(Mark One)
NAYAX LTD.
Consolidated Financial Statements
2022 Annual Report
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm
(PCAOB ID 1309)
F- 3
Consolidated financial statements – in thousands of US Dollars:
Consolidated statements of financial position
F - 4-F - 5
Consolidated statements of profit or loss
F - 6
Consolidated statements of comprehensive income (loss)
F - 7
Consolidated statements of changes in equity
F - 8
Consolidated statements of cash flows
F - 9-F - 10
Notes to the consolidated financial statements
F - 11-F - 70
F - 2
F - 3
December 31
2022
2021
(Audited)
U.S. dollars in thousands
F - 4
Total equity attributed to shareholders of the company
The accompanying notes are an integral part of these financial statements.
F - 5
F - 9
NOTE 1 - GENERAL
a. Background
a. Nayax Ltd. (hereafter – the “Company”) was incorporated in January 2005. The Company provides processing and software as a service (SaaS) business operations solutions and services via a global platform. The Company is marketing its POS devices and SaaS solutions it developed in more than 60 countries worldwide (including Israel) through subsidiaries (the Company and the subsidiaries, hereafter – the “Group”) and through local distributors.
b. On May 13, 2021, the Company completed an initial public offering (IPO) on the Tel Aviv stock exchange (TASE)in which it sold 4.4million ordinary shares of NIS 0.001par value for a gross amount, before issuance costs, of $141.6million and $132.5million, net of issuance costs. The IPO was a non-uniform offering, as this term is defined by Israeli Securities Regulations (Manner of Offering Securities to the Public), 2007, to institutional investors in Israel and outside of Israel.
c. On September 21, 2022, Company's ordinary shares were listed on the Nasdaq Global Select Market under the symbol NYAX. As of that date, the company is dual listed on Nasdaq and as well as on the Tel Aviv Stock Exchange.
d. In connection with Company's May 2021 IPO on the TASE, the expenses incurred in the profit or loss report for the year ended December 31, 2021, other than underwriter discount and commissions, were $1,879thousand and include bonuses in respect of the IPO to a number of its employees for a total of $979thousand. In connection with Company's September 2022 listing on Nasdaq, the expenses incurred in the profit or loss report for the year ended December 31, 2022 are $1,790thousand.
e. On September 11, 2022 Company's shareholders approved a reverse share split in a ratio of 10:1. All issued and outstanding Company's Ordinary Shares have been retroactively adjusted to reflect the reverse share split for all periods presented in these financial statements prior the approval.
b. Current geopolitical conflict between Russia and Ukraine
On February 24, 2022, following Russia's invasion of Ukraine, a military conflict broke out in eastern Europe and dragged a political tension between countries from the European Union and United States to Russia.
Although this conflict caused various disruptions in a global scale, in many aspects, the risks inherent in conducting business in these countries are highly remote since the Company has no revenue generated in the countries involved directly or indirectly at the Russia-Ukraine conflict and the Company has a relatively small scale of business research and development conducted only in Ukraine. The operation of research and development in Ukraine considered to be immaterial in comparison to entire Company's research and development operations and as of the date of these financial statements there was no impact noted.
As of the date of these financial statements, the Company has no operating subsidiary which are organized under the laws of the Russian Federation and has no subsidiaries which are incorporated in other countries which are subject to economic sanctions on the Russian Federation. Neither of the Company's controlling shareholder nor the Company's principal operating subsidiary or other subsidiaries are targets of sanctions.
NAYAXLTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (continued):
c. Impact of COVID-19 (continued):
a) General
In December 2019, the COVID-19 pandemic broke out in China, which quickly spread world wide in early 2020, causing global economic uncertainty and distress due to mandatory shut-downs of many businesses, slower manufacturing and disruption of national and international shipments and travel (hereinafter: "COVID"), while on the other hand, significantly increasing global demand for different electronic products. This trend coupled with the slowdown in manufacturing, created a global shortage for the components required to make many electronic products.
As part of the efforts to cope with COVID, most countries worldwide imposed certain restrictions on their populations, including limits on movement, gathering in the public space; caps on the numbers of employees allowed in workplaces and more. Those restrictions have had a direct impact on many industries, with some of them experiencing complete halt.
Such global shortage in the availability of components started to adversely affect the gross profit rate from selling the hardware since third quarter of 2021, due to an increase in the price of many components used by the Company for manufacturing its hardware products, some of them significantly.
b) Efficiency plans
In response to the COVID crisis in Israel and worldwide, the Company implemented two efficiency plans for coping with the situation. The first plan started shortly after the outbreak in March 2020. This plan mostly involved a 15%-20% reduction in monthly hours of employees and sent 10% of its staff in Israel on unpaid leave. This plan ended in July 2020.
The second efficiency plan implemented by the Company began in October 2020. The plan mostly involved a reduction of up to 10% of Israeli-based employees' salaries. This plan ended in January 2021.
For the avoidance of doubt, all employees sent on unpaid leave returned to normal work, and all payroll reductions and/or hour cuts were eliminated.
c) Government support
• Government guarantee loans
In May 2020, the Company received from an Israeli bank a 15million NIS ($4.25million) long-term loan that is backed by a government guarantee, as part of the government assistance plan due to COVID. For more information on the terms of the loan, see note 13(b)(2). For list of liens to secure the loan, see note 25(a)(3).
Additionally, support was received from governments in the domicile of a number of subsidiaries:
• The Australian government – an employment encouragement grant of AU$222thousand (US$170thousand)) was received during the year ended December 31, 2020
• The US government - Forgivable loans totaling $483thousand were received during the year ended December 31, 2020 and forgiven during the year ended December 31, 2021.
Accordingly, these loans were derecognized against a decrease in the payroll expenses in respect of which the loans were received.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a. Basis of presentation:
The financial statements of the Group as of December 31, 2022 and 2021 and for each of the three years ended December 31, 2022, are in compliance with International Financial Reporting Standard (hereafter – “IFRS”), as issued by the International Accounting Standards Board (hereafter – “IASB”) were approved for issue by the Board of Directors (the "Board") of the Company on February 28, 2023.
In connection with the presentation of these financial statements, the following is stated:
1) The principal accounting policies set out below have been consistently applied to all periods presented, unless otherwise stated.
2) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Group’s management to exercise its judgment in the process of applying the Group’s accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3. Actual results may differ materially from estimates and assumptions used by the Group's management.
3) The Group's operating cycle is 12 months.
b. Consolidated financial statements
1) Subsidiaries and business combinations
Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Company. They are deconsolidated from the date that control ceases.
When assessing control, the Company considers its potential voting rights, as well as such rights held by other parties to determine whether it has power over an investee. Potential voting rights are rights to obtain voting rights of an investee, such as those arising from convertible instruments or options, including forward contracts. Those potential voting rights are considered only if the rights are substantive.
Business combinations are accounted for using the acquisition method. The cost of acquisition is measured at the fair value of the consideration transferred on acquisition date plus non-controlling interests in the acquired entity. In each business combination, the Group determines whether to recognize non-controlling interests in the acquired entity at fair value on acquisition date or proportionally to the share of non-controlling interests at the fair value of net identifiable assets of the acquired entity.
Goodwill represents the excess of the acquisition consideration and the amount of non-controlling interests and acquisition-date fair value of any previous equity interest in the acquired entity over the net identifiable assets acquired and liabilities assumed. If the resulting amount is negative, the acquirer recognizes the resulting gain on the acquisition date.
Intra-group transactions and balances, including revenues, expenses and dividends in respect of transactions between Group entities were eliminated. Gains and losses on intra-group transactions that are recognized as assets (such as inventory and property and equipment) are also eliminated.
Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
b. Consolidated financial statements (continued):
2) Transactions with non-controlling interests' owners which do not result in loss of control
Transactions with non-controlling interests owners which do not result in loss of control are accounted for as transactions with shareholders. In such transactions, the difference between the fair value of any consideration paid or received and the amount in which the non-controlling interests are adjusted to reflect the changes in their proportional interest in a subsidiary are recognized directly in equity and attributed to the owners of the Company.
3) Associates
An associate is an entity over which the Group exercises significant influence, but not control. The investment in an associate is accounted for by the equity method.
4) The equity method
According to the equity method of accounting, the investment is initially recognized at cost and its carrying amount varies such that the Group recognizes its share of the associate's earnings or losses from acquisition date.
Goodwill relating to associates is included in the investment’s carrying amount and tested for impairment as part of the entire investment.
The Group’s share of post-acquisition profit or loss is recognized in the statements of profit or loss , and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equal or exceeds its interest in the associate (including any other unsecured long term receivables), the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there are any indications that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment (the higher of the value in use and the fair value less costs to sell) and its carrying amount and recognizes the impairment amount in the income statement.
c. Translation of foreign currency balances and transactions:
1) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (hereafter - the “Functional Currency”). When determining the functional currency of Group companies and whether their functional currency is identical to that of the Company, the materiality of the foreign operations as an extension of the reporting entity was taken into account.
The consolidated financial statements are presented in US Dollars which is the functional and presentation currency of the Company and Group entities, except Nayax Retail and Weezmo, whose functional currency is the NIS.
c. Translation of foreign currency balances and transactions (continued):
Set forth below are the exchange rates of the US Dollar against the NIS, Euro, Pound Sterling and Australian Dollar as of December 31, 2022, 2021 and 2020:
2) Transactions and balances
Transactions made in a currency which is different from the functional currency ("foreign currency") are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or revaluation, if the items are revalued. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the end-of-year exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit or loss. Gains and losses from changes in exchange rates are presented in the statement of profit or loss among "finance expenses, net".
3) Translation of financial statements of Group entities:
The results and financial position of Group entities, whose functional currency is different than the presentation currency, are translated into the presentation currency as follows:
(a)
Assets and liabilities for each statement of financial position statement presented are translated at the closing rate at the date of the statement of financial position;
(b)
Income and expenses for each statement of profit or loss are translated at average exchange rates for the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
(c)
All resulting exchange differences are recognized in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations whose functional currency is different than that of the Company are recognized in other comprehensive income. When a foreign operation is fully disposed of, exchange differences that were recorded in other comprehensive income are recognized in the statement of profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising from acquisition of foreign operations, are accounted for as assets and liabilities of the foreign operations and translated at closing rate. Exchange differences arising from the translation as aforesaid are carried to other comprehensive income.
d. Cash and cash equivalents
Cash and cash equivalents include cash on hand and short-term bank deposits, which are not restricted by liens, with original maturities of three months or less. For additional information about the restricted cash, see note 8 below.
e. Inventory
Finished goods inventories purchased by the Company are stated at the lower of cost and net realizable value. Cost is determined on a moving average basis. The cost of inventory includes all acquisition costs, conversion costs and other direct costs incurred in bringing the inventory to its current location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
The Group periodically reviews the condition and age of the inventory, and where necessary makes impairment provisions.
f. Property and equipment
Property, plant and equipment items are initially recognized at acquisition cost. Subsequent costs are included as incurred in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. When a part of a property, plant and equipment item is replaced, its carrying amount is derecognized.
All other repair and maintenance costs are charged to the statement of profit or loss during the financial period in which they are incurred.Depreciation on assets is calculated using the straight-line method to depreciate their cost to their residual value over their estimated useful lives, as follows:
Leasehold improvements are depreciated by the straight-line method over the earlier of the term of the lease or the estimated useful life of the improvements.
The assets’ residual values, their useful lives and the depreciation method are reviewed and adjusted, if appropriate, at least once a year.
g. Intangible assets:
1) Research and development
Intangible assets arising from development projects or from internally-developed new products, development of internally-used operational systems and integration of external systems with the Group’s existing systems, are recognized as intangible assets, subject to the following conditions being met:
a)
The technical feasibility of completing the intangible asset so that it will be available for use exists;
b)
Management intends to complete the intangible asset and use or sell it;
c)
There is an ability to use or sell the intangible asset;
d)
The way the intangible asset will generate probable future economic benefits is demonstrable;
e)
The technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and
f)
The expenditure attributable to the intangible asset during its development can be reliably measured.
g. Intangible assets (continued):
1) Research and development (continued):
The Group monitors all its development projects to identify costs for recognition as an expense in profit or loss and costs for capitalization as an asset in the statement of financial position by making a distinction between:
(1)
Investments in new products (hardware and software), as opposed to expenses aimed at maintaining normal functionality;
(2)
Investment in integrations and opening markets; and
(3)
Investment in software for own use.
The Group reviews, in relation to each investment, whether it is designed to substantially enhance the functionality in a way that would increase the economic benefit flowing to the Group (i.e. higher revenue and/or cost savings).
Investments designed to enhance functionality in a way that would increase the economic benefit flowing to the Group are capitalized as an asset and presented within "goodwill and intangible assets, net" in the statement of financial position (subject to satisfying of the terms as instructed in IAS38 and listed in an extract above).
The main types of costs that are capitalized as an intangible asset as of December 31, 2022 and 2021 are:
Payroll costs and related expenses, which are attributed by the Group to the different projects that meet the conditions for capitalization;
Cost of subcontractors, which are specifically identified to projects that meet the conditions for capitalization.
Share-based payment expenses contributed apportionately with payroll and related suppliers expenses arise from development.
Research costs are expensed as incurred to the "research and development expenses" item in the statement of profit or loss. Research costs of the Group in the reported periods are immaterial to its financial statements.
Development costs designed to maintain normal functionality or insignificantly enhance functionality, as well as development costs that are not identified with a project that can be capitalized, are expensed as incurred to "research and development expenses" in profit or loss.
Research and development expenses that were previously expensed to profit and loss are not recognized as intangible assets in subsequent reporting periods. Development costs presented as intangible assets are amortized from the point in time in which the asset is available for use, on a straight-line basis, over their useful lives (5 years).
Development assets which have not yet reached the point in which the asset is available for use are tested for impairment every year.
2) Distribution rights
Distribution rights purchased as part of a business combination are recognized at fair value on the acquisition date. Separately purchased distribution rights are recognized at cost, plus directly attributable acquisition costs. The distribution rights have a definite useful life (20 years), and they are presented net of accumulated amortization on a straight-line basis.
3) Customer relationships
Customer relationships purchased as part of a business combination are recognized at fair value on the acquisition date. Separately purchased customer relationships are recognized at cost, plus directly attributable acquisition costs. The customer relationships have a definite useful life (10 years), and they are presented net of accumulated amortization on a straight-line basis.
4) Technology
Technology purchased as part of a business combination is recognized at fair value on the acquisition date. Technology has a definite useful life (5-7 years) and is presented net of accumulated amortization on a straight-line basis.
5) Goodwill
Goodwill arising from the acquisition of a subsidiary represents the overall excess of: (1) the consideration transferred; (2) the amount of any non-controlling interests in the acquiree; (3) in a business combination achieved in stages, also the existing fair value as of the acquisition date of the Group’s previously held equity interest in the acquiree, over the net amount as of the acquisition date, of the identifiable assets acquired and the acquiree’s liabilities and contingent liabilities assumed.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated, as from the acquisition date to each of the cash generating units or groups of cash generating units of the Group that are expected to benefit from the synergies of the combination.
Impairment testing of a cash generating unit to which goodwill was allocated is undertaken annually and whenever there is any indication of impairment of the cash generating unit, by comparing the carrying amount of the cash generating unit, including the goodwill, to its recoverable amount, which is the higher of its value in use and the fair value less costs to sell.
Any impairment loss is first allocated to write-down the carrying amount of any goodwill allocated to the cash generating unit, and afterwards to the remaining assets of the cash generating unit, on a proportionate basis using the carrying amounts of each asset of the cash generating unit.
Any impairment loss on goodwill is recognized immediately in profit or loss and is not subsequently reversed.
h. Impairment of non-financial assets
Intangible assets that have an indefinite useful life, such as goodwill, as well as intangible assets that are not yet available for use, are not amortized and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that such assets might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less selling costs and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels of identifiable cash flows (cash-generating units). Non-monetary assets, other than goodwill, that were impaired are reviewed for possible reversal of the impairment recognized in respect thereof at each statement of financial position date.
i. Leases:
The Group accounts for a contract as a lease contract if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration:
1) The Group as a lessee:
In transactions in which the Group acts as lessee, the Group recognizes a right-of-use asset against a lease liability on the commencement date of the lease contract, except in the case of lease transactions with a lease term of up to 12 months and lease transactions for which the underlying asset is of low value; in those cases, the Group recognizes the lease payments on a straight-line basis as an operating cost over the lease period.
As part of the measurement of the lease liability, the Group does not separate between lease and non-lease components, such as: management services, maintenance services and more, which are included in the relevant transaction.
The lease liability on the commencement date includes outstanding lease payments discounted by the interest rate implicit in the lease, if that rate can be readily determined, or by the lessee’s incremental borrowing rate. The Group used the incremental borrowing rate, which is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Subsequent to the commencement date, the Company measures the lease liability using the effective interest method.
The right-of-use asset on the commencement date is measured based on the lease liability plus lease payments paid on or before inception date plus initial direct costs and less lease incentives received. The right-of-use asset is measured using the cost model and depreciated over the shorter of its useful life and the lease period. When there are indications for impairment, the Group tests the right-of-use asset for impairment in accordance with the provisions of IAS 36.
2) The Group as a lessor:
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Group regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of IFRS 9, recognizing an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest income is calculated with reference to their amortized cost (i.e. after a deduction of the loss allowance).
3) Subleases
In transactions where the Group leases an underlying asset (a head lease) and sub-leases that underlying asset to a third party (sublease), the Group checks whether the risks and rewards relevant to the right-of-use asset were transferred by, among other things, checking the sub-lease period in reference to the useful life of the right-of-use asset arising from the head lease.
i. Leases(continued):
3) Subleases(continued):
When substantially all the risks and rewards incidental to ownership of the right-of-use asset were transferred, the Group accounts for the sub-lease as a finance lease. At sublease commencement date, the leased asset is derecognized and a “receivable in respect of finance lease” is recognized in an amount equal to the present value of the lease proceeds discounted by the lease’s implicit interest rate. Any difference between the balance of the leased asset prior to derecognition and the receivable balance in respect of the lease is recognized in profit and loss.
j. Government grants
Government grants are recognized at fair value when there is reasonable assurance that the grant will be received and that the Group will meet all the terms attached thereto. A forgivable loan from a government is treated as a government grant when there is reasonable assurance that the Group will meet the terms for forgiveness of the loan.
Government grants relating to costs are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants received as participation in research and development carried out by the Group fall into the scope of "forgivable loans" as defined in IAS 20 – “Accounting for Government Grants and Disclosure of Government Assistance”.
In cases where on the date on which the entitlement to receive the grant is established (hereafter – the “entitlement date”) the Group’s management concludes that there is no reasonable assurance that the grant to which the Group is entitled will not be repaid, the Group recognizes, on that date, a financial liability accounted for in accordance with the provisions applicable under IFRS 9 to financial liabilities measured using the effective interest method.
In cases where the Group’s management concludes that there is reasonable assurance that the grant received will not be repaid, or if it is not expected that the Company will be required to pay royalties in respect thereof, the grant is carried, at that date, to profit or loss as a reduction of research and development expenses.
If in subsequent periods the Group's management concludes for the first time that the grant will be repaid or that royalties will be paid by the Group in respect thereof, the Group recognizes a financial liability on that date, against profit or loss as an increase in research and development expenses. This liability will be measured at amortized cost in accordance with the provisions of IFRS 9 using the effective interest method. Amounts payable on account of repayment of the grant or as royalties are recognized as the settlement of the liability.
k. Financial instruments:
Classification of financial assets
The Group classifies its financial assets into the following categories: financial assets at fair value through profit or loss and financial assets at amortized cost. The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows in respect thereof.
k. Financial instruments (continued):
Classification of financial assets (continued):
Financial assets at amortized cost are financial assets held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and their contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at fair value through profit or loss are financial assets not classified into one of the categories of financial assets at amortized cost or financial assets at fair value through other comprehensive income.
These assets are classified as current assets, except if they are expected to be settled within more than 12 months after the statement of financial position date, in which case they are classified as non-current assets. The Group’s financial assets at amortized cost are included in the following items: “receivables in respect of processing activity”, “trade receivable”, “other current assets”, “cash and cash equivalents”, “short- term bank deposits”, “restricted cash transferableto customers in respect of processing activity”, “long-term receivables” and “long-term bank deposits” in the statement of financial position.
Recognition and measurement
Ordinary course purchase and sales of financial assets are recorded in the Group’s books of accounts on the date on which the asset is delivered to the Group or by the Group.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership associated with these assets. Financial assets at fair value through profit or loss are presented in subsequent periods at fair value. In subsequent periods, financial assets at amortized cost are measured based on the effective interest method.
Financial assets measured at fair value through profit or loss are initially recognized at fair value and transaction costs are carried to profit or loss. Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in profit or loss under “finance expenses, net”, in the period in which they are incurred.
Impairment of financial assets measured at amortized cost
The Group recognizes a provision for loss in respect of expected credit losses on debt instruments measured at amortized cost, lease receivables and assets in respect of contracts with customers that arise from transactions within the scope of IFRS 15.
At each statement of financial position date, the Group assesses whether the credit risk of the financial asset has increased significantly since it was initially recognized, whether assessed on an individual or collective basis. For that purpose, the Group compares the risk of default at the reporting date with the risk of default on the initial recognition date, taking into account all reasonable and supportable information that is available, including forward-looking information.
For financial assets that experience a significant increase in their credit risk since initial recognition, the Group measures the impairment for loss at the amount of expected credit losses over the entire life of the instrument. Otherwise, the provision for loss is measured at the expected credit loss in a 12-month period.
However, the Group measures the provision for loss at an amount equal to expected credit losses over the instrument’s life for trade receivables or assets in respect of contract with customers arising from transactions within the scope of IFRS 15, and for receivables in respect of lease, stemming from transactions within the scope of IFRS 16.
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position, only when there is an immediate legally enforceable right (which is not conditional upon the occurrence of a future event) to offset the recognized amounts under all of the following circumstances: in the ordinary course of business, in the event credit default, insolvency or bankruptcy of the entity and of all counterparties, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or at fair value through profit or loss.
Financial liabilities measured at amortized cost:
Upon initial recognition, the Group measures the financial liabilities at fair value, net of transaction costs. In subsequent periods these financial liabilities are measured at amortized cost. Any differences between the amount of initial recognition (net of transaction costs) and the redemption value are recognized in the statement of profit or loss over the term of the financial liability, in accordance with the effective interest method.
Fees paid in respect of receipt of a credit facility are recognized as transaction costs attributed to the relevant loan, to the extent that it is probable that a portion or all of the credit facility amount shall be utilized. In such a case, the recognition of fees is deferred until the funds are actually withdrawn as part of the loan. If there is no evidence that a portion or all of the credit facility will be utilized, the fee is capitalized as a prepaid payment in respect of financing services and amortized over the term of the relevant credit facility.
Financial liabilities measured at fair value through profit or loss:
The Group measures these financial liabilities at fair value. Transaction costs are recognized in profit or loss. Financial liabilities are classified as current liabilities, unless if the Group has an unconditional right to defer the settlement of the liability by at least 12 months after the end of the reporting period, in which case they are classified as non-current liabilities.
l. Trade receivables
Trade receivables are amounts due from customers for sales of POS devices or services performed in the ordinary course of business.
m. Trade payables
Trade payables are the Group’s obligations to pay for goods or services that have been rendered by suppliers in the ordinary course of business.
n. Income taxes
Income tax expense or benefits for the reported years include current and deferred taxes. Taxes are recognized in profit or loss, except for taxes arising from business combination and taxes relating to items carried to other comprehensive income or directly to equity, which are also recognized in other comprehensive income or equity, respectively, together with the item in respect of which they were created.
n. Income taxes (continued):
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted in the countries in which Group companies operate and generate taxable income at the statement of financial position date. The Group periodically evaluates the tax aspects applicable to its taxable income based on the relevant tax laws and makes provisions in accordance with the amounts expected to be paid to the tax authorities.
The Group recognizes deferred income tax using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
The amount of deferred taxes is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for temporary differences that are tax deductible, up to the amount of the differences that are expected to be utilized in the future, against taxable income. Deferred tax assets are recognized in respect of unused carryforward losses, if it is probable that future taxable profit will be available against which the unused tax losses can be utilized.
The Group does not recognize deferred taxes on temporary differences arising on investments in subsidiaries, since the timing of the reversal of the temporary differences is controlled by the Group and it is probable that these temporary differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are set off only if: (a) An enforceable legal right exists to set off current tax assets against current tax liabilities; and; (b) Deferred tax assets and liabilities relate to income tax imposed by the same tax authority on the same entity or on different entities that intend to settle the balances on a net basis.
o. Employee benefits:
1) Post-employment benefits:
a. Defined contribution plans
For most of its employees in Israel, the Company operates various pension and severance pay schemes which were approved in accordance with Section 14 to the Severance Pay Law. The schemes are generally funded through payments to insurance companies or trustee-administered funds.
These plans constitute defined contribution plans since the Company pays fixed contributions into separate and independent entities. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as an expense for employee benefits when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
o. Employee benefits (continued):
b. Defined benefit plans
Labor laws and agreements in Israel, and the practice of the Group, require it to pay retirement benefits to employees dismissed or retiring in certain other circumstances. The amounts of benefits that such employees are entitled to receive upon retirement is based on the number of years of employment and the employee’s last monthly salary, subject to the conditions set in the agreements. These liabilities are accounted for as defined benefit plans.
Total retirement benefit obligation as recognized in the statements of financial position is the present value of the defined benefit obligation at the statement of financial position date, less the fair value of plan assets. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method.
The present value of the obligation is determined by discounting the estimated future cash outflows (after taking into account the expected rate of salary increases) using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related liability.
The Company recognizes remeasurements of the net defined benefit obligations in other comprehensive income in the period in which they are incurred. Those remeasurements are created as a result of experience adjustments and changes in actuarial assumptions and differences between plan assets return and the amounts included in net interest on net defined benefit obligations.
Past and current service costs are recognized immediately in profit or loss under the payroll line items, while interest expenses on the net liabilities are recognized in expense on a current basis under the finance expenses line item.
“Plan assets”, as defined in IAS 19, are measured at fair value, and they are deducted from the balance of the defined benefit obligation for statement of financial position presentation.
2) Other long-term benefits
Other long-term employee benefits are employee benefits that are not short term, post-employment and termination benefits, as defined in IAS 19. The liability for other long-term employee benefits is measured in the same way of measuring the obligation for defined benefit plans (see (1) above). However, remeasurements of other long-term employee benefits are not recognized in other comprehensive income, but to profit or loss.
3) Vacation and recreation benefits
Under labor laws in Israel every employee is legally entitled to vacation and recreation benefits, both computed on an annual basis. This entitlement is based on the term of employment. The Group charges a liability and expense due to vacation and recreation pay, based on the benefits that have been accumulated for each employee.
3) Vacation and recreation benefits (continued):
Where the Group expects that the liability in respect of the vacation pay benefit will be settled within 12 months from the end of the annual reporting period during which the employees provided the relating services, the liability in respect of this benefit is measured in accordance with the additional amount, which the Group expects to pay in respect of the unutilized benefit accrued as of the end of the reporting period. If the Group does not expect that the liability in respect of the vacation pay benefit will be settled in full within that period, the liability for this benefit is measured as a liability for other long-term employee benefits (see (2) above).
4) Bonus plan
During the year ended December 31, 2021, the Company’s management for the first time adopted a remuneration program for all of the Group’s employees (apart from sales people and apart from employees that are relatives of the Company’s controlling shareholders) in effect from 1 July 2021. According to the terms of the program, at the beginning of every calendar year (and in the current year at the beginning of the second half of 2021) personal annual targets shall be set for each employee, and pursuant to their fulfillment and to the Company’s general targets, the employees shall be entitled to bonuses.
p. Revenue recognition
The Group has revenues from sales of Point of Sales (POS) devices, software as a service (SaaS) and payment processing fees.
1) Revenue measurement
The revenue of the Group is measured at the amount of the consideration to which the Group expects to be entitled in exchange for transferring promised terminals or services to a customer, excluding amounts collected on behalf of third parties, such as certain selling taxes. Revenue is presented net of VAT and after elimination of intra-group revenue.
2) Timing of revenue recognition
The Group recognizes revenue when the customer obtains control of the promised goods or service under the contract with the customer. For each performance obligation, the Group determines, when entering into a contract, if it satisfies the performance obligation over time or at a point in time.
The group satisfies a performance obligation over time if one of the following criteria is met: (1) the customer is receiving and consuming the benefits of the Group’s performance as the Group performs; (2) the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (3) the Group’s performance does not create an asset with an alternative use to the Group, and the Group has an enforceable right to payment for performance completed to that date.
p. Revenue recognition (continued):
3) Types of revenues of the Group
Revenue from sales of POS devices
The Group sells POS devices to customers.
Pursuant to IFRS 15, goods or services promised to a customer are distinct if the customer can benefit from the good or service supplied (either on its own or together with other resources that are readily available); and the Group’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
The POS devices sold to the Group’s customers enable multiple functionalities. The sale of the POS device does not oblige the customer to purchase a full solution or to make a further purchase of the Group’s services. Accordingly, the POS devices constitute a performance obligation that is separate from the service component, and the Group recognizes revenues from sales of POS devices at a point in time, when control of the POS devices is transferred to its customers.
SaaS revenue and payment processing fees (hereafter –"Recurring revenue")
The Group provides management services and payment processing services. The consideration for the management services includes monthly fees in respect of each POS device. The consideration for the payment processing fees includes processing services, which are mostly calculated as a percentage of the transaction’s value and/or a defined fee for each processed transaction. Payment is made per the normal payment terms of the Company, which are generally 15 to 60 days from the date of the invoice. The revenue from those services is recognized in the period the services are rendered.
The Group recognizes the payment processing fees collected from its customers on a gross basis, since the Group controls the specified services before it is transferred to the customers, in accordance with the provisions of IFRS 15. In particular, the Group is primarily responsible for fulfilling the promise to provide the payment processing services to the customer, and the Group has discretion in establishing the price for the specified services. As a payment service provider, the Group acts as a merchant of record for its merchants. The Group bears the risk of chargebacks if amounts cannot be recovered from the customer. The fees paid to the processing companies are recognized as expenses under cost of revenue.
Allocation of the consideration in transactions that include the sale of POS devices and the above related services is based on the relative stand-alone selling price of each performance obligation based on the price at which a good or service is sold separately.
q. Share-based payments
From time to time, the Group’s Board of Directors approves plans for the award of options to the Group’s employees and suppliers, whereby the Groupreceives services from its employees and/or suppliers in consideration for equity instruments (options) of theGroup.
The amount recognized for share-based payments to employees is determined in reference to the fair value of the options granted on the grant date. Non-market vesting terms are included among the assumptions used to estimate the number of options expected to vest, such that the expense is recognized during the vesting period, which is the period in which the employee is required to complete the set service period. As to other service providers, the cost of the transactions is measured in accordance with the fair value of the goods or services received in return for the equity instruments that were granted. Where it is not possible to measure reliably the fair value of the goods or services received in consideration for equity instruments, they are measured at the fair value of the granted equity instruments.
q. Share-based payments (continued):
At each statement of financial position date, the Group revises its estimates as to the number of options expected to vest, based on the non-market vesting and service conditions, and recognizes the impact of the change compared to the original estimates, if any, in the statement of profit or loss, with a corresponding adjustment to equity.
r. Earnings (Loss) per share
The computation of basic earnings (loss) per share is based on the profit (loss) attributable to holders of ordinary shares, divided by the weighted average number of ordinary shares in issue during the period, excluding treasury shares. When calculating the diluted earnings (loss) per share, the Group adds to the average number of ordinary shares outstanding, that was used to calculate the basic earnings per share, the weighted average of the number of shares to be issued assuming that all shares that have a potentially dilutive effect would be converted into shares. Said potential shares are only taken into account in cases where their effect is dilutive (reducing the earnings per share or increasing the loss per share).
s. Provisions
Provisions are recorded in the books of accounts when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the present value of the cash flows expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.
t. New International Financial Reporting Standards, amendments to standards and new interpretations:
1) Amendment to IAS 1 "Presentation of Financial Statements" (hereinafter – "Amendment to IAS 1")
The amendment clarifies, among other things, that:
(a) The Amendment to requires companies to disclose their material accounting policy information rather than their significant accounting policies.
(b) The amendment defines what is ‘material accounting policy information’ and explains how to identify when accounting policy information is material. The amendment further clarifies that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information.
(c) The Amendment to IAS 1 is applicable for annual periods beginning on or after 1 January 2023. According to provisions of the amendment, early adoption is permitted.
The Company is currently evaluating the effects of adopting the Amendment to IAS 1 on its financial statements.
2. Amendment to IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors" (hereinafter: "Amendment to IAS 8")
(a) The amendments to IAS 8 clarify how entities should distinguish changes in accounting policies from changes in accounting estimates. That distinction is important because changes in accounting estimates are applied prospectively only to future transactions and other future events, but changes in accounting policies are generally also applied retrospectively to past transactions and other past events, and also to present events and present transactions.
(b) The Amendments to IAS 8 will be applied retrospectively for annual periods beginning on or after January 1, 2023. According to provisions of the Amendments, early adoption is permitted. Initial application of Amendments to IAS 8 is not expected to have material impact on the Group's consolidated financial statements.
NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
As part of the financial reporting process, the Group’s management is required to make certain assumptions and estimates that affect the value of assets, liabilities, income, expenses and some of the disclosures provided in the Group’s consolidated financial statements. By their nature these estimates may be subjective and complex and may therefore differ from actual results.
The accounting estimates and judgments used in the preparation of the financial statements are continually reviewed and are based on historical experience and other factors, including expectations as to future events that are believed to be reasonable under the current circumstances.
Set forth below is a description of the material accounting estimates and judgments used in the preparation of financial statements, at the formulation of which the Group was required to make assumptions as to circumstances and events involving significant uncertainty. The Group takes into account, as applicable, the relevant facts, historical experience, impact of external factors and reasonable assumptions in accordance with the circumstances.
1) Development assets
The Group capitalizes development costs and recognizes them as intangible assets in accordance with the accounting policy listed in note 2(g). In accordance with this policy, costs incurred in respect of development projects are recognized as development assets only when a number of conditions listed in that note are met, whereas other development expenses, that do not meet these terms, are recognized as an expense in profit or loss as incurred.
The Group’s management exercises judgment as to the fulfillment of the conditions allowing capitalization of development costs for each of the development projects it implements; in cases where management determines that those conditions are, indeed, met, development assets are recognized at the amount of the development costs invested in the project.
The Group’s management also determines the relating estimated useful life and amortization expenses of the said development assets. The estimate is based on the projected period for the marketing of the products to be developed on the basis of the said development assets. These estimates may change significantly as a result of technological innovations and the activity of the Group’s competitors, in response to extreme cyclical changes in the sector.
The Group's management shall increase the amortization expenses when the estimated useful life will decrease compared to previous estimates, or, alternatively, it shall recognize impairment or write-off development assets that have become technologically obsolete.
NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued):
2) Distribution rights, customer relationship and technology
Distribution rights, customers relationship and technology recognized as a result of business combinations carried out by the Group are amortized on an ongoing basis on a straight-line basis in accordance with expected useful life. The Company assesses the need to change the intangible assets’ useful lives on an ongoing basis.
3) Determining the lease terms and the discount rate in respect thereof
The Group applies IFRS 16 to account for leases. In determining the lease term and determining the discount rate of a lease liability, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Based on historical experience and its business plans, the Company assesses whether it is expected that the extension options included in the lease agreements it entered into shall be exercised or not.
4) Fair value of share-based payments
The fair value of the Group's equity instruments that were granted to its employees and consultants is determined using valuation methods. Fair value of stock-option awards was determined using a the Black-Scholes option pricing model, which requires a number of assumptions, of which the most significant are the expected share price, volatility, and the expected option term. Expected volatility was calculated based on comparable public companies in the same industry. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term.
5) Deferred tax assets
Deferred tax assets are recognized in respect of carryforward losses and unused deductible temporary differences, if it is probable that future taxable income will exist against which they can be utilized. A management estimate is required to determine the amount of the deferred tax asset that can be recognized based on the timing, amount of expected taxable income, its origin and tax planning strategy.
NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT
Financial risk factors
TheGroup’s activities expose it to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's risk management plan focuses on the uncertainty of the financial markets seeking to minimize potential negative impacts on the Group’s financial performances. Group’s risk management is carried out under policies approved by senior management. This policy relates to management of foreign exchange risks, market risks and cash management risks.
1) Market risks:
a) Foreign exchange risks
TheGroup operates internationally and is exposed to fluctuations in exchange rates of various currencies, primarily with respect to the exchange rates of the NIS, Euro, GPB and AUD against the US Dollar.
Foreign exchange risks arise from commercial transactions, assets or liabilities, or net investments in foreign operations which are denominated in a currency which is not the entity’s functional currency.
NOTE 4 - FINANCIAL INSTRUMENTS AND FINANICAL RISK MANAGEMENT (continued):
Financial risk factors (continued):
1) Market risks (continued):
a) Foreign exchange risks (continued):
b) Risk in respect of interest rate change
Risks related to interest rates stem from changes in interest rates, which may have an adverse effect on the Group’s net income or cash flows. Changes in interest rates trigger changes in the Group’s interest income and expenses in respect of interest-bearing assets and liabilities.
The Company does not have material assets or liabilities bearing variable interest, as it has only loans from an Israeli bank which have the Prime interest's impact, which the effect of possible changes in Prime rate with that respect is immaterial. Therefore, the Group’s revenues and operating cash flows are not materially impacted from changes in market interest rates.
2) Credit risks
Credit risk is managed on a Group level. Credit risks arise mainly from cash and cash equivalents, bank deposits and credit exposures to receivables. The Group carries out a risk assessment by assessing the credit quality of each customer, taking into account the customer's financial position, past experience and other factors. The Group settles the processing fee before remitting funds to the customers.
2) Credit risks (continued):
Based on the above, the loss balance for trade receivables as of December 31, 2022 and 2021 was determined as follows:
Most of the Group’s cash and cash equivalents as of December 31, 2022 and 2021 were deposited with Israeli, European and American banks.
In the opinion of the Group, the credit risk arising from those balances with banks is low.
In respect of the processing activity, the Group has a restricted cash balance for transfer to customers and is also entitled to receive proceeds from international processing companies. In the opinion of the Group, the credit risk arising from the balances with those processing companies is low.
3) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and credit facilities to fund operations. In view of the dynamic nature of its business activity, the Group maintains financing flexibility through maintaining the availability of credit facilities from banks, loans from shareholders and investments in share capital.
3) Liquidity risk (continued):
The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts presented in the table represent undiscounted cash flows.
Group Management periodically reviews the ratio between future cash flows that will arise from maturities of its liabilities and the future cash flows that will arise from maturities of its financial assets; where necessary, the Group changes its liability mix and the timing of their maturity.
4) Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stockholders and to maintain an optimal capital structure to reduce the cost of capital.
From time to time the Group assesses, as applicable, the need to raise funds from external investors.
4) Capital risk (continued):
Europe (excluding UK)
UK
Israel
NOTE 6 - BUSINESS COMBINATIONS AND EQUITY METHOD INVESTEES
a. Nayax Retail Ltd. (formerly: UPITec Software Ltd.)
In March 2020 (hereinafter – "closing date"), the Company entered into an agreement for the acquisition of the shares of UPITec Software Ltd, which was later renamed Nayax Retail Ltd. (hereinafter - "Nayax Retail"). Nayax Retail specializes in providing universal computing solutions for retailers on the basis of the SAP Business One information system. Under the terms and conditions of the agreement, the Company acquired a 51% equity interest in Nayax Retail upon deal closing, for NIS 5.1million (approx. $1.43million) which are payable as follows:
1. NIS 3million ($0.85million) in cash on closing date.
2. NIS 2.1million ($0.58million) payable in four equal monthly installments, beginning on the first month after closing date.
The remaining shares represent a 49% interest, were supposed to be acquired by the Company over five years, for an aggregate consideration of NIS4.9million (approx. $1.5million), payable in five equal installments (hereinafter: the “Additional Consideration”).
NOTE 6 - BUSINESS COMBINATIONS AND EQUITY METHOD INVESTEES (continued):
a. Nayax Retail Ltd. (formerly: UPITec Software Ltd.) (continued):
Additionally, in the event of a qualifying transaction (as defined in the agreement), the additional acquisitions would be accelerated, and performed within 14 business days from the date of the qualifying transaction. Accordingly, and given the completion of the initial public offering by the Company (see note 1), the entire additional consideration, as above, was paid at the end of May 2021 against the transfer of all Nayax Retail’s shares to the Company. The Company performed a purchase price allocation study (PPA). As part of the PPA, the assets and liabilities were measured and presented at fair value, including technology and customer relationships that were included in intangible assets.
Additionally, due to the fact that the Company and the sellers engaged in a forward contract for the acquisition of the remaining 49% interest in Nayax Retail, the Group accounted for this as an acquisition of the entire share capital of Nayax Retail with a correspondent liability for the forward contract.
The following table presents the consideration in respect of the acquisition of Nayax Retail, the amounts recognized in respect of the assets purchased and the liabilities assumed on purchase date, at fair value:
USD in
thousands
Cash paid
Deferred consideration
Liability for forward contract for acquisition of subsidiary
Total consideration
Amounts recognized in respect of identifiable assets
purchased and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Accounts payable
)
Post-employment obligation
Technology
Customer relationships
Deferred tax liabilities
Total identifiable assets, net
Goodwill
Cash flows in respect of the purchase included in
cash flows from investing activities
Cash and cash equivalents of the subsidiary
Purchase of subsidiary, net of purchased cash, as
presented in cash flows from investing activities
The following is information about revenue and losses of the Group under the assumption that the Nayax Retail transaction was completed on January 1, 2020:
(1) The Group’s revenues in 2020 would have been $79,045thousand compared to $78,783thousand as reported.
(2) The 2020 loss would have been $6,163thousand compared to a loss of $6,083thousand as reported.
Nayax Retail's revenue and net loss as reported in the consolidated financial statements since acquisition date and through the end of the acquisition year was $2,011thousand and $872thousand, respectively.
b. Agreement to acquire Weezmo Technologies Ltd
On January 7, 2021 (hereinafter: the "Acquisition Date"), the Company entered into an agreement with Weezmo Technologies Ltd. ("Weezmo"), which is active in the interactive receipts business in Israel and worldwide, and with seven of Weezmo shareholders and five option holders, according to which the Company acquired preferred shares from threeWeezmo shareholders (hereinafter: the "Sellers"), representing 36.13% (31.59% on a fully-diluted basis) of Weezmo's issued share capital. According to the agreement, the consideration to two of the Sellers will be a total of $300thousand in cash, such that on Acquisition Date, the Company paid $100thousand and three months after Acquisition Date it paid an additional amount of $200thousand (hereinafter: the "Cash to Two of the Sellers") in exchange for 5.78% (5.06% fully diluted) of Weezmo's issued share capital.
The consideration to the third Seller (hereinafter: the "Third Seller") is $3.2million in cash or alternatively through issue of 1,909,716ordinary shares of the Company to the Third Seller (hereinafter: the "Liability to the Third Seller"), at the discretion of the Company, with the number of shares issued under that alternative being subject to adjustments, as described in the agreement.
In addition, each of Weezmo's additional shareholders (including option holders) with whom the Company entered into the agreement (hereinafter: the "Joining Shareholders") granted the Company a call option to purchase all the ordinary shares of Weezmo or the options held by them (representing a 43.73% stake, or 41.68% on a fully-diluted basis) (hereinafter: the "Call Options"). The Call Options can be exercised by the Company during the thirty-six-month period starting on Acquisition Date. In general, the consideration to all Joining Shareholders for an exercise of the Call Options will be a cash amount of $2.6million, or alternatively, through an issue of 1,706,213ordinary shares of the Company to the Joining Shareholders, at the Company's discretion, with the number of shares issued under this alternative being subject to adjustments, as described in the agreement. However, in certain circumstances as stipulated by the agreement, the Joining Shareholders had the right to require the Company to pay some of the consideration in cash.
In addition, the Company granted each of the Joining Shareholders a put option to sell to the Company all shares of Weezmo they hold (hereinafter: the "Put Options"). The Put Options can be exercised by each of the Joining Shareholders starting from the Acquisition Date until the earlier of: (a) 36 months after Acquisition Date (or until another date to be agreed in writing between the Company and any Joining Shareholder); and (b) closing of an initial public offering of the Company's shares (hereinafter: "IPO"); and (c) the closing of the sale of all or substantially all shares of the Company to a third party ("Exit").
The consideration to all Joining Shareholders for the exercise of the Put Options will be $2.6million in cash or alternatively an allotment of 1,455,301ordinary shares of the Company to the Joining Shareholders, at the discretion of the Company, with the number of shares issued under that alternative being subject to adjustments, as described in the agreement.
Notwithstanding the above, to the extent that the Put Options are exercised before and subject to closing an IPO or an Exit by Nayax, the number of shares the Company would allot to the Joining Shareholders is a total 1,580,758ordinary shares. Even in this case, under certain circumstances that are detailed in the agreement, the Joining Shareholders may demand that the Company pay some of the consideration in cash.
Note that the election of the Company to pay in cash to Put and Call Option holders is limited to a period of six months, from Acquisition Date.
On Acquisition Date, the Company received all voting rights of the Sellers and the Joining Shareholders, and also received and exercised the right to appoint all directors on the board of Weezmo. Accordingly, beginning on Acquisition Date, the Company controls Weezmo and includes it in the consolidated financial statements. The portion of Weezmo's income attributed to owners of the Company also includes the portion of non-controlling interest to whom the Company issued the Put Options and from whom it received the Call Options. Accordingly, the rate of non-controlling interests reflected in the Company’s consolidated financial statements of Acquisition Date is approximately20%.
b. Agreement to acquire Weezmo Technologies Ltd (continued):
The consideration for the business combination comprises a number of elements, as follows:
▪ The Cash to Two of the Sellers, as defined above;
▪ The Liability to the Third Seller, as defined above; and
▪ The liability for the arrangement that includes the Put Options and Call Options, as defined above.
The Company recognized financial liabilities for the Liability to the Third Seller and its liability for the arrangement that includes the Put Options and the Call Options. The Company elected to allocate the entire Put and Call Options instrument as financial liability measured at fair value through profit or loss, as permitted by IFRS 9 to account for a financial liability with an embedded derivative.
Eventually, the Company opted to pay in cash the entire consideration for Weezmo’s shares.
The fair value of the liability to the Third Seller and the liability to the overall put and call options arrangement as of the Acquisition Date and close to the date of actual payment was $5.3million and $5.8million, respectively. The difference, at $0.5million, was recognized in the "finance expenses, net" item in the income statement.
The Company engaged with an external valuer for measuring the fair value of acquisition consideration and its allocation to the assets acquired and liabilities assumed in the acquisition.
The following table presents the consideration for the acquisition of Weezmo, the non-controlling interests and the amounts recognized for assets acquired and liabilities assumed on acquisition date, at fair value:
The Cash to Two of the Sellers
The Liability to the Third Seller
The liability for the arrangement that includes the Put Options and Call Options
Amounts recognized on acquisition date:
Trade payables
Other Payables
Customer relations
Deferred tax liability
Goodwill (*)
Less non-controlling interests (**)
Total Consideration
Cash flows in respect of the acquisition, as presented in cash flows from investing activities
Cash and cash equivalents of subsidiary included in consolidated for the first time
Acquisition of subsidiary, less cash acquired, as presented in cash flows from investing activity
(*)
Goodwill is not deductible for tax purposes and arises mainly from projected synergies with activities of the Group and from workforce that does not qualify for recognition as a separate asset.
(**)
Non-controlling interests were measured at fair value on acquisition date.
During the period ended December 31, 2021, Put Options representing43.73% of Weezmo's share capital (41.68% on a fully diluted basis) were exercised in exchange for $2.6million in cash, and the consideration to the Third Seller totaling $3.2million was paid.
In May 2021, an agreement was signed with all holders of non-controlling interests whereby the Company acquired their entire interest in Weezmo for $1.25million, payable in nine cash installments. Through December 31, 2021, an amount of $1,069thousand was paid. Consequently, the Company’s interest in Weezmo increased to 100%.
The additional revenue included in the consolidated income statement since Acquisition Date resulting from consolidating Weezmo's results was $534thousand during the year. Additionally, the consolidation of Weezmo resulted in an increase of $576thousand in the loss for the year.
c. On Track Innovation Ltd.
On January 19, 2022 the Company entered into a binding term sheet with On Track Innovations Ltd. (hereinafter - "OTI"), according to which the parties shall engage in a two-phase transaction, where in the first phase the Company shall provide a loan to OTI (hereinafter - "Loan") and thereafter the Company and OTI shall negotiate to acquire 100% of OTI’s shares by way of reverse triangular merger (hereinafter - "Merger").
On January 27, 2022, the Company executed a Loan agreement with OTI, according to which the Company extended a Loan to OTI totaling $5.5million to repay its outstanding debts. The Loan will be repaid in two years, bearing a 10% annual interest rate. The loan shall be secured by a floating charge over OTI's assets.
According to the Loan Agreement, the Company may, in its sole discretion, extend the Loan with additional amounts, in order to pay to any creditor of OTI from the date of the Loan agreement and until the closing of the Merger in order to allow OTI to continue to operate in the ordinary course (hereinafter - "Additional Amounts"). Additional Amounts, if any, will be deemed to be as part of a Loan and the terms of the Loan will apply to them in full.
On April 25, 2022 and on July 5, 2022 the Company extended OTI an additional loan amount of $1million and $1.6million, respectively. The loan is accounted for as a financial asset at fair value through profit or loss.
If the Merger agreement will not be put to the vote of the shareholders of OTI or if it will not be approved by the shareholders of OTI by the dates in the Loan agreement, for a reason that is not directly and exclusively related to the Company, then (a) the Company shall have the right to either demand the immediate repayment of the Loan from OTI only, or convert it into OTI's equity based on the determined price in the Loan agreement (b) if the Company elected not to demand the immediate repayment or conversion, the interest on the Loan shall be increased to the mentioned interest rate in the Loan agreement, and (c) OTI shall pay, upon demand by the Company, to the Company an agreed amount in the Loan agreement.
On March 17, 2022, the merger agreement with OTI were completed under the preliminary terms as noted at the binding sheet which OTI will become a private wholly-owned subsidiary of the Company. On May 10, 2022, OTI's general assembly of shareholders approved the Merger agreement.
On June 9, 2022, the transactions under the Merger Agreement were completed and the shareholders of OTI received from the Company an aggregate cash consideration of $4.5million. The cash consideration was paid in full on July 18, 2022 and the long-term liability OTI received from the Company, as part of the first phase of the merger considerations, was eliminated in the consolidated financial statements.
The following table presents the consideration for OTI's merger and the amounts recognized for assets acquired and liabilities on the of the merger, at fair value:
As of
June 9, 2022
Cash to OTI's shareholders (***)
Amounts recognized on merger date:
Trade receivables
Inventory
Other receivables
Right of use assets, net
Property and equipment, net
Other assets, net
Short-term bank loans
Other payables
Lease liability
Other long term liabilities
Long term liability from the Company (*)
Total identifiable assets, net (**)
(*) The long-term liability from the Company was eliminated in the consolidated financial statements.
(**) Due to accumulated loss for tax, deferred tax liabilities were offset up to their aggregated value recognized at the day of the acquisition.
(***) The consideration was fully paid in July 2022.
The following is information about revenues and losses of the Group under the assumption that the OTI transaction was completed on January 1, 2022: (1) The Group’s revenues for the year ended December 31, 2022, would have been $179,008thousand, compared to $173,515thousand as reported, and; (2) The Group's losses for year ended December 31, 2022, would have been $42,166thousand compared to $37,332thousand as reported.
The additional revenue included in the consolidated income statement since Acquisition Date resulting from consolidating OTI's results was $7,610thousand during the year. Additionally, the consolidation of OTI resulted in an increase of $909thousand in the loss for the year.
d. Agreements for the acquisition of the shares of Tigapo Ltd.
On February 4, 2021, the Company entered into a memorandum of understanding (hereinafter: "the First Memorandum of Principles") with Tigapo Ltd. (hereinafter: "Tigapo"), which is developing a smart, cloud-based system for management of gaming arcades. According to the First Memorandum of Principles, the Company invested $300thousand in Tigapo under a Simple Agreement for Future Equity (SAFE) against a right for allotments of shares in a future investment event in Tigapo at an amount that may not be less than $1.5million.
In May 2021, the Company acquired Tigapo shares constituting 33.39% (fully diluted) of its capital from a number of shareholders in consideration for a cash payment of $2.1million (hereinafter: the “Existing Shares”).
In the third quarter of 2021, an additional acquisition agreement was signed in which the Company increased its interest in Tigapo for a $6.8million consideration, composed of a number of elements, as indicated below:
▪
$4million in cash (hereinafter: the "Additional Investment Amount");
Conversion of the investment in SAFE, as indicated above;
Obligation to provide future consulting services by the Company to Tigapo in the Company's areas of expertise over 3 years, as well as granting a license to use the Nayax brand name;
The Company issued to Tigapo a put option enabling an additional investment of up to $1million under the same terms applied to the Additional Investment Amount (hereinafter: the "Liability for Put Option"). The put option is a liability financial instrument measured at fair value through profit or loss.
A put option granted by the Company to the remaining shareholders for the sale of the remaining shares of Tigapo and a call option that the remaining shareholders of Tigapo granted the Company to acquire the remaining shares of Tigapo (hereinafter: the "Liability for overall arrangement of put option and call option"). The options are accounted for as a financial liability and a financial asset, respectively, both measured at fair value through profit or loss. The Company presents an asset and a liability for the overall arrangement of the put and call options, which are presented as a net item in the financial statements
After entering into the agreement discussed above, the Company holds shares of Tigapo, representing 53.55% of its issued share capital. The other shareholders of Tigapo have substantial rights in relation to relevant activities of the investee, which prevents the Company from gaining control over Tigapo. Therefore, the investment is accounted for as an investment in an associate using the equity method. The Company engaged with an external valuer for calculating the fair value of acquisition consideration and its allocation to the assets acquired and liabilities assumed under the acquisition. The following table presents the increase in the overall investment in the third quarter of 2021:
U.S. dollars
in thousands
Cash for the Additional Investment Amount
Investment in SAFE
Obligation to provide Services to Tigapo
Liability for Put Option (*)
Liability for overall arrangement of put option and call option (*)
(*) The financial instruments are measured at fair value and included under level 3. The valuation is performed once quarterly by an external valuer. During the year ended December 31, 2022 and 2021, the Company recognized income of $608thousand and expense of $93thousand, respectively, for the options valuation in the "finance expenses, net" item in the income statement.
The share of the Company in losses of associates accounted for by the equity method amounted to $1,794thousand during the year ended December 31, 2022. Tigapo is a private company and its shares do not have a quoted market price.
e. A cooperation agreement for the creation of Nilus Ltd.
On December 10, 2020, Nayax Retail Ltd (hereinafter: "Nayax Retail"), a subsidiary of the Company, engaged with some of the largest distribution companies in the Israeli economy, in a cooperation agreement by way of a shareholders’ agreement for the incorporation of a new company called Nilus for Businesses Ltd. (hereinafter: "Nilus"), with Nayax Retail holding 12% of Nilus’s issued and paid-up capital.
In May and August 2021, the shareholders extended a shareholders’ loan to Nilus at the total amount of NIS 12million (approximately $3.7million), with Nayax Retail’s share in the loan amounting to NIS 1,440thousand (approximately $446thousand) (hereinafter: the “Shareholders’ Loan”).
In March and October 2022, the shareholders extended a shareholders’ loan to Nilus at the total amount of NIS 10million (approximately $2.9million), with Nayax Retail’s share in the loan amounting to NIS 1,200thousand (approximately $598thousand) (hereinafter: the “Shareholders’ Loan”).
The amount of the Shareholders’ Loan bears annual interest at the maximum rate set in Section 3(j) to the Income Tax Ordinance. The loan (principal and interest) is repayable in one installment within 36 months from the date of signing the Loan Agreement. Nevertheless, Nilus is entitled to extend the term of the loan for additional periods at its discretion.
The amount paid is presented under “other long-term assets” in the statement of financial position as of December 31, 2022.
f. Restructuring of the Company and Dually Ltd.
According to an agreement signed between the controlling shareholders of the Company, the Company and Dually, according to an in-agreement tax ruling that was received from the Israel Tax Authority, and after receiving an approval from the Company's board of directors and the shareholders meeting dated April 1, 2021, a three-part restructuring process was performed on April 1, 2021 (which is tax exempt under the provisions of Sections 104B, 103T and 104C to the Income Tax Ordinance [New Version] (the "Ordinance"), the end result of which was that all shares of Dually were transferred to the Company (such that Dually became a wholly owned subsidiary of the Company), and 281,202,800dormant shares (as this term is defined by Section 308(a) of the Companies Law) were created. On April 1, 2021, the Company eliminated all said dormant shares.
Following the above, the Company consolidates Dually’s financial statements as from April 1, 2021.
The restructuring is accounted for in the Company’s financial statements as a business combination under common control with initial recognition based on book value amounts of Dually. As a result of the first-time consolidation, a total of $316thousand was recognized in cash and cash equivalents. The net identifiable assets that were recognized on acquisition date were recognized against the equity attributed to Company’s shareholders.
The additional income included in the consolidated statement of income or loss from Acquisition Date as a result of the consolidation of Dually’s results amounted to $1,167thousand through December 31, 2021 (after elimination of the intercompany revenue). Furthermore, the consolidation of Dually’s results caused a $195thousand decrease in loss during period, from April 1, 2021 through December 31, 2021.
g. Agreement with Bank Hapoalim B.M. and Feit Synergy Ltd. for establishing an entity
On June 9, 2022 the Company entered into an agreement with Bank Hapoalim B.M. (hereinafter - "Bank Hapoalim") and Feit Synergy Ltd. (hereinafter - "Feit") a company controlled by Mr. Alon Feit (all of the parties jointly: the "Parties") for purpose of creating an entity under which the Parties shall establish and operate an innovative international platform, which shall provide financing options for small and medium businesses for acquiring POS devices, automated vending machines and electric vehicle chargingstations. Under the terms of the agreement, the Parties shall incorporate a new Israeli company (hereinafter - "IOT"), with an initial holding structure according to which 49.1% of the IOT’s share capital shall be held by the Company, 30.9% by Feit, 20% by Bank Hapoalim.
The agreement sets forth that the Company shall invest in IOT an amount of $1.5million, Feit shall invest in IOT an amount of $0.5million, and Bank Hapoalim shall invest in IOT a cash amount of $1.5million and additional loan of $1.5million.
Additionally, the agreement includes three options:
First Call Option - a call option granted to the Company to buy from BHP and Feit such number of shares that following the exercise option the Company will hold 50.1% from IOT. The option can be exercised by the Company between three to twelve years after the signing agreement date.
Second Call Option - a call option granted to the Company to buy from BHP and Feit such number of shares that following the exercise option the Company will hold 100% from IOT. The option can be exercised by the Company at any time during a period of ten years following the exercise of the First Call Option but in no any event of later than fifteen years from the signing agreement date.
Put Option – a put options granted by the Company to BHP and Feit to sell the remaining shares of IOT. The Put Option shall be exercisable commencing at any time following the lapse of 3 years following the signing agreement date and ending upon the lapse of the Second Call Option period.
IOT has been established on July 5, 2022 and as of the date of the approval of the financial statements, the agreement has not yet been finalized.
NOTE 7 - CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short- term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Below is the composition of cash and cash equivalents by US Dollar and other currencies:
December 31,
US Dollars in thousands
US Dollar
11,415
32,196
New Israeli Shekel
1,498
28,687
Euro
11,182
13,834
British pound sterling
3,909
8,020
Australian Dollar
1,650
1,045
Other currencies
4,226
3,550
33,880
87,332
NOTE 8 - RESTRICTED CASH TO BE TRANSFERRED TO CUSTOMERS IN RESPECT OF PROCESSING ACTIVITY
Nayax Europe, a subsidiary of the Group, holds a Payment Institution License from the central bank of Lithuania and is licensed to hold and transfer funds to the Group’s customers across Europe for the purpose of the Group processing activity in Europe. In accordance with the requirements of the central bank of Lithuania, the funds of Nayax Europe’s customers are held in a segregated account before being transferred to customers. As of December 31, 2022 and 2021, $34,119 and $23,695thousand, respectively, were held in segregated accounts for the Group's customers.
NOTE 9 - TRADE RECEIVABLES
Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components then they are recognized at fair value. The balance subsequently measured at amortized cost less allowance for credit losses. Below is the composition of trade receivables in net values:
Open accounts
29,844
20,887
Less – provision of allowance for credit loss
(2,432
(1,549
Trade receivables - net
27,412
19,338
For information about receivable aging and calculating the impairment of accounts receivables in 2021 and 2022, see note 4(2).
b. Changes in provision of allowance for credit loss:
US Dollars
Balance as of January 1, 2021
910
Amounts provided against profit or loss in respect of receivables for which the provision for loss is measured over the entire life of the receivable balance
639
Balance as of December 31, 2021
1,549
883
Balance as of December 31, 2022
2,432
Note that the carrying amount of trade receivables represent a reasonable approximation of their fair value, as the impact of discounting is immaterial.
NOTE 10 - LEASES
a. General
As of December 31, 2022, the Group had right of use assets related to leased buildings used as the Group’s offices and related to leases of technological equipment used for the Group’s operating activities. Set forth below are the right-of-use asset years of depreciation and the interest rates used to discount the lease payments:
Years of
depreciation
Interest rate
Buildings
2-4
1.5%-5%
Technological equipment
3-5
3.88%
b. Composition and movement of right-of-use assets:
The following is the composition of right-of-use asset balances as of December 31, 2022:
Technological
equipment
Total
Cost:
Balance as of January 1, 2022
7,382
331
7,713
Additions during the year
2,048
-
Additions in respect of acquisition
1,722
Disposals
Other changes
257
10,947
11,278
Depreciation and amortization:
2,186
252
2,438
Depreciation during the year
1,731
66
1,797
(338
3,579
318
3,897
Right-of-use assets - net
7,368
13
7,381
The following is the composition of right-of-use asset balances as of December 31, 2021:
5,752
6,083
1,428
202
1,136
186
1,322
1,050
1,116
5,196
79
5,275
NOTE 10 - LEASES (continued):
b. Composition and movement of right-of-use assets: (continued):
The following is the composition of right-of-use asset balances as of December 31, 2020:
Balance as of January 1, 2020
4,517
4,848
1,235
Balance as of December 31, 2020
399
120
519
737
803
4,616
145
4,761
c. Composition and changes in lease liabilities
The following table summarizes the composition of lease liability balances as of December 31, 2022:
6,769
126
6,895
2,014
1,696
Interest expenses
293
3
296
Lease payments
(2,036
(111
(2,147
(464
(9
(473
8,141
9
8,150
Current maturities of lease liabilities
2,197
2,206
Long-term lease liabilities
5,944
NOTE 10 –LEASES (continued):
c. Composition and changes in lease liabilities (continued):
The following table summarizes the composition of lease liability balances as of December 31, 2021:
6,245
229
6,474
207
7
214
(1,506
(114
(1,620
395
4
1,387
115
1,502
5,382
11
5,393
The following table summarizes the composition of lease liability balances as of December 31, 2020:
5,595
310
5,905
321
10
(1,390
(108
(1,498
484
17
501
1,212
108
1,320
5,033
121
5,154
The Group incurred expenses in the amounts of $209thousand, $168thousand and $244thousand in 2022, 2021 and 2020, respectively, related to short-term leases, which were included in research and development expenses and selling, general and administrative expenses.
NOTE 11 - PROPERTY AND EQUIPMENT
Composition of property and equipment and accumulated depreciation thereon, grouped by major classifications, and changes therein in 2022, are as follows:
Composition of property and equipment and accumulated depreciation thereon, grouped by major classifications, and changes therein in 2021, are as follows:
NOTE 11 – PROPERTY AND EQUIPMENT (continued):
Composition of property and equipment and accumulated depreciation thereon, grouped by major classifications, and changes therein in 2020, are as follows:
NOTE 12 - GOODWILL AND INTANGIBLE ASSETS
Composition of intangible assets and accumulated amortization thereon, grouped by major classifications, and changes therein in 2022 are as follows:
Capitalized
Development
costs **
Distribution
rights *
Customer
relationships
purchased *
Technology**
Goodwill(a)
Patents**
34,209
5,292
4,188
2,921
8,271
806
55,687
Additions
14,615
Acquired through business combinations
1,261
5,046
1,711
2,724
10,742
Translation differences
(279
(350
(176
(799
(1,604
49,806
8,884
4,456
10,196
79,440
Accumulated amortization:
13,454
1,996
843
1,546
47
17,886
Amortization
3,642
265
902
564
62
5,435
Acquisitions during the year
(6
(52
(55)
(113
18,206
2,261
1,693
2,055
109
24,324
Net book value:
As of December 31, 2022
31,600
3,031
7,191
2,401
697
55,116
NOTE 12 - GOODWILL AND INTANGIBLE ASSETS (continued):
Composition of intangible assets and accumulated amortization thereon, grouped by major classifications, and changes therein in 2021 are as follows:
27,477
1,636
2,111
3,478
40,800
6,708
2,478
769
4,615
7,862
(30
54
74
41
178
347
10,244
1,730
423
1,015
13,412
3,240
266
407
523
4,483
8
21
As of December 31, 2021
20,755
3,296
3,345
1,375
759
37,801
Composition of intangible assets and accumulated amortization thereon, grouped by major classifications, and changes therein in 2020 are as follows:
20,864
1,178
1,411
1,394
30,139
6,613
7,419
414
632
1,867
2,913
44
68
217
329
7,067
1,466
246
623
9,402
3,177
264
172
382
3,995
5
15
As of December 31, 2020
17,233
3,562
1,213
1,096
27,388
* Amortization of customer relationship and distribution rights are included under the selling, general and administrative expenses.
** Amortization of technology and development costs are included in the “depreciation and amortization in respect of technology and capitalized development costs”.
(a) Goodwill
The group tests whether goodwill has suffered any impairment on an annual basis. For the 2022 and 2021 reporting periods, the recoverable amount of the cash-generating units (CGUs) was determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management. The discount rate was a pre-tax measure using a rate of return that reflects the relative risk of the investment, as well as the time value of money. Five years of cash flows were included in the discounted cash flow model. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. These growth rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates.
1. On Track Innovations Ltd. - As part of the business combination for the purchase of On Track Innovations Ltd. (hereinafter – "OTI") the Company recognized goodwill in the total amount of $2,724thousand (see note 6c). The following key assumptions were used to determine the value in use of the CGU as at December 31, 2022:
Growth rate
3%
Discount rate
20.4%
The recoverable amount is greater than the carrying amount, and no impairment of goodwill was required.
(a) Goodwill(continued):
2. Modularityand Nayax Retail- As part of the business combination for the purchase of Modularity Technologies Ltd. (hereinafter – "Modularity") the Company recognized intangible assets (goodwill) in the total amount of $503thousand. As part of the business combination related to the acquisition of Nayax Retail (see note 6a), the Company recognized intangible assets (goodwill) in the total amount of $1,867thousand.
The following key assumptions were used to determine the value in use of the CGUs as at December 31, 2022:
20.6%
3. Weezmo- As part of the business combination related to the acquisition of Weezmo (see note 6b), intangible assets of goodwill at $4,615thousand were recognized.
Weezmo
4. Vendsys - As part of the business combination related to the acquisition of Greenhithe Software Solutions Ltd (hereinafter – "VendSys") the Company recognized goodwill in the total amount of $891thousand. The following key assumptions were used to determine the value in use of the CGU as at December 31, 2022.
Vendsys
4%
12%
NOTE 13 - CREDIT AND LOANS FROM BANKS
a. Short-term bank credit
In June 2018, the Company received a short-term credit facility of NIS 25million ($6.9million) from an Israeli bank bearing variable interest of Prime + 2%. On May 19, 2019 and in October 2020, the Company signed agreements to increase the short-term credit facility, such that as of December 31, 2021 the amount of the short-term credit facility is NIS 42.5million ($13.2million). On August 9, 2022, the short-term credit facility from the bank was renewed in an amount of NIS 35million ($10.6million). The short-term credit facility from August has the same terms as received in previous short-term credit facility.
As of December 31, 2022, a fully owned subsidiary of the Company has a short-term loan for $2million (NIS 7.03million) from an Israeli bank. The short-term loan bears interest of foreign exchange market + 3%. The loan is renewed monthly according to the company sole discretion.
b. Long-term bank loans
Long-term bank loans
2,496
5,166
Less - current maturities
(1,052
(2,406
1,444
2,760
1)
2)
The carrying amount of the credit and loans from banks reasonably approximate their fair value.
c. Financial covenants
During 2021 and after the IPO, the Company’s financial covenants were cancelled in respect to short-term borrowings and long-term loans.
NOTE 14 - LONG-TERM LOANS FROM OTHERS
Long-term loans from others (*)(**)
7,367
3,219
(3,585
(2,989
3,782
230
The balance is composed of loans received from an acquirer of the Group.
Below is the composition of the loans:
a. In April 2019, the Group received a loan in the amount of $2.5million. The loan bears effective annual interest of 4.74% and is being returned in 36 monthly instalments beginning in April 2019. On March 18, 2020, following the COVID crisis, the Group signed an agreement whereunder it will not pay the principal of the loan for a six-month period from March 2020 to August 2020. During January 2022, the loan fully repaid.
b. In February 2020, the Group received a loan in the amount of Euro 3.5million ($3.8million). The loan bears effective annual interest of 4.74% and is being returned in 24 equal monthly instalments beginning in February 2021. In March 2021, following the COVID crisis, the Company received an approval to defer repayment of the said loan by six months and expected to be fully repaid during 2023.
c. In December 2, 2022 the company received an additional loan in the amount of Euro 6.5million ($6,850 million). The additional amount bears effective annual interest rate of 10% and is being returned by an equal 25 instalments where the last payment is expected to be on December 2024.
NOTE 15 - OTHER LONG-TERM LIABILTIES
Composition of other long-term liabilities, net of current maturities
Liability in respect of purchase of servers (a)
175
411
Liability in respect of royalties to government institutions (b)
563
660
Liability for contingent payment due to employee benefit (c)
1,006
760
Liability for forward contract for acquisitions, see note 6
1,536
2,238
3,280
4,069
(a) The balance of $91thousand is paid in 48 monthly installments from July 2019.
The balance of $ 279thousand is paid in 58 monthly installments from July 2020. The implied interest rate in the transaction is 1.78%.
Current maturities as of December 31, 2022 and 2021 were $97and $312thousand, respectively.
(b) The liability in respect of royalties to government institutions was initially recognized at fair value based on the applicable discount rate. The Group capitalized the royalty liability using a discount rate of 14%. Current maturities as of December 31, 2022 and 2021 were $296and $277thousand, respectively.
NOTE 15 - OTHER LONG-TERM LIABILTIES (continued):
Composition of other long-term liabilities, net of current maturities (continued):
As of December 31, 2022, the Company received an amount of NIS 3.93million ($1.07million) from the below support schemes and recognized a liability in respect of these grants in the amount of $773thousands. Below is information about the support programs:
1) The “Smart Money” program and the “India, China, Japan” program – between 2014-2019, the Israeli Ministry of Economy issued the Company with approvals of eligibility to grants totaling NIS 4.1million ($1.08million) to be used a support in increasing the scope of sales in the USA, Japan, China and India. The accumulated amount of grants received through December 31, 2022 is NIS 2million ($526thousand).
2) The Halutz and Hadgama project – in November 2017, the Israeli Ministry of Energy issued the Company with an approval of eligibility for a grant of up to NIS 1.5million ($413thousand) out of an approved budget of up to NIS 3million ($826thousand) as part of the Halutz and Hadgama project for the development of a charging system for electric cars. As of the year ended December 31, 2022 the Company has not received new grants.
3) Public transportation pilot – in May 2019, the Israeli Innovation Authority issued the Company with an approval for eligibility for a grant of up to NIS 1.1million ($314thousand) out of an approved budget of up to NIS 2.2million ($628thousand) as part of the development of ticketing and validation systems for public transport. The accumulated amount of grants received through December 31, 2021 is NIS 441thousand ($127thousand).).
(c) The balance includes liabilities for contingent payments recognized as a separate transaction which is not included in the application of the acquisition method.
As of December 31, 2022 and 2021, regarding the liability for contingent payment of long-term employee benefit, which was not included in the application of the purchase method to the acquisition of VendSys is estimated at $1,006thousand and $760thousand, respectively.
As of December 31, 2022 and 2021, the liability has a current maturity to contingent payments in respect of long-term employee benefit that was not included in the application of the purchase method to the acquisition of Modularity is estimated at $56thousand and $22thousand, respectively.
NOTE16 - INCOME TAXES
a. Taxation of the Company in Israel
1) Tax rates:
The Company’s income in Israel (except for income qualifying for reduced tax rates under Israel encouragement law, see paragraph 2 below) is taxed at regular rates.
The Israeli corporate tax rate in 2018 and thereafter is 23%.
Capital gains of the Company in Israel are subject to tax at the regular corporate tax rate applicable during the tax year.
2) In December 2020, the Company received an in-agreement tax ruling, indicating that the enterprise of the Company meets the definition of a Technological Preferred Enterprise, and that the income of the Company from selling POS devices, provision of processing SaaS are deemed "technology income" as defined by Section 51 to the Encouragement of Capital Investment Law, 1959 (hereinafter - "the Law"), which are subject to 12% tax, while income attributed to production are "preferred income", as this term is defined by Section 51 to the Law, which are subject to 16% or 7.5%. tax (depending on the production activity place). This tax ruling applies to the Company beginning in the 2020 tax year through 2024.
NOTE16 - INCOME TAXES (continued):
a. Taxation of the Company in Israel (continued):
3) In February 7, 2021, the Company received an in-agreement tax ruling, indicating that the restructuring that the Company completed during 2022 which holding the entire (100%) share capital of Dually, is tax exempt. See note 6e.
b. Taxation of subsidiaries outside of Israel
Subsidiaries that are incorporated outside Israel are assessed for tax under the tax laws applicable in their countries of residence.
The principal tax rates applicable in 2022 to subsidiaries outside Israel are as follows:
Companies incorporated in the United States – tax rate of 34.7% (including federal, state and branch profits tax).
Company incorporated in the UK – tax rate of 19%.
Company incorporated in Australia – tax rate of 30%.
Company incorporated in Lithuania –corporate tax rate of 15%.
Generally, inter-company transactions between the Company and subsidiaries outside Israel are subject to the provisions and reporting requirements set out in the Income Tax Regulations (Determination of Market Terms), 2006.
c. Carry forward losses
Deferred tax assets on carryforward losses are recognized if the exercise of the relevant tax benefit is expected in the foreseeable future against a taxable income.
As of December 31, 2022 and 2021, the carryforward tax losses stemming from the Company in Israel amounted to NIS 173,274thousand ($49,240thousand) and NIS 86,944thousand ($27,956thousand), respectively.
The Group recognizes deferred taxes in respect of carryforward losses stemming from the Group only up to the amount of the liability for deferred tax, since the utilization of those losses is not expected in the foreseeable future. Carryforward tax losses accrued in Israel may be offset over an unlimited time.
d. Tax assessments
The limitation period in Israel of tax assessments filed by taxpayers in respect of tax year 2013 and thereafter is 4 years from the end of the tax year in which a tax return was filed.
Accordingly, the Company’s tax assessments through tax year 2017 are considered to be final.
e. Tax rate reconciliation:
The reconciliation of the theoretical tax benefit (expense) by the Israeli statutory tax rate to the Company's effective benefit (expense) taxes are as follows:
2020
Loss before taxes on income
(37,058
(24,137
(6,098
Tax rate
23
%
Theoretical tax benefit
8,523
5,551
1,402
Share-based payment expenses which are not deductible
(2,012
(2,035
(682
Carry forward losses without deferred taxes recognition
(6,872
(3,249
(527
Other
Effective taxbenefit (expense)
(451
(632
f. Deferred income tax:
The composition of deferred taxes as of statement of financial position dates and the change thereof in those years is:
Intangible assets
Provisions for employee rights
Losses for tax purposes
Balance at January 1, 2022
(1,111
(1,088
Change in 2022:
Recognized in income statement
(77
170
181
Recognized in translation currency difference reserve
114
Balance at December 31, 2022
(1,074
193
(793
Balance at January 1, 2021
(998
208
91
(285
Change in 2021:
665
(208
(91
(391
(25
Deferred taxes created in acquisition of subsidiary
(747
(31
Balance at December 31, 2021
Balance at January 1, 2020
(935
129
87
473
(246
Change in 2020:
206
(59
(241
(28
Balance at December 31, 2020
f. Deferred income tax (continued):
Deferred taxes are presented in the statement of financial position as follows:
Non-current assets
Non-current liabilities
g. Taxes on income included in profit or loss:
For the year ended December 31,
Current tax expenses
(607
(215
Deferred tax income (expenses)
NOTE17 - CAPITAL AND RESERVES
The share capital as of December 31, 2022, is composed of Ordinary shares, all having ILS 0.001par value, as follows:
Number of shares
In thousands
Authorized
Issued and paid
December 31, 2022
Ordinary shares
70,000,000
32,956,004
70,000
32,956
The share capital as of December 31, 2021, is composed of Ordinary shares, all having ILS 0.001par value, as follows:
December 31, 2021
32,752,242
32,752
The share capital as of December 31, 2020, is composed of Ordinary shares, Ordinary shares A and Ordinary shares B, all having NIS 0.001par value, as follows:
December 31, 2020
33,743,340
24,842,100
33,743
24,842
Ordinary shares A
1,606,660
1,530,480
1,607
1,530
Ordinary shares B
2,650,000
1,747,700
2,650
1,748
38,000,000
28,120,280
38,000
28,120
NOTE 17 - CAPITAL AND RESERVES (continued):
a. Composition (continued):
In April 2021, all ordinary A shares of NIS 0.001par value and all ordinary B shares of NIS 0.001par value – both issued shares and shares included in the Company’s authorized capital – were converted into ordinary shares of NIS 0.001par value each based on a 1:1 ratio, such that subsequent to the conversion, the Company’s capital comprises only ordinary shares.
In April 2021, the Company increased the registered share capital by 32,000,000Ordinary shares par value NIS 0.001each.
In May 2021, the Company completed an IPO. For additional information, see note 1a.
As of December 31, 2022, the Company has two equity-settled compensation plans to employees and service providers of the Company and its subsidiaries, under which options were allotted: (1) the option plan approved by the Company’s Board of Directors in February 2013 (hereafter – the “2013 Plan”); and (2) global equity-settled incentive plan adopted by the Company’s Board of Directors in December 2018 (hereafter – the “2018 Plan”), as follows:
Under the 2013 Plan, employees of Group companies may be awarded options (hereafter – the “2013 Options”). A 2013 Option may be exercised into one ordinary share against payment of an exercise price set by the Board of Directors on the grant date. Under the 2018 Plan, employees of Group companies may be awarded options (hereafter – the “2018 Options”). A 2018 Option is exercisable into one ordinary share against the payment of exercise price set by the Board of Directors on grant date.
2.
Replacement of options allotted under the 2013 Plan by options under the 2018 Plan: On October 15, 2020, the Company's Board of Directors resolved to offer holders of options offered under the 2013 Plan in the capital gains track with a trustee under Section 102(b)(2) to the Israel Income Tax
Ordinance [New Version] ("2013 Employee Options" and the "Offerees") to replace the 2013 Employee Options in their possession with new options under the 2018 Plan, with terms that differ from those of the 2013 Employee Options (including a change of exercise price, change of number of options and change of vesting and expiration dates of the options), and with the new options under the 2018 Plan to be Allotted under the capital gains track with trustee under Section 102 to the Ordinance (the "Change of Terms").
According to a tax ruling received from the Israel Tax Authority (ITA) on November 10, 2020, the Company's Board of Directors approved on that day, in relation to interested Offerees, to cancel 249,340of 2013 Employee Options allocated to them and replace those with 246,000options that were allotted on November 10, 2020 to those same Offerees under the 2018 Plan.
The new allotments, as above, are governed by the provisions of the capital gains track with trustee under Sections 102(b)(2) and 102(b)(3) to the Ordinance, as applicable.
The Company recognized an expense of $221 thousand in accordance with the 2013 Options’ original vesting period prior to their replacement by the 2018 Options.
b. Share-based payment (continued):
The Company recognized an expense of $509thousand in respect of the 2013 Options benefit balance, which were not replaced by 2018 Options, and whose vesting was conditional upon the occurrence of an IPO.
January 2021 award: On January 7, 2021, the Company allotted to two employees of the Company 40,000options each (a total of 80,000options) under the 2018 Plan.
The vesting period of the options is four years, where 25% of the options vest on the first anniversary of grant date, and after that, additional 6.25% of the options vest on the last day of each subsequent calendar quarter. Options not exercised by the fifth anniversary of grant date will expire.
The40,000options have an exercise price of $6.7(hereinafter: "Part A Options") and 40,000options have an exercise price of the par value of the shares (NIS 0.001) and also include accelerated vesting in the event of an IPO or at the termination of the employee's service, meaning that they vested upon completion of the IPO of the Company (hereinafter: "Part B Options") (see note 1 below).
March 2021 award: On March 24, 2021, the Company allotted 282,500options to employees of the Company and subsidiaries under the 2018 Plan. The exercise price of 253,000options is $6.7each (hereinafter: "Part C Options") and the exercise price of 29,500options that were allotted to employees of subsidiaries in the US is $19.5each (hereinafter: "Part D Options").
The vesting period of the options is five years, with 20% of the options vest on the first anniversary of grant date, and after that, additional 5% of the options vest on the last day of each subsequent calendar quarter. Options not exercised by the end of the quarter following the end of vesting period will expire.
May 2021 award: On May 13, 2021, the Company allotted Mr. Yair Nechmad and Mr. David Ben Avi 725,000options each, which are convertible into ordinary Company shares. The options shall vest over a five-yearperiod (through 2025), subject to attaining the following targets:
Should the Company fail to meet the targets set out above in a certain calendar year, the options attributed to that calendar year will expire.
The exercise price of the said options will be the price set for the Company’s share as part of the IPO (see note 1). The total expense recognized in respect of this award during 2021 is $4,413thousand based on the expected targets above.
August 2021 award: On August 22, 2021, the Company's board of directors approved an allotment to employees of the Company and subsidiaries and to service providers of 196,750options under the 2018 Plan and of 50,000restricted share units (RSUs). The vesting period of the options and RSUs is the same as March 2021 award.
November 2021 award: On November 11, 2021, the Company's board of directors approved an allotment to employees of the Company and subsidiaries of 167,500options under the 2018 Plan. The vesting period of 127,500options is the same as March 2021 award and the vesting period of 40,000 options is three years, with 25% of the options vest on the grant date, and after that, additional 6.25% of the options vest on the last day of each subsequent calendar quarter. Options not exercised by the end of the quarter following the end of vesting period will expire.
On March 28, 2022, the Company's board of directors approved re-pricing for August and November 2021 awards. According to a tax ruling received from the Israel Tax Authority (ITA) on May 31, 2022, the exercise price for 191,750options was updated to $20.39and the incremental fair value is $486thousand.
March 28, 2022 award: On March 28, 2022, the Company allotted 215,500options and 45,000restricted share units (RSUs) to employees of the Company and subsidiaries.
June 30, 2022 award: On June 30, 2022, the Company allotted 170,000options and 6,000restricted share units (RSUs) to employees of the Company and subsidiaries.
September 29, 2022 award: On September, 2022, the Company allotted 54,500options and 18,600restricted share units (RSUs) to employees of the Company and subsidiaries.
December 20, 2022 award: On December, 2022, the Company allotted 10,667restricted share units (RSUs) to employees of the Company and subsidiaries.
The vesting period of all grants rewarded during the year ended December, 31 2022 of both options and RSUs are 4 years, with 25% of the options vest on the first anniversary of grant date, and after that, additional 6.25% of the options vest on the last day of each subsequent calendar quarter. Options not exercised within 5 years of inception date will expire.
The Company used the Black and Scholes option pricing model to measure the fair value of the share options on award dates. The key assumptions used by the Company in this model and the fair value of each option are as follows:
Allotment date
Share price
Exercise price
Expected option life
Risk-free
interest rate
Average standard deviation (**)
Option
fair value
May 20, 2020
$
9.7
6.7
0.33
56
5.5
October 29, 2020
0.38
52
5.3
November 10, 2020
6.7/ NIS 0.001
0.38%/0.46
5.3/9.7
December 3, 2020
0.39
January 7, 2021 – Part A Options
0.46
51
January 7, 2021 – Part B Options
NIS0.001
March 24, 2021 – Part C Options
19.5
5.25
0.88
50
14.1
March 24, 2021 – Part D Options
8.7
May 13, 2021
31.9
5.88-9.88
1.05%-1.65
53.1%-54.67
16.2-$20.1
August 22, 2021 – Options
31.7
30.6
0.83
55
15.5
August 22, 2021 – RSUs
November 11, 2021
39
6.7/38.8
1.21
19/$33.2
March 28, 2022 – Options
18.4
20.4
2.50
March 28, 2022 – RSUs
June 30, 2022 – Options
18.5
16.7
3.01
9.7-$10.8
June 30, 2022 – RSUs
September 29, 2022 – Options
23.9
25.5
3.98
54.45
11.8-$23.9
September 29, 2022 - RSUs
December 20, 2022 - RSUs
19.7
The weighted average for 2020
5.6
The weighted average for 2021
17.3
The weighted average for 2022
11.1
(**) The expected volatility was determined based on comparable companies.
All allotments to employees and offices in Israel carried out as part of the plan are subject to the terms set out in Section 102 of the Income Tax Ordinance. The allotments to Israelis who are not employees are subject to Section 3(i) to the Income Tax Ordinance. Foreign employees and service providers are subject to the tax law in the relevant countries.
Below is a breakdown of the options and the weighted average exercise price during the reported periods:
(1) In 2020, includes 246,000options that were replaced against waiver of 249,340options under the 2013 Plan, as indicated above.
As of December 31, 2022, 2021 and 2020, the weighted-average remaining contractual life of exercisable options were 2.7,3.11and 3.49 years, respectively.
As of December 31, 2022, 2021 and 2020, the range of exercise prices for share options outstanding at the end of the period was NIS 0.001-$25.52, NIS 0.001-$38.8and NIS 0.001-$6.7, respectively.
The expenses related to share base compensation for each of the three years in the period ended December 31, 2022 are $9,667, $8,850thousand and $2,965thousand during 2021 and 2020, respectively.
The amounts of expense recognized as capitalized development costs and included as intangible assets for each of the three years in the period ended December 31, 2022 are $909, $649and $883thousand during 2022, 2021 and 2020, respectively.
The balance of unrecognized benefit as of December 31, 2022, assuming that all conditions set were met, is $12,703thousand.
NOTE 18 - REVENUES
Revenue from the sale of integrated POS devices
68,726
47,987
35,414
Recurring revenue:
SaaS revenue
45,274
34,641
25,127
Payment processing fee
59,514
36,506
18,242
104,788
71,147
43,369
173,514
119,134
78,783
NOTE 19 - COST OF REVENUES
Cost of integrated POS devices sales
62,872
40,165
24,825
Cost of recurring revenue
50,604
30,805
16,778
113,476
70,970
41,603
As of the periods ended December 31, 2022, 2021 and 2020 , cost of revenue includes employee related costs and share based compensation in the amount of $6,352thousand, $4,058thousand and $2,135thousand, respectively.
NOTE 20 - RESEARCH AND DEVELOPMENT EXPENSES
Payroll and related expenses
14,820
12,970
6,189
Suppliers and subcontractors
4,193
2,557
976
Office and maintenance
602
539
259
Share-based payment
1,279
1,846
1,133
Depreciation and amortization
1,238
1,128
743
22,132
19,040
9,300
NOTE 21 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Advertising and sales promotion
Computers and IT systems maintenance
Professional fees
Provision for credit losses and bad debts
Other expenses
NOTE 22 - FINANCE EXPENSES, NET
Interest on bank loans and bank fees
993
964
821
Change in fair value options
(423
Finance expenses in respect of loans from others
70
248
Finance expenses in respect of shareholders and related companies
(15
136
27
Finance expenses in respect of other liabilities
167
302
Finance expenses in respect of leases liabilities
260
379
Financing income in respect of finance sub-lease
(2
(14
Benefit in respect of government guarantee loans
(389
Exchange rate differences
1,968
(490
2,500
3,020
1,655
3,874
NOTE23 - LOSS PER SHARE
a. Basic
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue.
Loss for the year attributed to holders of ordinary shares (US Dollars in thousands)
Weighted average of number of ordinary shares in issue (in thousands)
Basic loss per ordinary share (in dollars)
b. Diluted
Instruments that can potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share, as their impact was anti-dilutive:
Thousands of shares
Options and RSU issued as part of share-based payment
NOTE 24 - RELATED PARTIES
a. Transactions with related parties:
Payroll, options and payments to related parties employed by the Company
5,378
6,512
1,519
Number of interested parties to which the benefits relate
Payroll to directors
25
Number of directors
Transactions - associated companies
766
900
3,520
Shareholders – interest expenses, net
141
b. Balances with related parties:
Receivables – associated companies
983
Trade payables – related companies and parties
95
81
Other payables – related companies and parties
42
64
NOTE 24 - RELATED PARTIES(continued):
c. Related parties' employment terms:
Payment of management and consulting fee to Mr. Yair Nechmad for serving as CEO are performed under a November 2016 agreement (in this paragraph (1), the "Agreement"). Under the Agreement, the services are provided by Mr. Nechmad through Yair Nechmad Ltd., which is fully controlled by Mr. Yair Nechmad, in consideration for a management fee at a monthly cost of NIS 50thousand ($14.5thousand), and reimbursement of various expenses. In 2020, a one-time NIS 190thousand ($55thousand) payment was made to Mr. Nechmad for management fee differentials in respect to a previous period.
On March 10, 2021, the Board of Directors and the general meeting of the shareholders of the Company approved a revision to the terms of engagement between the Company and Mr. Yair Nechmad, effective January 1, 2021, as follows: The management fee of Mr. Yair Nechmad, CEO of the Company, through Yair Nechmad Ltd, was changed to a monthly cost of NIS 150thousand ($46thousand), instead of NIS 50thousand ($15thousand).
On May 4, 2021, the Board of Directors and general meeting of the Company approved engagement in revised service agreements with Mr. Yair Nechmad, in which the monthly management fee of each of them was revised to NIS 140thousand ($43thousand), beginning on the date completing the IPO on the Tel Aviv Stock Exchange, i.e. May 13, 2021. This amount is to increase each calendar year by 2.5% so the payment for each of the 12 months during the year ended December 31, 2022 accounted to NIS 143thousand ($43thousand). For information about the share-based payment to Mr. Yair Nechmad, see note 17 above.
The total expenses related to the son of Mr. Nechmad, Mr. Arnon Nechmad, who is employed in 2022, 2021 and 2020 by the subsidiary Nayax Retail Ltd. and as of December2022 by the subsidiary EV Metter Ltd. was $83 thousand, $42thousand and $14thousand, respectively.
Tal Tannenbaum, who became the daughter-in-law of Yair Nechmad in August 2022, has been a part-time employee of the Company since December 2021. Ms. Tannenbaum received compensation of approximately $26 thousand and $22thousand in 2022 and 2021, respectively. The company granted to Ms. Tannenbaum 500options in the March 28, 2022 grant.
The employment terms of controlling shareholder and director, Mr. David Ben Avi, for his service as the Company’s CTO:
Payment of management and consulting fee to Mr. David Ben Avi for serving as the Company’s CTO is under a November 2016 agreement (in this paragraph (2), the "Agreement"). Under the Agreement, services are provided by Mr. Ben Aviv through David Ben Avi Holdings Ltd., which is fully controlled by Mr. Ben Avi, in consideration for a monthly management fee at the cost of NIS 50thousand ($14.5thousand), and reimbursement of various expenses. In 2020, a one-time NIS 190thousand ($55thousand) a payment was made to Mr. David Ben Avi for management fee differentials in respect to previous period.
On March 10, 2021, the Board of Directors and the general meeting of the shareholders of the Company approved a revision to the terms of engagement between the Company and Mr. David Ben-Avi, effective January 1, 2021, as follows: The management fee of Mr. David Ben Avi, CTO of the Company, through David Ben Avi Holdings Ltd, was changed to a monthly cost of NIS 150thousand ($46thousand), instead of NIS 50thousand ($15thousand).
c. Related parties' employment terms (continued):
On May 4, 2021, the Board of Directors and general meeting of the Company approved engagement in revised service agreements with Mr. David Ben Avi, in which the monthly management fee was revised to NIS 140thousand ($43thousand), beginning on the date completing the IPO on the Tel Aviv Stock Exchange, i.e. May 13, 2021. This amount is to increase each calendar year by 2.5% so the payment for each of the 12 months during the year ended December 31, 2022 accounted to NIS 143thousand ($43thousand).
For information about the share-based payment to Mr. David Ben-Avi, see note 17b5 above.
Mr. Ben Avi's spouse, Ms. Gilat Gordon, who is employed in the Company's Finance Department, was employed in the company until early 2022. The total expenses in 2021 and 2020 was $57thousand and $60, respectively.
The total expenses related to Mr. Ben Avi’s brother, Shai Ben Avi, who is employed by the Company as chief architect, and to a company wholly-owned by Mr. Ben Avi’s brother in 2022, 2021 and 2020 was $375 thousand, $382thousand and $256thousand, respectively. During 2020, the Company allotted 30,000options to Shai Ben Avi.
The total expenses related to Oded Frenkel, Mr. Ben Avi’s brother-in-law, who is employed by the Company as Chief Customer Officer in 2022, 2021 and 2020 was $236thousand, $259thousand and $135thousand, respectively. During 2021 and 2020, the Company allotted 2,500options each year to Oded Frenkel.
The total expenses related to Reuven Amar, Mr. Ben Avi’s brother-in-law, who is employed by the Company as Engineering Lab Manager in 2022, 2021 and 2020 was $206thousand, $193thousand and $107thousand, respectively. During 2021 and 2020, the Company allotted 2,500options each year to Reuven Amar.
Payments to Mr. Amir Nechmad – controlling shareholder and director
In 2021, 2020 and 2019, the amount paid by the Company to Mr. Amir Nechmad for services rendered to the Company by companies under his control including directors' fees amounted to $96thousand, $187thousand and $184thousand, respectively.
Mr. Amir Nechmad, through Ofer R.G Ltd. (a company wholly owned by Mr. Amir Nechmad), provided shareholders' loans to the Company in theperiod ended December 31, 2021 that carried an annual interest of 6%, and with an aggregate amount of $7.6million. According to the terms of the loan agreements, Ofer R.G Ltd. had a right to call the loans at any time, but provided that the Company received a ten business days' advance notice. In May 2021, the Company fully repaid the above shareholders' loans.
In April 2021, Mr. Amir Nechmad, through Ofer R.G Ltd., provided the Company a $2million credit line, from which the Company was able to draw at any time. Amounts drawn by the Company, as above, carried annual interest of 6%.
According to the terms of the credit line, Ofer R.G. Ltd had a right to call loans taken at any time, but provided that the Company is provided a ten business days' advance notice.
In June 2021, the Company repaid the full amount it utilized out of the credit line totaling $1.3million.
4)
Wise-Sec Ltd.:
In May 2018, the Company and its shareholders entered into an agreement with Wise-Sec Ltd. ("Wise-Sec") and its shareholders, where after a six-month period from the signing date on the agreement, the Company and/or its shareholders will acquire the shares of Wise-Sec under the terms set in the agreement. Additionally, under the agreement, the Company extended a loan to Wise-Sec as part of a business collaboration between the parties, including providing the Company the ability to use technologies developed by Wise-Sec.
In January 2019, Mr. Yair Nechmad, Mr. David Ben Avi and Mr. Amir Nechmad, controlling shareholders of the Company, entered into an agreement to acquire the entire share capital of Wise-Sec.
Additionally, in 2020 the Company entered with Wise-Sec into an agreement for the acquisition of Wise-Sec’s patents and intellectual property for NIS 2,676thousand ($806thousand).
Directors insurance:
The Company has a directors and office holders insurance policy with limit of liability of NIS 67million ($20million) any one occurrence and in the aggregate plus excess limit of $5million Side A Insurance for the directors & officers only.
6)
On March 9, 2021, the Company's controlling shareholders – Mr. Amir Nechmad, Mr. Yair Nechmad, Yair Nechmad Ltd (for the purpose of the shareholders agreement, Yair Nechmad and Yair Nechmad Ltd are considered as a single shareholder) and Mr. David Ben Avi ("the Controlling Shareholders") – entered into a shareholders' agreement ("the Shareholders' Agreement"). The agreement formalizes the issue of their voting on different matters, including the appointment of directors, and sets certain limitations on the transfer of Company shares, including a first right to offer in relation to the sale of shares on and off a stock exchange, a tag along right and liens on shares. The effective date of the Shareholders' Agreement is September 30, 2020.
NOTE 25 - LIENS, GUARANTEES AND COMMITMENTS
a. Liens
1) As of the approval date of the financial statements, the company has floating charge obligation to an Israeli bank to secure credit line facility and the activity related in the Israeli bank.
2) The Company has a frame bank guarantee provided by an Israeli bank of NIS 5,000,000($1,491thousand) and used the bank guarantees below:
a) In respect of a bank guarantee provided by an Israeli bank for a lessor, the Company provided a NIS 3,192,000($952thousand) liens, which is under a charge to secure the guarantee.
b) In respect of a bank guarantee provided by an Israeli bank for a government authorities, the Company provided a NIS 712,000($212thousand) deposit, which is under a charge to secure the guarantee.
3) In respect of a bank guarantee provided to Israeli bank for OTI, fully own subsidiary, the Company provided an amount of GBP 1,750thousand ($2,283thousand), to secure OTI's short term bank loan. See note 6 and 13.
NOTE 25 - LIENS, GUARANTEES AND COMMITMENTS (continued):
b. Contingent liability
Asof the date of the approval of these financial statements, there are no lawsuits pending against the Group.
c. Commitments
1. As part of an agreement with a European processing agency for the provision of loans, the Group has undertaken in December 4, 2022 to reach, aggregate, a minimum processing turnover of Euro 250million ($264million) transactions per annum and to reach minimum turnover of 3.5million transactions per month which includes at least 55% through Visa credit. The agreement stipulates that in the event that the Group fails to meet the assignable thresholds, the event shall constitute a breach event (as defined in the agreement), which will establish a contractual right for the acquirer the right to demand of an immediate repayment of the outstanding balance of the loans. See note 14c
2. In November 2016 and February 2018, the Company and the processing agency entered into a processing agreement where under the Group undertakes to reach a minimum processing turnover in Europe. Furthermore, under the agreement a minimum fee will be paid out of the processing funds that are cleared using the processing agency’s services. In 2020, the Company signed an agreement to extend the terms of minimum processing turnover until December 31, 2025. As of December 31, 2022 and the date of these financial statements, no changes regarding to processing agreement took place.
NOTE 26 - SUBSEQUENT EVENTS
a. Acquisition of Roseman Engineering Ltd.
Roseman, a private entity founded in 1978 under the law of the state of Israel, manages smart systems in the fields of refueling, charging stations and management system for vehicle fleets. On January 31, 2023, the company entered into a binding agreement for the purchase of the entire share capital (hereinafter "Purchased Shares") of Roseman Engineering Ltd. and Roseman Holdings Ltd. (hereinafter, together, "Roseman"). In consideration of the transaction, the transfer and conveyance of the Purchased Shares, the Company will pay to the Seller a gross amount of NIS 15,000thousand minus the Loans Purchase Price (the “Purchase Price”), such that 88% of the Purchase Price shall be attributed to Roseman Engineering Ltd. and the remain 12% of the Purchase Price shall be attributed to Roseman Holdings Ltd. The agreement is a subject to certain closing conditions and as of the day of these financial statements, the merger is pending the approval of the Competition Authority in Israel (hereinafter "Governmental approval").
Consolidated companies’ appendix as of the statement of financial position date:
Company’s name
ID number
Country of
incorporation
Relationship
with Company
Area of activities
Description of
business relationship
Nayax (UK) Ltd
7939558
Subsidiary
Distribution activity
Distributing Company’s products
Nayax LLC
15-0107001502002212
USA
Nayax Canada Inc
676838
Canada
Nayax S de RL de CV
15080271770
Mexico
Processing activity
Processing funds of end users
Nayax GmbH
121/5750/5230
Germany
Nayax Au Pty Ltd
CAN 615 300 402
Australia
Nayax Nz Ltd
6264000
New-Zealand
Nayax Europe UAB
304891914
Lithuania
Processing activity (holding financial institution license)
Processing funds of end users in Europe
Nayax KK
02-0651970
Japan
Nayax China Ltd
X31022932169738
China
Nayax (EU) Ltd
HE 280566
Cyprus
Greenhithe Software Solutions Ltd.
2202591
Holds Synectic Solutions Ltd. (incorporated in the USA) engaged in software solutions to the field of vending machines management
No material business relationship between the parties
Nayax Retails Ltd.
514364579
Developing technology and providing software solutions in the field of retail
Provision of retails services to Company’s customers
EV Meter Ltd.
516263332
Charging system for electric cars
Providing services to customers of the charging system
Nayax Capital Ltd.
516269933
Expected to concentrate Nayax Group’s future credit activity
Has not yet commenced operations
Nayax Financial Services Ltd.
1301087
Concentration of the processing activity in the UK
In set up stage
Weezmo Technologies Ltd.
515333185
As of May 2021, the Company holds 100% of the shares of the related company
Issue of interactive invoices and marketing
Expansion of the solutions platform provided to retail customers.
Dually Ltd.
513558726
On Track Innovations Ltd.
520042862
First consolidated as of June 30, 2022 Subsidiary
Design, marketing and sales of hardware solutions for unattended POSs
Marketing and sales of own products
OTI America, Inc.
13-4014031
Second-tier company
Providing sales and marketing services.
OTI America sp. z.o.o.
1999/019045/07
Poland
Providing fuel products and management solutions
OTI PetroSmart Proprietary Limited
5272895580
RSA
Liquidated in 2022
F - 70