts in pension
funds and in insurance companies are not under the Group’s control or management and, accordingly, neither those amounts nor the
corresponding accrual for severance pay are presented in the consolidated statements of financial position.
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in
the periods during which related services are rendered by employees.
Post-employment benefits for Essemtec’s
employee are treated as defined benefit plans. The net obligation in respect of defined benefit pension plans is calculated separately
for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior
periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The Group determines
the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure
the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset).
Re-measurements of the net defined
benefit liability (asset) comprise actuarial gains and losses and the return on plan assets (excluding interest). Re-measurements are
recognized immediately directly in retained earnings through other comprehensive income.
Interest costs on a defined benefit
obligation, interest income on plan assets and interest from the effect of the asset ceiling that were recognized in profit or loss are
presented under financing income and expenses, respectively.
Share-based payment transactions
The grant date fair value of share-based
payment awards granted to employees is recognized as a salary expense, with a corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. Share-based payment arrangements in which the subsidiary grants rights to parent
company equity instruments to its employees are accounted for by the Group as equity-settled share-based payment transactions.
The Group has also recognized share-based
payment transactions for non-employees, based on the fair value of the services received. If the Group is unable to reliably measure the
fair value of the services received, the fair value is measured with respect to the fair value of the equity instruments granted.
The Group presents basic and diluted
loss per share for its Ordinary Shares. Basic loss per share is calculated by dividing the loss attributable to holders of Ordinary Shares
of the Company by the weighted average number of Ordinary Shares outstanding during the year, adjusted for treasury shares. Diluted loss
per share is determined by adjusting the loss attributable to holders of Ordinary Shares of the Company and the weighted average number
of Ordinary Shares outstanding, after adjustment for treasury shares, for the effects of all dilutive potential Ordinary Shares.
Note 4.A – Cash
| |
December
31, | |
| |
2020 | | |
2021 | |
| |
Thousands
USD | | |
Thousands
USD | |
Bank accounts- dominated in NIS | |
| 1,057 | | |
| 72,190 | |
Bank accounts- dominated in USD | |
| 584,205 | | |
| 753,320 | |
Bank accounts- dominated in GBP | |
| - | | |
| 23,651 | |
Bank accounts- other | |
| 76 | | |
| 4,465 | |
| |
| 585,338 | | |
| 853,626 | |
Note 4.B – Restricted deposits
The Group has a restricted deposit of $649 thousand
for the lease of its offices and labs and for credit cards ($148 thousand presented under current assets and $501 thousand presented as
non-current assets). The deposit is not linked and bears an annual interest rate of 0.01%. The Group expects to lease its offices and
labs for a period of more than a year, thus the restricted deposit was classified as a non-current asset. The restricted deposit for the
credit cards was classified as a current asset.
Note 4.C – Bank deposits
The Group has unrestricted bank deposits of $501,969
thousand (2020: $85,596 thousand). $437,598 thousand are presented under current assets and $64,371 thousand are presented as non-current
assets. The deposits bear an annual and fixed interest rate of between 0.36%-1.22%.
Note 5.A – Trade receivables
| |
December 31, | |
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Trade receivables | |
| 713 | | |
| 3,530 | |
Provision for impairment | |
| - | | |
| (108 | ) |
| |
| 713 | | |
| 3,422 | |
Note 5.B – Other receivables
| |
December 31, | | |
| |
2020 | | |
2021 | | |
| |
Thousands USD | | |
Thousands USD | | |
Government authorities | |
| 400 | | |
| 1,093 | | |
Prepaid expenses | |
| 696 | | |
| 1,386 | | |
Others | |
| 30 | | |
| 3,423 | | (*) |
| |
| 1,126 | | |
| 5,902 | | |
(*) | Including deposit in escrow for payment of Earn-Out in the acquisition
of NanoFabrica of approximately $3,362 thousand. For more information see Note 9.B(2). |
Note 6 – Inventory
| |
December
31, | |
| |
2020 | | |
2021 | |
| |
Thousands
USD | | |
Thousands
USD | |
Raw materials and work in progress (*) | |
| 2,692 | | |
| 7,028 | |
Finished goods | |
| 622 | | |
| 4,171 | |
| |
| 3,314 | | |
| 11,199 | |
(*) | A part of the raw materials and work in progress is expected to be sold in a period longer than the operating cycle of the Company. |
Note 7 – Property plant and equipment,
net
|
|
Machinery, equipment and vehicles |
|
|
Computers |
|
|
Office furniture and equipment |
|
|
Leasehold improvements |
|
|
Raw materials for property |
|
|
Buildings |
|
|
Total |
|
|
|
Thousands
USD |
|
|
Thousands
USD |
|
|
Thousands
USD |
|
|
Thousands
USD |
|
|
USD |
|
|
Thousands
USD |
|
|
Thousands
USD |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2020 |
|
|
4,708 |
|
|
|
476 |
|
|
|
187 |
|
|
|
1,745 |
|
|
|
- |
|
|
|
- |
|
|
|
7,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
1,163 |
|
|
|
124 |
|
|
|
85 |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
1,384 |
|
Disposals |
|
|
- |
|
|
|
(8 |
) |
|
|
(22 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(30 |
) |
As of December 31, 2020 |
|
|
5,871 |
|
|
|
592 |
|
|
|
250 |
|
|
|
1,757 |
|
|
|
- |
|
|
|
- |
|
|
|
8,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions through business combinations |
|
|
1,686 |
|
|
|
325 |
|
|
|
110 |
|
|
|
592 |
|
|
|
- |
|
|
|
- |
|
|
|
2,713 |
|
Additions |
|
|
1,545 |
|
|
|
1,078 |
|
|
|
461 |
|
|
|
423 |
|
|
|
439 |
|
|
|
6,064 |
|
|
|
10,010 |
|
Disposals |
|
|
(646 |
) |
|
|
(122 |
) |
|
|
(25 |
) |
|
|
(193 |
) |
|
|
- |
|
|
|
- |
|
|
|
(986 |
) |
Effect of changes in exchange rates |
|
|
34 |
|
|
|
(3 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30 |
|
As of December 31, 2021 |
|
|
8,490 |
|
|
|
1,870 |
|
|
|
795 |
|
|
|
2,579 |
|
|
|
439 |
|
|
|
6,064 |
|
|
|
20,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation accrued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2020 |
|
|
1,486 |
|
|
|
430 |
|
|
|
53 |
|
|
|
404 |
|
|
|
- |
|
|
|
- |
|
|
|
2,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
787 |
|
|
|
47 |
|
|
|
30 |
|
|
|
167 |
|
|
|
- |
|
|
|
- |
|
|
|
1,031 |
|
Disposals |
|
|
- |
|
|
|
(8 |
) |
|
|
(18 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26 |
) |
As of December 31, 2020 |
|
|
2,273 |
|
|
|
469 |
|
|
|
65 |
|
|
|
571 |
|
|
|
- |
|
|
|
- |
|
|
|
3,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
1,144 |
|
|
|
184 |
|
|
|
61 |
|
|
|
367 |
|
|
|
- |
|
|
|
18 |
|
|
|
1,774 |
|
Disposals |
|
|
(539 |
) |
|
|
(118 |
) |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
- |
|
|
|
- |
|
|
|
(667 |
) |
Impairment loss |
|
|
5,585 |
|
|
|
1,331 |
|
|
|
676 |
|
|
|
- |
|
|
|
439 |
|
|
|
- |
|
|
|
8,031 |
|
Effect of changes in exchange rates |
|
|
27 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
As of December 31, 2021 |
|
|
8,490 |
|
|
|
1,870 |
|
|
|
795 |
|
|
|
935 |
|
|
|
439 |
|
|
|
18 |
|
|
|
12,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020 |
|
|
3,598 |
|
|
|
123 |
|
|
|
185 |
|
|
|
1,186 |
|
|
|
- |
|
|
|
- |
|
|
|
5,092 |
|
As of December 31, 2021 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,644 |
|
|
|
- |
|
|
|
6,046 |
|
|
|
7,690 |
|
During the year ended December 31, 2021, the group acquired $249,000
of property and equipment on credit.
As part of the impairment testing of
cash generating units, an impairment loss of property plant and equipment was recognized at the sum of approximately $8,031 thousand.
For further information regarding the impairment test, see Note 8.D.
Note 8 – Intangible assets
A. |
Movement in carrying amount |
| |
Goodwill | | |
Technology | | |
Development Costs | | |
Other | | |
Total | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Cost | |
| | |
| | |
| | |
| | |
| |
As of January 1, 2020 | |
| - | | |
| - | | |
| 7,672 | | |
| - | | |
| 7,672 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2020 | |
| - | | |
| - | | |
| 7,672 | | |
| - | | |
| 7,672 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Acquisitions through | |
| 89,244 | | |
| 39,987 | | |
| - | | |
| 2,853 | | |
| 132,084 | |
business combinations | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2021 | |
| 89,244 | | |
| 39,987 | | |
| 7,672 | | |
| 2,853 | | |
| 139,756 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization and impairment losses | |
| | | |
| | | |
| | | |
| | | |
| | |
As of January 1, 2020 | |
| - | | |
| - | | |
| (2,461 | ) | |
| - | | |
| (2,461 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization for the year | |
| - | | |
| - | | |
| (771 | ) | |
| - | | |
| (771 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2020 | |
| - | | |
| - | | |
| (3,232 | ) | |
| - | | |
| (3,232 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Amortization for the year | |
| - | | |
| (3,189 | ) | |
| (775 | ) | |
| (301 | ) | |
| (4,265 | ) |
Impairment loss | |
| (89,244 | ) | |
| (36,798 | ) | |
| (3,665 | ) | |
| (2,552 | ) | |
| (132,259 | ) |
As of December 31, 2021 | |
| (89,244 | ) | |
| (39,987 | ) | |
| (7,672 | ) | |
| (2,853 | ) | |
| (139,756 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying amount | |
| | | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2020 | |
| - | | |
| - | | |
| 4,440 | | |
| - | | |
| 4,440 | |
As of December 31, 2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Intangible assets include development
costs that were capitalized. The expenditure capitalized in respect of development activities includes the cost of materials, direct labor
and overhead costs that are directly attributable to preparing the asset for its intended use. See also Note 3.E.(2).
The current amortization of technology
is allocated both to the cost of revenues and to the research and development expenses, net. The current amortization of development costs,
backlogs (included in Other) is recognized in cost of revenues as inventory is sold. Furthermore, the current amortization of trademarks
(included in other) is recognized in selling and distribution expenses.
D. |
Impairment testing for cash-generating units containing goodwill |
For the purposes of goodwill impairment
testing, goodwill acquired in a business combination is allocated to a group of cash-generating units, including those existing in the
Group before the business combination, that are expected to benefit from the synergies of the combination. Therefore, the Group tests
the goodwill acquired from the acquisition of DeepCube, NanoFabrica and Essemtec, at the Group’s level, since the goodwill cannot
be allocated to individual cash-generating units. Moreover, the Group recognized technology assets that were acquired in business combinations,
as corporate assets that do not generate separate cash inflows and are utilized by more than one cash-generating unit. Those technology
assets cannot be allocated reasonably and consistently to cash-generating units and therefore are allocated to the Group level.
The estimated recoverable amount of
the cash generating units was based on the value-in-use of the Group and was determined by discounting the future cash flows to be generated
from the continuing use of the Group, with the assistance of independent valuers. The carrying amount of the cash-generating units was
determined to be higher than its recoverable amount and an impairment loss of $140,290 thousand was recognized. The impairment loss was
allocated to goodwill, intangible assets and property plant and equipment, and is included in other expenses.
E. |
Key assumptions used in calculation of recoverable amount |
Key assumptions used in the calculation
of recoverable amounts are discount rates, revenues terminal value growth rates and EBITDA (earnings before income tax, financing, depreciation
and amortization) margins. These assumptions are as follows:
The discount rate was estimated based
on an industry average weighted average cost of capital, without debt leveraging, and was estimated to 20%. The discount rate is based
on the risk-free rate for 20-year debentures issued by the government in the relevant market, and adjusted for a risk premium to reflect
the increased risk of investing in equities, a small stock premium and a company specific risk premium.
|
(2) |
Revenues and revenues terminal growth rate |
The Company’s estimated revenues
are based on the Company's budget, growth plans and available market information. In total, revenues annual growth rate is expected to
gradually decrease from 33.33% in 2026 to 5% in 2029. From 2030 onward, revenues are expected to increase at an annual rate of 3%, which
reflects the long-term growth rate assumed.
EBITDA margin is expected to gradually
increase from negative 280.7% in 2022 to 17.1% in 2030 onward, which represents the EBITDA margin assumed for the long-term. This estimation
is supported by a sample of projected EBITDA margin of comparable companies, according to analyst reports.
The effective tax rate during the projection
period is 16%.
|
(5) |
Assets that were not impaired
|
The estimated fair value less cost
of sell of some property, plant and equipment assets and right of use assets was higher than its carrying amount, and therefore there
was no need to impair them.
Note 9 – Subsidiaries
A. |
Details in respect of subsidiaries |
Presented hereunder is a
list of the Group’s subsidiaries:
|
|
Principal location
of the |
|
The Group’s ownership interest in the subsidiary for the year ended December 31 |
|
|
|
company’s |
|
2020 |
|
|
2021 |
|
Name of company |
|
activity |
|
% |
|
|
% |
|
Nano Dimension Technologies Ltd. |
|
Israel |
|
|
100 |
% |
|
|
100 |
% |
Nano Dimension IP Ltd. |
|
Israel |
|
|
100 |
% |
|
|
100 |
% |
Nano Dimension USA Inc. |
|
USA |
|
|
100 |
% |
|
|
100 |
% |
Nano Dimension (HK) Limited |
|
Asia-Pacific |
|
|
100 |
% |
|
|
100 |
% |
Nano Dimension GmbH |
|
Germany |
|
|
100 |
% |
|
|
100 |
% |
J.A.M.E.S GmbH (*) |
|
Germany |
|
|
0 |
% |
|
|
50 |
% |
DeepCube Ltd. (**) |
|
Israel |
|
|
0 |
% |
|
|
100 |
% |
NanoFabrica Ltd. (**) |
|
Israel |
|
|
0 |
% |
|
|
100 |
% |
Essemtec AG (**) |
|
Switzerland |
|
|
0 |
% |
|
|
100 |
% |
Nano Dimension Swiss (***) |
|
Switzerland |
|
|
0 |
% |
|
|
100 |
% |
(*) | On June 30, 2021, the Company signed an agreement with Hensoldt AG, under which the two companies agreed to jointly own and manage a joint venture company, named J.A.M.E.S GmbH (“JAMES”). The object of JAMES is the development of an electronic designer’s community that will exchange designs and methodologies for manufacturing, component integration, and materials for Printed Electronics (PE) and Additively Manufactured Electronics (AME). Although the Company owns 50% of JAMES and has 50% of their voting power, the Company’s management has determined that the Company controls JAMES, by virtue of an agreement with JAMES’s other shareholder (50%). This agreement gives the company the current ability to direct relevant activities of JAMES, among other things by giving the Company a casting vote in JAMES’s advisory board, which is the governing body that directs the relevant activities. |
(***) | Nano Dimension Swiss was incorporated by the Company in 2021
and its main activity is holding a property in Switzerland, which is rented to Essemtec. |
B. |
Acquisition of subsidiaries |
|
(1). |
Acquisition of DeepCube |
On April 22, 2021, the Group acquired
100% of the shares and voting interests in DeepCube. DeepCube operates in the Machine Learning/Deep Learning (ML/DL) industry. Taking
control of DeepCube will enable the Group access to DeepCube’s unique technology, and to benefit from its experienced scientists
and engineers.
The founders of DeepCube are directors
of the Company, and they continue to serve as directors of the Company after completion of DeepCube’s acquisition. One of the founders
also continue working at DeepCube, in the role of Chief Technology Officer.
For further details on the remuneration
to key management personnel, and the amounts of transactions and outstanding balances with related parties, see Note 22.
From the date of the acquisition until
December 31, 2021, DeepCube contributed costs of $8,238 thousand to the Group’s results. If the acquisition had occurred on January
1, 2021, the unaudited consolidated pro forma loss for the year would have been $66,200 thousand (before impairment testing). In determining
these amounts, management has assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition
would have been the same if the acquisition had occurred on January 1, 2021.
|
|
Consideration transferred |
The following table summarizes the acquisition
date fair value of each major class of consideration:
| |
Thousands USD | |
Cash | |
| 40,082 | |
Equity instruments (2,535,218 Ordinary Shares) – with holdback restrictions | |
| 16,328 | |
Replacement of share-based payment awards | |
| 734 | |
Share price protection | |
| 9,550 | |
Total consideration transferred | |
| 66,694 | |
| a) | Equity instruments issued The fair value of the Ordinary Shares issued was based on the listed share price of the Company at the date of acquisition, with discounts for lack of marketability as a result of holdback restrictions. In accordance with the terms of the acquisition agreement, additional Ordinary Shares of the Company will be issued to one founder of DeepCube, with a share price protection mechanism. The granting of these shares is subject to conditions related to the continued employment of the founder. Hence these shares were not taken as part of the consideration for the business combination. The fair value of those shares, with the share price protection mechanism, is estimated at $7,347 thousand, and will be recognized as post-acquisition compensation cost. For further details on the replacement awards, see Note 19. |
| b) | Replacement of share-based payment awards In accordance with the terms of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of DeepCube (the acquiree’s awards) for equity settled share-based payment awards of the Company (the replacement awards). The details of the acquiree’s awards and replacement awards were as follows. The acquiree’s awards were granted during the years 2018 to 2021, and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date, and are subject to a 3-year vesting schedule. The fair value of the acquiree’s awards and the fair value of the replacement awards at the date of acquisition is $2,171 thousand. The consideration for the business combination includes $734 thousand transferred to employees of DeepCube when the acquiree’s awards were substituted by the replacement awards, which relates to past service. The balance of $1,437 thousand will be recognized as post-acquisition compensation cost. For further details on the replacement awards, see Note 19. |
| c) | Share price protection DeepCube’s shareholders, who hold 2,535,218 Ordinary Shares of
the Company, have a price protection for a period of twelve months, based on a per share protection price which is the volume weighted
average of the closing sale prices for one share of the Company as quoted on the Nasdaq over the thirty days immediately prior to the
closing date, multiplied by 0.7. The fair value of the share price protection was measured using a Monte Carlo simulation analysis. For
further details on the fair value measurement of the share price protection, see Note 20. |
| d) | Acquisition-related
costs |
The Group incurred acquisition-related
costs of $177 thousand on legal fees and due diligence costs. These costs have been included
in general and administrative expenses.
|
|
Identifiable assets acquired and liabilities assumed |
The following table summarizes the recognized
amounts of assets acquired and liabilities assumed at the date of acquisition.
| |
Thousands USD | |
Cash and cash equivalents | |
| 2,691 | |
Restricted cash | |
| 105 | |
Other current assets | |
| 218 | |
Property and equipment, net | |
| 701 | |
Right-of-use asset | |
| 948 | |
Technology | |
| 21,680 | |
Goodwill | |
| 43,989 | |
Trade accounts payable | |
| (94 | ) |
Employees and related | |
| (373 | ) |
Other current liabilities | |
| (30 | ) |
Deferred taxes | |
| (2,193 | ) |
Lease liability | |
| (948 | ) |
Total identifiable net assets acquired | |
| 66,694 | |
Measurement of fair value
For the valuation of the technology
asset, the income approach: multi-period excess earnings method (“MEEM”) was used. The value of the asset is estimated based
on the present value of the after-tax cash flows attributable only to that intangible asset. The MEEM approach comprises the following
steps: (a) Forecasting revenues attributable solely to DeepCube’s technology; (b) Applying an appropriate operating margin to forecast
sales; (c) Applying an appropriate tax charge to estimate post-tax cash flows; (d) Applying post-tax contributory asset charges to reflect
the return required on other assets that contribute to the generation of the forecast cash flows; (e) Discounting the resulting net post-tax
cash flows, using an appropriate discount rate to arrive at the net present value; and (f) Adding an amortization benefit based on the
technology’s remaining useful life.
The
aggregate cash flows derived for the Group as a result of the acquisition:
| |
Thousands
USD | |
Cash and cash equivalents paid | |
| (40,082 | ) |
Cash and cash equivalents of the subsidiary | |
| 2,691 | |
| |
| (37,391 | ) |
Goodwill
The goodwill is attributable mainly
to the skills and technical talent of DeepCube’s work force, its technology and the synergies expected to be achieved from integrating
DeepCube into the Group’s existing 3D Technologies and business. None of the goodwill recognized is expected to be deductible for
tax purposes.
(2). Acquisition of NanoFabrica
On April 26, 2021, the Group acquired
100% of the shares and voting interests in NanoFabrica. NanoFabrica operates in the additive manufacturing (AM) industry. Taking control
of NanoFabrica will enable the Group access to NanoFabrica’s micron-resolution technology, and benefit from its experienced scientists
and engineers.
From the date of the acquisition until
December 31, 2021, NanoFabrica contributed revenue of $864 thousand and loss of $9,785 thousand to the Group’s results. If the acquisition
had occurred on January 1, 2021, the unaudited consolidated pro forma revenue would have been $10,497 thousand, and the unaudited consolidated
pro forma loss for the year would have been $66,467 thousand (before impairment testing). In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the
acquisition had occurred on January 1, 2021.
Consideration transferred
The following table summarizes the acquisition
date fair value of each major class of consideration
transferred.
|
|
Thousands
USD |
|
Cash |
|
|
22,977 |
|
Deferred payment |
|
|
1,123 |
|
Earn-out cash consideration – contingent consideration |
|
|
1,367 |
|
Equity instruments (2,249,232 Ordinary Shares) |
|
|
19,614 |
|
Equity instruments (262,070 Ordinary Shares) – with holdback restrictions |
|
|
1,873 |
|
Replacement of share-based payment awards |
|
|
171 |
|
Total consideration transferred |
|
|
47,125 |
|
| a) | Earn-out cash consideration – Contingent Consideration |
| | |
| | The Company will pay NanoFabrica’s founders Earn-out payments, depending on certain targets, in an aggregate amount of up to $3,362 thousand (“Earn-Out Consideration”) as follows: |
| | (i) | Revenue based earn-out (50% of Earn-Out Consideration) – In the event that NanoFabrica generates, during the period commencing on June 1, 2021 and ending on May 31, 2022, revenues of at least $2,800 thousand (“Revenues Target”). If the actual amount of revenue that was achieved by NanoFabrica during this period is equal to or lower than 75% of the Revenues Target, then NanoFabrica’s founders shall not be entitled to receive any portion of the revenue based earn-out consideration. If the actual amount of revenue that was achieved by NanoFabrica during this period is lower than the Revenues Target but higher than 75% of the Revenues Target, then the founders shall be entitled to a portion of the revenue earn-out based on this formula: revenue consideration - (revenue consideration * (1-revenues/Revenues Target)*4). |
| | (ii) | Gross margin based earn-out
(50% of Earn-Out Consideration) – In the event that NanoFabrica generates, during the period commencing on June 1 ,2021 and ending
on May 31, 2022, gross margin of at least $1,740 thousand (“Gross Margin Target”). If the gross margin that was achieved by NanoFabrica during this period is equal to or lower than 41.33% of the Gross Margin Target, then NanoFabrica’s founders shall not be entitled to receive any portion of the gross margin based earn-out consideration. If the gross margin that was achieved by NanoFabrica during this period is lower than the Gross Margin Target but higher than 41.33% of the Gross Margin Target then the founders shall be entitled to a portion of the gross margin earn-out based on this formula: gross margin consideration - (gross margin consideration * (1-margin/62%)*3). |
| | The Group has included $1,367 thousand as contingent consideration
related to the additional consideration, which represents its fair value at the date of acquisition. The fair value of the contingent
consideration was measured using a Monte Carlo simulation analysis. Against this liability, the Group has deposited in escrow an amount
of approximately $3,362 thousand. As of December 31, 2021, the contingent consideration has reduced to zero, due to lack of expectations
for meeting the targets. (see Note 20.F). |
| b) | Equity instruments issued The fair value of the Ordinary Shares issued was based on the listed share price of the Company at the date of acquisition. Some of the shares are subject to holdback restrictions, and were measured with discounts for lack of marketability. In accordance with the terms of the acquisition agreement, additional Ordinary Shares of the Company will be issued to two founders of NanoFabrica, with a share price protection mechanism. The granting of these shares is subject to conditions related to the continued employment of the founders. Hence these shares were not taken as part of the consideration for the business combination. The fair value of those shares, with the share price protection mechanism, is estimated at $10,941 thousand, and will be recognized as post-acquisition compensation cost. For further details on the replacement awards, see Note 20. |
| c) | Replacement of share-based payment awards In accordance with the terms of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of NanoFabrica (the acquiree’s awards) for equity settled share-based payment awards of the Company (the replacement awards). The details of the acquiree’s awards and replacement awards were as follows. The acquiree’s awards were granted during the years 2017 to 2020, and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date, and are subject to a 3-year vesting schedule. The fair value of the acquiree’s awards and the fair value of
the replacement awards at the date of acquisition is $633 thousand. The consideration for the business combination includes $171 thousand
transferred to employees of NanoFabrica when the acquiree’s awards were substituted by the replacement awards, which relates to
past service. The balance of $462 thousand will be recognized as post-acquisition compensation cost. For further details on the replacement
awards, see Note 19. |
|
d) |
Acquisition-related costs |
The Group incurred acquisition-related
costs of $230 thousand on legal fees and due diligence costs. These costs have been included
in general and administrative expenses.
Identifiable
assets acquired and liabilities assumed
The following table summarizes the recognized
amounts of assets acquired and liabilities assumed at the date of acquisition.
|
|
Thousands
USD |
|
Cash and cash equivalents |
|
|
2,218 |
|
Restricted cash |
|
|
44 |
|
Prepaid expenses and other receivables |
|
|
102 |
|
Inventory |
|
|
130 |
|
Property and Equipment, net |
|
|
654 |
|
Backlog |
|
|
190 |
|
Technology |
|
|
14,211 |
|
Goodwill |
|
|
33,029 |
|
Trade payables |
|
|
(195 |
) |
Other accounts payable and accrued expenses |
|
|
(694 |
) |
Deferred taxes |
|
|
(1,669 |
) |
Long term liabilities |
|
|
(895 |
) |
Total identifiable net assets acquired |
|
|
47,125 |
|
|
Measurement of fair value
For the valuation of the technology asset, the
income approach: MEEM was used. The value of the asset is estimated based on the present value of the after-tax cash flows attributable
only to that intangible asset. The MEEM approach comprises the following steps: (a) Forecasting revenues attributable solely to NanoFabrica’s
technology; (b) Applying an appropriate operating margin to forecast sales; (c) Applying an appropriate tax charge to estimate post-tax
cash flows; (d) Applying post-tax contributory asset charges to reflect the return required on other assets that contribute to the generation
of the forecast cash flows; (e) Discounting the resulting net post-tax cash flows, using an appropriate discount rate to arrive at the
net present value; and (f) Adding an amortization benefit based on the technology’s remaining useful life.
|
|
The aggregate cash flows derived for the Group as a result of the acquisition: |
| |
Thousands USD | |
Cash and cash equivalents paid | |
| (22,977 | ) |
Cash and cash equivalents of the subsidiary | |
| 2,218 | |
| |
| (20,759 | ) |
Goodwill
The goodwill is attributable mainly
to the skills and technical talent of NanoFabrica’s work force, its technology and the synergies expected to be achieved from integrating
NanoFabrica into the Group’s existing business. NanoFabrica fits the Group’s target markets, and the combined offering will
increase the number of applications that can be relevant for mass manufacturing. None of the goodwill recognized is expected to be deductible
for tax purposes.
(3). Acquisition of Essemtec
On November 2, 2021, the Group acquired
100% of the shares and voting interests in Essemtec. Essemtec is a Swiss company, that produces equipment for placing and assembling electronic
components on printed circuit boards. Taking control of Essemtec will enable the Group to enhance product lines of both companies, and
benefit from Essemtec’s experienced scientists and engineers.
From the date of the acquisition until
December 31, 2021, Essemtec contributed revenue of $6,283 thousand and profit of $969 thousand to the Group’s results. If the acquisition
had occurred on January 1, 2021, the unaudited consolidated pro forma revenue would have been $29,662 thousand, and the unaudited consolidated
pro forma profit for the year would have been $65,691 thousand (before impairment testing). In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the
acquisition had occurred on January 1, 2021.
Consideration
transferred
The following table summarizes the fair value as of the acquisition
date of each major class of consideration transferred:
| |
Thousands USD | |
Cash | |
| 15,152 | |
Shareholder’s loans | |
| (2,681 | ) |
Earn-out cash consideration – Contingent consideration | |
| 8,792 | |
Total consideration transferred | |
| 21,263 | |
| a) | Shareholder’s loan Comprised of two loans – one of approximately $1,095 thousand, bearing interest of 3%, and the other of approximately $1,586 thousand, bearing interest of 1%. |
| b) | Earn-out cash consideration – Contingent Consideration The Company will pay Essemtec’s shareholders earn-out payments, depending on certain targets, in an aggregate amount of up to CHF 8,900 thousand (as for December 31, 2021, approximately $9,700 thousand) (“Earn-Out Consideration”) as follows: |
| (i) | EBITDA based earn-out (maximum of up to CHF 3,500 thousand (as for December 31, 2021, approximately $3,815 thousand) of the Earn-Out Consideration) – In the event that Essemtec generates, during the fiscal year ending on December 31, 2021, EBITDA of at least CHF 2,000 thousand (as for December 31, 2021, approximately $2,180 thousand) (“EBITDA Target”). If the actual amount of EBITDA that was achieved by Essemtec during this period is equal to or lower than 50% of the EBITDA Target, then Essemtec’s shareholders shall not be entitled to receive any portion of the EBITDA based earn-out consideration. If the actual amount of EBITDA that was achieved by Essemtec during this period is lower than the EBITDA Target but higher than 50% of the EBITDA Target, then Essemtec’s shareholders shall be entitled to a portion of the EBITDA earn-out based on this formula: EBITDA consideration * (1 - (EBITDA Target - Actual EBITDA)*2/EBITDA Target). |
| (ii) | Gross profit based earn-out (maximum of up to CHF 5,400 thousand (as for December 31, 2021, approximately $5,886 thousand) of the Earn-Out Consideration) – In the event that Essemtec generates, during the fiscal year ending on December 31, 2022, gross profit of at least CHF 10,702,683 (as for December 31, 2021, approximately $11,666 thousand) (“Gross Profit Threshold”), the earn-out consideration will be paid as follows: If the actual gross profit that was achieved by Essemtec during this period is equal to CHF 13,378,298 (as for December 31, 2021, approximately $14,582 thousand) (“Gross Profit Target”), then Essemtec’s shareholders shall be entitled to receive a gross profit based earn-out consideration of CHF 4,500 thousand (as for December 31, 2021, approximately $4,905 thousand). If the actual gross profit that was achieved by Essemtec during this period is lower than the Gross Profit Target but higher than the Gross Profit Threshold, then Essemtec’s shareholders shall be entitled to a portion of the gross profit earn-out based on this formula: CHF 4,500 thousand * (1 - (Gross Profit Target - Actual Gross Profit)*5/Gross Profit Target). If the actual gross profit that was achieved by Essemtec during this period is greater than the Gross Profit Target, then Essemtec’s shareholders shall be entitled to a portion of the gross profit earn-out based on this formula (but not more than CHF 5,400 thousand): CHF 4,500 thousand * (1 + (Actual Gross Profit
- Gross Profit Target)/Gross Profit Target). |
| b) | Acquisition-related
costs |
The Group incurred acquisition-related
costs of $1,094 thousand on legal fees and due diligence costs. These costs have been included
in general and administrative expenses.
Identifiable
assets acquired and liabilities assumed
The following table summarizes the recognized
amounts of assets acquired and liabilities assumed at the date of acquisition.
| |
Thousands USD | |
Cash and cash equivalents | |
| 3,221 | |
Trade receivables | |
| 2,270 | |
Other short-term receivables | |
| 661 | |
Inventories | |
| 10,172 | |
Deferred tax assets | |
| 994 | |
Property, plant and equipment | |
| 1,358 | |
Right-of-use | |
| 47 | |
Customer relationships | |
| 1,579 | |
Technology | |
| 4,096 | |
Trademark | |
| 1,085 | |
Goodwill | |
| 12,225 | |
Trade payable | |
| (1,454 | ) |
Other current liabilities | |
| (4,371 | ) |
Long-term liabilities | |
| (6,518 | ) |
Shareholder’s loan (*) | |
| (2,681 | ) |
Deferred tax liabilities | |
| (1,374 | ) |
Lease liability | |
| (47 | ) |
Total identifiable net assets acquired | |
| 21,263 | |
(*) See Note 9.B.3(a).
The
aggregate cash flows derived for the Group as a result of the acquisition:
| |
Thousands
USD | |
Cash and cash equivalents paid | |
| (15,152 | ) |
Cash and cash equivalents of the subsidiary | |
| 3,221 | |
| |
| (11,931 | ) |
Goodwill
The goodwill is attributable mainly
to the skills and technical talent of Essemtec’s work force, its technology and the synergies expected to be achieved from integrating
Essemtec into the Group’s existing business. Essemtec’s present products fit the Group’s markets, in a way that can
leverage the distribution channels and go-to-market efforts of both organizations. In addition, the Group’s intention to use its
newly acquired deep learning based artificial intelligence technologies from the DeepCube acquisition with Essemtec’s systems. None
of the goodwill recognized is expected to be deductible for tax purposes.
4. | The
aggregate cash flows derived for the Group as a result of all acquisitions during the current period: |
| |
Thousands USD | |
Cash and cash equivalents paid | |
| (78,211 | ) |
Amount deposited in escrow | |
| (4,493 | ) |
Cash and cash equivalents of the subsidiary | |
| 8,130 | |
| |
| (74,574 | ) |
See also Note 24.A regarding acquisition after
the reporting date.
Note 10 – Other payables
| |
December 31, | |
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Accrued expenses | |
| 1,635 | | |
| 2,658 | |
Contract liabilities | |
| 968 | | |
| 3,021 | |
Lease liability | |
| 1,148 | | |
| 2,086 | |
Employees and related liabilities | |
| 1,230 | | |
| 4,392 | |
Government authorities | |
| 659 | | |
| 1,231 | |
Current maturities in respect of government grants | |
| 226 | | |
| 428 | |
Other | |
| 44 | | |
| 20 | |
| |
| 5,910 | | |
| 13,836 | |
Note 11 – Liability in respect of government grants
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Balance as of January 1 | |
| 1,275 | | |
| 1,076 | |
Increase through business combination | |
| - | | |
| 912 | |
Amounts received during the year | |
| 55 | | |
| 217 | |
Payment of royalties | |
| (158 | ) | |
| (196 | ) |
Amounts recognized as an offset from research and development expenses | |
| (23 | ) | |
| (118 | ) |
Revaluation of the liability | |
| (73 | ) | |
| 97 | |
Balance as of December 31 | |
| 1,076 | | |
| 1,988 | |
| |
| | | |
| | |
Current maturities in respect of government grants | |
| 226 | | |
| 428 | |
Long term liability in respect of government grants | |
| 850 | | |
| 1,560 | |
During the years 2014 to 2021, the Company’s
subsidiaries received several approvals from the Innovation Authority, to finance development projects in an aggregate amount of up to
$8,745,000, while the Innovation Authority share of financing the aforesaid amount was in a range of 30% to 85% of expenditures. As of
December 31, 2021, the Company received grants in the aggregate amount of $3,843,000. In consideration, the Company undertook to pay the
Innovation Authority royalties in the rate of 3%-3.5% of the future sales up to the amount of the grants received. On the date on which
the grants were received, the Group recognized a liability using a discount rate ranging between 19% to 30%.
Note 12 – Equity
A. |
The Company’s share capital (in thousands of Ordinary Shares) |
| |
Ordinary Shares | |
| |
2020(*) | | |
2021 | |
Issued and paid-up share capital as at December 31 | |
| 172,052 | | |
| 257,376 | |
Authorized share capital | |
| 250,000 | | |
| 500,000 | |
(*) | Following
the approval of its shareholders on April 16, 2020, the board of directors of the Company approved a 1-for-50 reverse split of the Company’s
share capital. The implementation of the reverse split resulted in a reduction in the issued and outstanding Ordinary Shares, and the
increase of the par value per Ordinary Share from NIS 0.10 to NIS 5.00 per Ordinary Share. Concurrently with the reverse split, the Company
effected a corresponding change in the ratio of ordinary shares to each of the Company’s ADSs, such that its ratio of ADSs to Ordinary
Shares has changed from one (1) ADS representing fifty (50) Ordinary Shares to a new ratio of one (1) ADS representing one (1) Ordinary
Share. The effective date of this reverse split was June 29, 2020. All options and warrants of the Company outstanding immediately prior
to the reverse split were appropriately adjusted by dividing the number of Ordinary Shares into which the options and warrants are exercisable
by 50 and multiplying the exercise price thereof by 50, as a result of the reverse split. All the figures in these financial statements
relating to share capital were appropriately adjusted to reflect the above-mentioned reverse split. |
Share capital
(in thousands of shares of NIS 5 par value)
| |
Ordinary Shares | |
| |
2020 | | |
2021 | |
Issued as at January 1 | |
| 4,179 | | |
| 172,052 | |
Issued for cash during the period | |
| 163,542 | | |
| 74,100 | |
Issued for purchase of companies during the period | |
| - | | |
| 7,162 | |
Conversion into shares of convertible notes during the period | |
| 1,395 | | |
| - | |
Exercise of warrants during the period | |
| 2,918 | | |
| 2,690 | |
Exercise of share options during the period | |
| 18 | | |
| 1,372 | |
Issued and paid-in share capital as at December 31 | |
| 172,052 | | |
| 257,376 | |
In April 2020, following approval of the general
meeting of the Company’s shareholders, the Company increased its authorized share capital by NIS 100,000,000, such that the authorized
share capital of the Company was NIS 150,000,000.
In May 2020, following approval of the general
meeting of the Company’s shareholders, the Company increased its authorized share capital by NIS 100,000,000, such that the authorized
share capital of the Company was NIS 250,000,000.
In June 2020, following approval of the general
meeting of the Company’s shareholders, the Company increased its authorized share capital by NIS 1,000,000,000, such that the authorized
share capital of the Company was NIS 1,250,000,000 divided into 250,000,000 Ordinary Shares, par value NIS 5.00 each.
In February 2021, following approval of the general
meeting of the Company’s shareholders, the Company increased its authorized share capital by NIS 1,250,000,000, such that the authorized
share capital of the Company was NIS 2,500,000,000 divided into 500,000,000 Ordinary Shares, par value NIS 5.00 each.
B. |
Financing transactions |
| 1. | In February 2019, the Company issued, pursuant to a public offering in the United States, an aggregate of 1,600,000 ADSs, 1,600,000 non-tradable warrants with an exercise price of $8.625 per ADS and term of 5 years and 1,200,000 non-tradable rights to purchase shares with an exercise price of $7.50 per ADS and term of 6 months. In certain cases, the rights to purchase and the warrants may be exercised on a cashless basis. Therefore, the rights to purchase and the warrants are accounted for as derivative instruments which are classified as a liability and measured at fair value through profit or loss. The total gross consideration was $12,000,000 and was initially attributed to the financial liability for the rights to purchase and warrants based on their fair value of $10,201,000 and the remaining amount was attributed to the ADSs issued and recognized as an equity component of $1,799,000. Applicable issuance costs, amounting to $1,440,000, have been allocated in the same proportion as the allocation of the gross proceeds. An amount of $1,224,000 was considered as issuance costs allocated to the rights to purchase and the warrants and has been recorded in profit or loss as finance expense, while costs allocated as issuance costs of ADSs of $216,000 have been recorded in equity as a reduction of the share premium. The total net proceeds from the offering were approximately $10,560,000. |
During the first quarter of 2019, investors
exercised 37,620 of the rights to purchase 37,620 Ordinary Shares for a total consideration of $282,000.
The value of the financial liability
in respect to the warrants was measured as of December 31, 2021, at an amount of approximately $3,057,000.
| 2. | In
August 2019, the Company issued, pursuant to a securities purchase agreement, convertible promissory notes, in an aggregate principal
amount of $4,276,000 and an additional approximately $2,700,000 to be received in two subsequent closings, bringing the expected total
gross proceeds from this funding to approximately $7,000,000. The notes were convertible into the Company’s ADSs. As a part of
this transaction, the Company issued non-tradable warrants to purchase 62,668,850 ADSs. The warrants have an exercise price equal to
125% of the conversion price of the convertible promissory notes, will be exercisable upon the six-month anniversary of issuance and
will expire five years from the date of issuance. The total gross proceeds from the first closing were $4,276,000. |
The first tranche of the convertible
promissory notes was unsecured, had a maturity date of March 4, 2021, bore no interest except in an event of default and could be converted,
at the election of the holder, into ADSs at an initial per share conversion price of $2.90, subject to adjustments, including among others,
revenue targets and the conversion prices of the subsequent tranches. The convertible notes have been designated as a financial liability
measured at fair value through profit and loss since they were combined instruments including embedded derivatives. The warrants are also
classified as a financial liability that is measured at fair value through profit and loss as neither the exercise price nor the number
of shares to be issued is fixed. The rights for the future issuance of the convertible notes and the warrants of the second and third
tranches have been accounted for as derivatives.
The initial fair value of the financial
liabilities issued in the transaction at their issuance date has been evaluated in the amount of $11,609,000, while the consideration
received from this transaction was $4,276,000. The difference of $7,333,000 has been allocated to the convertible notes, warrants and
rights to purchase recognized with respect to this transaction.
The allocation was based on the proportion
of the fair value of each instrument. The loss that has not been recognized for each instrument is amortized on a straight line basis
over the term of each instrument.
Accordingly, from the consideration
received, approximately $1,569,000 was attributed to the convertible notes of the first tranche, $1,902,000 was attributed to the warrants
of the first tranche, and a total of approximately $805,000 was attributed to the rights with respect to the second and third tranches.
During 2019 and until December 31, 2019,
$1,767,400 of the principal amount of the convertible notes was converted into 609,448 ADSs. As a result of the conversion, $2,003,000
of the loss that had not been initially recorded has been recognized as finance expenses in the year ended December 31, 2019.
Prior to February 4, 2020, an additional
of approximately $204,000 of the principal amount of the convertible notes was converted.
On February 4, 2020, the Company and
the holders of a significant portion of the remaining financial instruments agreed to amend the terms of this transaction such that the
conversion price of the convertible notes decreased to $1.74 per ADS, and the holders of such notes agreed to convert such notes into
ADSs. As a result, an aggregate of approximately $2,305,000 of the principal amount of the convertible notes was converted. Additionally,
the Company agreed to amend the exercise price of the warrants of the first tranche to $1.914 per ADS, and the Company and the investors
agreed to terminate substantially all remaining obligations in this transaction, including the instruments to be issued under the second
and third tranche.
During the first quarter of 2020, all
the outstanding balance of the convertible notes was converted.
The fair value of the remaining financial
liabilities relating to the warrants issued in this transaction was measured as of December 31, 2021, at an amount of approximately $290,000.
See also Note 20.D - Financial Liabilities.
| 3. | During 2020, the Company issued, pursuant to several public offerings
in the United States, an aggregate of 163,542,447 ADSs and 430,000 pre-funded warrants (that were converted to ADSs during 2020). The
total gross proceeds from the offerings were approximately $710,013,000, before deducting underwriting discounts and commissions and other
offering-related expenses. The total net proceeds from the offerings, after deducting issuance expenses, were approximately $650,115,000.
As a part of those offerings, the Company issued a total of 7,365,289 non-tradable warrants to the underwriters. The warrants are accounted
for as share-based payment expenses, see also Note 19. |
During 2021, the Company issued, pursuant
to two public offerings in the United States, an aggregate of 74,100,000 ADSs. The total gross proceeds from the offerings were approximately
$832,980,000, before deducting underwriting discounts and commissions and other offering-related expenses. The total net proceeds from
the offerings, after deducting issuance expenses, were approximately $796,437,000. As a part of one of these offerings, the Company issued
1,137,500 non-tradable warrants to the underwriters. The warrants are accounted for as share-based payment expenses. See also Note 19.
As of December 31, 2021, the Company
held 10,540 Ordinary Shares, constituting approximately 0.004% of its issued and paid up share capital.
| D. | Translation reserve from foreign
operations |
Net changes in translation reserve
from foreign operations in 2021 amounted to $24 thousand, mainly from JAMES which its functional currency is Euro.
Note 13 – Revenues
| |
For the year ended December 31 | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Consumables | |
| 650 | | |
| 554 | | |
| 1,631 | |
Support services | |
| 650 | (*) | |
| 654 | | |
| 1,117 | |
Sales of systems | |
| 5,770 | | |
| 2,191 | | |
| 7,250 | |
Research and development services | |
| - | | |
| - | | |
| 495 | |
Total revenue | |
| 7,070 | | |
| 3,399 | | |
| 10,493 | |
(*) | Immaterial reclassification |
Revenues per geographical locations:
| |
For the year ended December 31, | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
America | |
| 3,367 | | |
| 1,263 | | |
| 2,513 | |
Asia Pacific | |
| 1,591 | | |
| 1,362 | | |
| 743 | |
Europe and Israel(*) | |
| 2,112 | | |
| 774 | | |
| 7,237 | |
Total revenue | |
| 7,070 | | |
| 3,399 | | |
| 10,493 | |
(*) | The Company combined all revenues into the Europe and Israel geography, due to immateriality of the amounts. |
Timing of revenue recognition:
| |
For the year ended December 31, | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Goods and services transferred over time | |
| 650 | | |
| 654 | | |
| 1,074 | |
Goods transferred at a point in time | |
| 6,420 | | |
| 2,745 | | |
| 9,419 | |
Total revenue | |
| 7,070 | | |
| 3,399 | | |
| 10,493 | |
The table below provides information
regarding receivables and contract liabilities deriving from contracts with customers.
| |
December 31, | |
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Trade receivables | |
| 713 | | |
| 3,422 | |
Contract liabilities | |
| 968 | | |
| 3,021 | |
The contract liabilities primarily
relate to the advance consideration received from customers for contracts giving yearly maintenance for the printer. The revenue is recognized
in a straight line basis over the contracts’ period.
Contract costs
Management expects that commissions
paid to agents for obtaining contracts are recoverable. The Group applies the expedient included in IFRS 15.94 and recognizes incremental
costs for obtaining the contract as an expense as incurred, where the amortization period of the asset it would have otherwise recognized
is one year or less.
Note 14 – Cost of revenues
| |
For the year ended December 31 | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
According to components - | |
| | |
| | |
| |
Raw materials, auxiliary materials and consumables | |
| 2,129 | | |
| 772 | | |
| 3,585 | |
Salaries, wages and related expenses | |
| 807 | | |
| 293 | | |
| 1,412 | |
Other | |
| 1,376 | | |
| 499 | | |
| 733 | |
Total | |
| 4,312 | | |
| 1,563 | | |
| 5,730 | |
Note 15 – Further detail of profit or loss
|
|
For the year ended December 31 |
|
|
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
|
Thousands
USD |
|
|
Thousands
USD |
|
|
Thousands
USD |
|
A. Research and development expenses, net |
|
|
|
|
|
|
|
|
|
Payroll |
|
|
4,672 |
(*) |
|
|
4,849 |
|
|
|
14,604 |
|
Share-based payment expenses |
|
|
162 |
(*) |
|
|
1,682 |
|
|
|
14,238 |
|
Materials |
|
|
1,001 |
|
|
|
940 |
|
|
|
2,764 |
|
Subcontractors |
|
|
82 |
|
|
|
258 |
|
|
|
2,864 |
|
Patent registration |
|
|
144 |
|
|
|
160 |
|
|
|
441 |
|
Depreciation |
|
|
1,534 |
|
|
|
1,588 |
|
|
|
5,697 |
|
Rental fees and maintenance |
|
|
197 |
|
|
|
173 |
|
|
|
559 |
|
Other |
|
|
339 |
|
|
|
249 |
|
|
|
637 |
|
|
|
|
8,131 |
|
|
|
9,899 |
|
|
|
41,804 |
|
Less – government grants |
|
|
(49 |
) |
|
|
(21 |
) |
|
|
(118 |
) |
|
|
|
8,082 |
|
|
|
9,878 |
|
|
|
41,686 |
|
B. Sales and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Payroll |
|
|
2,729 |
|
|
|
3,336 |
|
|
|
8,283 |
|
Share-based payment expenses |
|
|
144 |
|
|
|
1,990 |
|
|
|
8,569 |
|
Marketing, advertising and commissions |
|
|
1,808 |
|
|
|
577 |
|
|
|
4,053 |
|
Rental fees and maintenance |
|
|
114 |
|
|
|
201 |
|
|
|
365 |
|
Travel abroad |
|
|
317 |
|
|
|
235 |
|
|
|
749 |
|
Depreciation |
|
|
212 |
|
|
|
223 |
|
|
|
318 |
|
Other |
|
|
145 |
|
|
|
35 |
|
|
|
376 |
|
|
|
|
5,469 |
|
|
|
6,597 |
|
|
|
22,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Payroll |
|
|
872 |
|
|
|
1,377 |
|
|
|
2,880 |
|
Share-based payment expenses |
|
|
155 |
|
|
|
16,837 |
|
|
|
6,974 |
|
Fees |
|
|
22 |
|
|
|
22 |
|
|
|
33 |
|
Professional services |
|
|
1,545 |
|
|
|
1,064 |
|
|
|
6,993 |
|
Office expenses |
|
|
359 |
|
|
|
386 |
|
|
|
1,065 |
|
Travel abroad |
|
|
37 |
|
|
|
44 |
|
|
|
461 |
|
Depreciation |
|
|
78 |
|
|
|
76 |
|
|
|
210 |
|
Rental fees and maintenance |
|
|
43 |
|
|
|
46 |
|
|
|
97 |
|
Other |
|
|
159 |
|
|
|
435 |
|
|
|
931 |
|
|
|
|
3,270 |
|
|
|
20,287 |
|
|
|
19,644 |
|
D. Finance income |
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation of liability in respect of government grants |
|
|
58 |
|
|
|
75 |
|
|
|
25 |
|
Exchange rate differences |
|
|
- |
|
|
|
123 |
|
|
|
3,444 |
|
Revaluation of financial liabilities at fair value through profit or loss (**) |
|
|
8,707 |
|
|
|
- |
|
|
|
10,608 |
|
Bank interest and fees |
|
|
- |
|
|
|
248 |
|
|
|
3,832 |
|
|
|
|
8,765 |
|
|
|
446 |
|
|
|
17,909 |
|
Finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate differences |
|
|
151 |
|
|
|
- |
|
|
|
- |
|
Bank fees |
|
|
14 |
|
|
|
28 |
|
|
|
70 |
|
Finance expense in respect of lease liability |
|
|
425 |
|
|
|
390 |
|
|
|
237 |
|
Revaluation of financial liabilities at fair value through profit or loss (**) |
|
|
- |
|
|
|
12,825 |
|
|
|
- |
|
Fundraising expenses |
|
|
1,693 |
|
|
|
- |
|
|
|
- |
|
Revaluation of liability in respect of government grants |
|
|
- |
|
|
|
- |
|
|
|
121 |
|
|
|
|
2,283 |
|
|
|
13,243 |
|
|
|
428 |
|
(**) | See Note 19 regarding financing
transactions that included issuance of financial instruments accounted at fair value through profit and loss. |
Note 16 – Income Tax
Presented hereunder are the tax rates
relevant to the Company in the years 2019 to 2021:
2019 – 23%
2020 – 23%
2021 – 23%
On December 22, 2016, the Knesset
plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) –
2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of
24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.
As a result of the reduction in the
tax rate, the deferred tax balances as at December 31, 2019 and 2020 were calculated according to the new tax rates specified in the
Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018), at the tax rate expected
to apply on the date of reversal.
B. |
Benefits under the Law
for the Encouragement of Industry (Taxes) |
| (a) | The Company and some of its subsidiaries qualify as “Industrial Companies” as defined in the Law for the Encouragement of Industry (Taxes) – 1969, and accordingly they are entitled to benefits, of which the most significant are, under limited conditions, the possibility of submitting consolidated tax returns with related Israeli companies and amortization in three equal annual portions of issuance expenses when registering shares for trading as from the date the shares of the company were registered. |
| | |
| (b) | The Company and certain subsidiaries are submitting a consolidated tax return to the tax authorities in accordance with the Law for the Encouragement of Industry (Taxes) – 1969. As a result, the companies are, inter alia, entitled to offset their losses from the taxable income of other companies, subject to compliance with certain conditions. |
C. |
Description of the implications
of the tax laws applicable to affiliated companies incorporated outside of Israel |
The Group companies operating outside
of Israel are subject to the tax laws applicable in the countries of residence and the activity of those companies. The tax rate applicable
to material companies outside of Israel is 12.44% in Switzerland.
D. |
Composition
of income tax expense (income) |
| |
Thousands USD | |
| |
For the year ended December 31, | |
| |
2021 | |
| |
| |
Current tax expense | |
| (107 | ) |
| |
| | |
Deferred tax income | |
| 5,013 | |
Income tax | |
| 4,906 | |
| E. | Deferred
tax assets and liabilities |
Deferred taxes are calculated according
to the tax rate anticipated to be in effect on the date of reversal as stated above.
The movement in deferred tax assets
and liabilities is attributable to the following items:
| |
Intangible assets and inventories | | |
Carry- forward tax losses | | |
Total | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
| |
| | |
| | |
| |
Balance of deferred tax asset (liability) as at January 1, 2021 | |
| - | | |
| - | | |
| - | |
Deferred tax asset (liability) acquired in business combinations (see Note 9.B) | |
| (7,117 | ) | |
| 2,875 | | |
| (4,242 | ) |
Changes recognized in profit or loss | |
| 6,881 | | |
| (1,868 | ) | |
| 5,013 | |
Balance of deferred tax asset (liability) as at December 31, 2021 | |
| (236 | ) | |
| 1,007 | | |
| 771 | |
The main reconciliation between the theoretical tax on the pre-tax
profit and the tax expense drives from temporary differences and tax losses for which deferred taxes are not created.
The Company has final tax assessments
until and including the 2017 tax year.
Nano Dimension Technologies Ltd. has
final tax assessments until and including the 2016 tax year.
H. |
Accumulated losses for
tax purposes and other deductible temporary differences |
As of December 31, 2021, the Group
has a net operating loss for tax purposes of approximately $156,200,000, approximately $122,820,000 of which is originated from the Company,
the remining amount of which is mostly allocated to Nano Dimension Technologies Ltd. and capital loss for tax purposes of approximately
$845,000, approximately $495,752 of which is originated from the Company.
Essemtec, which operates in Switzerland,
has approximately $8,826,000 accumulated loss as of December 31, 2021.
As of December 31, 2021, the Group
has deductible temporary differences in the amount of approximately $29,000,000, mainly relating to funding expenses and research and
development expenses which are deductible over a period of three years for tax purposes.
The Group has not recognized a tax asset
for the aforesaid losses and deductible temporary differences, except deferred tax of $1,007 thousand recognized partially by Essemtec
on accumulated loss, due to the uncertainty regarding the ability to utilize those losses and deductible of temporary differences in the
future.
I. |
Income Tax Regulations
(Rules on Bookkeeping by Foreign Invested Companies and Certain Partnerships and Determination of their Taxable Income), 1986 |
As a “Foreign investment company”
(as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company’s management has elected to apply Income
Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their
Taxable Income) – 1986, from January 2018. Accordingly, its taxable income or loss is calculated in USD.
Note 17 – Loss per share
Basic loss per share
The calculation of basic loss per share as at
December 31, 2021 was based on the loss attributable to the owners of the company divided by a weighted average number of ordinary shares
outstanding, calculated as follows:
| |
For the year ended December 31 | |
| |
2019(*) | | |
2020(*) | | |
2021 | |
Weighted average number of Ordinary Shares (thousands of shares)(*) | |
| 3,513 | | |
| 42,947 | | |
| 247,335 | |
Loss attributable to the owners of the company (thousands USD) | |
| 8,353 | | |
| 48,494 | | |
| 200,777 | |
(*) | All the figures in this note were adjusted to reflect the 1:50 reverse split effective June 29, 2020. See Note 12.A. |
Weighted average number of Ordinary
Shares:
| |
Year ended December 31 | |
| |
2019(*) | | |
2020(*) | | |
2021 | |
| |
Thousands of | | |
Thousands of | | |
Thousands of | |
| |
shares of NIS 5.0 | | |
shares of NIS 5.0 | | |
shares of NIS 5.0 | |
| |
par value | | |
par value | | |
par value | |
Balance as at January 1 | |
| 1,932 | | |
| 4,179 | | |
| 172,052 | |
Effect of share options exercised | |
| 135 | | |
| 9 | | |
| 2,558 | |
Effect of warrants exercised | |
| - | | |
| 1,184 | | |
| 575 | |
Effect of conversion of notes | |
| - | | |
| 1,236 | | |
| - | |
Effect of shares issued during the year | |
| 1,446 | | |
| 36,339 | | |
| 72,150 | |
Weighted average number of Ordinary Shares used to calculate basic loss per share as at December 31 | |
| 3,513 | | |
| 42,947 | | |
| 247,335 | |
(*) | All the figures in this note were adjusted to reflect the 1:50 reverse split effective June 29, 2020, see note 12.A. |
Diluted loss per share
The calculation
of diluted loss per share as at December 31, 2021 was based on loss attributable to the owners of the company divided by a weighted average
number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:
Loss attributable to owners of the company (diluted)
| |
Year ended December 31 | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands | |
Loss used to calculate basic loss per share | |
| 8,353 | | |
| 48,494 | | |
| 200,777 | |
Changes in fair value of share price protection liability | |
| - | | |
| - | | |
| 3,783 | |
Changes in fair value of warrants classified as liabilities | |
| - | | |
| - | | |
| 456 | |
Loss attributable to ordinary shareholders | |
| 8,353 | | |
| 48,494 | | |
| 205,016 | |
Weighted average number of ordinary shares (diluted)
| |
Year ended December 31 | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands of | | |
Thousands of | | |
Thousands of | |
| |
shares of NIS 5.0 | | |
shares of NIS 5.0 | | |
shares of NIS 5.0 | |
| |
par value | | |
par value | | |
par value | |
Weighted average number of Ordinary Shares used to calculate loss per share | |
| 3,513 | | |
| 42,947 | | |
| 247,335 | |
Effect of share price protection on issue | |
| - | | |
| - | | |
| 702 | |
Effect of warrants on issue | |
| - | | |
| - | | |
| 95 | |
Weighted average number of Ordinary Shares used to calculate diluted loss per share as at December 31 | |
| 3,513 | | |
| 42,947 | | |
| 248,132 | |
In 2021, 55,817,296 options and warrants (in 2020: 22,810,291 and 2019:
3,468,948) were excluded from the diluted weighted average number of Ordinary Shares calculation as their effect would have been anti-dilutive.
Note 18 – Employee Benefits
As regards share-based payments, see Note 19 on
share-based payments.
As regards benefits to key management employees, see Note 23 on related
and interested parties.
A. |
Composition of employee
benefits: |
| |
December 31, | |
| |
2021 | |
| |
Thousands USD | |
Presented under current liabilities – other payables: | |
| |
Short-term employee benefits | |
| (234 | ) |
Total | |
| (234 | ) |
| |
| | |
Presented under non-current liabilities – employee benefits: | |
| | |
Recognized liability for defined benefit plan, net | |
| (4,145 | ) |
Total | |
| (4,145 | ) |
B. |
Post-employment benefit
plans – defined benefit plan |
Essemtec, a subsidiary of the Company,
located in Switzerland, participates in a defined benefit plan. Employees in Switzerland are insured against the risks of old age, death
and disability. Essemtec is affiliated to the collective foundation Bâloise Collective BVG foundation. The supreme governing body
of the pension fund is the Foundation Council, which is made up of an equal number of representatives from the employees and the employer.
The pension fund rules, together with the legal provisions concerning occupational pension plans, constitute the formal regulatory framework
of the pension plan. Individual retirement savings accounts are maintained for each beneficiary, which savings contributions varying
with age are credited to as well as any interest which accrues. The rate of interest to be applied to the retirement savings accounts
is set each year by the Foundation Council, having regard to the financial situation of the pension fund. The amounts credited to the
individual savings accounts are funded by savings contributions from both the employer and employees. In addition, the employer pays
risk contributions to fund death and disability benefits.
The standard retirement age is 64
for women and 65 for men. Employees are entitled to early retirement with a reduced old-age pension. The amount of the old-age pension
is the result of multiplying the individual retirement savings account at the time of retirement by a conversion rate set out in the
pension-fund rules. The retirement benefits can also be paid out in the form of a capital payment either in full or in part. The amount
of disability pensions is determined as a percentage of the insured salary and is independent of the number of years of service.
The Group’s defined benefit obligations
and the related defined benefit costs are determined at each balance sheet date by a qualified actuary using the Projected Unit Credit
Method. The amount recognized in the consolidated balance sheet represents the present value of the defined benefit obligations reduced
by the fair value of plan assets. Any surplus resulting from this calculation is limited to the present value of any economic benefits
available in the form of refunds from the plans or reductions in future contributions to the plans.
As of December 31, 2021, plan assets were comprised of qualifying insurance
policies of $11,671 thousand (December 31, 2020: $0).
|
2) |
Movement in net defined
benefit liabilities (assets) and in their components |
| |
Defined benefit obligation | | |
Fair value of plan assets | | |
Net defined benefit liability (asset) | |
| |
2020 | | |
2021 | | |
2020 | | |
2021 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | | |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Balance as of January 1 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Included in other comprehensive income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Effect of movements in exchange rates | |
| - | | |
| 91 | | |
| - | | |
| (67 | ) | |
| - | | |
| 24 | |
Other movements | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Changes from business combinations and loss of control | |
| - | | |
| (15,907 | ) | |
| - | | |
| 11,738 | | |
| - | | |
| (4,169 | ) |
Balance as of December 31 | |
| - | | |
| (15,816 | ) | |
| - | | |
| 11,671 | | |
| - | | |
| (4,145 | ) |
|
3) |
The defined benefit
liability is attributed to the plans’ participants as follows: |
| - | Active members: 93.6% (2020: 0%) |
| - | Pensioners: 6.4% (2020: 0%) |
|
4) |
Actuarial assumptions
and sensitivity analysis |
Principal actuarial assumptions
at the reporting date (expressed as weighted averages):
| |
2021 | |
| |
% | |
Discount rate as of December 31 | |
| 0.4 | |
Future salary growth | |
| 1 | |
Interest rate on the savings account | |
| 0.75 | |
Price inflation | |
| 1 | |
Future pension growth | |
| 0 | |
Assumptions regarding future mortality
are based on published statistics and mortality tables (BVG 2020 generational).
The calculation of the defined benefit
obligation is sensitive to the mortality assumptions in accepted mortality tables. As a result, an increase of one year in average life
would cause an increase in the defined benefit obligation of $ 248 thousand as of December 31, 2021.
Reasonably possible changes at the
reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit
obligation by the amounts shown below:
| |
December
31, | |
| |
0.5
percentage
point
increase | | |
0.5
percentage
point
decrease | |
| |
2021 | | |
2021 | |
| |
Thousands
USD | | |
Thousands
USD | |
Future salary growth | |
| (100 | ) | |
| 95.59 | |
Discount rate | |
| 1,173 | | |
| (1,350 | ) |
|
5) |
Effect of the plan on
the Group’s future cash flows |
The Group expects $469 thousand in contributions
to be paid to the funded defined benefit plan in 2022.
The Group estimates the plan’s
duration (based on weighted average) to be 15.9 years at the end of the reporting period.
Note 19 – Share-based payment
A. | During 2019, the Company granted to employees, officers and consultants 6,029,000 non-tradable share options, which are exercisable into 6,029,000 Ordinary Shares. The share options vest over a period of three years. The share options will be exercisable during the earlier of a period of four years from the vesting date, or 90 days from the end of employment date, in consideration for an exercise price ranging between $0.14 to $0.17 for each share option. Some of the share options include a cashless exercise mechanism. |
During 2019, the Company granted to
employees 2,723,500 restricted shares units (“RSUs”). The RSUs represent the right to receive Ordinary Shares at a future
time and vest over a period of three years.
During 2020, the Company granted to
employees, officers and consultants 6,930,000 non-tradable share options and RSUs, which are exercisable into 5,400,000 Ordinary Shares.
The share options vest over a period of three years. The share options will be exercisable during the earlier of a period of four years
from the vesting date, or 90 days from the end of employment date in consideration for an exercise price ranging between $0.70 to $4.12
for each share option. Some of the share options include a cashless exercise mechanism.
During 2021, the Company granted to employees, officers and consultants
10,967,162 non-tradable share options and RSUs, which are exercisable into 10,967,162 Ordinary Shares. The share options
vest over a period of three years. The share options will be exercisable during the earlier of a period of four years from the vesting
date, or 90 days from the end of employment date, in consideration for an exercise price ranging between $0 to $7.5 for each share option.
Some of the share options include a cashless exercise mechanism.
During 2020, the Company granted to
underwriters in public offerings in the U.S. an aggregate of 7,365,289 warrants, which are exercisable into 7,365,289 Ordinary Shares.
The exercise prices range between $0.875 to $9.375 for each warrant. The warrants are exercisable 6 months from the issuance date and
expire 5 years after the issuance date.
During 2021, the Company granted to underwriters in public offering
in the U.S. an aggregate of 1,137,500 warrants, which are exercisable into 1,137,500 Ordinary Shares. The exercise price is $11.875 for
each warrant. The warrants are exercisable 6 months from the issuance date and expire 4 years after the issuance date.
In July 2019, the Company issued non-tradable
share options to purchase 2,545,000 Ordinary Shares to directors of the Company at an exercise price of $0.15 per share. One third of
the share options will vest after one year from the grant date, and the remaining will vest in eight equal quarterly batches over a period
of two years. The share options will be exercisable during the earlier of a period of four years from the vesting date, or 90 days from
the end of employment date.
In July 2020, the Company issued non-tradable
share options to purchase 440,000 Ordinary Shares to directors of the Company at an exercise price of $0.70 per share. The share options
are vested over a period of no more than 3 years from the grant date. The share options will be exercisable during the earlier of a period
of four years from the vesting date, or 90 days from the end of employment date.
In December 2019, the Company signed
an agreement for options grants on January 2, 2020, to purchase 286,172 ADSs with Yoav Stern, the Company’s Chief Executive Officer
(“CEO”), with an exercise price of $2.86 per ADS. The vesting start date of the share options is January 2, 2020.
In March 2020, the Company issued
options to purchase 294,828 ADSs to Yoav Stern, the Company’s CEO, with an exercise price of $1.09 per ADS. 99.9% of the options
vest at the grant date, and the remaining options will vest 3 years after the grant date.
In August 2020, following the approval
of our shareholders, in consideration for his services as the Company’s CEO, and as appropriate incentive, the Company entered
a private placement of warrants (the “Stern Transaction”) with its CEO, Mr. Yoav Stern. In consideration of $150,000, the
Company issued to Mr. Stern warrants to purchase 6,880,402 ADSs of the Company. The warrants have an exercise price of $0.75 per ADS,
will vest over a period of two and a half years and will expire after 7 years. Simultaneously with the issuance of the warrants, Mr.
Stern forfeited options to purchase 581,000 ADSs, previously granted to him, as described above. In addition, as long as Mr. Stern is
employed by the Company or is a member of the Company’s board of directors, Mr. Stern may invest an additional amount up to $50,000
to buy Series B Warrants, in an amount equal to 10% of the Company’s fully diluted capital. The exercise price per ADS under the
Series B Warrants will be the average of the daily volume weighted average price of the ADSs for the 10 consecutive trading days ending
on the trading day that is immediately prior to the date of the applicable notice to purchase the Series B Warrants. The grant of the
warrants was treated as a modification of the terms of equity-classified share-based payment under IFRS 2. The fair value of the grant
was measured at the grant date in an amount of approximately $18.7 million and is recorded as share-based compensation expenses through
the vesting period. In the same general meeting that approved the Stern Transaction, the Company’s shareholders approved the amended
terms of compensation of the Company’s CEO. In February 2021, Mr. Stern exercised 30% of the series A warrants. In May 2021, Mr.
Stern invested $50,000 and received 27,742,103 Series B Warrants. The exercise price of the Series B Warrants is $6.16 per ADS.
In September 2020, the Company issued
1,500,000 warrants to purchase 1,500,000 ADSs to the Company’s director, Mr. Yaron Eitan, in consideration of $150,000. The warrants
have an exercise price of $2.25 per ADS, will vest over a period of three years and will expire after 7 years.
In May 2021, the Company issued non-tradable
share options to purchase 131,000 Ordinary Shares to directors of the Company at an exercise price ranging from $7.69 to $9.33 per share.
The share options are vested over a period 3 years from the grant date. The share options will be exercisable during the earlier of a
period of four years from the vesting date, or 90 days from the end of employment date.
C. | On April 22, 2021, the Group acquired 100%
of the shares and voting interests in DeepCube. After the acquisition, one of DeepCube’s founders continued to work at DeepCube,
in the role of Chief Technology Officer. In accordance with the terms of the acquisition agreement, 892,465 Ordinary Shares of the Company
will be issued to this founder, with a share price protection mechanism. The granting of these shares is subject to conditions related
to the continued employment of the founder. Hence these shares were not taken into account as part of the consideration for the business
combination. The fair value of those shares, with the share price protection mechanism, is estimated at $7,756 thousand, and will be
recognized as post-acquisition compensation cost. |
| In addition, as part of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of DeepCube (the acquiree’s awards) for 299,455 RSUs of the Company (the replacement awards). The acquiree’s awards were granted during the years 2018 to 2021 and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date and are subject to a 3-year vesting schedule. |
D. | On April 26, 2021, the Group acquired 100% of the shares and voting interests in NanoFabrica. In accordance with the terms of the acquisition agreement, 1,178,008 Ordinary Shares of the Company will be issued to NanoFabrica’s founders, with a share price protection mechanism. The granting of these shares is subject to conditions related to the continued employment of the founders. Hence these shares were not taken into account as part of the consideration for the business combination. The fair value of those shares, with the share price protection mechanism, is estimated at $10,941 thousand, and will be recognized as post-acquisition compensation cost. |
| In addition, as part of the acquisition agreement, the Group exchanged equity-settled share-based payment awards held by employees of NanoFabrica (the acquiree’s awards) for 76,928 RSUs of the Company (the replacement awards). The acquiree’s awards were granted during the years 2017 to 2020 and were generally subject to a 4-year vesting schedule. The replacement awards were granted on the acquisition date and are subject to a 3-year vesting schedule. |
E. |
The fair value of share options is measured
using the Black-Scholes formula or the Binomial pricing model. Measurement inputs include the share price on the measurement date, the
exercise price of the instrument, expected volatility (based on the weighted average volatility of the Company’s shares, over the
expected term of the options), expected term of the options (based on general option holder behavior and expected share price), expected
dividends, and the risk-free interest rate (based on government debentures). |
The following is the data used in determining
the fair value of the equity instruments granted in 2019 to 2021:
| |
19.A, C. and D- Consultants and Employees | | |
19.B- Directors and CEO | |
Number of equity instruments granted | |
| 26,861,174 | | |
| 36,744,405 | |
Fair value in the grant date (thousands USD) | |
| 86,989 | | |
| 21,056 | |
Range of share price (USD) | |
| 2.03-10.94 | | |
| 1.38-6.52 | |
Range of exercise price (USD) | |
| 0-11.88 | | |
| 0.7-9.33 | |
Range of expected share price volatility | |
| 58.54%-115.14% | | |
| 60.22%-125.95% | |
Range of estimated life (years) | |
| 4-9 | | |
| 4-7.08 | |
Range of weighted average of risk-free interest rate | |
| 0.36%-1.65% | | |
| 0.29%-1.33% | |
Expected dividend yield | |
| - | | |
| - | |
Outstanding as of December 31, 2021 | |
| 21,022,609 | | |
| 34,410,284 | |
Exercisable as of December 31, 2021 (from grants granted in 2019-2021) | |
| 7,337,388 | | |
| 30,631,203 | |
F. | The
number of share options and RSUs granted to employees and consultants, and included in Note
19.A are as follows: |
| |
2020 | | |
2021 | |
| |
Share option programs | | |
Share option programs | | |
Replacement awards | |
Outstanding at January 1 | |
| 521,138 | | |
| 12,603,828 | | |
| - | |
Granted during the year | |
| 14,295,289 | | |
| 11,850,252 | | |
| 254,409 | |
Exercised during the year | |
| (1,703,902 | ) | |
| (2,351,420 | ) | |
| - | |
Forfeited or expired during the year | |
| (508,697 | ) | |
| (1,334,460 | ) | |
| - | |
Outstanding at December 31 | |
| 12,603,828 | | |
| 20,768,200 | | |
| 254,409 | |
Exercisable as of December 31 | |
| 880,734 | | |
| 7,337,388 | | |
| - | |
The number of share options
granted to directors and the CEO included in Note 19.B are as follows:
| |
2020 | | |
2021 | |
Outstanding at January 1 | |
| 78,435 | | |
| 8,839,482 | |
Granted during the year | |
| 8,820,402 | | |
| 27,873,103 | |
Exercised during the year | |
| - | | |
| (2,147,454 | ) |
Forfeited or expired during the year | |
| (59,355 | ) | |
| (154,847 | ) |
Outstanding at December 31 | |
| 8,839,482 | | |
| 34,410,284 | |
Exercisable as of December 31 | |
| 8,679,113 | | |
| 30,631,203 | |
G. | The share-based payments expenses in 2021 were $29,782 thousand (in 2020: $20,502 thousand, in 2019: $445 thousand). In addition, the fair value of the warrants granted to underwriters in 2021 were $9,151 thousands and has been recorded as a deduction of share premium. |
Note 20 – Financial instruments
A. |
Risk management policy |
The actions of the Group expose it
to various financial risks, such as a market risk (including a currency risk, fair value risk regarding interest rate and price risk),
credit risk, liquidity risk and cash flow risk for the interest rate. The comprehensive risk-management policy of the Group focuses on
actions to limit the potential negative impacts on financial performance of the Group to a minimum. The Group does not typically use
derivative financial instruments in order to hedge exposures. Risk management is performed by the Group’s CEO in accordance with
the policy approved by the board of directors.
The Group does not have a significant
concentration of credit risks.
The cash of the Group is deposited
in Israeli, European and U.S. banking corporations. In the estimation of the Group’s management, the credit risk for these financial
instruments is low.
In the estimation of the Group’s
management, it does not have any material expected credit losses.
A currency risk is the risk of fluctuations
in a financial instrument, as a result of changes in the exchange rate of the foreign currency.
The following is the classification
and linkage terms of the financial instruments of the Group (in thousands USD):
| |
NIS | | |
USD | | |
Other (*) | | |
Total | |
December 31, 2021 | |
| | |
| | |
| | |
| |
Cash | |
| 72,190 | | |
| 753,320 | | |
| 28,116 | | |
| 853,626 | |
Bank deposits | |
| 80,457 | | |
| 421,512 | | |
| - | | |
| 501,969 | |
Restricted deposits | |
| 569 | | |
| 80 | | |
| - | | |
| 649 | |
Trade receivables (net) | |
| 36 | | |
| 130 | | |
| 3,256 | | |
| 3,422 | |
Other receivables | |
| 4,240 | | |
| 2,806 | | |
| 856 | | |
| 5,902 | |
| |
| 157,492 | | |
| 1,175,848 | | |
| 32,228 | | |
| 1,365,568 | |
Financial liabilities at amortized cost | |
| (10,392 | ) | |
| (3,623 | ) | |
| (7,096 | ) | |
| (21,111 | ) |
Total net financial assets (liabilities) | |
| 147,100 | | |
| 1,172,225 | | |
| 25,132 | | |
| 1,344,457 | |
| |
| | | |
| | | |
| | | |
| | |
December 31, 2020 | |
| | | |
| | | |
| | | |
| | |
Cash | |
| 1,057 | | |
| 584,205 | | |
| 76 | | |
| 585,338 | |
Bank deposits | |
| - | | |
| 85,596 | | |
| - | | |
| 85,596 | |
Restricted deposits | |
| 406 | | |
| 62 | | |
| - | | |
| 468 | |
Trade receivables | |
| 17 | | |
| 534 | | |
| 162 | | |
| 713 | |
Other receivables | |
| 410 | | |
| 19 | | |
| - | | |
| 429 | |
| |
| 1,890 | | |
| 670,416 | | |
| 238 | | |
| 672,544 | |
Financial liabilities at amortized cost | |
| 4,366 | | |
| 16,134 | | |
| 45 | | |
| 20,545 | |
Total net financial assets (liabilities) | |
| (2,476 | ) | |
| 654,282 | | |
| 193 | | |
| 651,999 | |
The following is a sensitivity
analysis of changes in the exchange rate of the NIS as of December 31, 2021:
| |
Profit (loss) from the change | |
| |
Thousands USD | |
Increase at a rate of 5% | |
| 7,355 | |
Increase at a rate of 10% | |
| 14,710 | |
Decrease at a rate of 5% | |
| (7,355 | ) |
Decrease at a rate of 10% | |
| (14,710 | ) |
D. |
Fair value of financial instruments |
The carrying amounts of certain financial assets
and liabilities, including cash and cash equivalents, trade receivables, other receivables, trade payables and other payables are the
same or proximate to their fair value.
The table below presents an analysis of financial
instruments measured at fair value through profit or loss using a valuation methodology in accordance with the fair value hierarchy levels
(for a definition of the various hierarchy levels, see Note 2.E regarding the basis of preparation of the financial statements).
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Financial liabilities: | |
| | |
| |
Liability in respect of warrants | |
| 11,986 | | |
| 3,697 | |
Share price protection for previews shareholders of subsidiary acquired | |
| - | | |
| 5,768 | |
Contingent consideration in business combination | |
| - | | |
| 8,792 | |
Total | |
| 11,986 | | |
| 18,257 | |
Presented under current liabilities | |
| - | | |
| 14,910 | |
Presented under non-current liabilities | |
| 11,986 | | |
| 3,347 | |
|
(1) |
Details regarding fair
value measurement at Level 2 |
The fair value of the warrants was measured using the Black-Scholes
model. The following inputs were used to determine the fair value:
Expected term of warrant (a) –
2.1-2.68 years (2020: 3.1-3.68 years).
Expected volatility (b) –138.5%-152.4%
(2020: 118.77%-128.1%).
Risk-free rate (c) – 0.69%-0.83%
(2020: 0.17%-0.24%). Expected dividend yield – 0%.
|
|
(a) |
Based on contractual
terms. |
|
|
(b) |
Based on the historical
volatility of the Company’s Ordinary Shares and ADSs. |
|
|
(c) |
Based on traded zero-coupon
U.S. treasury bonds with maturity equal to expected terms. |
|
|
Share price protection
for previews shareholders of subsidiary acquired |
During 2021, the Group acquired 100%
of the shares and voting interests in DeepCube. The consideration transferred includes a share price protection. For further details
on the share price protection, see Note 9.
The fair value of the share price protection
is determined by external valuers on a regular basis. The valuations are presented to the Company’s management. The fair value of
the share price protection was measured using a Monte Carlo simulation analysis. The following inputs were used to determine the fair
value at December 31, 2021 and at April 22, 2021 (the business combination’s date):
Share price protection period (a)
– 0.31 years (April 22nd: 1 year).
Expected volatility (b) – 56.89% (April 22nd: 196.01%).
Risk-free rate (c) – 0.09% (April
22nd: 0.02%).
Share price – 3.8 USD (April
22nd: 7.25 USD).
Expected dividend yield – 0%.
|
|
(a) |
Based on contractual
terms. |
|
|
(b) |
Based on the historical
volatility of the Company’s Ordinary Shares and ADSs. |
|
|
(c) |
Based on traded zero-coupon
U.S. treasury bonds with maturity equal to expected terms. |
| (2) | Details
regarding fair value measurement at Levels 3 |
|
|
Contingent consideration
in business combination |
During 2021, the Group acquired 100%
of the shares and voting interests in Essemtec. The consideration transferred includes earn-out cash considerations. For further details
on the earn-out payments, see Note 9.
The fair value of the contingent consideration
is determined by external valuers/internal valuations on a regular basis. The valuations are presented to the Company’s management.
The fair value of the earn-out cash payments was measured using a Monte Carlo simulation analysis. The following inputs were used to determine
the fair value:
| | Essemtec’s underlying EBITDA– CHF 2,100-2,500. Risk Neutral probability of EBITDA – 21% (positive), 31% (neutral), 47% (negative) |
| | Essemtec’s underlying gross profit – CHF 13,502-17,360. |
| | Risk neutral probability of gross profit – 1% (positive), 11% (neutral), 89% (negative). |
| | Risk free rate – (0.73%).
|
|
(3) |
Level 3 financial instruments
carried at fair value |
The table hereunder presents a reconciliation
from the opening balance to the closing balance of financial instruments carried at fair value level 3 of the fair value hierarchy:
| |
2021 | |
| |
Contingent consideration in business combinations | |
Balance as of January 1, 2021 | |
| - | |
Arising from business combinations (*) | |
| (10,159 | ) |
Changes in fair value (unrealized) | |
| 1,367 | |
Balance as of December 31, 2021 | |
| (8,792 | ) |
(*) | See Note 9.B regarding acquisition of NanoFabrica for information in
relation to the contingent consideration liability at the amount of $1,367 thousand arising from business combination and Note 20.F regarding
offsetting the liability against deposit. See Note 9 (3) B regarding acquisition of Essemtec for information in relation to the
contingent consideration liability at the amount of $8,792 thousand arising from business combination.
|
|
(4) |
Sensitivity analysis for share price |
If the share price had increased in 10%, the fair value of the
warrants would have increased in approximately $399 thousand. If the share price had decreased in 10%, the fair value of the warrants
would have decreased by approximately $393 thousand.
The table below presents the repayment
dates of the Group’s financial liabilities based on the contractual terms in undiscounted amounts:
| |
First year | | |
More than a year | | |
Total | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
December 31, 2021 | |
| | |
| | |
| |
Trade payables | |
| 2,833 | | |
| - | | |
| 2,833 | |
Other payables | |
| 11,322 | | |
| - | | |
| 11,322 | |
Financial derivatives | |
| 14,910 | | |
| 3,347 | | |
| 18,257 | |
Lease liabilities | |
| 2,086 | | |
| 3,336 | | |
| 5,422 | |
Other long-term liability | |
| 417 | | |
| 1,104 | | |
| 1,521 | |
Liability in respect of government grants | |
| 428 | | |
| 1,560 | | |
| 1,988 | |
| |
| 31,996 | | |
| 9,347 | | |
| 41,343 | |
December 31, 2020 | |
| | | |
| | | |
| | |
Trade payables | |
| 776 | | |
| - | | |
| 776 | |
Other payables | |
| 5,910 | | |
| - | | |
| 5,910 | |
Lease liabilities | |
| - | | |
| 2,618 | | |
| 2,618 | |
Liability in respect of government grants | |
| - | | |
| 850 | | |
| 850 | |
| |
| 6,686 | | |
| 3,468 | | |
| 10,154 | |
F. | Offset
of financial assets and financial liabilities |
As part of the acquisition of NanoFabrica,
the Company has recognized a contingent liability to pay NanoFabrica’s founders earn-out payments, depending on certain targets,
as described in Note 9.B.(2). As of December 31, 2021, the contingent consideration is reduced to zero, due to lack of expectation in
reaching the target of paying the liability.
Against this liability, the Company has deposited in escrow an amount
of approximately $3,362 thousand, designated for the repayment of this contingent liability. This arrangement meets the criteria
for offsetting in the statement of financial position, because the Group has a legally enforceable right to offset recognized amounts,
and the intention to settle the asset and the liability on a net basis.
As of December 31, 2021, the net asset is measured to be $3,362 thousand,
and is included in other receivables in the statement of financial position.
Note 21 – Leases
A. Information regarding material lease agreements
|
a. |
The Group leases vehicles for three-year periods from several different leasing companies and from time to time changes the number of leased vehicles according to its current needs. The leased vehicles are identified by means of license numbers and the vehicle’s registration, with the leasing companies not being able to switch vehicles, other than in cases of deficiencies. The leased vehicles are used by the Group’s headquarter staff, marketing and sales persons and other employees whose employment agreements include an obligation of the Group to put a vehicle at their disposal. The Group accounted for the arrangement between it and the leasing companies as a lease arrangement in the scope of IFRS 16 “Leases” and for the arrangement between it and its employees as an arrangement in the scope of IAS 19, “Employee Benefits”. The agreements with the leasing companies do not contain extension and/or termination options that the Group is reasonably certain to exercise. |
A lease liability and right-of-use asset in the amount of $324 thousand
have been recognized in the statement of financial position as at December 31, 2021 in respect of new leases of vehicles.
| b. | The Group leases offices in Ness- Ziona from Africa-Israel for a period of five years under a few different contracts for four different floors used for offices, labs and manufacturing facilities, at the same building. The contractual periods of the aforesaid lease agreements end in August 2021, December 2023 and August 2024. The Group has an option to extend two of the lease agreements for an additional five years for an additional monthly fee (10% increase). The Company extended the lease agreement ended in August 2021 for an additional five years. The Group also leases offices in Hong-Kong. The contractual period of the aforesaid lease agreement ended in March 2024. The Group also leases offices in the U.S. for a contractual period of three years, which ends in August 2023. A lease liability and right-of-use asset of $1,595 thousand have been recognized in the statement of financial position as at December 31, 2021 in respect of new leases of offices, in order to expand the current headquarters of the Group. |
| | |
| c. | A lease liability and right-of-use asset of $995 thousand have been recognized as part of the consolidation of Essemtec and DeepCube, which is mostly allocated to DeepCube offices in Tel-Aviv. For more information, see Note 9.B. |
B. Right-of-use assets:
| |
Buildings | | |
Vehicles | | |
Total | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Balance as at January 1, 2020 | |
| 2,506 | | |
| 167 | | |
| 2,673 | |
| |
| | | |
| | | |
| | |
Depreciation | |
| 740 | | |
| 116 | | |
| 856 | |
Disposals | |
| - | | |
| 69 | | |
| 69 | |
Additions | |
| 1,312 | | |
| 109 | | |
| 1,421 | |
Balance as at December 31, 2020 | |
| 3,078 | | |
| 91 | | |
| 3,169 | |
Acquisition through business combinations | |
| 948 | | |
| 47 | | |
| 995 | |
Depreciation | |
| 1,359 | | |
| (15 | ) | |
| 1,344 | |
Disposals | |
| 70 | | |
| 178 | | |
| 248 | |
Additions | |
| 1,595 | | |
| 324 | | |
| 1,919 | |
Balance as at December 31, 2021 | |
| 4,192 | | |
| 299 | | |
| 4,491 | |
C. Lease liabilities
Maturity analysis of the Group’s lease
liabilities:
| |
December 31, 2020 | | |
December 31, 2021 | |
| |
Thousands USD | | |
Thousands USD | |
Less than one year | |
| 1,148 | | |
| 2,086 | |
One to five years | |
| 2,618 | | |
| 3,336 | |
Total | |
| 3,766 | | |
| 5,422 | |
During the years ended December 31, 2021 and 2020, the Company paid
a total of $1,494 thousand and $1,118 thousand, respectively, for lease payments.
Note 22 – Other long-term liabilities
Bank loans received by Essemtec.
Note 23 – Transactions and balances
with related parties
A. |
Balances with related
parties |
| |
December 31, | |
| |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | |
Other payables | |
| 207 | | |
| 330 | |
B. |
Shareholders and other
related parties benefits |
| |
Year ended on December 31, | |
| |
2019 | | |
2020 | | |
2021 | |
| |
Thousands USD | | |
Thousands USD | | |
Thousands USD | |
Salaries and related expenses- related parties employed by the Group | |
| 1,047 | | |
| 18,252 | | |
| 13,629 | (*) |
Number of related parties | |
| 4 | | |
| 5 | | |
| 7 | |
Compensation for directors not employed by the Group | |
| 218 | | |
| 2,204 | | |
| 3,951 | |
Number of directors | |
| 6 | | |
| 6 | | |
| 8 | |
(*) | Includes share-based payment expenses of $10,925,000. |
C. |
On November 12, 2019, the
board of directors of the Company approved an arms-length transaction in which Mr. Ofir Baharav, the former chairman of the board
of directors of the Company, has a personal interest, for an administrative services agreement between Nano Dimension USA Inc. and
Breezer Holdings LLC, whereby the Company will lease space and will use logistics services for the Company’s office in Boca
Raton, Florida, starting on February 1, 2020. In September 2020, the Company ceased this transaction. |
D. |
On December 5, 2019, the
Company announced the appointment of Yoav Stern as CEO, effective January 2, 2020. See note 19 regarding options granted to the
CEO. |
E. | On July 7, 2020, following approval of the general meeting of the Company’s shareholders, the Company granted options to purchase 1,000,000 ADSs to officer and additional 440,000 ADSs and directors of the Company at an exercise price of $0.70 per ADS. |
F. | On July 7, 2020, the Company issued warrants to the Company’s CEO, Mr. Yoav Stern. See note 19.B. In February 2021, Mr. Stern exercised 30% of the series A warrants. In May 2021, Mr. Stern invested $50,000 and received 27,742,103 Series B Warrants. The exercise price of the Series B Warrants is $6.16 per ADS. |
G. |
In August 2020, the Company issued warrants to the Company’s director, Mr. Yaron Eitan, see Note 19.B. |
H. | On April 22, 2021, the Company acquired 100% of the shares and voting interests in DeepCube. The founders of DeepCube are Mr. Eli David and Mr. Yaron Eitan (through his holding in Anaknu LLC (“Anaknu”), of which he is one of the shareholders). Mr. Eli David and Mr. Yaron Eitan are directors of the Company. Mr. Eli David also continued to work at DeepCube after the acquisition, in the role of Chief Technology Officer. For further details on the transaction, see Note 9.B. For the sale of their holdings in the company, the founders received the following consideration (Mr. Eli David and Anaknu in aggregate): |
| 1) | Cash payments - $19.42 million. |
| 2) | Payment in equity instruments to Anaknu 1,339 thousand Ordinary Shares
in the fair value of $11,682 thousand. Those shares are entitled to a share price protection mechanism for a period of 12 months, whose
fair value at the transaction date was $9,551 thousand, and as of December 31, 2021, was $5,768 thousand. |
| 3) | Post-acquisition compensation cost 892 thousand Ordinary Shares, with a share price protection mechanism for a period of 12 to 36 months, subject to conditions related to the continued employment of Mr. Eli David. These shares were not taken into account as part of the consideration for the business combination. The fair value of those shares, with the share price protection mechanism, was estimated at the transaction date at $7,756 thousand. For the year ended December 31, 2021, $3,286 thousand of the share-based compensation was recognized as share based payment expenses. |
I. | In November 2021, the Company acquired 100% of the shares and voting interests of Essemtec. In addition, the Group acquired, through Nano Dimension Swiss, from a third party, the property from which Essemtec facilities are operated. Hence, as of the end of November 2021, Essemtec rents its offices from Nano Dimension Swiss under terms similar to those that Essemtec rented the facilities from the third party that owned the facilities before this acquisition. |
J. | On May 25, 2021, following approval of the general meeting of the Company’s shareholders, the Company granted options to purchase 131,000 ADSs to directors of the Company at an exercise price ranging from $7.69 to $9.33 per ADS. |
K. | In May 2021, the Company granted options to purchase 3,000,000 ADSs to officers of the Company at an exercise price of $6 per ADS. In addition, the Company granted options to purchase 1,000,000 ADSs to an officer of the Company, subject to certain change-of-control events, which have not occurred during the reporting period. |
Note 24 – Events after the reporting date
A. | After the reporting date, in January 2022, the Company acquired 100%
of the shares and voting interests in Global Inkjet Systems Ltd. (“GIS”), a company incorporated under the laws of England
& Wales. GIS is a leading developer and supplier of high-performance control electronics, software, and ink delivery systems. Taking
control of GIS will enable technology synergies with the Group’s existing technology, and a financial value through a business growth
using the Group’s existing resources. |
| |
| The consideration for GIS will be paid fully in cash, according to the following structure: |
| (1) | Closing consideration – Around £13,500 thousand (as for the closing date, approximately $18,225 thousand), adjusted post-closing upwards or downwards to reflect a cash-free debt free basis on the closing date, with respect to an agreed working capital level. The total closing consideration was estimated at around £17,000 thousand (as for the closing date, approximately $22,950 thousand). |
| | |
| (2) | Deferred consideration – £1,000 thousand (as for the closing date, approximately $1,350 thousand), due on April 1st, 2024, to all sellers in an unconditional manner, except to key management team, for whom payment is due only if they stay with the company until such date. |
| | |
| (3) | Earn-out cash consideration – Contingent Consideration – Up to £7,000 thousand (as for the closing date, approximately $9,450 thousand), depending on certain targets (“Earn-Out Consideration”) as follows: |
|
(i) |
EBITDA based earn-out –
£1,000 thousand (as for the closing date, approximately $1,350 thousand), in the event that GIS generates, during the fiscal
year ending on March 31, 2022, EBITDA of at least £396 thousand (as for the closing date, approximately $535 thousand). |
|
|
|
|
|
For every 1% below EBITDA of £396 thousand, EBITDA based earn-out will be reduced by 2%, going down to 0 if EBITDA will be £198. |
| (ii) | Gross profit based earn-out – £3,000 thousand (as for the closing date, approximately $4,050 thousand), in the event that GIS generates, during the fiscal year ending on March 31, 2023, gross profit of at least £6,962 thousand (as for the closing date, approximately $9,400 thousand). |
| | |
| | For every 1% below gross profit of £6,962 thousand, gross profit based earn-out will be reduced by 5%, going down to 0 if gross profit will be £5,570. |
| | |
| (iii) | Revenues based earn-out – £3,000 thousand (as for the closing date, approximately $4,050 thousand), in the event that GIS generates, during the fiscal year ending on March 31, 2023, revenues of at least £9,537 thousand (as for the closing date, approximately $12,875 thousand). |
| | |
| | For every 1% below gross profit of £9,537 thousand, revenues based earn-out will be reduced by 10%, going down to 0 if revenues will be £8,584. |
| | |
| | The Group has not yet completed the measurement of the fair value of the consideration transferred in the business combination, the fair value of the identifiable assets acquired and the measurement of the goodwill that may be recognized as a result of the business combination. |
B. | After the reporting date, in January 2022, the Group granted to employees 5,507,000 options and RSUs. The options and RSUs represent the right to receive Ordinary Shares at a future time and vest over a period of three to four years. |
C. | After the reporting date, in March 2022, the Group granted to employees 1,207,000 options and RSUs. The options and RSUs represent the right to receive Ordinary Shares at a future time and vest over a period of three to four years. |
F-60
International Financial Reporting Standards
3427683
Following the approval of its shareholders on April 16, 2020, the Board of Directors of the Company approved a 1-for-50 reverse split of the Company’s share capital. The implementation of the reverse split resulted in a reduction in the issued and outstanding ordinary shares, and the increase of the par value per ordinary share from NIS 0.10 to NIS 5.00 per ordinary share. Concurrently with the reverse split, the Company effected a corresponding change in the ratio of ordinary shares to each of the Company’s ADSs, such that its ratio of ADSs to ordinary shares has changed from one (1) ADS representing fifty (50) ordinary shares to a new ratio of one (1) ADS representing one (1) ordinary share. The effective date of this reverse split was June 29, 2020. All options and warrants of the Company outstanding immediately prior to the reverse split were appropriately adjusted by dividing the number of ordinary shares into which the options and warrants are exercisable by 50 and multiplying the exercise price thereof by 50, as a result of the reverse split. All the figures in these financial statements relating to share capital were appropriately adjusted to reflect the above-mentioned reverse split.
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